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Boeing 787 Dreamliner Break Even No!  
User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Posted (8 years 4 weeks 1 day 18 hours ago) and read 13545 times:

What do you guys think should be a reasonable break even no. for the 787 ( just out of the 3 models we know off so far ) given that unofficial sources give the cost of the development in the 8-10 billion US $ bracket ( boeing doesnt officially release developmental costs ) .

55 replies: All unread, showing first 25:
 
User currently offlineLemurs From United States of America, joined Mar 2005, 1439 posts, RR: 4
Reply 1, posted (8 years 4 weeks 1 day 18 hours ago) and read 13548 times:

Seems like you could do the math pretty easily...assuming $50M in real money per airframe sold (probably a little low) and $10B in development costs (possibly high, who knows though) they'd break even at 200 airframes. That doesn't factor maintnance contracts they'll get for those sales either. Kind of looks like the 787 might already be at 100+% ROI, assuming no cancelations, cost overruns, or a billion other things that could go wrong.


There are 10 kinds of people in the world; those who understand binary, and those that don't.
User currently offlineDAYflyer From United States of America, joined Sep 2004, 3807 posts, RR: 3
Reply 2, posted (8 years 4 weeks 1 day 18 hours ago) and read 13436 times:

A far cry from the breakeven point of the A-380, which now must be at 400+ frames.


One Nation Under God
User currently offlineEbbUK From , joined Dec 1969, posts, RR:
Reply 3, posted (8 years 4 weeks 1 day 17 hours ago) and read 13434 times:

I heard it was 3000 frames. Is that right?

User currently offlineClickhappy From United States of America, joined Sep 2001, 9644 posts, RR: 68
Reply 4, posted (8 years 4 weeks 1 day 17 hours ago) and read 13408 times:
AIRLINERS.NET CREW
PHOTO SCREENER

3000 frames

LMFAO.

If your build cost is (lets say) 50 million each, 3000 copies would equal a break even cost of $150,000,000,000

I dont think the development cost of the 787 program is $150 Billion


User currently offlineDAL767400ER From , joined Dec 1969, posts, RR:
Reply 5, posted (8 years 4 weeks 1 day 17 hours ago) and read 13375 times:

Quoting Clickhappy (Reply 4):
I dont think the development cost of the 787 program is $150 Billion

In EbbUK's Airbus-centered world it is  Wink . Of course, whatever the actual number is, I would bet that the total number of orders has already surpassed the break-even number.


User currently offlineOsiris30 From Barbados, joined Sep 2006, 3192 posts, RR: 25
Reply 6, posted (8 years 4 weeks 1 day 17 hours ago) and read 13340 times:

Quoting EbbUK (Reply 3):
I heard it was 3000 frames. Is that right?

I think you meant 300 didn't you?

My number is between 300 and 400.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineLemurs From United States of America, joined Mar 2005, 1439 posts, RR: 4
Reply 7, posted (8 years 4 weeks 1 day 17 hours ago) and read 13303 times:

Oops...I entirely left the build cost out of my disturbingly basic equation. Let's assume $20m on that. It would up the number to 330 frames or so. That still puts them into profit, but only just the begining...still, for an airplane that's not been assembled yet...

Of course, the build and sales numbers are entirely whipped out of thin (non-existant) air.



There are 10 kinds of people in the world; those who understand binary, and those that don't.
User currently offlineSwissy From Switzerland, joined Jan 2005, 1734 posts, RR: 4
Reply 8, posted (8 years 4 weeks 1 day 17 hours ago) and read 13302 times:

Quoting DAL767400ER (Reply 5):
would bet that the total number of orders has already surpassed the break-even number.

It is a little early to make statements like that..... IF everything is going the way it should I agree  Wink but lets wait and see.........

Cheers,


User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Reply 9, posted (8 years 4 weeks 1 day 17 hours ago) and read 13231 times:

Whats the profit margin like with jets like 787 and 350 in general terms not generous terms Smile obviously someone will get a fantastic deal but on an average how much profit can one expect in terms of dollars and percentage ??

User currently offlineOsiris30 From Barbados, joined Sep 2006, 3192 posts, RR: 25
Reply 10, posted (8 years 4 weeks 1 day 17 hours ago) and read 13201 times:

Quoting Bringiton (Reply 9):
Whats the profit margin like with jets like 787 and 350 in general terms not generous terms obviously someone will get a fantastic deal but on an average how much profit can one expect in terms of dollars and percentage ??

