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Will The B787 Lose More Money Than The A380  
User currently offlineAlnicocunife From United States of America, joined Mar 2011, 163 posts, RR: 0
Posted (1 year 6 months 1 week 6 days 21 hours ago) and read 9370 times:

With the production of the A380 at about 100 aircraft, is Airbus losing more money than Boeing with the B787? No A380 deliveries in January 2013?

Airbus estimated 1,000+ passenger planes in the VLA category for the next 20 years starting in 2006 but there are only orders for 250+ A380's and about 50 orders for B747-8's

Boeing has 800+ orders for the B787 and it is presently not able to fly? When will the orders get canceled or how much will be required for Boeing to pay.

Both are impressive aircraft, but with their respective issues and sales what is the "break even" point?

31 replies: All unread, showing first 25:
 
User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 1, posted (1 year 6 months 1 week 6 days 20 hours ago) and read 9266 times:
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Boeing will never publicly release the actual costs and revenues of the 787 program, so nobody will ever know how much it made or lost. People will speculate, but their numbers will never be able to be fully trusted as the truth, regardless of how they come by them.

If Airbus is smart, they'll do the same about the A380.

So there is no definitive answer to your question and speculative answers are likely to devolve into an Airbus vs. Boeing flame war which will lead to the thread's eventual closure.

[Edited 2013-02-07 19:23:27]

User currently onlinepar13del From Bahamas, joined Dec 2005, 7115 posts, RR: 8
Reply 2, posted (1 year 6 months 1 week 6 days 19 hours ago) and read 9203 times:

Well if we go on volume, everything but size will be bigger on the 787 so the potential is obvious.
Market in terms of units is much larger for the 787 than the A380, more money will be spent building and buying 787 size a/c (include the A350) and one A380 is not twice the cost so................


User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 3, posted (1 year 6 months 1 week 6 days 19 hours ago) and read 9192 times:

Well, the 787 covers a far bigger market than the A380, so over the course of the program, the 787 is likely to do better.

However, an interesting question is whether the A380-800 will do better/worse than the 787-8. Both are likely to be the weakest part of their subfleet profitability wise and operationally.



Airports 2012: IXE HYD DEL BLR BOM CCU KNU KTM BKK SIN ICN LAX BUR SFO PHX IAH ORD EWR PHL PVD BOS FRA MUC IST
User currently offlinecornutt From United States of America, joined Jan 2013, 338 posts, RR: 1
Reply 4, posted (1 year 6 months 1 week 6 days 18 hours ago) and read 9088 times:

Back when the A380 was being proposed, Boeing was not going to go after that market. The two companies had market projections, both from about 1998, which differed sharply on the potential of the VLA market; IIRC Airbus estimate the market potential as about 2,000 aircraft and Boeing estimated about 200. I was really surprised when Boeing announced the 747-8 program, because it implied that the company was having second thoughts about that market projection. But lots of other things about the whole VLA market have surprised me in the past decade; I thought that a freighter version of the A380 would outsell the passenger version. I also thought there was a market for a commercial freighter version of the C-17, so what do I know.

User currently offlineMD-90 From United States of America, joined Jan 2000, 8505 posts, RR: 12
Reply 5, posted (1 year 6 months 1 week 6 days 18 hours ago) and read 8968 times:

Neither program is capable (at this point) of achieving a ROI rate that would've made sense when each project was given the go ahead by their respective boards so it's really a moot point. Who cares?

User currently offlineflyglobal From Germany, joined Mar 2008, 575 posts, RR: 3
Reply 6, posted (1 year 6 months 1 week 6 days 16 hours ago) and read 8714 times:

I am not sure if such a thread leads to anything.

Both programs have their core engineering money spent and the engineering cost have been already covered in the quarterly earnings.
It is rather important to draw lessens learned from those projects for the next ones, then to continue crying about the past.
And we see it in the A350 already where Airbus rather takes an earlier hit in timing and avoids potential rebuild activities.
Also at Boeing we see that the delay of the 777x decision is caused by a 'we better think twice before we go' learning in the company.

