rigo
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Why is the A350 so expensive?

Mon May 14, 2018 1:29 am

With 830+ aircraft sold across its various models, the A350 is undoubtedly a success, however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high. It is certainly true that depending on the model, an A350 costs on average between $30M to $60M more than a 787. Hence me wondering:

1. Is Airbus completely off the mark? or
2. Is Boeing dumping the 787 at near-loss to undercut the competition? or
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings? or
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?
5. Or... ?
 
Antarius
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Re: Why is the A350 so expensive?

Mon May 14, 2018 1:45 am

The 350 and 787 aren't direct competitors. The 350 is closer to a 777 competitor than a 787.

No doubt that Boeing is doing an impressive job on cutting costs and selling the 787. But it isnt an apples to apples fight like the a320 family vs 737
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LAX772LR
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Re: Why is the A350 so expensive?

Mon May 14, 2018 1:57 am

rigo wrote:
it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high.

If it's "no secret," then it shouldn't be too hard for you to tangibly substantiate such a claim.

So I'll ask: what are you basing that on?
I myself, suspect a more prosaic motive... ~Thranduil
 
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AirKevin
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Re: Why is the A350 so expensive?

Mon May 14, 2018 2:54 am

Is there a commercial plane that ISN'T expensive?
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cvgComair
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Re: Why is the A350 so expensive?

Mon May 14, 2018 3:45 am

rigo wrote:
With 830+ aircraft sold across its various models, the A350 is undoubtedly a success, however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high. It is certainly true that depending on the model, an A350 costs on average between $30M to $60M more than a 787. Hence me wondering:

1. Is Airbus completely off the mark? or
2. Is Boeing dumping the 787 at near-loss to undercut the competition? or
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings? or
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?
5. Or... ?

You are comparing the wrong airplanes, the A330neo and 787 are good comparisons, while the A350 and B777 are good comparisons. That is the reason for the price difference, the A350 is much more airplane than a 787.
A330-800 <--> B787-8
A330-900 <--> B787-9
A350-900 <--> B787-10
A350-1000 <--> B777-8
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globetrotter94
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Re: Why is the A350 so expensive?

Mon May 14, 2018 3:51 am

My understanding is that aircraft are rarely sold at list price anyway--is this wrong? If not, then what are the drivers to choosing a list price for a given aircraft in the first place?
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mham001
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Re: Why is the A350 so expensive?

Mon May 14, 2018 4:08 am

globetrotter94 wrote:
My understanding is that aircraft are rarely sold at list price anyway--is this wrong? If not, then what are the drivers to choosing a list price for a given aircraft in the first place?


No idea but the 787 has had a lower list price than the A330 for years.
 
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seahawk
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Re: Why is the A350 so expensive?

Mon May 14, 2018 4:55 am

The production line at Boeing is more mature and more streamlined. The production process is also more efficient.
 
Flighty
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:12 am

The only possible reason why the A350 would be selling for big amounts of money would be because airlines really, really want it.

It probably has something to do with the fuel burn and other advances. Why does Airbus charge as much as possible? Because that is their business! What do list prices mean, nothing! AFAIK. But thread starter is no doubt right; A350 probably cost a pretty penny!
 
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DocLightning
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:13 am

Remember, list prices are a bunch of hooey. No competent airline negotiating team would pay list prices. It's a starting point for a negotiation. Discounts in excess of 70% have been heard of.

I'll give you an example: a few years ago, UA went to Boeing and traded in the orders for 10 788s for 77Ws instead. In the interview, Mr. Smisek said that this was done at "no additional capital expenditure for our airline." The meeting probably went something like this: "You want to sell 77Ws. We want to buy 77Ws. So if we trade our order for 787s, we can take up slots on your 77W queue and you can turn around and sell those 787 production slots for way more than you sold them to us. Whaddya say?" Boeing said: "Yes." So given that UA was an early customer for the 788 and already likely had a significant discount probably of something like $120m per 787, they scored a bunch of 77Ws with a list price of $361.5m for 2/3 off.

So why would an OEM agree to such insanity? Well, in the case of this specific deal, Boeing really needed to fill 77W/L/F slots (and ain't nobody buying 77Ls). But kind of like how Epson practically gives you the printer for free and then extracts your money from you on the ink cartridges, Boeing and Airbus really make the money off the support contracts.
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YIMBY
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:13 am

seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


This is irrelevant. The agreed price depends on the market conditions, and as long as there is more demand than supply the prices grow.

