Boeing to accelerate 787 production, increases accounting block

osupoke07 · Wed Sep 13, 2017 5:03 pm

Ostrower on Twitter reporting that Boeing to increase production rate to 14, and the accounting block has increased by 100 frames. I don't have a link I can post yet.

KarelXWB · Wed Sep 13, 2017 5:04 pm

Boeing CEO Muilenburg today announced the 787 production rate will be increased to 14 aircraft per month in 2019, and added the accounting block will be increased by 100 airplanes.

https://twitter.com/Boeing/status/908011887715119106

ikolkyo · Wed Sep 13, 2017 5:11 pm

Bet they have some orders in the pipeline.

jbs2886 · Wed Sep 13, 2017 5:51 pm

As in the title, production will increase from 12 to 14x per month in 2019. There was some expectation that Boeing would not increase production due to the downturn in wide body orders.

http://www.seattletimes.com/business/bo ... per-month/

MIflyer12 · Wed Sep 13, 2017 6:12 pm

For those who might not use the 'Seattle Times' link, here's what may be the bigger news:

'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'

cledaybuck · Wed Sep 13, 2017 6:15 pm

MIflyer12 wrote:
For those who might not use the 'Seattle Times' link, here's what may be the bigger news:

'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'

How is a change in the accounting block bigger news that a change in the production rate?

KarelXWB · Wed Sep 13, 2017 6:16 pm

MIflyer12 wrote:
For those who might not use the 'Seattle Times' link, here's what may be the bigger news:

'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'

Many people expected that to happen.

Stitch · Wed Sep 13, 2017 6:18 pm

Kind of surprised it was only to 1400 (I expected 1500-1600), but a conservative boost won't raise the attention of the market as much and they can always raise it later should they close in on 1400 firm orders.

BN727227Ultra · Wed Sep 13, 2017 6:37 pm

Working on clearing out the backlog so Boeing can get cracking on the 787MAX? :-)

Momo1435 · Wed Sep 13, 2017 6:48 pm

Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.

So far this year Boeing booked / announced just over 100 firm orders / MoUs & Commitments. With a bit of luck this could be much higher at the end of year. Boeing of course knows who they are talking to, all the buzz from Indian carriers wanting to start long haul routes will be very interesting to watch. And it's not likely that the Chinese order rush is going to slow down anytime soon. Even without reaching 168 orders the next couple of years the rate of 14 per year could easily be continued into 2024 before it might become a problem.

jbs2886 · Wed Sep 13, 2017 6:51 pm

Momo1435 wrote:
Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.

So far this year Boeing booked / announced just over 100 firm orders / MoUs & Commitments. With a bit of luck this could be much higher at the end of year. Boeing of course knows who they are talking to, all the buzz from Indian carriers wanting to start long haul routes will be very interesting to watch. And it's not likely that the Chinese order rush is going to slow down anytime soon. Even without reaching 168 orders the next couple of years the rate of 14 per year could easily be continued into 2024 before it might become a problem.

I suspect a fair number of those aircraft won't be delivered by 2021 so there is likely positions available.

448205 · Wed Sep 13, 2017 6:54 pm

AA has 58 options that could become firm if they drop the A350 order.

jbs2886 · Wed Sep 13, 2017 6:54 pm

Varsity1 wrote:
AA has 58 options that could become firm if they drop the A350 order.

AA doesn't have to drop the A350 to firm all of its options. It may decide to take the options and the A350s...

Either way, not really sure what the relevance of the post is? Are we listing out all options for Boeing 787s? :lol:

Momo1435 · Wed Sep 13, 2017 7:10 pm

jbs2886 wrote:
Momo1435 wrote:
Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.

I suspect a fair number of those aircraft won't be delivered by 2021 so there is likely positions available.

