Major Aircraft Program Profitability

Sat Jul 03, 1999 4:02 am

The old rule of thumb is in order for a (new) commercial design to be profitable; the program has to sell 400 units in 10 years.

Let’s look at the major jet aircraft programs and see which ones have been profitable:

B747-----------380 (414 after 11 years)
B757----- ----412
B777-----------216 (after 5 years on pace to be profitable)


A300/A310-------- 225
A330/340----------280 (after 8 years NOT on pace to be profitable)


Boeing 6 of 7 or 85%

Airbus 1 of 3 or 33%

MD 1 or 3 or 33%

Interesting facts. The total production numbers could be + or – a few but not enough to make a difference.

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RE: Major Aircraft Program Profitability

Sat Jul 03, 1999 4:20 am

How are you tabulating this, by virtue of airplanes actually built and flying today?

The assumptions made in this -especially the- A330-A340 are taking a lot of liberties, especially with the A330-200 literally taking off in many ways. The thing has over 150 orders in less than a few years time.

Another (rather funny one I might add) but..the 737 numbers..are those the ones actually built and flying..then compare that to the A32X series...(LOL!) I mean..I know there is a truckload of 737s and now over 1000 A32X's flying out there..but these numbers are all over the place. The 747 numbers also...are these the ones flying? I'm thinking over 1000 747s have been built..

Another thing to consider in all of this..the DC-10/MD-11...Money Loser central on that as a program..I reference the excellent two issue expose on that series in Airways magazine. The DC-10 and MD-11 in financial terms was a -disaster-.

I'll have to go check Bill Harm's site that details commercial airliner disposition. Is that your site referencing this?

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RE: Major Aircraft Program Profitability

Sat Jul 03, 1999 4:21 am

I saw the numbers and was wondering if the 737 and 727 numbers were intended to be reversed. 904 727's sounds a little high and 481 737's sounds a little too low. If im wrong sorry about that..

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Run This Again In About 5 Years..(G)

Sat Jul 03, 1999 4:28 am


I'd suggest running this tabulation again in about 5 years.

I say that because I really believe there is a paradigm shift goingon right now in the airline industry with regards to suppliers. And yes I'm saying this is a very dynamic trend that favors new competition.

The key players in this are of course Airbus and now the Regional jet makers like Embraer, Bombardier, and Avro. This era of RJ's is really going to define something new for airline flying.

The other show is going to drop when the A3XX is launched. (G)


RE: Run This Again In About 5 Years..(G)

Sat Jul 03, 1999 4:59 am

First the 727 vs 737 numbers are correct. The 737 was very slow out of the gate. The DC-9 was more popular at the beginning and the 737 really did not take off until US airline deregulation.

Running this again in 5 years would not change the results significantly. We are 8 years into the A330/A340 programs and they will not at current or planned production rates meet the 400-unit total for profitability. Even if the 717 program fails to get enough orders to meet the profitability test, the A3xx program will create even bigger losses.

The real point here is that Boeing has had to get capital to launch its programs at market interest rates throughout its history. It has made a profit on all of these programs.

McDonnell Douglas did not make money on its programs and we see the result.

Airbus is protected by its "status". Instead of using commercial sources for its capital to start programs it has had government support. If Airbus had to live by the same rules as Boeing, it would have disappeared before the A300/A310 series reached 10 years of age and the A320 was launched.

Before you claim that Boeing gets government support via military programs, please note that Airbus members Aerospatiale, British Aerospace, and DaimlerChrysler Aerospace also have very large military contracts.

In the past 30 years, Aerospatiale/BAe/DASA/CASA (and their predecessors) had received significantly more government military and space contracts than Boeing.

These are the facts. Look them up!

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RE: Run This Again In About 5 Years..(G)

Sat Jul 03, 1999 6:24 pm

TAD wrote:
Airbus is protected by its "status". Instead of using commercial sources for its capital to start programs it has had government support. If Airbus had to live by the same rules as Boeing, it would have disappeared before the A300/A310 series reached 10 years of age and the A320 was launched.

Before you claim that Boeing gets government support via military programs, please note that Airbus members Aerospatiale, British Aerospace, and DaimlerChrysler Aerospace also have very large military contracts.

In the past 30 years, Aerospatiale/BAe/DASA/CASA (and their predecessors) had received significantly more government military and space contracts than Boeing.

These are the facts. Look them up!

Amazing stuff Tad but I cannot agree.

Firstly lets not begin this with a comparison of how Airbus operates versus Boeing. You must understand that what is being demanded here is something that isnt factually feasable. We all know how Airbus started up, we really dont need the history lesson.

