bigbird
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Break Even Numbers For A380, 777, & 787

Fri Aug 03, 2007 10:29 pm

I know that the last published Break Even sales numbers for the A380 was 420. Does anyone know if this has changed? Also, with the increased developement costs just announced by Boeing recently does anyone know what the new Break Even numbers are for the 787? Also the 777 if known.
bigbird from georgia
 
tdscanuck
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RE: Break Even Numbers For A380, 777, & 787

Fri Aug 03, 2007 11:25 pm

Quoting Bigbird (Thread starter):
I know that the last published Break Even sales numbers for the A380 was 420. Does anyone know if this has changed?

I don't know of any further hiccups in the program since they said 420 so it seems like it should be as valid as it ever was. Airbus has a huge incentive to keep that number low, and I know there are a lot of people who speculate that the A380 will never break even, so I'm not sure how good an estimate 420 ever was.

Quoting Bigbird (Thread starter):
Also, with the increased developement costs just announced by Boeing recently does anyone know what the new Break Even numbers are for the 787?

It's tough to tell if those were already included in the program cost or not. Boeing had planned and budgeted for significant contingencies on the 787 program. It's not clear if the recent announcements were activiation of existing contingencies (in which case they might have already been in the break-even calculation) or if that's new money.

Quoting Bigbird (Thread starter):
Also the 777 if known.

I believe the intended breakeven on the 777 was 250. Even if it went way over, that program should have been making money quite some time ago.

My basic assumption is that the 737 keeps the lights on, the 747/767 provide a nice but not-assumed bonus, and the 777 is paying for the 787 development.

Tom.
 
Ferret
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 12:34 am

Quoting Tdscanuck: "...the 737 keeps the lights on, the 747/767 provide a nice but not-assumed bonus, and the 777 is paying for the 787 development."

I'd say that sums it up well!  Smile

What advantage is the stated 420 A380 break-even number if it's not correct?
Murphy lives here.
 
bringiton
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 12:39 am

Quoting Tdscanuck (Reply 1):
so it seems like it should be as valid as it ever was

Louis Gallois in an investors confrence sometime back has said that the no. has risen further but hasnt specified what the new number is . You can search the forum for more on that.


Regards
 
UAEflyer
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 12:45 am

In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.
 
bringiton
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 12:49 am

Quoting UAEflyer (Reply 4):
Can't Airbus cover that costs by the profit from the A32X program or by A330 program.

No one is disputing airbus's ability to leverage its succesfull aircraft projects to produce profits by offsetting the ones that arent making the profits .
 
cygnuschicago
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 1:11 am

The A380 numbers are much higher if you use current selling prices. The 420 number assumes they can regain pricing power.

777 did go way over the 250 number, by close to the same margin that the A380 went over its 250 number. A few months ago, I posted the real breakeven numbers for the a.net community's interest, but someone with a chip on their shoulder had it deleted because you can't get this data using a google search.

If you're interested in the real numbers, PM me, and I will share  Smile
If you cannot do the math, your opinion means squat!
 
jacobin777
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 1:21 am

Quoting CygnusChicago (Reply 6):
The 420 number assumes they can regain pricing power.

..IIRC, it was under the assumption of around $1.30/Euro....we are $1.38/Euro...doesn't help the situation.. no ..

..that being said, regarding the A380 program, its no longer about "breaking even"..its about getting money from those frames sold.....i.e.-generating cash flow...
"Up the Irons!"
 
NAV20
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 1:22 am

I used to earn a living in project analysis, which included cash flow projections. It's a complicated field; but I'll try to explain the basic principles.

Suppose that you have a product that will cost you 1,000 (dollars, pounds, euros, whatever) to develop, cost 50 to build, and sell for 100. Also suppose that it will take a full year to develop; that you will sell 10 units a year; and that you can borrow money to develop it at an interest rate of 10%.

OK – in Year 1, your cash flow will be entirely outward – 1,000 development cost, subject to interest at 10%. Assuming a regular monthly outward cash flow, that will cost you 1,000 plus 50 (10% interest for half the year) = 1,050.