Regards

Flyglobal


User currently offlineplanespotting From United States of America, joined Apr 2004, 3526 posts, RR: 5
Reply 7, posted (1 year 6 months 1 week 6 days 14 hours ago) and read 8451 times:

All costs up to this point are sunk (i.e. spent and not coming back) so the success of both airplanes (once the 787 is allowed to fly again, that is) is now contingent (as always) on the sales guys. If both companies can make enough sales to recoup both the engineering investment costs and the loss of customer good will following delays, then the airplanes will be considered successful internally and externally.

If not, then the companies will tout their success externally while senior management and others within the company will know the truth. Barring unlikely circumstances (i.e., Boeing write off the the entire 787 project, or Airbus selling 50 or fewer frames from here on out), I'm sure we'll hear positive information on each aircraft from both companies.



Do you like movies about gladiators?
User currently offlinegoosebayguy From United Kingdom, joined Sep 2009, 392 posts, RR: 0
Reply 8, posted (1 year 6 months 1 week 6 days 13 hours ago) and read 8131 times:

Always tricky to work out profitability so early in an airliners life cycle. I look back the the 747 and its initial need for 400 to be sold as break even. It took many years to achieve this despite having the market all to itself. I'm sure both projects will make money but more than just money its about styaing ahead of the competition. When I say competition I refer to the rising force of China, Russia and Brazil. Would one of these pump money into a similar A380 project? Probably not. Firts mover has an advantage here which due to the low volume simply stops anyone even considering entering this market. With the 787 its about building an entire composite aircraft and being competitive against Boeing or Airbus who as their projects mature will be finding efficiencies and cost savings while increasing fuel efficiency. Boeing has invested in the future here and it will make them piles of money but first ly they have to get it right and hold their nerve.

User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 9, posted (1 year 6 months 1 week 6 days 7 hours ago) and read 7713 times:
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One item that will likely support the 787's position is that if Boeing is successful in delivering thousands of frames, they will generate a huge amount of high-margin ancillary revenue.

User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 10, posted (1 year 6 months 1 week 6 days 5 hours ago) and read 7480 times:

Quoting MD-90 (Reply 5):
Who cares?

In the long term everyone in the traveling public should, because we're the ones who pay for it.



Inspiration, move me brightly!
User currently offlineSEA From United States of America, joined Jul 2011, 235 posts, RR: 0
Reply 11, posted (1 year 6 months 1 week 5 days 23 hours ago) and read 6590 times:

If you look at Boeing's financials from the last year, I think the 787 is actually making Boeing money, in combination with the 737 NG.

User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 12, posted (1 year 6 months 1 week 5 days 23 hours ago) and read 6400 times:
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Quoting SEA (Reply 11):
If you look at Boeing's financials from the last year, I think the 787 is actually making Boeing money, in combination with the 737 NG.

Boeing should be currently losing money on each 747-8 and 787 delivery, but they're making plenty on the 737, 767 and 777 and they're delivering more of them, so their overall financial picture remains strong.

[Edited 2013-02-08 16:17:39]

User currently offlineAlnicocunife From United States of America, joined Mar 2011, 163 posts, RR: 0
Reply 13, posted (1 year 6 months 1 week 5 days 22 hours ago) and read 6092 times:

It took Boeing about 10 years to make 500 B747's. A380's built 100 in 6 years with a a projected ROI of 400+ airframes.

Boeing has 800+ orders for the B787 with a projected ROI of ??? Plus the cost of over 2 years delay and who knows how much for the cost of battery issues.

If Airbus can make 400+ A380 in 20 years of manufacture I do not think it will make any profit.

How many airframes must Boeing make on the B787 (that actually fly) to even recover the costs of development, manufacture, delays and present issues?


User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 14, posted (1 year 6 months 1 week 5 days 22 hours ago) and read 6020 times:
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Quoting Alnicocunife (Reply 13):
How many airframes must Boeing make on the B787 (that actually fly) to even recover the costs of development, manufacture, delays and present issues?

Only Boeing knows and they're never going to share.