We already see this happening, most orders that were firmed up last year and even some from this year have 1st deliveries in 2018. The new orders are filling up already available slots and also slots freed up by deferrals. This is good for the number of orders as airlines can get them fairly quickly, even with such a large backlog. With the rate increase now decided it will even create more early slots in 2019. This might actually explain in part the fairly high number of orders so far this year.

jbs2886 · Wed Sep 13, 2017 7:18 pm

Momo1435 wrote:
jbs2886 wrote:
Momo1435 wrote:
Making a quick calculation with the 700 in the backlog and a mid 2019 date for the raise to 14 per month the 787 production line is still completely filled until the end of 2021.

I suspect a fair number of those aircraft won't be delivered by 2021 so there is likely positions available.

We already see this happening, most orders that were firmed up last year and even some from this year have 1st deliveries in 2018. The new orders are filling up already available slots and also slots freed up by deferrals. This is good for the number of orders as airlines can get them fairly quickly, even with such a large backlog. With the rate increase now decided it will even create more early slots in 2019. This might actually explain in part the fairly high number of orders so far this year.

We haven't heard of too many 787 deferrals, some yes. I meant that the backlog, without deferrals, still stretched beyond 2021.

JAAlbert · Wed Sep 13, 2017 7:20 pm

Jeez, I remember a time when 1,400 was considered the high end of an aircraft's run. I remember when the 747 achieved 1,400 orders and everyone used the 747 as the benchmark for a successful run - now, 1,400 is just a mid-point. How many 787s do you think will be ordered before the series ceases production? 2,000? 2,500?

The 787 certainly has enjoyed a good year so far, I hope we start seeing several of them here in SAN.

Ronaldo747 · Wed Sep 13, 2017 7:22 pm

BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

Similar thoughts, too. I don't think about entirely new engines but I think we will see a revised 787 down the line, with an much lighter 787-8 and a bit lighter 787-9. Maybe with some updates incorporated from the MOM-project.

MIflyer12 · Wed Sep 13, 2017 7:30 pm

cledaybuck wrote:
MIflyer12 wrote:
For those who might not use the 'Seattle Times' link, here's what may be the bigger news:

'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'
How is a change in the accounting block bigger news that a change in the production rate?

It's an explicit acknowledgement by Boeing that a run of 1,300 wasn't going to cover $30 Billion in deferred costs. There has been extensive discussion about this on a.net.

par13del · Wed Sep 13, 2017 7:31 pm

cledaybuck wrote:
How is a change in the accounting block bigger news that a change in the production rate?

.....wait for it, the experts on the loss making aspects of the 787 program will chime in soon.

I agree the increase is smaller than I expected, Boeing must not have the anticipated number of orders to have a greater increase in the block size.

Momo1435 · Wed Sep 13, 2017 7:36 pm

jbs2886 wrote:
We haven't heard of too many 787 deferrals, some yes. I meant that the backlog, without deferrals, still stretched beyond 2021.

Of course earlier open slots automatically means that there are also slots reserved for airlines beyond 2021. That's why I said a quick calculation because we simply don't know exactly how many slots are already filled every year.

With a backlog of 700 you will have deferrals, and not all of them will be made public. One of the biggest recent ones is the Aeroflot order transfer to a leasing company (which has not changed on Boeing's order book btw.) which also means it's a deferral. KLM has converted several 787-9s to the 787-10s over the last year, recently Saudia did the same. These conversion are usually also deferrals in disguise, even if it's just by a couple of months.

Stitch · Wed Sep 13, 2017 7:40 pm

MIflyer12 wrote:
It's an explicit acknowledgement by Boeing that a run of 1,300 wasn't going to cover $30 Billion in deferred costs. There has been extensive discussion about this on a.net.

It's an explicit acknowledgement by Boeing at how popular the 787 is with airlines and passengers.

par13del wrote:
.....wait for it, the experts on the loss making aspects of the 787 program will chime in soon.

Happened right before you posted. I don't know if it's deliberate obtuseness or just trolling now.

Momo1435 · Wed Sep 13, 2017 7:43 pm

par13del wrote:
cledaybuck wrote:
How is a change in the accounting block bigger news that a change in the production rate?

.....wait for it, the experts on the loss making aspects of the 787 program will chime in soon.

I agree the increase is smaller than I expected, Boeing must not have the anticipated number of orders to have a greater increase in the block size.