The unit price may be above or below the production costs. In the latter case the profit is taken from maintenance contracts and spare parts.
 
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seahawk
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:36 am

YIMBY wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


This is irrelevant. The agreed price depends on the market conditions, and as long as there is more demand than supply the prices grow.

The unit price may be above or below the production costs. In the latter case the profit is taken from maintenance contracts and spare parts.


So you mean the 787 is winning because the lifetime costs are cheaper. I could agree to that.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:48 am

YIMBY wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


This is irrelevant. The agreed price depends on the market conditions, and as long as there is more demand than supply the prices grow.

The unit price may be above or below the production costs. In the latter case the profit is taken from maintenance contracts and spare parts.


Below production costs is a short term thing only. Even then you'd best be able to justify said sale as losing you less money than not selling.
 
grbauc
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Re: Why is the A350 so expensive?

Mon May 14, 2018 5:57 am

rigo wrote:
With 830+ aircraft sold across its various models, the A350 is undoubtedly a success, however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high. It is certainly true that depending on the model, an A350 costs on average between $30M to $60M more than a 787. Hence me wondering:

1. Is Airbus completely off the mark? or
2. Is Boeing dumping the 787 at near-loss to undercut the competition? or
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings? or
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?
5. Or... ?



I think Number 2 for sure. There Dumping them at a loss, Ive heard this many many times on A-net and its got to be true. According to A-net anytime a manufacturer sells a plane its because they gave them away. Great question but seeing number #2 :rotfl: :white:
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 6:02 am

seahawk wrote:
So you mean the 787 is winning because the lifetime costs are cheaper. I could agree to that.


That doesn't have to be the case. Keep in mind the 787 is also smaller than the A350, so eventhough the lifetime costs are cheaper the lifetime earnings are also lower. Still the 787 makes sense on routes that are too thin to fill an A350. It's all about the right aircraft for the right route.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 6:51 am

A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.
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carlokiii
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Re: Why is the A350 so expensive?

Mon May 14, 2018 6:58 am

B777LRF wrote:
A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.

The arithmetic on this post is completely off. :geek:
 
RB211trent
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:09 am

B777LRF wrote:
A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.


Aircraft aren’t sold by weight....ridiculous
 
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kaichinshih
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:10 am

Correct me if I'm wrong, but I heard back in 2008-ish how airlines were choosing the A350 b/c it was cheaper (+ had a more negotiable price) than the 787. Should the OP be correct, did this change in situation arise from the 787 suffering from various battery and engine issues while the A350 has a (relatively) stable performance record (so far)?
 
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Mortyman
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:17 am

Quality costs ;-)
 
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LAX772LR
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:28 am

RB211trent wrote:
Aircraft aren’t sold by weight....ridiculous

Actually, in a way, they sorta are...

You're going to pay more for a higher weight option on a given model, versus the exact same plane at a lower weight.
I myself, suspect a more prosaic motive... ~Thranduil
 
RB211trent
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:37 am

LAX772LR wrote:
RB211trent wrote:
Aircraft aren’t sold by weight....ridiculous

Actually, in a way, they sorta are...

You're going to pay more for a higher weight option on a given model, versus the exact same plane at a lower weight.

Very very loosely, your referring to the take off weight not aircraft weight and that’s not what B777LRF was referring to.
 
RB211trent
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Re: Why is the A350 so expensive?

Mon May 14, 2018 7:38 am

Mortyman wrote:
Quality costs ;-)

Yep, you get what you pay for.
 
ELBOB
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Re: Why is the A350 so expensive?

Mon May 14, 2018 9:26 am

RB211trent wrote:

Aircraft aren’t sold by weight....ridiculous


No-one was saying that they are. But it's an interesting metric as it shows a consistent distribution each for narrowbody and twin-aisle categories, and suggests that the A359 isn't as madly 'over-priced' as claimed. Not causal but better than anything else proposed so far in this thread.
 
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Jayafe
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Re: Why is the A350 so expensive?

Mon May 14, 2018 9:42 am

rigo wrote:
...however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high.