With or without dev costs? Without development, production is likely $20M (ish) for a 787. How much development you attribute to the cost depends on how many you sell (the more you sell the better the margin on each one). Assume they sell for $80M to the first customers.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Reply 11, posted (8 years 4 weeks 1 day 17 hours ago) and read 13168 times:

OSIRIS thx man!! I was refering to only recurring cost ( dev. cost being non-recurent for fixed varients) !!

User currently offlineIkramerica From United States of America, joined May 2005, 21547 posts, RR: 59
Reply 12, posted (8 years 4 weeks 1 day 17 hours ago) and read 13169 times:

The title reads funny.

Reminds me of a Simpsons episode:

Lionel Hutz's yellowpages ad read: "Work on contingency. No money down."

He explained it was a misprint. It should have read: "Work on contingency? NO! Money down!"

That's how the thread reads: "Boeing 787 Dreamliner. Break Even? NO!"

Quoting EbbUK (Reply 3):
I heard it was 3000 frames. Is that right?

Sounds low...  Wink

Nobody can take a joke these days, can they?



Of all the things to worry about... the Wookie has no pants.
User currently offlineLehpron From United States of America, joined Jul 2001, 7028 posts, RR: 21
Reply 13, posted (8 years 4 weeks 1 day 17 hours ago) and read 13129 times:

Quoting Osiris30 (Reply 6):
Quoting EbbUK (Reply 3):
I heard it was 3000 frames. Is that right?

I think you meant 300 didn't you?

I think he mistook what Boeing expects to sell over the course of the life of the model.

While, IMO, assuming that because 787 is smaller than A380 then it should sell less to break even is dangerous. Scaling the costs of development to the estimated costs of each unit with the percentage of profit aimed at both, it is concievable that both aircraft may need to reach the same number to break even. People think/believe/know that 787 may reach its mark quicker. It may already have, I don't keep up with that stuff. To me the selling of an airplane is not a race.



The meaning of life is curiosity; we were put on this planet to explore opportunities.
User currently offlineOsiris30 From Barbados, joined Sep 2006, 3192 posts, RR: 25
Reply 14, posted (8 years 4 weeks 1 day 17 hours ago) and read 13095 times:

Quoting Lehpron (Reply 13):
While, IMO, assuming that because 787 is smaller than A380 then it should sell less to break even is dangerous. Scaling the costs of development to the estimated costs of each unit with the percentage of profit aimed at both, it is concievable that both aircraft may need to reach the same number to break even. People think/believe/know that 787 may reach its mark quicker. It may already have, I don't keep up with that stuff. To me the selling of an airplane is not a race.

Well to Airbus and Boeing the race of selling is all that counts  Wink As for the 787 I expect it's break even to be compared in terms of frames to the INITIAL 380 projections. My number is roughly between 300 and 400. Without having the financials anything more precise than that is a WAG.

Having said that, I think Boeing is at or just past break even on the 787, and feel confident that by year end they are > breakeven.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlinePope From , joined Dec 1969, posts, RR:
Reply 15, posted (8 years 4 weeks 1 day 17 hours ago) and read 13061 times:

The above calculations assume that the technology developed in the 787 has no value in any other project. Furthermore, you forget that R&D costs generate tax deductions which offset other taxable income and depending on the specific expense may qualify for an R&D tax credit.

User currently offlineTexfly101 From United States of America, joined Jan 2006, 351 posts, RR: 0
Reply 16, posted (8 years 4 weeks 1 day 17 hours ago) and read 13061 times:

Quoting Bringiton (Reply 9):
Whats the profit margin like with jets like 787 and 350 in general terms not generous terms Smile obviously someone will get a fantastic deal but on an average how much profit can one expect in terms of dollars and percentage ??

Check the annual report, its available online, and you'll see the reported margin for either company. Its believable and will give a good estimate of the profits for the business units. Just remember that some models are sold at discounts and that others have to make up for their lack of profit. Make your assumptions, factor in numbers of airframes and profits, and you probably won't be too far off. A basic economics text will help with the NPV, FV and AC equations.


User currently offlineOsiris30 From Barbados, joined Sep 2006, 3192 posts, RR: 25
Reply 17, posted (8 years 4 weeks 1 day 17 hours ago) and read 13061 times:

Quoting Pope (Reply 15):
The above calculations assume that the technology developed in the 787 has no value in any other project. Furthermore, you forget that R&D costs generate tax deductions which offset other taxable income and depending on the specific expense may qualify for an R&D tax credit.