Going to 14 a month will also be positive to reduce the deferred costs quicker. Both by working more efficient and having early production slots available which they can sell with a higher price.

ODwyerPW · Wed Sep 13, 2017 7:47 pm

It's an explicit acknowledgement that 'yeah, we really blew the development program and are having a harder time recouping costs than anyone could have imagined. but thank goodness we built a machine that people want, and by the grace of that we might bail this thing out after all.'

it all might go down in biz case studies as a record breaking program disaster in terms of costs, with an equally incredible financial recovery. who knows? apparently there is time to find out as customers keep ordering this bird.

Strato2 · Wed Sep 13, 2017 7:47 pm

[quote="Stitch]
Happened right before you posted. I don't know if it's deliberate obtuseness or just trolling now.[/quote]

Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.

Stitch · Wed Sep 13, 2017 7:55 pm

Strato2 wrote:
Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.

Because stating a falsehood over and over doesn't make it any more true? The Accounting Quantity has never been a representation for the unit break-even of a Boeing Commercial Aircraft program.

It's no different than continuing to challenge the falsehood propagated that Airbus does not have to repay the RLI for the A380 program because that program won't break even on a complete basis.

Ruscoe · Wed Sep 13, 2017 8:10 pm

IMO Boeing is just preparing for the next round of widebody orders.
Increasing the production run allows Boeing to offer bigger discounts on future sales.
This is because Boeing divides the total deferred production costs by the production run and adds it to the cost of sales of each 787.
Thus there is no "get out of jail" in the increased production numbers.
Boeing has already financed the deferred costs, and their balance sheet looks good.
Another contributing reason may be that the 777 production rate is going down and they want to maintain skilled staff and Revenue by compensating with increased 787 production until the next cycle of sales.

Ruscoe

Planesmart · Wed Sep 13, 2017 8:12 pm

Stitch wrote:
Kind of surprised it was only to 1400 (I expected 1500-1600), but a conservative boost won't raise the attention of the market as much and they can always raise it later should they close in on 1400 firm orders.

Perhaps the increase in monthly production rates is short-term, and reflects that customers who had deep discounts and flexible launch-style contract T&C's, have now all been rolled for the last time, capped to the early 20's. Presumably, the majority will lock in those prices.

Would explain why the accounting block rise is so modest.

2175301 · Wed Sep 13, 2017 8:14 pm

Strato2 wrote:
Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.

The Accounting Block is nothing more than the current anticipated production numbers based on existing orders and projected orders in the next few years. It changes over the entire life of the program. The 737 is currently in the range of 10,000 (I posted the actual number earlier this year on another thread... and its history of changes since the introduction of the 737). My memory is that Boeing reduced the Accounting Block on the 747 several years ago when it became apparent that the 747-8 was not going to sell as well as expected.

I predict you will see the 787 Accounting Block exceed 2000 eventually.

It has absolutely "Zero" to do with financial success, or lack of, of an aircraft family. It's just an anticipated production number that can be defended.

With that, I am surprised that the change is not at least to 1500.

Have a great day,

Revelation · Wed Sep 13, 2017 8:21 pm

Ruscoe wrote:
IMO Boeing is just preparing for the next round of widebody orders.
Increasing the production run allows Boeing to offer bigger discounts on future sales.
This is because Boeing divides the total deferred production costs by the production run and adds it to the cost of sales of each 787.
Thus there is no "get out of jail" in the increased production numbers.
Boeing has already financed the deferred costs, and their balance sheet looks good.
Another contributing reason may be that the 777 production rate is going down and they want to maintain skilled staff and Revenue by compensating with increased 787 production until the next cycle of sales.

Ruscoe

The idea being floated on twitter by Hamilton and others is that the 787 is (believe it or not!) generating actual cash, which matters a lot to the way Wall Street values the company (far more than this 'accounting block' number which is already factored into their analysis) and of course this is the kind of thing the corporate suite folks thrive on, so let's make more 787s while the sun is shining!