Wrong, A350s don't compete with 787s, they'll lose where their features are not needed, not because it's expensive. It actually competes with the 777 family, and is widely overselling it as it's more capable and cheaper than them. You have one example in the forum that not even a current 787-10 can compete with A350's capabilities:
viewtopic.php?f=3&t=1393909

rigo wrote:
1. Is Airbus completely off the mark?

No.

rigo wrote:
2. Is Boeing dumping the 787 at near-loss to undercut the competition?

More than often.

rigo wrote:
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings?

It's not.

rigo wrote:
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?

The price is justified from a size, capacity, range and technology point of view. Some companies are ok getting massive discounts where dumping is allowed (hence beating the A330), and can deal with a limited plane that is a pain for passengers due to market domination/cartel.

rigo wrote:
5. Or... ?

As stated above, they are different birds. You are comparing a sedan with a SUV. More than likely the SUV will cost more from any angle you focus it, specially if the sedan is designed to be a cheap-suboptimal-unreliable people-mover.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 9:51 am

RB211trent wrote:
B777LRF wrote:
A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.


Aircraft aren’t sold by weight....ridiculous


Yes, but there should be some sort of correlation between weight and cost to manufacture.
 
Mrakula
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Re: Why is the A350 so expensive?

Mon May 14, 2018 9:53 am

I red in the past Boeing prices are without engines and interior and Airbus use some standart interior so thats why Boeing seems cheaper and giving less disccouts. But Im not completly certain about the information.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 9:57 am

I'd suggest aircraft are priced by the number of seats and CASM
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 10:09 am

seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


Do you have anything to support this opinion? Perhaps the main difference still is that Boeing has not booked its full cost.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 10:17 am

Only the 78J competes with the 359 directly. A combination exists. Airlines chose the 359 and 789 as the popular ones because they have a perfect capacity and long range. The 78J is too short range over the 359 and airlines will only get to use it on shorter flights (less than 10 hours). The 789 however, which is considered as the 359's main competitor, has the capacity of an A330-300, thus is a better choice for airlines looking to expand, but not jump the gun. The 359 is basically a 1:1 replacement of the 77E.
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Re: Why is the A350 so expensive?

Mon May 14, 2018 10:35 am

mham001 wrote:
globetrotter94 wrote:
My understanding is that aircraft are rarely sold at list price anyway--is this wrong? If not, then what are the drivers to choosing a list price for a given aircraft in the first place?


No idea but the 787 has had a lower list price than the A330 for years.



You cannot compare list prices for so many reasons. A key one is that Airbus include a lot more of the fit out in the price whereas it is not in the Boeing list price.

It is a bit like the old days in the UK where a BMW list price didn't even include a radio as standard. It made its list price much closer to say a Ford.
 
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seahawk
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Re: Why is the A350 so expensive?

Mon May 14, 2018 10:44 am

mjoelnir wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


Do you have anything to support this opinion? Perhaps the main difference still is that Boeing has not booked its full cost.


Well the 787 production line running for a longer time and at a higher rate, so the whole production and supply line should be more mature and optimized than the A350´s today. It would be not reasonable to assume otherwise, if one is too believe that the learning curve at A and B is somewhat similar.

And the barrel construction requires less structural work than the panel construction so it should be faster but at the cost of requiring a more complex production infrastructure. But as Boeing has outsourced much of this, it might not factor into their calculations as strongly as it would otherwise.

In addition Boeing seems to be playing with increasing the accounting block once again, which allows for lower profits on each frame.
 
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Trystar
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:18 pm

RB211trent wrote:
LAX772LR wrote:
RB211trent wrote:
Aircraft aren’t sold by weight....ridiculous

Actually, in a way, they sorta are...

You're going to pay more for a higher weight option on a given model, versus the exact same plane at a lower weight.

Very very loosely, your referring to the take off weight not aircraft weight and that’s not what B777LRF was referring to.


Come on, now. LAX772LR doesn't let questionable - or, indeed, completely incorrect - statements get in the way of being contrarian for the sake of it.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:21 pm

YIMBY wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


This is irrelevant. The agreed price depends on the market conditions, and as long as there is more demand than supply the prices grow.

The unit price may be above or below the production costs. In the latter case the profit is taken from maintenance contracts and spare parts.

Production cost isn't irrelevant.

I've read A359 estimated production costs are $125M.
B789 production costs are believed to be much lower. As in $35 M lower. ($90 million).
Supply grows when an aircraft sells at a profit. Ideally, a 20% out the door profit. For Boeing, $108 million (assuming the above numbers are correct) generates a nice profit of $18 million per airframe. For Airbus, that would be a $17 million loss.

