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787 Break Even Point?  
User currently offlineT773ER From United States of America, joined Dec 2006, 277 posts, RR: 0
Posted (7 years 3 months 1 day 1 hour ago) and read 7932 times:

The cost of the 787 is said to be around 8 billion, and with 471 orders and commitments, one would have to guess that it is already profitable. But what was the actual break even point?

Also, does any one know what Boeing's forecast has in store for the 787 as far as numbers are concerned?

[Edited 2007-01-20 00:40:29]

[Edited 2007-01-20 00:40:51]


"Fixed fortifications are monuments to the stupidity of man."
45 replies: All unread, showing first 25:
 
User currently offlineEvilForce From , joined Dec 1969, posts, RR:
Reply 1, posted (7 years 3 months 1 day 1 hour ago) and read 7878 times:

I would guesstimate "breakeven" around 200 - 225 airframes.

Assuming of course there are no major issues in getting it launched. Of course this doesn't include paying it's contribution towards fixed overhead.

[Edited 2007-01-20 01:18:59]

User currently offlineOsiris30 From Barbados, joined Sep 2006, 3186 posts, RR: 26
Reply 2, posted (7 years 3 months 1 day 1 hour ago) and read 7883 times:

Average widebody discount is around 40% of list, so it's not too hard to math out.. if all ordered 787s (using your number of 471) are delivered then the actually value to Boeing would be approximately:

471 * $150M (roughly the middle point of 787 pricing) * 0.6 = $42.3B

So as long as the varibale costs for each aircraft are below 80% of the sale price (which is a reasonable assumption I think) then the 787 is past the breakeven point.

If not, it would be very very close.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineKFLLCFII From United States of America, joined Sep 2004, 3288 posts, RR: 31
Reply 3, posted (7 years 3 months 22 hours ago) and read 7610 times:

Quoting Osiris30 (Reply 2):
then the 787 is past the breakeven point.

Pardon my ignorance, but to date, has a launch aircraft ever passed its breakeven point before a single aircraft had even been delivered?

Or for that matter, has a launch aircraft ever passed its breakeven point before a single assembled hull had even taken to the sky?



"About the only way to look at it, just a pity you are not POTUS KFLLCFII, seems as if we would all be better off."
User currently offlineSirOmega From United States of America, joined Sep 2005, 735 posts, RR: 0
Reply 4, posted (7 years 3 months 22 hours ago) and read 7554 times:

Quoting T773ER (Thread starter):

Also, does any one know what Boeing's forecast has in store for the 787 as far as numbers are concerned?

IIRC, the market for widebodies is about 3000 units over the next 20 years, and its estimated that Boeing will get 2000 orders out of that 3000.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 5, posted (7 years 3 months 21 hours ago) and read 7506 times:

Quoting KFLLCFII (Reply 3):

Pardon my ignorance, but to date, has a launch aircraft ever passed its breakeven point before a single aircraft had even been delivered?

Or for that matter, has a launch aircraft ever passed its breakeven point before a single assembled hull had even taken to the sky?

None in modern history..if ever..... Smile

The 787 is the fastest selling widebody in aviation history....



"Up the Irons!"
User currently offlineOsiris30 From Barbados, joined Sep 2006, 3186 posts, RR: 26
Reply 6, posted (7 years 3 months 20 hours ago) and read 7314 times:

Quoting KFLLCFII (Reply 3):
Pardon my ignorance, but to date, has a launch aircraft ever passed its breakeven point before a single aircraft had even been delivered?

Or for that matter, has a launch aircraft ever passed its breakeven point before a single assembled hull had even taken to the sky?

While I can't speak for props, this is the first *commercial* jet aircraft that has achieved such a feat.



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineWingedMigrator From United States of America, joined Oct 2005, 2138 posts, RR: 56
Reply 7, posted (7 years 3 months 20 hours ago) and read 7288 times:

Quoting Jacobin777 (Reply 5):
The 787 is the fastest selling widebody in aviation history....

That's the one true fact.

As pointed out so much more rapidly in other threads discussing matters of break-even and return on investment:

a) the frames indeed have to be delivered, which means break-even won't occur until late 2012 or early 2013

b) when break-even is reached, return on investment will be zero. In order to reach a decent (say 15-20%) ROI it will be another few years from there.