In Year 2, you start selling. Gross sales income on 10 units is 1,000, but production cost is 50 per unit = 500 (net sales income); and you also have to deduct interest on the outstanding development cost (that arithmetic being 1,050 at 10% = 105). So net income is (1,000 – 605 =) 395. You ‘apply’ that surplus to reducing your debt.

In Year 3, net sales income is again 500; but your interest payment is reduced to (605 at 10% =) 60.5, leaving a surplus of 439.5 which you can again apply to reducing your debt.

Carry that arithmetic through and you’ll find that you’ll clear the debt plus accumulated interest (i.e. ‘break even’) some time in Year 5. After that, the 500 p.a. net income is pure profit.

Of course, in real life, things tend to be more complicated. You often have to offer discounts on early sales; interest rates are variable; you usually have to borrow the working capital needed for production as well as the original development cost; you have shareholders clamouring for annual dividends; cash flows have to be analysed on a monthly or weekly basis, not an annual one; etc, etc. Above all, ‘Murphy’s Law’ (“If it CAN go wrong, it bloody well WILL go wrong, at the worst possible time”) invariably applies.

But you will (I hope) gather from the above that Boeing, with nearly 1,000 X 777s and 700 X 787s sold, can probably at least ESTIMATE when they are likely to reach their breakeven points on both models (i.e. all development costs recovered), if costs, interest rates etc. remain under control.

Airbus, with only maybe 160 X A380s sold, are in no position to form any sort of comparable estimate – as things stand, proceeds of sales cannot hope to recoup the costs of development and production, and they are facing a certain and mounting loss on the A380 programme unless they can jack sales up by several hundred units.
"Once you have flown, you will walk the earth with your eyes turned skywards.." - Leonardo da Vinci
 
tdscanuck
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 1:30 am

Quoting UAEflyer (Reply 4):
In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.

They'll cover it eventually. They took pretty significant losses last year and (probably) this year. There are three distinct metrics that all sound similar but have very different meanings that sometimes get confused in these types of discussions:

1) Project break-even: Does the particular aircraft ever make enough money to pay for its own development? This is a measure of success of the particular design. It answers, in hindsight, the question "Should we have commercialized this airplane?"

2) Company profitability: Does the company generate revenue to cover their costs? This is a measure of success of the overall strategy of the company.

3) Cash flow: Does money coming in cover money going out? Given the long payment times involved with aircraft, this can be very different from profitability. This is (partly) a measure of how well the company's current business is providing for the needs of future growth. All new aircraft have enourmous negative cash flow during development...you need to have profitable aircraft in production or else get someone to loan/give you money.

Tom.
 
flysherwood
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 2:34 am

Quoting UAEflyer (Reply 4):
In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.

That is exactly what is going to have to happen if the A380 doesn't sell 420 units or whatever the real number is. This program is also why Airbus is finally having to face and do something about its bloated overhead with the Power 8 program.
 
EA772LR
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 2:47 am

I would think that the 777 is WELL past it's breakeven point, and is making Boeing some cash. The 787 with around 700 orders will no surpass the breakeven point sooner than later
We often judge others by their actions, but ourselves by our intentions.
 
EMBQA
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 2:49 am

Quoting Bigbird (Thread starter):
Break Even numbers are for the 787?

I thought I saw something like 380 or so..... which was long ago passed in sales.

Quoting Bigbird (Thread starter):
Break Even sales numbers for the A380 was 420.

Yea, I think that was the last numbers I saw too... the problem, the longer it takes to get it into service the higher those numbers grow and with current sales trends on the A380 its a tall mountain to climb to break even.
"It's not the size of the dog in the fight, but the size of the fight in the dog"
 
EA772LR
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 3:10 am

Quoting Jacobin777 (Reply 7):
..that being said, regarding the A380 program, its no longer about "breaking even"..its about getting money from those frames sold.....i.e.-generating cash flow...

 checkmark  Exactly. At this point the 160 or so orders need to be put in 'revenue' service, then worry about creating sales for the program.

Quoting Bringiton (Reply 3):
Louis Gallois in an investors confrence sometime back has said that the no. has risen further

This is a little concerning to me. I hope for the best with the A380  crossfingers .
We often judge others by their actions, but ourselves by our intentions.
 
astuteman
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 4:18 am

Quoting CygnusChicago (Reply 6):
A few months ago, I posted the real breakeven numbers for the a.net community's interest

Saw that, and it was with interest.