Putting this in perspective, an A330CEO is estimated to cost $85 million. Boeing can match the price now!
The A330NEO costs over $90 million. At best Airbus can match the price of the 789 and the 789 is more capable (worth more to some airlines).

Production costs mean quite a bit in the industry.

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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:35 pm

seahawk wrote:
In addition Boeing seems to be playing with increasing the accounting block once again, which allows for lower profits on each frame.

Larger block means less cost payback per aircraft so more profit per aircraft.
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:37 pm

lightsaber wrote:

I've read A359 estimated production costs are $125M.
B789 production costs are believed to be much lower. As in $35 M lower. ($90 million).


No idea where you are getting those numbers from, the cost for the each OEM to produce the 787/A350 is less than 50 million. Put things in perspective at the peak of demand, you could buy an A330 ready to fly for 60 million and a 777W for 100 million.

On top of the OEMs airframe costs you have the other big ticket items such as engines, apu, interior, avionics, these are not manufactured by the OEMs, and may involve buyer furnished equipment clauses.
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:38 pm

Revelation wrote:
seahawk wrote:
In addition Boeing seems to be playing with increasing the accounting block once again, which allows for lower profits on each frame.

Larger block means less cost payback per aircraft so more profit per aircraft.


I think we were just looking at it from different angles.

You say that a lower payback means more profit for the same price. I meant that a lower payback means a similar book profit at a lower price. In the end we meant the same.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:40 pm

Cost is very difficult to define! It can be apples or pears! A carrier or leasing company will use varying criteria to define “cost” in their individual settings. An important definition could be the “total cost of ownership over a defined time period”. That varies from each starting point and base currencies. Basic hull cost is but one component therefoe the thread title question is unanswerable and can seriously mislead.
 
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:43 pm

seahawk wrote:
mjoelnir wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


Do you have anything to support this opinion? Perhaps the main difference still is that Boeing has not booked its full cost.


Well the 787 production line running for a longer time and at a higher rate, so the whole production and supply line should be more mature and optimized than the A350´s today. It would be not reasonable to assume otherwise, if one is too believe that the learning curve at A and B is somewhat similar.

And the barrel construction requires less structural work than the panel construction so it should be faster but at the cost of requiring a more complex production infrastructure. But as Boeing has outsourced much of this, it might not factor into their calculations as strongly as it would otherwise.

In addition Boeing seems to be playing with increasing the accounting block once again, which allows for lower profits on each frame.


It just seems that Airbus does not need over 500 frames to only break even on single frames for the A350.
 
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zeke
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Re: Why is the A350 so expensive?

Mon May 14, 2018 12:49 pm

seahawk wrote:
Well the 787 production line running for a longer time and at a higher rate, so the whole production and supply line should be more mature and optimized than the A350´s today. It would be not reasonable to assume otherwise, if one is too believe that the learning curve at A and B is somewhat similar.

And the barrel construction requires less structural work than the panel construction so it should be faster but at the cost of requiring a more complex production infrastructure. But as Boeing has outsourced much of this, it might not factor into their calculations as strongly as it would otherwise.


Please enough of this rubbish, you have presented zero evidence of these lower costs. Facts we do know is the A350 was a far more mature aircraft at EIS that required very little if any post production out of sequence work. It is very well documented on how Boeing kept producing aircraft that were parked for long periods of time for out of sequence work. All of that out of sequence work, all of those months of parking aircraft comes out of the production budget.

Secondly on the barrel vs panel construction again you have produced any evidence, the 787 has more barrel sections than the A350 which need joining, and it is not like Airbus is putting the panels together by hand. Inside the barrel sections both OEMs add to the structure.
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Re: Why is the A350 so expensive?

Mon May 14, 2018 1:18 pm

zeke wrote:
seahawk wrote:
Well the 787 production line running for a longer time and at a higher rate, so the whole production and supply line should be more mature and optimized than the A350´s today. It would be not reasonable to assume otherwise, if one is too believe that the learning curve at A and B is somewhat similar.

And the barrel construction requires less structural work than the panel construction so it should be faster but at the cost of requiring a more complex production infrastructure. But as Boeing has outsourced much of this, it might not factor into their calculations as strongly as it would otherwise.