And another consideration often ignored:

c) such an unprecedented level of risk sharing naturally comes with a high level of profit sharing, so even if a good RoI is reached, less of the profit goes to Boeing than for previous models.

Not that any of this should be a problem, of course!  Big grin

Quoting SirOmega (Reply 4):
IIRC, the market for widebodies is about 3000 units over the next 20 years

Boeing predicts over 6200 frames in the twin-aisle category. Airbus predicts 5600 frames. If as you say, Boeing only captures 2000 of those, they will have done poorly. Which leads to another Leahy gem: "I'm willing to give up, regretfully, the first 400 to them, and I'll catch up on the next 5,200"


User currently offlineJayinKitsap From United States of America, joined Nov 2005, 769 posts, RR: 1
Reply 8, posted (7 years 3 months 19 hours ago) and read 7269 times:

The breakeven point occurs when sufficient planes are DELIVERED. The number of orders currently is about the anticipated BE point, but so far only the initial deposits have been paid.

It does put Boeing in the catbird seat from a pricing perspective as R &D can be spread over more planes, reducing the average unit costs.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 9, posted (7 years 3 months 19 hours ago) and read 7253 times:

Quoting JayinKitsap (Reply 8):
It does put Boeing in the catbird seat from a pricing perspective as R &D can be spread over more planes, reducing the average unit costs.

It also allows for funding of other products, such as a potential B787-F as well as B787-9ER, B787-10, etc...



"Up the Irons!"
User currently offlineOsiris30 From Barbados, joined Sep 2006, 3186 posts, RR: 26
Reply 10, posted (7 years 3 months 19 hours ago) and read 7233 times:

Quick note guys:

I see many of you pointing out the money is paid on delivery (and correctly so). You will note the "if" in my initial post on the subject that is basically saying the same thing. However, not ALL moneys are paid on delivery. It is likely Boeing already has well over $.5B in the bank on the 787 in terms of deposits, etc. for those orders and options currently held. All in all that ain't too shabby for an aircraft which hasn't even been assembled yet  Wink



I don't care what you think of my opinion. It's my opinion, so have a nice day :)
User currently offlineBaron95 From United States of America, joined May 2006, 1335 posts, RR: 9
Reply 11, posted (7 years 3 months 19 hours ago) and read 7233 times:

It does also allow/justifies Boeing spending more on the baseline 787 (787-8) and derivatives to make it even better. Example is the additional US$1B in R&D that Boeing announced for the 787 to bring weight down and inprove mannufacturing times. If they had 50 on order they may not have spent the $$$ and would accept the 2-3% over target weight. With 500 on order they can easily justify make the plane even better and shutting the door even further on the competition (A330/350).


Killer Fleet: E190, 737-900ER, 777-300ER
User currently offlineBaron95 From United States of America, joined May 2006, 1335 posts, RR: 9
Reply 12, posted (7 years 3 months 19 hours ago) and read 7217 times:

Quoting KFLLCFII (Reply 3):
Pardon my ignorance, but to date, has a launch aircraft ever passed its breakeven point before a single aircraft had even been delivered?

For this to happen, the deposits on the orders would have to be sufficient to cover all the anticipated development, production tooling, certification, long-lead mannufacturing sub-sontracting of items, etc. If you assume something like US$10M deposit on firm order per 787, Boing has about US$4B on hand from deposits. If it is true that risk sharing partners are picking up 50% of the US$8B development tab, maybe Boeing is even on the program to date (or even a bit ahead).

I somehow doubt it though.

Btw - does anyone know if deposits are held in escrow or if Beoing can make use of the funds? Thanks.



Killer Fleet: E190, 737-900ER, 777-300ER
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 912 posts, RR: 51
Reply 13, posted (7 years 3 months 18 hours ago) and read 7153 times:

Quoting EvilForce (Reply 1):
I would guesstimate "breakeven" around 200 - 225 airframes.

Break-even will be considerably higher than 200-225 frames.


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 14, posted (7 years 3 months 18 hours ago) and read 7118 times:

Quoting DfwRevolution (Reply 13):
Quoting EvilForce (Reply 1):
I would guesstimate "breakeven" around 200 - 225 airframes.