Given that corporate overheads, R+D etc, get assigned out on some sort of pro-rata basis, I was intrigued to see how you could possibly come up with a "definitive" answer to that question, for any model, from any manufacturer.

My own suspicions are that getting even a "relevant" figure for actual break-even for a particular model for a particular manufacturer would be a work of the dark arts (or pie in the sky, if one wasn't blessed with the requisite spiritual skills  Smile )

Regards
 
CruzinAltitude
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 4:58 am

Quoting Tdscanuck (Reply 1):
My basic assumption is that the 737 keeps the lights on, the 747/767 provide a nice but not-assumed bonus, and the 777 is paying for the 787 development.



Quoting UAEflyer (Reply 4):
In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.

[disclaimer] The following opinions are just that, opinion. Don't ask me for sources, don't slam me and call me an idiot for being so out of touch from the airliner manufacturing industry. The opinions below make sense to me and my own twisted little mind. [/disclaimer]

I think it is important to highlight the difference between both companies right now.

Boeing is likely using the 737 cash to keep the day to day operations going, and the 777 cash to fund Boeings upcoming projects. I also imagine the profit from the 787 is going a long way to fund the next Y product.

On the other hand, Airbus is likely using the A32x cash to just keep things a float. I'm sure that Airbus had hoped the A380 would help pave the way to further airliner development. However the A380 is probably sucking money out of Airbus at an alarming rate. The A350 has to have been expensive to develop up to this point because of the number and complexity of revisions.

I really think right now the ball is in Boeings court. Boeing has the capital to effectively move on the 787-10 and the 797 projects without feeling to much of a pinch. Airbus is likely to be scraping cash together to move on their next narrowbody.

That is quite a difference in financial situations if you ask me.

Any thoughts?
 
ikramerica
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 5:07 am

Quoting UAEflyer (Reply 4):
In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.

Of course, on a grand scale, this can work. But the problem is, because of state loans and aid, they aren't supposed to account for it that way. It's a per program proposition.

Further, the case against the A380 is that they used false numbers to justify the program. If they had been honest from the start and said they would sell 400, and made the case to the EU that the prestige and job creation are worth the lack of return on investment, then that's different. This is done ALL THE TIME with state aid. I'm working on a film right now where the primary concern of the state of New Mexico is the former, and the prospect for return on investment is just a bonus. If they are only repaid their loan, with no profit, they still win based on the influx of cash and the creation of jobs.

But if the criteria for greenlighting an aircraft program for Airbus is that they will make a ROI, then no, the A320 "making up" for the A380 is not a valid argument. At least not when they continue to build the money losing product.
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airfrnt
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 5:12 am

Quoting Bigbird (Thread starter):
know that the last published Break Even sales numbers for the A380 was 420. Does anyone know if this has changed?

It's higher now, but the accounting here is a black dark secret. Airline manufacturors try to keep this number as hidden as possible because it reflects the inner details of how much it costs them to do business. It's the margin information for their product line, and like any other retailer they want to keep it quiet.

I think it's probably fair to estimate that the A380 is costing at least 450 frames to offset costs at this point, given just the currency increases alone (airbus burned through their hedges for most of their orders). Add a few more frames for other unintended costs as well, then +/- 10 frames depending on a lot of factors including rate of repaying loans, etc.

Also bear in mind that 200 tends to be the magic number in the aviation business. Most new programs are slated to be repaid at 200 frames, including the original projections for the A380 and the 777. The 777 went double over it's budget (reportedly) and the A380 is somewhere well north of that. Most projections of the 777 I saw where that break even was somewhere around 390-410 frames.

The 787 is a bit of a different bird. Since there is much more revenue sharing, but also much less capital investment on Boeing's part, the breakeven number should have still been around 330-360 orders (obviously, Boeing is making bank right now). Since a lot of the investment capital was risk shared among the partners, it's going to be different for each company. Boeing also makes a pretty penny with purchases it capitalizes itself.

Quoting CygnusChicago (Reply 6):

777 did go way over the 250 number, by close to the same margin that the A380 went over its 250 number. A few months ago, I posted the real breakeven numbers for the a.net community's interest, but someone with a chip on their shoulder had it deleted because you can't get this data using a google search.