User currently offlinezippyjet From United States of America, joined Sep 2001, 5478 posts, RR: 12
Reply 15, posted (1 year 6 months 1 week 5 days 19 hours ago) and read 5344 times:

I'm an optimist and feel once all the issues are rectified on the 787, it will be a success and popular amongst the flying public. This in spite of that addage that most people don't care what they are flying on and couldn't tell the difference between an ATR or a 380. The planes seem to be built with many creature comforts.


I'm Zippyjet & I approve of this message!
User currently offlinecornutt From United States of America, joined Jan 2013, 338 posts, RR: 1
Reply 16, posted (1 year 6 months 1 week 5 days 18 hours ago) and read 5241 times:

Quoting Alnicocunife (Reply 13):
How many airframes must Boeing make on the B787 (that actually fly) to even recover the costs of development, manufacture, delays and present issues?

Hard to say, but whatever the usual number for an aircraft of that size it, I think it's fair to say that the number will be higher for the 787. We can count on the usual sequence of derivatives and incremental models over the next few years -- there will be fuselage stretches, more powerful engines, the usual improvements, and that will sell more aircraft. The other side of that is that Boeing may not be that bothered if they don't make a ton of money on the 787 itself, since the program has created a big bank of new technologies to use on future models.

As for the A380, I really have no idea. We've all heard the usual discussions about that program's finances, so I won't rehash that here. It may turn out like the 747 program, where they never make a ton of them every year, but there's always enough orders to keep the line open and eventually a significant number are sold over time. I still think the cargo carrier market will eventually be important to the A380, but that may happen indirectly -- the cargo lines, looking for replacements for old DC-10s and 747-200s, start offering to buy early-production A380s from the passenger lines, who then order improved A380 models to replace them.


User currently offlinecornutt From United States of America, joined Jan 2013, 338 posts, RR: 1
Reply 17, posted (1 year 6 months 1 week 5 days 18 hours ago) and read 5225 times:

Quoting flyglobal (Reply 6):
Also at Boeing we see that the delay of the 777x decision is caused by a 'we better think twice before we go' learning in the company.

There's another factor: For most of the last decade, Boeing has been relying on the defense and space half of the company to be a resource and cash cow to help cover the 787 development. That side of the business is now showing its age and is sorely in need of some investment. The need to do that is going to put some limits on how many aircraft developments they can take on for the next few years.


User currently offlinesweair From Sweden, joined Nov 2011, 1817 posts, RR: 0
Reply 18, posted (1 year 6 months 1 week 5 days 15 hours ago) and read 5099 times:

Both programs have costs still to take, A380-wings, 787-batteries. BUT both these programs will also have use in other programs, A350-A380, 787-777-X.

They took rnd cost in one program and use it on another program.

It´s not as easy as many think.

It might not be 100% reuse of technology in another program but it will still be of use and the big upfront rnd cost is already sunk.


User currently offlineastuteman From United Kingdom, joined Jan 2005, 9997 posts, RR: 96
Reply 19, posted (1 year 6 months 1 week 5 days 14 hours ago) and read 4976 times:
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Quoting SEA (Reply 11):
If you look at Boeing's financials from the last year, I think the 787 is actually making Boeing money, in combination with the 737 NG.

Boeing themselves have said that they will be making a unit cost loss on every 787 until sometime during 2015 (which incidentally is almost exactly the same statement Airbus have made for the A380). Therefore the 787 is without question NOT making money for Boeing at this time, even incrementally, any more than the A380 is for Airbus.

Break-evens for each type?
We'll never really know. My guess would be aroud 1000 - 1100 for the 787, and 500 - 600 for the A380.
i.e. into next decade in terms of deliveries for each type

For what its worth I think both models will eventually pass those numbers - the 787 substantially so.
In which case the thread starters question is moot. as ultimately I don't think either will end up losing money.

That time though may be far enough beyond the investment date to render the "profit" figure on an NPV basis meaningless.