Please enough of this rubbish, you have presented zero evidence of these lower costs. Facts we do know is the A350 was a far more mature aircraft at EIS that required very little if any post production out of sequence work. It is very well documented on how Boeing kept producing aircraft that were parked for long periods of time for out of sequence work. All of that out of sequence work, all of those months of parking aircraft comes out of the production budget.

Secondly on the barrel vs panel construction again you have produced any evidence, the 787 has more barrel sections than the A350 which need joining, and it is not like Airbus is putting the panels together by hand. Inside the barrel sections both OEMs add to the structure.


And even if the first 787 were glued together by dwarfs and fairies riding on unicorns in a moonless night, it does not matter for the currently produced frames. To be honest everybody should be aware of charts from Airbus showing that revenue from the A350 is expected to significantly rise till 2022 and then level out around 2025. The production price will come down at Airbus once the line moves at full rate for some time, just like the 787 line did. And it will be no different at RR.
 
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zeke
Posts: 12791
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Re: Why is the A350 so expensive?

Mon May 14, 2018 2:34 pm

The price aircraft are sold at reflects the demand and capabilities of that aircraft.

Fact of the matter is that the production cost on the 787 line is many times higher that the A350, they have built more of them. And the first 100+ basically had double or more time put in them. As a way to hide the true production cost Boeing also moved some of the early built aircraft into the R&D budget.

Because of the way Boeing chooses to account for aircraft production costs you need to look at the costs over the total accounting block.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
seb76
Posts: 29
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Re: Why is the A350 so expensive?

Mon May 14, 2018 3:10 pm

After so many years here, I still have the feeling that everybody on this forum has a very strong idea about how much A or B discounting all the frames below production costs while on the other hand, we never get the chance to see any real figure or figures that be verified (they are confidential anyway). Still, we see the two giants making profit despite the quantity of planes they are supposed to sell at loss...
No matter how expensive the A350 is, it amassed hundreds of orders in it's young carreer, so I assume that AIrbus's price is not perceived as prohibitive for the airlines. The only ones that can tell you if your price is wrong are the market (no orders then) and your own financial department (too much red in the bottom lines of the spreadsheets).
The lower sales figures compared to 787 can mean that the airlines may not see it as profitable for them to use as the 787s (I trust the airlines know how to calculate an ROI that factors in every possible parameter from acquisition costs, service, insurance, fuel, staff needed to operate it, etc...) or the A350 will sell better in the future when many 777s will be due for replacement (as the 350 plays in a slightly different category than the 787 after all).
 
mham001
Posts: 5082
Joined: Thu Feb 03, 2005 4:52 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 3:35 pm

zeke wrote:
No idea where you are getting those numbers from, the cost for the each OEM to produce the 787/A350 is less than 50 million. Put things in perspective at the peak of demand, you could buy an A330 ready to fly for 60 million and a 777W for 100 million.


When was that?
 
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Polot
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Joined: Thu Jul 28, 2011 3:01 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 3:42 pm

zeke wrote:
The price aircraft are sold at reflects the demand and capabilities of that aircraft.

Fact of the matter is that the production cost on the 787 line is many times higher that the A350, they have built more of them. And the first 100+ basically had double or more time put in them. As a way to hide the true production cost Boeing also moved some of the early built aircraft into the R&D budget.

Because of the way Boeing chooses to account for aircraft production costs you need to look at the costs over the total accounting block.

That is not how you determine production costs. Nobody looks at the total money spent to build every plane in existence on that line when determining the production costs. They look at the cost to build a single plane. Boeing/Airbus try to sell planes for more than they cost to build them, they don’t expect a sale to cover costs across the entire program’s lifetime. The production costs on the 787 line is lower than the A350 because Boeing have built so much more and the line is more mature.

Deferred production costs is just accounting, it is not money owed. If Boeing writes off the entire deferred production costs today then the 787 rolling off the line tomorrow doesn’t suddenly become cheaper to produce than the 787 that rolled off the line yesterday. Also moving early builds to R&D budget is not “hiding” true production costs. Moving to R&D requires writing them off (which Boeing did)- giving us an exact figure on how much it cost Boeing to build those planes. Hardly hiding anything.
 
LewisNEO
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Re: Why is the A350 so expensive?

Mon May 14, 2018 3:50 pm

seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


How do you know that, are there any facts about it? Where can I find it
You are the wind beneath my wings.