IIRC, you actually posted those numbers as a response to one of my posts, and I still am a bit skeptical of them, given that it really knocked the 330/340 down in terms of profitability. I unfortunitly do not have the numbers any longer as well.
 
sllevin
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 5:12 am

Quoting Bigbird (Thread starter):
I know that the last published Break Even sales numbers for the A380 was 420.

I believe the statement was "at least 420" and there's been no guidance since.

Steve
 
ikramerica
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 5:33 am

Quoting AirFrnt (Reply 17):
Since a lot of the investment capital was risk shared among the partners, it's going to be different for each company. Boeing also makes a pretty penny with purchases it capitalizes itself.

A good example is the engine companies.

B has likely gone positive on the 777LR program with the delivered frames. but it will take GE longer.

This is because they amortize over not just initial delivery, but replacement engines and parts as well. They may not break even, according to GE, until 2015, even though deliveries will have basically stopped for new 777LR frames (save for the F). But the replacement engine market will be ramping up...
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yellowtail
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 5:37 am

Quoting EMBQA (Reply 12):
I thought I saw something like 380 or so..... which was long ago passed in sales.


for the 787? Wouldn't this be ironic! that the 787s break even number was 380......funny
When in doubt, hold on to your altitude. No-one has ever collided with the sky.
 
jacobin777
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 11:19 am

Quoting Ikramerica (Reply 16):

But if the criteria for greenlighting an aircraft program for Airbus is that they will make a ROI, then no, the A320 "making up" for the A380 is not a valid argument. At least not when they continue to build the money losing product.

Even though its partially owned by various govts....as a publicly traded company, EADS has a fiduciary responsibility towards its shareholders.....

Quoting Yellowtail (Reply 20):
Quoting EMBQA (Reply 12):
I thought I saw something like 380 or so..... which was long ago passed in sales.


for the 787? Wouldn't this be ironic! that the 787s break even number was 380......funny

..its actually between 400-600 (which has been the "traditional" amount for widebodies)....not to mention, there has been a cost increase (along with the B748)
"Up the Irons!"
 
WingedMigrator
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 1:29 pm

Quoting Ikramerica (Reply 16):
Further, the case against the A380 is that they used false numbers to justify the program.

Is that a case of 20/20 hindsight? Remember, they didn't build the wrong airplane, but they built the airplane wrong. In the process the breakeven point went from 250 to 420+, taking the projected ROI from 'reasonable' to 'slim to none'.

Quoting Ikramerica (Reply 16):
But if the criteria for greenlighting an aircraft program for Airbus is that they will make a ROI, then no, the A320 "making up" for the A380 is not a valid argument.

 checkmark 

Quoting Ikramerica (Reply 16):
At least not when they continue to build the money losing product.

Not building the money losing product would cost them more than building it. On a per-frame basis they said they will make more money than they spend starting in 2010, so continuing is indeed the correct business decision (if they are not deluding themselves again).

Quoting Yellowtail (Reply 20):
Wouldn't this be ironic! that the 787s break even number was 380......funny

It would be even more ironic if the A380's break even number was 787 Big grin
 
tdscanuck
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 6:04 pm

Quoting WingedMigrator (Reply 22):
Remember, they didn't build the wrong airplane, but they built the airplane wrong.

It is, at best, unclear if they built the wrong airplane. There may not ever be enough market at that size for the project to ever break even. They certainly did build the plane wrong but, in the grand scheme of things, that will get taken care of.

Quoting WingedMigrator (Reply 22):
On a per-frame basis they said they will make more money than they spend starting in 2010, so continuing is indeed the correct business decision

It's only the correct business decision if the money they make from 2010 and on exceeds the loss they'll take from now to 2010 (plus interest).

Tom.
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Sat Aug 04, 2007 11:07 pm

Quoting Ikramerica (Reply 16):
Further, the case against the A380 is that they used false numbers to justify the program.

I think it's more a case of "optimistic" numbers more then "false" ones. Boeing found no traction with any of their 747 variants, the 787 was at best a "concept", and the 777-300ER development program was looking to have no better performance then the 777-200ER.