Break-even will be considerably higher than 200-225 frames.

400-500 frames..but regardless....Boeing will be reaching that milestone (500) soon enough and upon delivery of that frame #, they will be "breaking even" then start their ROI to the shareholders....



"Up the Irons!"
User currently offlineZvezda From Lithuania, joined Aug 2004, 10511 posts, RR: 64
Reply 15, posted (7 years 3 months 16 hours ago) and read 6989 times:

Quoting EvilForce (Reply 1):
I would guesstimate "breakeven" around 200 - 225 airframes.

We don't know the actual sales prices, but any reasonable guess would have to be somewhere in the 300 to 600 range, most likely within or near 400 to 450 range.


User currently offlineRheinbote From Germany, joined May 2006, 1968 posts, RR: 52
Reply 16, posted (7 years 3 months 14 hours ago) and read 6867 times:

Quoting Baron95 (Reply 11):
additional US$1B in R&D that Boeing announced for the 787

If I understand correctly, so far only 300m of that 1bn is earmarked for 787 EMD.


User currently offlineLeelaw From , joined Dec 1969, posts, RR:
Reply 17, posted (7 years 3 months 12 hours ago) and read 6691 times:

Quoting Jacobin777 (Reply 5):
The 787 is the fastest selling widebody in aviation history....

Boeing now claims that: "the Dreamliner [is] the most successful commercial airplane launch in history."

See: http://boeing.com/news/releases/2007/q1/070102b_nr.html


User currently offlineSacamojus From United States of America, joined Dec 2006, 228 posts, RR: 1
Reply 18, posted (7 years 3 months 12 hours ago) and read 6573 times:

If my memory recalls the formula for net present value breakeven analysis is as follows:

$0= CF0/(1+i)^1 + CF1/(1+i)^2 + CF2/(1+i)^3 .......

CF= cash flows i= discount rate

The trick is to find the timing of the cash flows, and to see how much positive cash flow you have to take in (discounted at the discount rate) to over come the initial cost of the project. This is a crude model but much better than what I usually see posted.


User currently offlineGEnxPower From United States of America, joined Apr 2005, 121 posts, RR: 0
Reply 19, posted (7 years 3 months 10 hours ago) and read 6162 times:

What is the definition of "break even point" used here anyways? Are we calling it as the initial amount to cover the cost of research, engineering, development and entry into service?

I'm thinking, even after "breaking-even", the entire sale price of any additional B787 doesn't automatically become profit. There is a whole bunch of production costs, raw material costs, delivery costs and other over heads. Working in this industry, I know that raw material and manufacturing (labor, technical etc) costs are going to drive up too, not to mention inflation. Remeber B787 parts are transported from all around the world, and that costs more each passing year. Profit from each additional sale of B787 could get less and less.

Raise the price of the plane and sales could get affected, especially with new competition and better and more technologically advanced planes come out.

I guess, my point is that, I don't believe in an early forecast of a certain break even point now. It will defintely flucuate even after going past whatever "break even" point we have defined.


User currently offlineGlideslope From United States of America, joined May 2004, 1594 posts, RR: 0
Reply 20, posted (7 years 3 months 10 hours ago) and read 6133 times:

Quoting KFLLCFII (Reply 3):
Pardon my ignorance, but to date, has a launch aircraft ever passed its breakeven point before a single aircraft had even been delivered?

Or for that matter, has a launch aircraft ever passed its breakeven point before a single assembled hull had even taken to the sky?

No need for concern. This is a Boeing project. It will EIS as scheduled, at weight, and sell over 1,000 airframes + during it's cycle.

So, relax.  checkeredflag 



To know your Enemy, you must become your Enemy.” Sun Tzu
User currently offlineGlideslope From United States of America, joined May 2004, 1594 posts, RR: 0
Reply 21, posted (7 years 3 months 10 hours ago) and read 6110 times:

Quoting Sacamojus (Reply 18):
The trick is to find the timing of the cash flows, and to see how much positive cash flow you have to take in (discounted at the discount rate) to over come the initial cost of the project. This is a crude model but much better than what I usually see posted.

It's not really that crude. Cash Flow is a HUGE advantage for Boeing at this point in history. The recent 20+20 LH order, IMO, was a good example of Cash Flow use timing.