But we do need an education in these so called "facts" you say need to be "looked up".

OK Fair..but where?

Where do you get your "facts" from?

I really would like to see your sources on this to back up this.

How can you compare the dollar figure spent upon the European defense contractors versus the US defense contractors?

It would be amazing if you are attempting to say the European contractors received -more- than the US ones! (G)

Firstly the 707 program was a child of Boeings KC-135, clearly a military program, and in dollar terms I just cannot conceive how the forementioned European companies you state -exceeded- the monetary compensation
received by Boeing, MDD, Lockheed, General Dynamics.

Simply preposterous. How can the outlays in budgets for such programs as the B-52, KC-135 (and all the differing variants of that type), the various fighter plane projects from Century Series to the current F-22 generation, let alone the massive transport plane projects (such as the C-5 , a project that helped launch the 747) and so forth..You need sir to really take a look at the massive amount of money spent on those programs, then take a look at what technology learned and transferred to profit making ventures like the commercial airplane programs.

What is being stated though about the European defense contractors is essentially a non-starter.

How can you compare the government expenditures the European aerospace manufacturers received from their governments versus the US defense contractors which also used and derived their technology rolling into their commercial programs.

I must say amazing! I must say also speaking from financial reporting experience inside the US Air Force, that the expenses incurred just from operations alone would be comparable to the cost of some of these programs by the US defense industry.

I can reference the CATO Institute report here for your perusal to just begin to debunk these claims:

Pay careful attention under the Commerce Department and the Defense Department entries into this and also understand that this is just for one year FY 1995.

I would very much like to see your sources on this as I will explore them.

...Inviting a factual response

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Joined: Tue Jun 08, 1999 3:03 am

Cato Institute Report

Sat Jul 03, 1999 7:10 pm

Here's an extract from that report.

I suggest reading this carefully and hopefully without prejudice (its written by a US lobbying group that is quite active in Libertarian politics I believe)

It will point up some glaring doublestandards in terms of subsidy and so forth which the US side frequently enjoys hide or pretending isnt there, or quickly changes the subject, "pointing fingers", A Clever and quite useful method with a lot of mileage in it's use by "Airbus bashers", but it doesnt work with me and many others.

The problem in this is refuses to recognizing the fact that the US side is
just as if not -far more- guilty of subsidizing supposedly "private enterprise" efforts, to also include state subsidized, below market rate Export financing of these same products.

Once you begin to peel away the "onion" you begin to understand just how deep and quite insideous this is and one reason I totally reject the claims by some on the US side that the only "villain" in this is the European side which is in all aspects complete balderdash.

And now, extracts from the Cato Institute Report
Under the Commerce Department:

Advanced Technology Program (1995 appropriation: $431.0 million). The mission of the Advanced Technology Program is to enhance the competitiveness of U.S. companies by helping them to make better use of basic research in new technologies. ATP gives away nearly half a billion dollars a year in R&D grants to huge high-tech corporations like Caterpillar, General Electric, and Xerox. Those grants assist some of the United States' largest companies in developing and bringing to market profitable new products. General Accounting Office audits have found many ATP grantees whose overhead costs exceed actual research expenses.[47] ATP was zeroed out by Congress last fall in the 1996 appropriations bill that funds the Commerce Department. President Clinton vetoed that bill and secured a compromise in the recently enacted FY 1996 Omnibus Appropriations Bill (H.R. 3019) that allows ATP to survive with a 49 percent budget cut.

International Trade Administration (1995 appropriation: $266.1 million). The International Trade Administration conducts export promotion programs directed
toward specific industry sectors through its Trade Development Program. ITA's U.S. and Foreign Commercial Service provides counseling to U.S. businesses on
exporting and facilitates participation of U.S. firms in trade shows. ITA also provides marketing services, develops regional and multilateral trade strategies, and investigates economically antiquated anti-dumping and countervailing duty cases. All those activities are more appropriately conducted directly by the private businesses and industries they are intended to benefit.

Defense Department

Technology Reinvestment Project (1995 appropriation: $443.0 million). The Technology Reinvestment Project is the primary vehicle of the Defense Department's strategy to encourage the development of dual-use technologies (i.e., those with both military and civilian uses). Proponents of dual-use technology development argue that it will help to reduce procurement costs and enable the military to more rapidly integrate new technologies into defense systems. In reality, the millions of dollars of TRP research grants given to huge high-tech firms like Boeing, Hewlett Packard, and Texas Instruments end up subsidizing the development of profitable new civilian technologies that should be developed by private industry.