Airbus probably felt they had a plane that Boeing had no answer to. They likely expected most of the world's 744/744F operators to move to the A380/A388F over time because it would literally be the only option available to them.

Instead, the 77W was better then expected and many 744 operators chose it. And Boeing finally got it right with the 747-8F, which negated most of the market for the A388F. And then the 787 appeared and made it more efficient to bypass the most constrained hubs in many cases. And now Airbus themselves are doing the best job of undermining the case for the A388 by launching the A350.

I don't think the A380 would have been "saved" even if she had EIS'd right on time. I don't believe the scarcity of new customers is because their waiting to see how the plane performs in service. I think it is because most don't see a need for it anymore now that they can get the 787 and A350.
 
britannia191a
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 12:50 am

Quoting NAV20 (Reply 8):
I used to earn a living in project analysis, which included cash flow projections. It's a complicated field; but I'll try to explain the basic principles.

 hypnotized   cry   crying   bored   bomb   zzz   zzz   yawn   white   veryhappy   vomit   weeping 
 
9252fly
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 2:55 am

Quoting Stitch (Reply 24):
I don't think the A380 would have been "saved" even if she had EIS'd right on time. I don't believe the scarcity of new customers is because their waiting to see how the plane performs in service. I think it is because most don't see a need for it anymore now that they can get the 787 and A350.

Excellent post!
 
Wsp
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 3:30 am

Quoting Stitch (Reply 24):
I don't think the A380 would have been "saved" even if she had EIS'd right on time. I don't believe the scarcity of new customers is because their waiting to see how the plane performs in service. I think it is because most don't see a need for it anymore now that they can get the 787 and A350.

If I understand you correctly then the LH 747-8I order is just a bridging order for later A350s ?
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 3:51 am

Quoting Wsp (Reply 27):
If I understand you correctly then the LH 747-8I order is just a bridging order for later A350s?

I'd find that highly unlikely because the 747-8Is would enter into service only a half-decade or so before the A350-1000s and LH's A340-600s themselves would be pretty "young", as well. So if LH does chose the A350-1000 as their A340-600 replacement, I would not expect to see them before 2020 or so.

With LH adding to their A333 and A346 fleets, they might very well be topping themselves off for the 2010s and waiting to see what Boeing launches in competition to the A350 and preparing their widebody fleet renewal for around the very late 2010s/very early 2020s.

And finally, LH is a current A380 customer and my comment was aimed at new customers.  Wink
 
474218
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 3:57 am

Quoting UAEflyer (Reply 4):
In term of the A380 which most of our colleagues here say it will never break-even. Can't Airbus cover that costs by the profit from the A32X program or by A330 program. As from business prospective i think that should work.

Lets say you own a taxi company with three cars and three drivers. Two of the drivers always turn a profit, but the third never has enough fares to cover the cost of the gas, insurance and maintenance for his cab. How long are you going to employ the driver that is costing you money, not making you money? This is Airbus's problem, they are making money on two of their three projects, A32X, and A330 but the third, the A380 is not meeting its obligation. How long does Airbus suffer the loses on the A380 program.

IMO if Airbus does not sell a significant number of A380's in the next two to three years, they will have to cease sales, build the airframes they have firm contracts for and cut their losses. Just exactly what you would say to the third taxi driver, start turning a profit or I will have to let you go.
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:04 am

Quoting 474218 (Reply 29):
IMO if Airbus does not sell a significant number of A380's in the next two to three years, they will have to cease sales, build the airframes they have firm contracts for and cut their losses. Just exactly what you would say to the third taxi driver, start turning a profit or I will have to let you go.

That time has, unfortunately, passed, though it never really existed since Airbus would have had to cancel the program around MSN005.

The situation is more like there are no other taxicabs or drivers available and you must have three of each. So you just hope that eventually the third driver will start earning a positive fare or will raise revenues and not lose so much money.
 
egronenthal
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:07 am

Call me cynical, but it is not really in Airbus' best interests to ever break even on a program (or at least publicly announce such a milestone), because they would then have to start repaying, with interest, all the government loans that they have received for program development.
 
ikramerica
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:10 am

Quoting WingedMigrator (Reply 22):
Is that a case of 20/20 hindsight? Remember, they didn't build the wrong airplane, but they built the airplane wrong. In the process the breakeven point went from 250 to 420+, taking the projected ROI from 'reasonable' to 'slim to none'.