And we see at https://leehamnews.com/2017/09/13/boein ... more-24736 while Hamilton says he feels this high rate is not sustainable in the long term,

Boosting the rate, however, will throw off cash, helping Boeing meet its free cash flow targets at a time when the company is transitioning from the 777 Classic to the 777X. The higher rate, from 12/mo, is worth a half point on the profit margin, one analyst told LNC.

Stitch · Wed Sep 13, 2017 8:24 pm

Planesmart wrote:
Perhaps the increase in monthly production rates is short-term, and reflects that customers who had deep discounts and flexible launch-style contract T&C's, have now all been rolled for the last time, capped to the early 20's. Presumably, the majority will lock in those prices.

Could be. Boeing's suppliers seem to be able to adjust quickly (they went from 5 to 7 per month in 2011 on the 777 than 8.3 in 2013 then back to 5 in 2017) so this could be a short-term increase (Leeham says it can't hold past 2020 with the current Book-to-Bill Ratio) to make availability for RFPs that may not yet be public knowledge.

jbs2886 · Wed Sep 13, 2017 8:34 pm

Stitch wrote:
Planesmart wrote:
Perhaps the increase in monthly production rates is short-term, and reflects that customers who had deep discounts and flexible launch-style contract T&C's, have now all been rolled for the last time, capped to the early 20's. Presumably, the majority will lock in those prices.

Could be. Boeing's suppliers seem to be able to adjust quickly (they went from 5 to 7 per month in 2011 on the 777 than 8.3 in 2013 then back to 5 in 2017) so this could be a short-term increase (Leeham says it can't hold past 2020 with the current Book-to-Bill Ratio) to make availability for RFPs that may not yet be public knowledge.

I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.

Stitch · Wed Sep 13, 2017 8:42 pm

jbs2886 wrote:
I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.

And even with all the pessimism we have been hearing about widebody orders, the 787 is already 70% of the way to matching 2016's and 2015's orders with 25% of the year remaining so a slight rate increase doesn't seem to be out of place.

Newbiepilot · Wed Sep 13, 2017 8:54 pm

Stitch wrote:
jbs2886 wrote:
I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.

And even with all the pessimism we have been hearing about widebody orders, the 787 is already 70% of the way to matching 2016's and 2015's orders with 25% of the year remaining so a slight rate increase doesn't seem to be out of place.

I think Boeing probably has some leads on potential orders driving the decision. Leeham has been pessimistic regarding the 787 for a while, but I think that is just Scott Hamilton's overall pessimism coming out.

jbs2886 · Wed Sep 13, 2017 9:23 pm

Newbiepilot wrote:
Stitch wrote:
jbs2886 wrote:
I wouldn't take Leeham's pessimism as gospel - not to get into the Leeham debate again though.

And even with all the pessimism we have been hearing about widebody orders, the 787 is already 70% of the way to matching 2016's and 2015's orders with 25% of the year remaining so a slight rate increase doesn't seem to be out of place.

I think Boeing probably has some leads on potential orders driving the decision. Leeham has been pessimistic regarding the 787 for a while, but I think that is just Scott Hamilton's overall pessimism coming out.

Agreed on both. I think we will start seeing options conversions / top ups from carriers. With open positions, we have seen strength in leasing (unexpectedly). Finally, once the 787-10 starts operating, I think it will start getting more orders.

gwrudolph · Wed Sep 13, 2017 10:35 pm

BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?

jbs2886 · Wed Sep 13, 2017 10:36 pm

gwrudolph wrote:
BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?

Highly unlikely. The MOM will either take over 767/747 lines or will be an entirely new line. There is no way Boeing will stop production of the 787 in early-mid 2020s.

mercure1 · Wed Sep 13, 2017 10:49 pm

I suspect Boeing is well aware of pending 787 orders in discussion, so creating the production rate to offer the required slots.

gwrudolph · Thu Sep 14, 2017 12:16 am

jbs2886 wrote:
gwrudolph wrote:
BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?

Highly unlikely. The MOM will either take over 767/747 lines or will be an entirely new line. There is no way Boeing will stop production of the 787 in early-mid 2020s.