I'm purposely ignoring those on both fronts, as the impact is much too hard to determine, especially across country lines. I'm intentionally "keeping it simple stupid" so as to provide a reasonable baseline by which all project might be compared, not just the 787.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Reply 18, posted (8 years 4 weeks 1 day 17 hours ago) and read 12991 times:

Quoting Lehpron (Reply 13):
While, IMO, assuming that because 787 is smaller than A380 then it should sell less to break even is dangerous. Scaling the costs of development to the estimated costs of each unit with the percentage of profit aimed at both, it is concievable that both aircraft may need to reach the same number to break even. People think/believe/know that 787 may reach its mark quicker. It may already have, I don't keep up with that stuff. To me the selling of an airplane is not a race.

That was something i believed aswell . If you look at the dev. cost of the A380 ( let me take the original 12 billion dollars ) and then take at the estimated dev. cost of the 787 ( 8-10 billion , lets assume 9 ) and assume that the profit margin ( profit % of the total cost (recurring ) of production) is the same for both aircraft then the dreamliner would have needed about 25% less no. of orders to break even . Even if we assume that the % of profit derived from one single 787 sale is 2/3 that derived from one A380 sale ( dont VLA's sell at a higher % profit ? ) and take the break even no. of 380 to be around 300 then the break even no. is rougly around 300-325 for the 787 .


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 19, posted (8 years 4 weeks 1 day 17 hours ago) and read 12952 times:

Quoting Bringiton (Thread starter):
What do you guys think should be a reasonable break even no. for the 787 ( just out of the 3 models we know off so far ) given that unofficial sources give the cost of the development in the 8-10 billion US $ bracket ( boeing doesnt officially release developmental costs ) .

The total program costs in 2003-2004 were about $9-$10 billion of which Boeing's expense was about $6 billion according to credible sources...which sounds just abuot right...



"Up the Irons!"
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 989 posts, RR: 51
Reply 20, posted (8 years 4 weeks 1 day 17 hours ago) and read 12952 times:

Quoting Bringiton (Thread starter):
What do you guys think should be a reasonable break even no. for the 787 ( just out of the 3 models we know off so far ) given that unofficial sources give the cost of the development in the 8-10 billion US $ bracket (

Most estimates place full amortization of program costs at 500-600 units.

Boeing is around 400 firm orders at the moment.

Quoting EbbUK (Reply 3):
I heard it was 3000 frames. Is that right?

For break-even, no that's well beyond reason

The total market size for the 787 and A350 over their product life is estimated at around 3,000 frames


User currently offlineKen777 From United States of America, joined Mar 2004, 8345 posts, RR: 9
Reply 21, posted (8 years 4 weeks 1 day 17 hours ago) and read 12952 times:

I think it may be different for Boeing and all of the risk taking suppliers. Each of the suppliers will have their own target break even point (unless they get cost overruns) and there may be a fairly wide range (like 300 - 400) depending on the supplier.

I wouldn't be surprised, however, if Boeing has the lowest break even point of them all.  Smile


User currently offlineAirFrnt From United States of America, joined Jul 2004, 2827 posts, RR: 42
Reply 22, posted (8 years 4 weeks 1 day 17 hours ago) and read 12923 times:

Quoting Bringiton (Thread starter):
What do you guys think should be a reasonable break even no. for the 787 ( just out of the 3 models we know off so far ) given that unofficial sources give the cost of the development in the 8-10 billion US $ bracket ( boeing doesnt officially release developmental costs ) .

The number is somewhere between 300-450. Typically planes with a higher break even number have not done as well. The 747 was very expensive when introduced because Boeing was not planning on selling a lot, and probably broke even around 200 frames.

Also, please bear in mind that Boeing isn't paying nearly the whole development cost for the 787. There is a much higher risk sharing percentage in the 787 then in the A380. Their number is probably around 5 billion budgeted, and will probably end around 8 billion. It ends up coming out in the wash however for break even because risk sharing partners get more of the profit.


User currently offlineBringiton From United States of America, joined Sep 2006, 866 posts, RR: 0
Reply 23, posted (8 years 4 weeks 1 day 17 hours ago) and read 12865 times:

DFWrev. the only way the breakeven no . would be 400-500 is if the % of profit as compared to the overall cost of production ( only recurring of the shelf or as we in defence call it FLY away ) is considerably less then that of the A380 as if 6-7 billion is to be take as BOEING's cost of development then their cost is roughly half so they should only need 150 odd to break even therefore 500 orders would suggest that the % of profit out of one 787 is 75% less then that out of one A380 sold in the market .

User currently offlineJet-lagged From United States of America, joined Mar 2002, 875 posts, RR: 0
Reply 24, posted (8 years 4 weeks 1 day 15 hours ago) and read 12542 times:

Breakeven, or makes a reasonable return on investment factoring in time value of money?

Most number for programs batted around seem to be in the 400 to 500 range, from what I see.