The projected 900-1100 sales over 20 years (from 2000), including a 1:1 replacement for the 744. That still required hundreds of more sales to customers that don't have the 747, or an expansion by carriers that do. Further, many of those sales were "back loaded" in that the world would expand a lot in the latter part of the 2010s (so why not build the plane to EIS in 2010...)

They ignored the trend even in the late 90s that airlines were buying 777s and A340s instead of more 747s for growth, that greater competition and fewer state run airlines meant more carriers flying smaller planes, and that others were not replacing the 747 classics with 744s at all. Airbus, out of one side of their mouth was selling the A346 as a 747 replacement and then also saying the A380 would replace all the 747s.

I honestly believe they were fudging the numbers for their own cause. This is normal business practice to try, but the governments were too eager to believe it. Just my opinion.
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flying_727
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:11 am

Quoting Tdscanuck (Reply 1):
My basic assumption is that the 737 keeps the lights on, the 747/767 provide a nice but not-assumed bonus, and the 777 is paying for the 787 development.

I would say the 737 pretty much pays for everything, the 777 helps out a little bit, Boeing is now giving 767's away to keep the line open for the tanker, and the 747 is a matter of pride (just its existence is worth more then the profit it does or doesn't make). Many people around Boeing believe the 737 is the line funding the 787, and the 737 people can't wait for the 787 to be done so they can spend their profit on the 737 replacement.

Thats my perspective.

Flying_727
On ATA, You're On Vacation
 
gbfra
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:33 am

Quoting Ikramerica (Reply 32):
The projected 900-1100 sales over 20 years (from 2000), including a 1:1 replacement for the 744.



Quoting Ikramerica (Reply 32):
They ignored the trend even in the late 90s that airlines were buying 777s and A340s instead of more 747s for growth, that greater competition and fewer state run airlines meant more carriers flying smaller planes, and that others were not replacing the 747 classics with 744s at all.



Quoting Egronenthal (Reply 31):
I honestly believe they were fudging the numbers for their own cause

If all this is so obvious, why is Boeing predicting in its current market outlook a demand for 960 VLAs until 2026? Why did they decide to develop the B748? Do the Boeing people even today ignore a trend that already started in the 1990s? Were they fudging the numbers for the sake of the B748?

If you compare their current market outlooks Airbus and Boeing have an almost identical view of the future as far as demand for new aircraft is concerned. Could it be that they have more insight into the market than a.netters have?

Just a question...
The fundamental things apply as time goes by
 
maddog888
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:44 am

Quoting Stitch (Reply 30):

The situation is more like there are no other taxicabs or drivers available and you must have three of each. So you just hope that eventually the third driver will start earning a positive fare or will raise revenues and not lose so much money.

I'm no financial/airline industry expert but...could the case not be made also for the 380 to be a (admittedly enormous) loss leader. If selling it keeps the airlines buying Airbus rather than Boeing, then the sale of sufficient other profitable a/c theoretically could be a reason to keep it. Couldn't it??????????????????????

Maddog888
 
474218
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 4:56 am

Quoting Stitch (Reply 30):
That time has, unfortunately, passed, though it never really existed since Airbus would have had to cancel the program around MSN005.

Please explain. Airbus has orders for 160 A380, what is to stop them from saying "we will build what we have orders for and that is all we are going to build?"
 
pygmalion
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 5:17 am

Quoting Tdscanuck (Reply 1):
My basic assumption is that the 737 keeps the lights on, the 747/767 provide a nice but not-assumed bonus, and the 777 is paying for the 787 development.

People seem to forget that Boeing has gotten something like $8 billion dollars in deposits for the 787 so far... I dont see any reason that any other program is paying anything for the 787 anymore. Boeing does not have a cash flow issue.
 
astuteman
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 5:17 am

Quoting Egronenthal (Reply 31):
Call me cynical

Misinformed would probably be a better adjective......  Smile
The loans have to be repaid whatever.

Quoting 474218 (Reply 36):
what is to stop them from saying "we will build what we have orders for and that is all we are going to build?"

Profitable sales are always worthwhile.