Good point. Just for clarifications I wasn't suggesting they would stop the 787 line by then as much as I was suggesting they might be accelerating 787 production so as to have fewer 787 lines by then freeing up space for new MOM line(s). However, knowing what we all know about the nearing end of the 747 and 767 lines, that was quite the oversight on my behalf. Those, of course, would be the likely lines to free up space for MOM lines.

jbs2886 · Thu Sep 14, 2017 12:34 am

gwrudolph wrote:
jbs2886 wrote:
gwrudolph wrote:

I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?

Highly unlikely. The MOM will either take over 767/747 lines or will be an entirely new line. There is no way Boeing will stop production of the 787 in early-mid 2020s.

Good point. Just for clarifications I wasn't suggesting they would stop the 787 line by then as much as I was suggesting they might be accelerating 787 production so as to have fewer 787 lines by then freeing up space for new MOM line(s). However, knowing what we all know about the nearing end of the 747 and 767 lines, that was quite the oversight on my behalf. Those, of course, would be the likely lines to free up space for MOM lines.

I don't expect the 767 to end soon. Between FedEx and potentially other F orders as well as the tankers, its got a while left. But, it shares a line with the 747 so I expect that to be rejigged.

Revelation · Thu Sep 14, 2017 12:42 am

jbs2886 wrote:
I don't expect the 767 to end soon. Between FedEx and potentially other F orders as well as the tankers, its got a while left. But, it shares a line with the 747 so I expect that to be rejigged.

The 767 line did get heavily re-jigged as the tanker was being developed. It shares part of the same building as 747 IIRC but of course the 747's more likely to be the odd man out if they needed space for the MOM.

Stitch · Thu Sep 14, 2017 12:46 am

The 747 uses Buildings 40-21, 40-22 and 40-23 so that would be the most logical location for NMA at Everett if the decision is made to build it there.

The 767 uses Buildings 40-31, 40-32 and 40-33 which are behind the 747 assembly zones. So they can remain in place without impacting NMA.

JAAlbert · Thu Sep 14, 2017 3:01 am

Strato2 wrote:
[quote="Stitch]
Happened right before you posted. I don't know if it's deliberate obtuseness or just trolling now.[/quote]

Why should Boeing get a free "get out of jail" card for a financial disaster that is the 787 program when Airbus has been shred to pieces here on A380 and A400 problems.[/quote]

Maybe cause Boeing managed to sell nearly 1300 of these birds and believes it will sell a bunch more?

And really, Boeing has not received any love from a.net on the 787's financial and PR issues. Brutal I think is an appropriate adjective of a.net's critiques and probably aptly deserved.

I don't think that anyone disputes that the roll-out of the 787 was an epic disaster - absolutely EPIC. Yet, at the end of the day, the plane is hugely popular and remains a bright spot on Boeing's order book. Boeing engineers designed a great plane as it turns out! It will be interesting to see just how much of the 787 technological advances make their way into new aircraft in the future.

787Mech · Thu Sep 14, 2017 5:19 am

gwrudolph wrote:
BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

I admittedly don't know that much about commercial aircraft assembly lines and re-tooling, but could they be accelerating so that they can eventually free-up some line space to create an MOM line in early-mid 2020s?

BSC is working toward all F/A work to be completed on one side of the building, which essentially free's up the other half of the building to operate as an additional line. Weather that will be the final intent is to be seen. We do not have the same tooling as the Evt line does, which is a huge contributing factor to their current rate vs BSC and of course their *much* larger workforce. I'd love to see the other side of the building be used for the -10's but in a similar way Everette had their surge-line for that extra plane or two a month.

81819 · Thu Sep 14, 2017 8:11 am

My analysis shows existing 787 customers have a requirement for an additional 650 aircraft up till 2025.

If we assume the 787 will be the aircraft of choice for 2 out of 3 purchases, there will be a requirement for an additional 400 aircraft on top of the existing backlog of 700 aircraft. 1100 aircraft in total.

This equates to approximately 6.5 years of production at 14/month from 2019.