Interestingly, lets say it is 500 for a good ROI. Since Boeing has ~440 orders now, I think it is safe to assume they will generate at least 25% more, when existing options are exercised.

So, unless they muck it up, they have a shareholder-value creating program on their hands.

And, I think many models sell 2 times, or more, they number of frames compared to orders before EIS. So, Boeing should have a real cash cow.


25 Bringiton : Lets see how the 787 pans out in the next critical 12-24 months or so , I guess it would be fair to say that as of now boeing has far more riding on t
26 Osiris30 : Well that's a relative now isn't it LOL.. To hear Airbus talk everything rides on the 380.. to the point of neglect for the 400M and 350. Knowing wha
27 FlyDreamliner : As boeing looks to end the year with about 500 787 orders, it's safe to say the aircraft will be profitable before it ever takes to the skies, somethi
28 Post contains images Osiris30 : Definitely a modern era first for a non-variant model.
29 Post contains images 787engineer : A and B make less of a profit on smaller aircraft. I think the break even point for the 787 will be 350-450 frames (barring any delays, etc). Just my
30 Kaitak744 : Also, keep in mind that some launch airlines, ANA for example, got their 787s at some pretty large discounts. So, they don't make the same amount of m
31 Bringiton : they are allready over that if you count the 20 Singapore orders and the UFO's , coupled with the aeroflot ( is it included in the UFO ?) they should
32 Kalakaua : I was thinking the same!
33 Post contains images WingedMigrator : I have trouble believing that figure... that's without engines, right? Engines would add quite a bit to that total. I could believe $45-50M per frame
34 Zvezda : My estimates are now 350-400 for B787, 40-50 for the B747-8, and 800-1000 for the WhaleJet.
35 Legoguy : Wow! Out of interest, how many orders does the a380 have?
36 Manni : Legoguy, The A380 has 159 firm orders and 9 commiments, there's also about 60 options. Altough people like to speculate, often greatly exaggerated, ab
37 Legoguy : Thanks for the info! That sounds do-able if the a380 performs well when enters service. The 787 is a great aircraft which will with out a doubt break
38 Osiris30 : Yes. Without engines. Those are contracted separately from the main body (sometimes in the same agreement, but broken out separately) Ofcourse. This
39 Aerosol : The development costs are only one part of the cost block. For the break even you have to factor in the other fix costs and variable costs (for exampl
40 Post contains links Manni : No, that wouldn't be correct. There are the development costs, overhead costs and discounts that need to be taken into consideration aswell. Except t
41 Osiris30 : I doubt it did. Engines are relatively immaterial for a plane maker in terms of $. (Outside of issues and delays that can impact overall sales)
42 Manni : I think it did. 40% + the cost of 4 engines seems a bit to much to start from, to make a profit. If it did not include the engines, the airframe + en
43 Osiris30 : Sorry misunderstood what the 40% was referring to. I thought you were referring to 40% of the sale price of an airplane being the cost excluding all
44 Jet-lagged : Have you included time value of money? If not, I think you should plan on a hurdle rate of around 8% (sounds too low to me, but let's be gentle). In
45 Post contains images PolymerPlane : A380 uses 4 engines so it should be around $40 mil per frame
46 Post contains images Manni : The 22 engines valued at US$240 million are for the 787s KE ordered. I've also included a link in my post to an article covering the A380 engine purc
47 Joni : We discussed this a while back, and from the annual reports of Airbus and Boeing the profit margins on sold planes are about 5-10% (average over narr
48 Jet-lagged : Well, yes, except that 'break even' doesn't really matter. It doesn't mean anything useful. Same applies for 787s. It is academic exercise, about as
49 Scaledesigns : Boeing has the updated 777 wich they are supposed to be working on now and the all new 737 replacement,so not everything is riding on the 787. CB is a
50 ThePRGuy : I heard somewhere that it was 35,000 frames Thats what Gustav was telling me anyhow Thanks PR
51 Post contains images Jacobin777 : My rough analysis was somewhere in between yours (about 400)...so we actually agree on something...
52 Post contains images Osiris30 : Yes, that's how I understand it to work. That's why you usually see separate announcements. You don't think two separate engines would cost exactly t
53 Shenzhen : Actually, Boeing and/or Airbus offer airlines contract proposals with and without engines (one or the other, not both at the same time). For example,
54 Ultrapig : Previously aircraft manufacturers would take the development cost -lets say $400m. and reserve it on the balalnce sheet like it was an investment in a
55 Flysherwood : What are you talking about? Have you not been listening to the news? The A380 could BREAK Airbus!!! Do you not realize how many billions of Euro's th
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