The development costs are spent.
The recovery costs are spent.
These can never be "unspent".

Any sale that either
a) helps recover another small bit of these costs
b) helps cover off corporate overheads by boosting throughput
c) helps generate cash

is worth pursuing, whether break-even is ever reached or not.

Regards
 
Wsp
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 5:22 am

Quoting Stitch (Reply 28):
I'd find that highly unlikely because the 747-8Is would enter into service only a half-decade or so before the A350-1000s and LH's A340-600s themselves would be pretty "young", as well. So if LH does chose the A350-1000 as their A340-600 replacement, I would not expect to see them before 2020 or so.

With LH adding to their A333 and A346 fleets, they might very well be topping themselves off for the 2010s and waiting to see what Boeing launches in competition to the A350 and preparing their widebody fleet renewal for around the very late 2010s/very early 2020s.

And finally, LH is a current A380 customer and my comment was aimed at new customers. Wink

So VLAs are dead. Except for the cases where they aren't. Big grin

Quoting Egronenthal (Reply 31):
Call me cynical, but it is not really in Airbus' best interests to ever break even on a program (or at least publicly announce such a milestone), because they would then have to start repaying, with interest, all the government loans that they have received for program development.

The payments you are referring to are made upon aircraft delivery.

Quoting 474218 (Reply 36):
Please explain. Airbus has orders for 160 A380, what is to stop them from saying "we will build what we have orders for and that is all we are going to build?"

Rational thought. They are making profit on additional copies. You are confusing project break-even and company profits. Your taxi driver is reducing company profits continuously, the A380 does so only in the initial phase but not after 2010.
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 5:27 am

Quoting Egronenthal (Reply 31):
Call me cynical, but it is not really in Airbus' best interests to ever break even on a program (or at least publicly announce such a milestone), because they would then have to start repaying, with interest, all the government loans that they have received for program development.

While there is some debate on how much, if any, of the RLA needs to be actually repaid in the event a program never generates a profit, it is not in the interests of the EU governments, to say nothing of the various other investors in Airbus projects, for those projects never to achieve a return on the initial investment.

Quoting Maddog888 (Reply 35):
I'm no financial/airline industry expert but...could the case not be made also for the 380 to be a (admittedly enormous) loss leader. If selling it keeps the airlines buying Airbus rather than Boeing, then the sale of sufficient other profitable a/c theoretically could be a reason to keep it.

Generally a "loss-leader" loses only a bit of money and generates sales of more profitable models. By definition, the A380 should be the most profitable model Airbus offers because it has little to no competition. Applying such a scenario, A320s should be the ones being sold at a loss, so as to drive sales of profitable A330s, A340s, A350s, and A380s.

Alas, the failure of the A380 to enter revenue service has placed pricing pressure on the entire Airbus product line, which is why margins and profits are shrinking even as raw revenues from orders and sales is increasing. Planes that should be making good profits are making smaller ones or even generating losses.

Quoting 474218 (Reply 36):
Airbus has orders for 160 A380, what is to stop them from saying "we will build what we have orders for and that is all we are going to build?"

Because they've already spent the vast majority of the monies they needed to on the program. The cost of building an A388 for a new customer or new order is lower then the sales price of that A388 so Airbus generates a profit from building that new plane which then helps replace all the money they have already spent.
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 5:31 am

Quoting Wsp (Reply 39):
So VLAs are dead. Except for the cases where they aren't. Big grin

It is not my intent to say that VLAs are "dead".

Instead, I am saying that airlines now have options, and will have even more in the future, that "pencil out" better then an A388 (or A388F) compared to when the A380 program was launched in December of 2000.
 
BoomBoom
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 6:17 am

Quoting Gbfra (Reply 34):

If all this is so obvious, why is Boeing predicting in its current market outlook a demand for 960 VLAs until 2026? Why did they decide to develop the B748? Do the Boeing people even today ignore a trend that already started in the 1990s? Were they fudging the numbers for the sake of the B748?

That's the total VLA market: A380, and 748 combined. A lot of those will be freighters, and Boeing owns that market now.

Didn't Airbus initially predict 1500 A380 sales alone?
Our eyes are open, our eyes are open--wide, wide, wide...
 
gbfra
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 6:38 am

Quoting Pygmalion (Reply 37):
Boeing does not have a cash flow issue.