The next few years will be pivotal for the 787 / A330NEO/A350 orders race. I suspect the 787’s advantage is that it can operate all of the routes of the A330NEO/A350 combo at either equivalent or less seat mile costs.

Quite a versatile aircraft.

Increasing the accounting block by 100 aircraft allows Boeing to better compete for orders with the A330NEO.

This will probably result in higher profits (positive cash flows from increased production is greater than discounts given to airlines to win orders).

This could be a no brainer for Boeing!

flee · Fri Sep 15, 2017 1:46 am

The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.

What is interesting is the production rate increase in 2019. I would imagine that it is to partially improve Boeing's cash flow as the B777 production will be winding down prior to the B777X introduction.

I am confident that Boeing will sell more 787s - the signs are clear as many airlines now prefer smaller airplanes. So, this looks like a good move by Boeing. They may even need to move to rate 16 later on!

Stitch · Fri Sep 15, 2017 4:36 am

flee wrote:
The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.

It's been predicted by many because the 787 remains popular with airlines, who continue to order it in quantities great enough to exceed previous Accounting Quantities.

The truly ironic bit about all misinformation over the Accounting Quantities is that if Boeing had executed perfectly with the first deliveries in 2008 and were on track to have 109 delivered by the end of 2009, the Initial Accounting Quantity still would have been over 1000 units because by the end of 2008, they had 910 orders and instead of seeing cancellations over the following few years, they likely would have secured significant positive orders due to a smooth EIS and production ramps.

So by now we'd probably see an Accounting Quantity north of 1500 units and people would be congratulating Boeing for it as an indication of how strong the program is! :rotfl:

kitplane01 · Fri Sep 15, 2017 5:05 am

Ronaldo747 wrote:
BN727227Ultra wrote:
Working on clearing out the backlog so Boeing can get cracking on the 787MAX?

Similar thoughts, too. I don't think about entirely new engines but I think we will see a revised 787 down the line, with an much lighter 787-8 and a bit lighter 787-9. Maybe with some updates incorporated from the MOM-project.

Are there any airliners that lost significant weight during a model change? I notice that the 737 (for example ) keeps weighing more (and getting bigger).

I don't think airliners lose weight. I'm willing to be corrected.

kitplane01 · Fri Sep 15, 2017 5:08 am

flee wrote:
The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.

My gawd I'm sick of seeing this on airliners.net.

The price that maximizes Boeing profit (or minimizes Boeing losses) is independent of the accounting block, and independent of changes to the accounting block. This has been discussed many times on airliners.net. Please see https://en.wikipedia.org/wiki/Sunk_cost

flee · Fri Sep 15, 2017 7:46 am

kitplane01 wrote:
flee wrote:
The increase in accounting block has been predicted by many because it is evident that Boeing is not going to be able to cover all the deferred costs without making the 787 selling price uncompetitive.
My gawd I'm sick of seeing this on airliners.net.

The price that maximizes Boeing profit (or minimizes Boeing losses) is independent of the accounting block, and independent of changes to the accounting block. This has been discussed many times on airliners.net. Please see https://en.wikipedia.org/wiki/Sunk_cost

I know what sunk cost is and I agree that there is no effect on cash flows as the money has already been spent.

I also know what Boeing's program accounting involves. All those sunk costs are not written off at the time they are incurred. Instead, they are carried forward as "deferred costs" and capitalised as an asset in Boeing's balance sheet. The asset is then amortised with each 787 frame delivered.

I hope that you now see the big picture!

RickNRoll · Fri Sep 15, 2017 7:50 am

cledaybuck wrote:
MIflyer12 wrote:
For those who might not use the 'Seattle Times' link, here's what may be the bigger news:

'Muilenburg also said Boeing has decided that 787 order prospects are sufficiently healthy that it can spread the deferred cost of the program over 1,400 planes, up from the current assumption of 1,300.'
How is a change in the accounting block bigger news that a change in the production rate?

It means that deferred costs are still a moving target.

Who is online

Popular Searches On Airliners.net