Independent Agencies and Other:

Export-Import Bank (1995 appropriation: $782.1 million). The Export-Import Bank uses taxpayer dollars to provide subsidized financing to foreign purchasers of U.S. goods. Eximbank's activities consist of making direct loans to those buyers at below-market interest rates, guaranteeing the loans of private institutions to those buyers, and providing export credit insurance to exporters and private lenders. In effect, Eximbank subsidizes the exports of some of America's largest companies, including Boeing, General Electric, and Westinghouse. Furthermore, according to the Congressional Budget Office, in the 60 years of its existence, Eximbank has lost $8 billion on its operations--most of that in the last 15 years. In addition, the new subsidy costs for Eximbank are estimated to be about $800 million a year.

In summary, the total from -just these- entries for FY 1995, US taxpayer supported programs that benefitted "private industry" total up to a whopping

$1.922 Billion (that's with a -B-)

--for one year alone, FY 1995--

Now what shall we estimate for years prior to this?

What can be explored there? I envision at least a figure -easily- from 4 to 6, to possibly as high as 10 times higher than this, especially during the Cold War years.

Say for the 747 development program during the 1960s (afterall it was part of the C-5 competition right, R&D was supported, and at least losses on it due to the Boeing product not being selected, were most probably explored and reported to the IRS in the form of a writeoff and other manuevers.)

Now, Please show me where and how the European defense contractors like DASA, BAe, Aerospatiale, etc get -that- kind of support. Here we have a very sophisticated structured government support network from the US government to supposedly "private industry" assisting it with R&D, as well as below market rate financing to sell these same US taxpayer assisted products thanks to another US taxpayer assisted instituion, the EX-IM Bank.

I invite your perusal of -these facts- and please show me dollar figures -exactly where- in the European defense industry , where and how much support they receive which in turn benefits Airbus Industrie or any of it's forebears before the Airbus Consortium was established (speaking of comparing how much stae support was there for BAe for it's Comet, Trident as well as 1-11, then I'd like to know how much in outlays were paid to Aerospatiale for the Caravelle, Vickers for it's VC-10, Rolls Royce for it's engine development, etc.)

I'd really be interested to see how much "more" those programs fared versus the Boeing, MDD, Convair, Lockheed competition.

Then we can flow chart it to today..I'd really love to see how much the Eurofighter or Tornado technology benefits the Airbus program and so forth and then claim that it exceeds the US defense contractors (G).

Otherwise, If the European defense industry was so much -bigger- in terms of dollar outlays, then literally "Pax Europa" would have been established.
Quite literally negating the need for NATO and US involvement all these years. (G) As history has shown otherwise, the US defense contractors did quite well and they reaped the benefits from their technologies into their commercial programs along with selling same products using state subsidized -below market rate- financing.

The pot calling the kettle black?
I think so.

I am very much interested in learning your sources.



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RE: Cato Institute Report-More Grist To Ponder

Sat Jul 03, 1999 10:24 pm

Here's a few links that I've compiled together here to just -begin- exposing the truly insideous nature of how deep US government subsidy to companies like Boeing and others exists.

Follow this link:

Between 1990 and 1997, the US taxpayer subsidized the sale of 11 -Billion- (with a -B-) worth of Boeing jetliners to overseas customers via the EX-IM Bank and at that in set up a dummy corporation overseas to escape income taxes-with official government encouragement- (sic!?).

Didnt we get a recent post here regarding taxes and Airbus, now I discover this one. It would be very interesting to see how an investigation of that bears out, Re: Boeing's tax evasion as alleged. Surprise, Surprise..Surprise..

$11 Billion in below market rate financing for Boeing products..very nice. The US taxpayers certainly -are- helping several of Boeing's commercial aircraft (Private enterprise?) programs maintain their profitability!!! (LOL!!!)

No wonder certain Boeing programs have been as you have declared "profitable" (G)..Well it's profitable sure but with a little * after that (Thank You The US Taxpayer)

OK...that's not enough?...follow this link.

This one gets very in depth over the costs from Pentagon grants for military operations with regards to NATO and expansion of it. The reason I included it here is to give an idea of just how -BIG- this type of stuff is. It details weapons giveaways and so forth.

And in the background, To claim that the European defense contractors get subsidized and supported on the -same- or -larger- level that US defense contractors do is in many ways completely -debunked- by reading this report.

