Airbus A3xx Case Study: Burbus

1534 Words 7 Pages
Register to read the introduction… Although the resulting NPV figure is positive under the base scenario, sensitivity analysis indicates that returns on this project are extremely sensitive to the underlying model assumptions (e.g. a drop in operating margin by just 2 percentage points results in negative NPV). Therefore, there is a high risk of negative returns on this project. The project’s profitability may also be undermined by external market factors. The most crucial ones being (a) the response of Boeing to A3XX project launch, (b) growth rate of the VLA market. However, this project is strategically important for Airbus. Over the last several decades, since the introduction of Boeing 747 the share of VLA segment has expanded significantly. Additionally, analysts estimate VLA manufacturing has the highest operating margins — that is commonly used to subsidise production of smaller aircraft. However Airbus is not present in this segment at this time. Therefore, despite a very high-risk profile of the project, Airbus has good reasons to proceed with this industrial launch. It it difficult to estimate the number of firm orders Airbus needs to have before committing to the project. The financial model suggests it needs to sell 300+ aircraft before cumulative non-discounted project cash flow becomes positive. However, taking into account the fact that airlines do not place orders with delivery time exceeding 5-6 years, it is highly …show more content…
Airbus A3XX case study, Group E10

Financial projections
(in US$ mln) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Revenue Operating profit R&D expenses Depreciation EBIT Taxes EBIAT

-

-

-

-

-

2,808 421 -880 -100 -559 212 -771

8,813 11,910 12,149 12,392 12,640 12,892 13,150 13,413 13,681 13,955 14,234 14,519 14,809 15,105 1,322 -660 -100 562 -214 775 1,787 -440 -100 1,247 -474 1,720 1,822 -100 1,722 -654 2,377 1,859 -100 1,759 -668 2,427 1,896 -100 1,796 -682 2,478 1,934 -75 1,859 -706 2,565 1,973 -40 1,933 -734 2,667 2,012 -5 2,007 -763 2,770 2,052 2,052 -780 2,832 2,093 2,093 -795 2,889 2,135 2,135 -811 2,946 2,178 2,178 -828 3,005 2,221 2,221 -844 3,066 2,266 2,266 -861 3,127

-1,100 -2,200 -2,200 -2,200 -1,320 -25 -60 -95 -100

-1,100 -2,225 -2,260 -2,295 -1,420 418 846 859 872 540

-1,518 -3,071 -3,119 -3,167 -1,960

R&D expenses Capital expenditure Net working capital Operating profit Taxes Free cash flow Discounted FCF

-1,100 -2,200 -2,200 -2,200 -1,320 418 -250 -150 846 -350 -300 859 -350 -300 872 -50 -200 540

-880 -50 421 212 -296 -158

-660 1,322 -214 448 216

-440 1,787 -474 873 379

1,822 -654 1,168 457

1,859 -668 1,190

Related Documents