Airbus A380 Turbulence Ahead Case Study Solution
Airbus is operating in the industry which is very sensitive; it has to comply with various laws and regulations in the manufacturing of the A 380 such as quality control issues and safety issues. Failure to comply with the safety rules can have a huge impact on the financial results of the company. Furthermore, in the case of any incident or accident, the governments can cancel the license of Airbus.
Additionally, many governments have introduced laws and regulations regarding the impact on the environment of the A 380 and can face many penalties if they fail to comply with legislation and regulations relating to the impact on the environment.
Answer Number 1:
The reaction of the Investors:
The response of the investors will be very different from the response of the first delay questioning regarding the competency of the current management of the Airbus; the impact of the second delay would be severe on the income and expenditure of the Airbus. Furthermore, the delay also results in the massive impairment of the goodwill; due to the poor market reputation, it is possible that many future orders of the Airbus A 380 will be lost.
The impact on the earnings of the second delay will reduce the earnings before interest and tax by €500 million from 2007 to 2010. The reduction in the earnings will affect the share price and decrease the value of an investment of the investors. As a result of the reduction in the share price, many investors might want to dispose of their holdings of Airbus.
By analyzing the Table E, the effects of the second delay are more than the consequences of the first delay, the original target was 10 in 2006, and the revised target is just 1. In 2007 the original goal was 35 while the new target is 9, the target was not available for 2008 and 2009, the revised target after the second delay is also lower as compare to the first delay. This reduction in the revised target would also enforce investors to dispose of their shareholdings from Airbus. The investors might think that further delays may occur in the future which also gives a boost to their decision to sell their holdings.
The importance of A 380 to WADS:
A 380 is strategically so significant for the WADS, because of the A 380, the WADS can gain the most of the market share of the industry, it is forecaster that it will also play a vital role in increasing the profits of the WADS. The WADS can also challenge Boeing with the help of A 380 because it can carry way more passengers than Boeing. A 380 is also financially necessary for the WADS, it can derive excessive profits from the A 380 which could also use to expand future operations, and they can tackle the increasing demand of A 380.
Financial characteristic of the Company:
- The financial characteristic of the company can be assessed by the earnings, the growth in earnings and stability in the earnings, without earnings it is almost impossible to value the company.
- Earnings growth is defined as the percentage increase in the gains in a specified period, earnings in the current period should exceed the previous period. The earnings of WADS are currently growing at a good pace which is considered as sound financial characteristic.
- Earnings stability can be classified as the how consistently company is achieving the growth in the earnings. WADS fails to reach the stability in earnings due to the delays in deliveries; earnings are forecaster to be unstable for the coming periods due to the same reasons.
Operating Characteristics of the Company:
The operational characteristic of the WADS can be assessing by operational efficiency, meeting delivery deadlines.
- EADS can achieve the operational efficiency through A380, the complaint in the A380 is minimum, and the design of A380 is also accurate for flying effectively and efficiently.
- As far as delivery dates are a concern, WADS the operational characteristic are not favorable, there is a severe mismanagement regarding the meeting of the delivery dates which can affect the business of WADS drastically…………
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