No, they really haven't. Their cash balance at the end of second quarter was quite impressive as well as their cash flow prediction for the whole year. I wonder if they will use some money to buy back shares.
The fundamental things apply as time goes by
 
Wsp
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 6:59 am

Quoting BoomBoom (Reply 42):
That's the total VLA market: A380, and 748 combined. A lot of those will be freighters, and Boeing owns that market now.

Boeing has a separate freighter airplane forecast.
 
WingedMigrator
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 8:08 am

Quoting BoomBoom (Reply 42):
Didn't Airbus initially predict 1500 A380 sales alone?

They have never done that. They predicted 1500 VLA sales, of which they expected to take half (about 750).

Some (minority) folks in the Boeing sales & marketing organization reportedly believe Airbus will sell 600.

Quoting Wsp (Reply 44):
Boeing has a separate freighter airplane forecast.

No they do not... the CMO numbers for VLAs include both.
 
gbfra
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 8:20 am

Quoting WingedMigrator (Reply 45):
Some (minority) folks in the Boeing sales & marketing organization reportedly believe Airbus will sell 600.

This was reported by www.leeham.net, iirc.
The fundamental things apply as time goes by
 
BoomBoom
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RE: Break Even Numbers For A380, 777, & 787

Sun Aug 05, 2007 11:18 am

Quoting WingedMigrator (Reply 45):
They have never done that. They predicted 1500 VLA sales, of which they expected to take half (about 750).

I found this amusing article from 2004:

Quote:
Boeing, in fact, has openly scoffed at Airbus's predictions of sales of more than 1,500 A380-size planes, a number that Airbus raised in predictions this year to 1,650 planes, including 400 freighters.

John Leahy, predicted that Boeing would be forced to build a rival in the 450-plus-passenger range, especially after its largest current plane, the 747-400, is phased out under pressure from the A380.

He said the top managers at Boeing would have to retire or be phased out before it could admit its mistake and start building a superjumbo. While calling Boeing's decision inevitable, he added: "I could be wrong. I hope I'm wrong."

http://www.iht.com/articles/2004/12/17/t16_5.php
Our eyes are open, our eyes are open--wide, wide, wide...
 
azhobo
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RE: Break Even Numbers For A380, 777, & 787

Mon Aug 06, 2007 1:57 am

On the 748 vs a380 discussions...

If a company has a route that is suited for 748i sized aircraft, is there any economic benefit from buying an a380, assuming similar % class layouts?

In another way of asking the question, would a full 748i be more economical than an a380 flying with the same number of passengers? Or how many more/less pax would the a380 need to have to create the same casm as the full 748i?

I am surprised by the lack of sales on the 748i and the A380. Seems the % of 777 sized aircraft on down will be much higher % of aicraft built in the future, thus making the behemoths really even more a niche market.

HOBO
 
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Stitch
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RE: Break Even Numbers For A380, 777, & 787

Mon Aug 06, 2007 2:53 am

Quoting Azhobo (Reply 48):
If a company has a route that is suited for 748i sized aircraft, is there any economic benefit from buying an a380, assuming similar % class layouts?

Yes, in that even with similar percentages, an A388 will have more people per class, which reduces CASM. It also tends to reduce RASM, but it appears many A388 operators are hoping that with running less then the maximum possible seats and thereby offering more space, even as CASM goes up, it will drive passengers to the A388 and they will pay a premium, thereby eliminating the RASM loss of having extra seats.

Quoting Azhobo (Reply 48):
In another way of asking the question, would a full 748i be more economical than an a380 flying with the same number of passengers?

In general, yes.

Quoting Azhobo (Reply 48):
Or how many more/less pax would the a380 need to have to create the same casm as the full 748i?

That I do not know, but it's probably not a large amount.

Quoting Azhobo (Reply 48):
I am surprised by the lack of sales on the 748i and the A380. Seems the % of 777 sized aircraft on down will be much higher % of aicraft built in the future, thus making the behemoths really even more a niche market.

Pretty much. The 77W proved more popular as a 744 replacement then Boeing and Airbus expected and the A3510 should put even more pressure on the 748 and A388 in that role.

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