Either way, both types having had the investment made, the only way is forwards.
So why should anyone really care?
Because it will make absolutely no difference   

Rgds


User currently offlinePellegrine From United States of America, joined Mar 2007, 2419 posts, RR: 8
Reply 20, posted (1 year 6 months 1 week 5 days 12 hours ago) and read 4777 times:

Quoting astuteman (Reply 19):

Your numbers are skewed. I would say 1450-1500 for the B787 and 475-550 for the A380. BOTH projections on my side are doable within time. I believe both programs will make money within a 20-yr timeframe. Doom and gloom is not relevant.



oh boy!!!
User currently offlineAlnicocunife From United States of America, joined Mar 2011, 163 posts, RR: 0
Reply 21, posted (1 year 6 months 1 week 5 days 8 hours ago) and read 4570 times:

Quoting astuteman (Reply 19):
n which case the thread starters question is moot.

Yes the topic could/should have been, "which would be more profitable" but everyone likes bad news.


User currently offlineastuteman From United Kingdom, joined Jan 2005, 9997 posts, RR: 96
Reply 22, posted (1 year 6 months 1 week 5 days 6 hours ago) and read 4390 times:
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Quoting Pellegrine (Reply 20):
Your numbers are skewed

"My numbers are skewed"?
They were opinions, exactly the same as your numbers are........
At least you're not accusing me of being biased towards the A380, which would be the norm on here  
Either way it matters not, as we seem to agree on the ultimate outcome..

Quoting astuteman (Reply 19):
ultimately I don't think either will end up losing money.
Quoting Pellegrine (Reply 20):
I believe both programs will make money within a 20-yr timeframe. Doom and gloom is not relevant.

 

Rgds


User currently offlineZKCIF From Lithuania, joined Oct 2010, 293 posts, RR: 0
Reply 23, posted (1 year 6 months 1 week 5 days 2 hours ago) and read 4171 times:

Personally, I also think and hope that both will be making money.

380

My estimate (totally based on what I've read and without any insider knowledge) is that Airbus needs to build 600. Yet, I am not sure that the market will take that many without 389 being launched. I see this as a quite expensive development. With this, I would add 100 and get 700. With the average production of 35 per year (we are already getting to 33 in 2014), Airbus should be *in the land of the black ink* in:
(700-100)/35=17 years. I would add 1 more year due to inflation (they expected earlier deliveries and agreed on prices that would ultimately be paid several years later on average and would thus get lower value per money).
Hence, including inflation, I would say, in 2031. I am sure the program will get there. Of course, if the program runs at the rate of 40 or even 45 deliveries annually, the very number of '700' may also decrease. The best case scenario for me is in about 2026.
If a freighter version is launched, the productivity increase will recoup the development losses and the year of 'black ink' should not change to the right at least.

787

My estimate is 1500    .
To make matters worse, the development of 7810 is badly required and it will take some 150 frames more to recoup.
With this, I believe the delivery on Jan 1, 2014 being about 80 and going at about 110/year should make it 1570/110=14 years plus two years for inflation (many prices of deliveries and options were agreed in the values of the 2000s) thus 2014+16=2030.
Of course, if the market is extremely hungry for 787 (provided it is as great as 77W) and the production exceeds 110/year, they may get *there* in 2028 or 2027.
If a freighter version is launched, the productivity increase will recoup the development losses and the year of 'black ink' should not change to the right at least.

The major difference for me is that I do not believe that A380 will get a competitor in the nearest future. Meanwhile, 787 could get a direct competitor in about 2030 thus 787 could be more in a hurry.

This is just an opinion. Don't shoot. Everything that flies is beautiful to my eye.
Cheers.


User currently offlinePellegrine From United States of America, joined Mar 2007, 2419 posts, RR: 8
Reply 24, posted (1 year 6 months 1 week 4 days 13 hours ago) and read 3809 times:

Quoting astuteman (Reply 22):

"My numbers are skewed"?
They were opinions, exactly the same as your numbers are........
At least you're not accusing me of being biased towards the A380, which would be the norm on here  
Either way it matters not, as we seem to agree on the ultimate outcome..

I did not mean to be accusatory. Without going too much into detail, only 1000-1100 787s, cannot possibly pay for Boeing's development expenditure. Again (for other readers...I know astuteman knows this), both airplanes are not even projected to be unit cost positive until 2015-16. The 787 dev. has cost $35-40 billion and running, yet the A380 has cost $20-22 billion. (Both are over budget.)



oh boy!!!
User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 25, posted (1 year 6 months 1 week 4 days 7 hours ago) and read 3714 times:
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Quoting Pellegrine (Reply 24):
The 787 dev. has cost $35-40 billion and running...