The dollar figures included are simply far and away -well beyond- the reach of the European companies and implied, governments mentioned previously, the influence of the US Government negotiating these types of "deals" also speaks how much collusion exists with companies like Boeing, It's far more massive than people realize.

And Finally, this link:

Ralph Nader's letter to the FTC opposing the Boeing/MDD merger a few years ago.

"If the FTC approves the Boeing merger, what are the signals that we will send to the entire world? We can expect big businesses to respond with a wave of new
mergers spurred on by the new "two is enough" decision in the Boeing/MD case. The stunning precedent of the Boeing/MD merger approval will handcuff the
Department of Justice in their attempt to curb this wave. In foreign markets, the U.S. advocacy of antitrust enforcement will be rightly seen as self-serving. The
hypocrisy will be no less evident at home, where the FTC's strong and sensible action in the Staples-Office Depot merger will contrast strangely with the agency's derogation of its responsibility in the Boeing/MD case. The obvious conclusion will be that the politically powerful can escape serious antitrust review, while the less powerful cannot.

The Boeing/MD merger is the most important current test of our nation's commitment to antitrust enforcement. We urge you to reject the merger."

I shall be exploring on this further. This is going to be very interesting indeed. (G)


Philly Phlyer
Posts: 356
Joined: Sun May 23, 1999 12:05 pm

The "Big Lie" Is Alive And Well

Sun Jul 04, 1999 1:54 am

For those of you who are not familiar with the concept of the "Big Lie," it is that if you tell a lie that's big enough, people will believe it. ["If it wasn't true, they couldn't say it!"]

The same concept is alive and well in the aerospace industry. Airbus AND Boeing receive heavy subsidies in different forms. Airbus complains that Boeing is launching a price war with its sell to SIA while literally doing what they are accusing Boeing of with Lan Chile. Think US Airways is flying new airbuses because they didn't get a great deal? Believe otherwise and I have a bridge here in Philly to sell you.

Let's be honest and face several facts:

> Boeing does get help in the form of research funds and financing
> Airbus consortium members get similar help from their own governments
> Airbus doesn't have to turn a profit, it is established to keep its consortium members in business and give them profits.

As to the complaints that the 707 and 747 benefited from government funding. You need to break out the history books. On the KC tanker, Boeing lost out on the proposal (the military did not want the Boeing plane) and picked a competitor. Boeing, however, was able to deliver the KC 135 to meet interim needs (it was able to move faster because of its experience with big bombers) and eventually got the long term contract by taking that risk. The 747 lost to the Lockheed C5, so Boeing also converted it to passenger use. In both instances, Boeing took two lemons and made lemonade.

Now as to Airbus, the A300 was a lousy seller at first. I had clients who were Airbus suppliers who had stock collecting dust in their plants with production lines at a standstill for several years. Airbus stuck with it and made it a success (much as Boeing stuck with the 737) with the help and subsidies of the respective governments. Without those direct subsidies, Airbus would have gone out of business and the A320 & A330/340 (or A300NG as I like to call them) would not have been developed. As a developing entity, Airbus needed the help.

In both cases, the manufacturers are getting help so that is a lame excuse to this point. Now that Airbus is maturing, however, it is time to see it become a company and show it can turn a profit as well as it can make an airplane. To date, it has not done this.
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RE: The "Big Lie" Is Alive And Well

Sun Jul 04, 1999 3:01 am

Hey Philly Phlyer

You speak exactly where I am coming from in this whole thing.
Both sides receive subsidies. And literally it is the "Big Lie". Repeat it long enough before it is believed.

There are no "angels" in this whole "battle royal" that comes up every now and then.

What makes it so mind-numbing is one side attempts to say the other side is the only practitioner of it. Which is hogwash. (G)

As for the future privatisation of Airbus, its a ways off, but I think it will happen.

With so much happening in Europe in recent years, let alone this one, on top of the integration of the Euro and so forth, a lot of changes are in the offing. It's just a matter of time and dealing with them. I think the pressure will be on with the A3XX launching with state support at first, then privatising it.

The main thing that we Americans have to understand is this, their government and yes economic system is vastly different from our own. In all concepts from laws, to trade, to air fares, train fares, you name it. It's a very different way of living. Imposing something to change in a moments notice is simply not going to work.

Things like the trade issues (this one) are going to get solved, but they take time, patience and yes an open mind. The thing that gets a bit distressing is when one side starts demanding something to be done quickly. Knowing human nature; that isnt necessarily a motivating experience. (G)

A whole laundry list of things gets intertwined with this, one BIG one of which is politics on both sides of the Atlantic.


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