To know your Enemy, you must become your Enemy.” Sun Tzu
User currently offlineLHStarAlliance From , joined Dec 1969, posts, RR:
Reply 22, posted (7 years 3 months 10 hours ago) and read 6090 times:

And of the 748I&F?


filler


User currently offlineJacobin777 From United States of America, joined Sep 2004, 14968 posts, RR: 60
Reply 23, posted (7 years 3 months 10 hours ago) and read 6053 times:

Quoting Leelaw (Reply 17):
Boeing now claims that: "the Dreamliner [is] the most successful commercial airplane launch in history."

See: http://boeing.com/news/releases/2007....html

Thank you so kindly Leelaw... Smile

Validates my arguments and then some..



"Up the Irons!"
User currently offlineEvilForce From , joined Dec 1969, posts, RR:
Reply 24, posted (7 years 3 months 10 hours ago) and read 6009 times:

Quoting GEnxPower (Reply 19):
What is the definition of "break even point" used here anyways? Are we calling it as the initial amount to cover the cost of research, engineering, development and entry into service?

That's the $64K question. Depending on what everyone "interprets" break-even to be.

Keep in mind Boeing doesn't even have all the information for break-even yet. It has highly educated guesses, but until the production line is ramped up and the "bugs" worked out, they don't know how the line will run. Less/more profit based on early assumptions will impact break-even.


25 BoomBoom : Of course the competition will also subject to the same inflationary pressures, not to mention exchange rate risk, and a less flexible labor market.
26 Post contains links and images Keesje : I think the total investments will wil higher the $8 Bill, keeping in mind all teh advanced technology and recent addition investments. I think $10 co
27 Reggaebird : I have no idea what the breakeven point would be for the 748I & F but it will be significantly lower and more attainable than that of the A380 (P&F),
28 Post contains images KFLLCFII : No concern here for profitability, I simply sparked the question to find out where this launch project matches up against the rest at this stage in d
29 JayinKitsap : If Boeing had located in Texas or Alabama where all Businesses have very low State & Local taxes would that be a subsidy? When Airbus enjoys low wage
30 Post contains links BoomBoom : So is it $10 billion or $4 billion? You seem confused by your own propaganda. The Washington tax breaks are available to any aerospace company that s
31 EvilForce : Both Boeing and Airbus hold their respective locales, municipalities, and countries feet to the fire to offer them the best subsidies, tax rebates, an
32 LHStarAlliance : Yes sure as the 748 is an evolution of an other existing A/C
33 Post contains images Astuteman : It's without doubt a great achievement. On the cashflow side, however, I'd suggest that a consequence of the large order backlog, and consequent rapi
34 Post contains images Zvezda : ... and then some. I'm sure the deposit money won't cover all the "buying stuff."
35 Stitch : Yup. It's really counterproductive to trot one or the other out to bolster one's argument since the other side can just respond in kind. The fact is
36 Post contains images Leelaw : As I've said before, both of the OEMs sit in front of the governmental trough as much as possible in numerous ways, and neither comes to the "subsidi
37 Post contains images Ikramerica : You don't understand tax cuts, maybe because the EU doesn't believe in them? Seriously, Boeing does not get this money up front. They get a discount
38 Post contains images N328KF : I think the only manufacturers that you can grant this to are the pure-civil players--this includes airframers that only sell a small portion of thei
39 Astuteman : That said, just before the ramp-up to full production is probably where cashflow is at its most critical (you've paid for the development, and are no
40 Post contains images Leelaw : Personally, I'd look pretty scary "dragged-up" in a two-piece, mumu, or grass skirt.
41 Post contains images Stitch : 10 points, sir.
42 Reggaebird : I agree. Boeing was able to make a financially viable and modern solution out of a 38 year-old model but Airbus couldn't do the same with a 14 year-o
43 Post contains images Stitch : To be fair, "sixth time" was the charm for the 747 as much as it was for the A350. B747: 744X, 745, 746, 74X, 74A, 748I A350: A330X/A3501, A3502, A35
44 Luvflng : This is just a pure NPV of all cash flows that a company may expect from the project/product. There is no implication of any break even point in term
45 Burnsie28 : Really, then why is the A380's BEP around 250 frames or at once was?
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