The 787 development cost is about half that. The remainder is inventory costs for undelivered and unfinished airframes.

[Edited 2013-02-10 08:07:21]

User currently offlineMaersk737 From Denmark, joined Feb 2004, 702 posts, RR: 1
Reply 26, posted (1 year 6 months 1 week 4 days 5 hours ago) and read 3505 times:

Boeing and Airbus can´t just continue the walk down Memory Lane... They have to take a calculated risk in order to stay on top. Sometimes they may loose a bit of money, but the knowledge and know-how they get is invaluable.


Peter

[Edited 2013-02-10 09:45:44]


I'm not proud to be a Viking, just thankfull
User currently offlinesweair From Sweden, joined Nov 2011, 1817 posts, RR: 0
Reply 27, posted (1 year 6 months 1 week 4 days 5 hours ago) and read 3511 times:

Quoting Pellegrine (Reply 24):
The 787 dev. has cost $35-40 billion and running, yet the A380 has cost $20-22 billion. (Both are over budget.)

Why not check the numbers before posting? That was way off target and most posters don´t make such mistakes if it´s not on purpose.


User currently offlineF9animal From United States of America, joined Dec 2004, 5025 posts, RR: 28
Reply 28, posted (1 year 6 months 1 week 4 days 5 hours ago) and read 3465 times:

Boeing may see a profit on the program after about 500 planes. If the problems continue, then it very well may not profit on it. The costs associated already are astronomical. Boeing has the 737, which has kept the company running during rough times. Maybe if the 787 is as successful as the 737, the plane could very well be what keeps Boeing going during rough times in the distant future. As for now though, the program has red ink pouring out of it. Especially at this very moment. Hope this grounding will result in getting most of the bugs fixed as well.


I Am A Different Animal!!
User currently offlinePellegrine From United States of America, joined Mar 2007, 2419 posts, RR: 8
Reply 29, posted (1 year 6 months 1 week 3 days 12 hours ago) and read 3068 times:

Quoting Stitch (Reply 25):
The 787 development cost is about half that. The remainder is inventory costs for undelivered and unfinished airframes.

I beg to differ. What you're talking about, costs previous to the 1st delivery, were in excess of $20-25 billion. They have ballooned further since then. Let's not argue over minutiae, even if we're reading the tea leaves differently.

Quoting sweair (Reply 27):
Why not check the numbers before posting? That was way off target and most posters don´t make such mistakes if it´s not on purpose.

Considering other factors, I am not going to dignify this with a response beyond this. Where are your numbers, or do you just choose to criticize mine? Seriously? Numbers are my business.

I stand by my statement that both programs will be net-positive (development costs and all) in a 20 year timeframe. Both projects are multi-decade investments. There is no A vs. B on my side.



oh boy!!!
User currently onlineStitch From United States of America, joined Jul 2005, 30855 posts, RR: 86
Reply 30, posted (1 year 6 months 1 week 3 days 7 hours ago) and read 2798 times:
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Quoting Pellegrine (Reply 29):
I beg to differ. What you're talking about, costs previous to the 1st delivery, were in excess of $20-25 billion. They have ballooned further since then.

Yes, total monies spent on everything (R&D, WiP inventory, tooling, capital expenditures, supplier loans, supplier buy-outs, etc) before the delivery of LN8 (the first 787 delivered) was in that range based on the figures provided by The Seattle Times in late 2011.


User currently offlineRevelation From United States of America, joined Feb 2005, 12417 posts, RR: 25
Reply 31, posted (1 year 6 months 1 week 3 days 6 hours ago) and read 2697 times:

Quoting Pellegrine (Reply 29):
They have ballooned further since then

What is the basis of this statement? It'd seem the bulk of costs happened before first delivery. I'm not saying things have been free of cost since then, and the current crisis is not helping, but I don't see the rationale for "ballooned" costs since then.



Inspiration, move me brightly!
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