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LewisNEO
Posts: 176
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Re: Why is the A350 so expensive?

Mon May 14, 2018 3:55 pm

StTim wrote:
mham001 wrote:
globetrotter94 wrote:
My understanding is that aircraft are rarely sold at list price anyway--is this wrong? If not, then what are the drivers to choosing a list price for a given aircraft in the first place?


No idea but the 787 has had a lower list price than the A330 for years.



You cannot compare list prices for so many reasons. A key one is that Airbus include a lot more of the fit out in the price whereas it is not in the Boeing list price.

It is a bit like the old days in the UK where a BMW list price didn't even include a radio as standard. It made its list price much closer to say a Ford.


True and of course, the list price is not the actual selling price. Besides that, it is possible both companies use different minimal margins they want to see on their products. But then we might get into the long discussed matter about accounting methods that differ between the US and the EU and also something like deferred (production) costs... :angel:
You are the wind beneath my wings.

Fokker 27, Bombardier Dash 8, Embraer 175 & 195, 727-200, 737-200 & -300 & -400 & -800, 747-400, 767-300, 767-400, DC 10-30, A320-200, A330-200, A330-300, A380.
 
mjoelnir
Posts: 7578
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:17 pm

Polot wrote:
zeke wrote:
The price aircraft are sold at reflects the demand and capabilities of that aircraft.

Fact of the matter is that the production cost on the 787 line is many times higher that the A350, they have built more of them. And the first 100+ basically had double or more time put in them. As a way to hide the true production cost Boeing also moved some of the early built aircraft into the R&D budget.

Because of the way Boeing chooses to account for aircraft production costs you need to look at the costs over the total accounting block.

That is not how you determine production costs. Nobody looks at the total money spent to build every plane in existence on that line when determining the production costs. They look at the cost to build a single plane. Boeing/Airbus try to sell planes for more than they cost to build them, they don’t expect a sale to cover costs across the entire program’s lifetime. The production costs on the 787 line is lower than the A350 because Boeing have built so much more and the line is more mature.

Deferred production costs is just accounting, it is not money owed. If Boeing writes off the entire deferred production costs today then the 787 rolling off the line tomorrow doesn’t suddenly become cheaper to produce than the 787 that rolled off the line yesterday. Also moving early builds to R&D budget is not “hiding” true production costs. Moving to R&D requires writing them off (which Boeing did)- giving us an exact figure on how much it cost Boeing to build those planes. Hardly hiding anything.


Deferred cost is profits moved from the future to the present. It shows in the early years a profit in regards to production while there is in reality a loss. As Boeing starts always new production runs, it can replace old deferred cost with new deferred cost.
If deferred cost would be only about accounting, nobody would bother. It is about showing a profit when there is no profit.

I know that everybody here talks about cash flow, a measurement that does not distinguish between cash earned and cash loaned. Free cash flow is not a measurement of the success of a company, that you would find in earnings or profit, but how much money it is possible to extract from a company at that time.
 
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seahawk
Posts: 7468
Joined: Fri May 27, 2005 1:29 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:23 pm

LewisNEO wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


How do you know that, are there any facts about it? Where can I find it


The fact alone that Airbus is still in the ramp up phase, while Boeing is producing at full capacity means that the production process is more mature at the moment. But that is nothing to worry about as the A350 ramp up goes pretty fine, especially with very few serious problems except delays by cabin interior suppliers. In the medium term it will be more than competitive.
 
StTim
Posts: 3036
Joined: Thu Aug 08, 2013 7:39 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:24 pm

LewisNEO wrote:
StTim wrote:
mham001 wrote:

No idea but the 787 has had a lower list price than the A330 for years.



You cannot compare list prices for so many reasons. A key one is that Airbus include a lot more of the fit out in the price whereas it is not in the Boeing list price.

It is a bit like the old days in the UK where a BMW list price didn't even include a radio as standard. It made its list price much closer to say a Ford.


True and of course, the list price is not the actual selling price. Besides that, it is possible both companies use different minimal margins they want to see on their products. But then we might get into the long discussed matter about accounting methods that differ between the US and the EU and also something like deferred (production) costs... :angel:


I am one who does not like the Boeing Accounting practice that pulls forward profit - BUT it is a huge stretch (ie not possible) to actually use it in an argument here.

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