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Profit Made On Each Airliner Made?  
User currently offlineCc2314 From Ireland, joined Jan 2008, 159 posts, RR: 0
Posted (5 years 2 months 4 days 17 hours ago) and read 1860 times:

Just a quick question,

If an airliner cost 150million for an airline purchase how much of this cost would be profit to the likes of airbus or boeing? How much would the aircraft cost to manufacture??

4 replies: All unread, jump to last
 
User currently offlineMEA-707 From Netherlands, joined Nov 1999, 4359 posts, RR: 35
Reply 1, posted (5 years 2 months 4 days 16 hours ago) and read 1815 times:

There is no quick answer possible on this question.
In simple terms, an aircraft like this probably costs 2-8 billion to design and test, including the production line and production hall.
With each aircraft built, the manufacturer wants to cover part of these design costs. If the sales go well and the competion is not undercutting the market rate, ideally the revenue would be around ( disclaimer; rough estimates only !!!)
50% direct production costs
30% write off development and testing
20% profit

The problem is that a slow economy, intense competition, tough and big buyers, a second hand market with comparible types for lower rates, can all eat up the margin, not only the profit margin but also the write off margin.

Say, an aircraft costs 150 million. The economy is slow, you think of halving the monthly production rate, and then a big airline, say Ryanair, approaches you and says, listen we only pay you 90 million a piece. Of that amount almost everything, 75 million goes to material, parts and salaries. At least you don't have to fire your staff and keep the production line busy. What's left is hardly enough to cover write offs let alone make a profit, but when Ryanair walks to your competitor and builds up a long term fleet of their aircraft the situarion is worse; you don't recoup the development costs or make a profit either plus you have to shrink your production output and your staff.
Also overtime we saw Airbus being more adventurous with startups to increase market rate, while Boeing insisted in being paid a better price (the reason easyJet, JetBlue and Frontier went to Airbus). After much critisizm around 2001, Boeing has now also gotten more keen in undercutting prices in order to keep their big customers on board.



nobody has ever died from hard work, but why take the risk?
User currently offlinePanHAM From Germany, joined May 2005, 9752 posts, RR: 31
Reply 2, posted (5 years 2 months 4 days 16 hours ago) and read 1791 times:

The cost of financing was taken out of the above calculation completely......

There are so many variables that it is virtually impossible for outsiders to tell how much profit is left on a single copy. Wallstreet analysts may be able, but they have much more confidential data on ahnd. The first 50 or so ships are more costly to produce than the last 100 of a series and the real profits are made with the spare parts anyway.

That is so with all OEMs.regardless what they make



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineMEA-707 From Netherlands, joined Nov 1999, 4359 posts, RR: 35
Reply 3, posted (5 years 2 months 4 days 16 hours ago) and read 1733 times:



Quoting PanHAM (Reply 2):
The cost of financing was taken out of the above calculation completely......

I wrote something about that as well but deleted it as it would make the explanation too hard. My goal was explaining the trap of the sunk or indirect costs which you already have made and the direct costs of building an additional aircraft. Of course write off costs cover costs of financing a program as well.
And of course 150 million paid in cash is worth much more then a promise to pay it in installments over the next 10 years, so the financing of the sale is also a delicate story.
I doubt the OP will understand your remark on OEM's, my goal is that he understands the big picture.



nobody has ever died from hard work, but why take the risk?
User currently offlineCc2314 From Ireland, joined Jan 2008, 159 posts, RR: 0
Reply 4, posted (5 years 2 months 4 days 15 hours ago) and read 1652 times:

Thanks for the reply guys,i wasnt too intersted in knowing how design costs would effect the final cost of the aircraft as that would be the case in every sale of piece of mchinery.

More of interest to me was the the cost of parts& labour costs.


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