Rj111
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A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 9:05 am

I personally view the A345/6 as a makeshift design which was necessary to avoid handing the whole segment to the 773ER/772LR. Thus it hasn't got the appeal of the 777 especially in the fuel consumption department.

So i was just wondering how many Airbus have to sell in order for it to break even. Obviously i realise every order varies in discount % so a rough estimation would be good thanks....

....Oh and how much where R&D costs? 3 bill USD was it?

Ta.
 
Planesmart
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 9:53 am

You are only going to get A v B and plenty of IMO.

There is not sufficient publicly available info to make the assessment. Most so-called analyst comments are using A or B propaganda (I mean PR). Same situation if you asked about 773ER / 772LR R&D costs and breakeven sales.

Given the design shares considerable similarities with the A33, various costs would have been amortised for the A345/6 project against the A33 and earlier A34 versions, as well as the A345/6 projects themselves, so definitely difficult to calculate.

Also, revenue from sales of other models may be written back to the A345/6. For example, where a package of models are sold.

Finally, how long is the proverbial piece of string? Until recently, B was the master of the blunt instrument, and A the master of sophistication when it came to pricing and packaging. Now thats changing. But the point is, if B are quoting a package deal priced for maximum tax effectiveness, in multi-currencies, with deferred payment, and a buyback deal, calculating the value of the aircraft sale is extremely complex.
 
atmx2000
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 10:21 am

I thought the A345/6 was launched two or three years before the 772LR/773ER. How can it be considered a response to a jet that was launched so late?
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 11:44 am

Excellent question. I would point out that the 345/6 received a new wing and engines so that its cost of R&D while less than a new airframe, is more along the lines of the 737NG (Same body cross section and design concept, but lots changed.)
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moose1226
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 12:21 pm

How many A345/A346 have been sold...how many 773ER/772LR?
 
Hamlet69
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 12:55 pm

Quoting RJ111 (Thread starter):
I personally view the A345/6 as a makeshift design which was necessary to avoid handing the whole segment to the 773ER/772LR.

Difficult to say one way or another. Boeing had been envisioning a future family (what would become the -200LR/-300ER) from the beginning of the 777 program. However, it took them longer to realize the actual aircraft than anticipated. In fact, the A340NG's were launched nearly three years before the 777's, so calling them necessary to counter the 772LR/773ER is anachronistic at best. In fact, the A340's promised capabilities forced Boeing to completely overhaul their design for the 777LR's, which caused a longer delay than anticipated in order to match or beat the A340's specs.

Quoting RJ111 (Thread starter):
So i was just wondering how many Airbus have to sell in order for it to break even.

I doubt we'll ever know. Depending on the accounting, the costs of the A340NG R&D can be partially recovered through every member of the A330/340 line sold. Of course, no matter the accounting, at the end of the day, Airbus still has to recover that money, which means they need to sell aircraft.

BTW - as to the actual cost of the A340NG program, all reliable estimates I've seen have placed total costs at $3-3.5 billion. Total program costs for the 777LR program have been reliably pegged at just under $1 billion.

Regards,

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Rj111
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 1:40 pm

Cheers for the responses folk.

I was aware the A340NG's where launched before the 777NG's (That's one of ConcordeBoy's favourite lines isn't it?) and i can only suggest that by anticipating Boeings next move, this was an aggresive strategy to gain early customers without competition.

Thanks for the replies anyway, and here's hoping they will/have broken even.
 
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 2:11 pm

Quoting Hamlet69 (Reply 5):
BTW - as to the actual cost of the A340NG program, all reliable estimates I've seen have placed total costs at $3-3.5 billion.

The figures I quote are in 1997 currencies.

The US$3bn first came around because BAE applied for a £120m (US$200.5m) UK Government loan representing BAE's 20% ownership of Airbus. If $200m was 20% of the government aid, then total aid was just over US$1bn. As Airbus was able to obtain 33% of development costs by government aid, it was said that total R&D for the A340-500/600 was around US$3bn.

I did an article search and I can't find one that shows Airbus disputing this ball-park figure. In fact, I think they pretty much agreed with it.

Since then, of course, both the -500 and -600 entered service later than planned. So, the program had deferred revenue. Since EIS, Airbus/R-R have not met EIS despatch reliability guarantee of 99%. The guarantee costs Airbus. I also suspect that the A340-500/600 isn't produced at the level that Airbus had planned when it launched the program.

These things combined suggest that costs are higher than planned. IMHO, a US$3bn development would have required 200+ sales for break-even. With the ensuing problems, I can only imagine that that has shifted to the right. So, I think it will be several more years before the A340-500/600 breaks-even.
 
atmx2000
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 2:12 pm

Quoting RJ111 (Reply 6):
and i can only suggest that by anticipating Boeings next move, this was an aggresive strategy to gain early customers without competition.

It represented a logical expansion of the Airbus product offerings to larger capacity jets, with a derivative of an existing plane, to cover a new market. Given that the A340 is an older line than the 777, it isn't too surprising that they would release a larger, longer range derivative earlier than Boeing, especially since the existing A340 line wasn't selling as well as the 772ER. The 772ER had more firm orders than the A343 does currently within a year of the launch of the A340NG in 1997.
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RE: A345/6 R&D Costs And Break Even Sales?

Mon Mar 14, 2005 3:47 pm

I may be being over-sensitive but both your thread starter and reply #6 seem to imply that whenever the 345/346 were launched they were somehow a hasty and ill-judged response to a fear that Boeing was about to run away with the long-range market. In other words, Boeing was driving the whole thing and Airbus was anxiously trying to keep up.

Surely we can be a bit more generous than that? In the mid-90s both manufacturers were identifying a growing market for these sorts of planes. Each eventually launched what they believed were appropriate and cost-effective derivatives of existing models that would meet the perceived need. Airbus happened to launch first but Boeing had already announced that they'd enter the same market.

Their solutions were different but on sales so far both seem to have been equally successful (or unsuccessful!).

If you want to argue that the A350 is a hasty "me too" I won't argue but it's an accusation that doesn't stick to the 345/346.
 
Rj111
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RE: A345/6 R&D Costs And Break Even Sales?

Tue Mar 15, 2005 12:31 am

No, you're right the A340NG was the natural progression for Airbus  sorry , acknowleged.....and i think it was a good idea for Airbus to press ahead with the A340NG.

Boeing was driving the whole thing and Airbus was anxiously trying to keep up.

You're being a little over-sensitive but I might say that the 777 base aircraft (772A) was in a stronger position to make a succesful 773ER sized plane than the A346 which was derived from the far smaller A342. Although the A346 featured greater modifications, i'd have guessed a clean sheet design for the A346 would have been a lot different.

Just a theory.  Cool

[Edited 2005-03-14 16:32:09]