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Faro
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Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 10:36 am

The development and launch of the 747, L1011 Tristar, and Cseries almost bankrupted their manufacturers. What other airliners did the same, either massively impairing their manufacturers' financial condition and/or leading to massive government bail-outs or take-overs?

Was the MD-11 among these for one thing, leading to Boeing's takeover of Mcdonnell Douglas? And how significant were the Mercure's commercial losses compared to Dassault's overall financial condition? And CV880/990's astronomical losses in the 1960's, did they ever threaten to take down General Dynamics as a whole back then?


Faro
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Polot
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 10:53 am

The MD-11 was just one factor in MD takeover. Remember the MD-90 also failed in the marketplace.
 
SpaceshipDC10
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 10:54 am

Faro wrote:
Was the MD-11 among these for one thing, leading to Boeing's takeover of Mcdonnell Douglas?


The MD-11 was a great factor, but one has to remember that the DC-10 was the very last all new civil aircraft designed and built by McDonnell Douglas. People from McDonnell lacked of vision in commercial aircraft. Had they launched the MD-11 earlier and invested good money in it, especially its wings, as well as new aircraft between the MD-11 and MD-80, MDC could have survived. All they did was stretch the DC-10 into the MD-11, and the DC-9 to MD-80, then the MD-90. Nothing else.
 
rukundo
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:23 am

And how significant were the Mercure's commercial losses compared to Dassault's overall financial condition?


I can't find infos about the losses, but it seems that Dassault has requested a loan, from French Gov, to improve Mercure Dassault, to save the program.

"After the French Gov. refused, in 1973, an extra 80 Millions French Francs loan to develop the version with the P&W engines JT8D-117 requested by Air France, Dassault tried to find a partnership with Douglas and Lockheed to build and sell the Mercure 200 in the US, and even later with General Dynamics, its biggest competitor, manufacturer of the F-16.
After all those attempts failed, the "Mercure 200" project was definately abandonned in 1975."

viewtopic.php?t=467969
Last edited by rukundo on Thu Nov 02, 2017 11:27 am, edited 1 time in total.
 
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Revelation
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:26 am

SpaceshipDC10 wrote:
All they did was stretch the DC-10 into the MD-11, and the DC-9 to MD-80, then the MD-90. Nothing else.

Well, they did add glass cockpit to MD-11, one that many praise, and it did make its way into MD-90 and MD-95.

One thing to consider is both McDD and Lockheed were caught out by the hangover after the great defense spending splurge of the Vietnam era. In the 60s they plowed military profits that would have had massive tax hits into airliners. After Vietnam ended not only did the military spending end, also the economy fell into a slump so airlines were not spending either.

Boeing was better off because they started the same strategy earlier. They were the big winners of the defense spending of the 50s Cold War where the USAF had the biggest budget and most of their money went into B-47, B-52 and KC-135. Thus they were better positioned when Vietnam came around and had done a lot more R&D during the big buildup era so when things unwound after Vietnam they didn't take as big a hit.
Last edited by Revelation on Thu Nov 02, 2017 11:28 am, edited 1 time in total.
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chiki
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:28 am

What about 787 and A380 had A & B not been a duoploy they would surely have gone under
 
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:30 am

chiki wrote:
What about 787 and A380 had A & B not been a duoploy they would surely have gone under

Nope, not in my eyes. Both were big enough enterprises that they could survive major mistakes such as 787 and A380. In fact both have.
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uta999
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:40 am

Concorde probably bought about the demise of the UK aircraft industry. Only the BAe146 built since and we all know how well that went.
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Archer
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:46 am

How about DeHavilland with the Comet? Vickers and the Vanguard. I'm not sure what happened with Martin after the 404.
These may not answer the question exactly.
 
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 11:47 am

Revelation wrote:
Well, they did add glass cockpit to MD-11, one that many praise, and it did make its way into MD-90 and MD-95.


Yes, but that still doesn't make up for no new aircraft.
 
Newbiepilot
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:03 pm

The Dornier 728 didn't almost bankrupt the manufacturer, some would argue it bankrupted two.
 
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TurboJet707
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:06 pm

The development of the 707/KC-135 was also a big gamble for Boeing. Huge amounts of Boeing's own money were invested in 'a step into the unknown'. There were no orders when development started and it was far from sure whether there would be any demand from the airlines or the military. Boeing had already gained some experience with swept-wing jets (the B-47 and B-52) but a large swept-wing passenger jet was really something else. In the end the 707 and KC135 were a big success, both technically and commercially, but the adventure could easily have ended far worse. The 367-80 prototype was already flying when the first (civilian) order was yet to be placed. Once the USAF ordered hundreds of tankers, the project and the Boeing company were safe; through the KC-135, the taxpayer made the development and further refinement of the 707 passenger jet possible. However, the large USAF jet tanker order had originally been granted to Lockheed. It was only when the winning Lockheed design was plagued by problems and delays when the USAF turned to Boeing for what was then called an 'interim solution'. No one ever heard about the Lockheed tanker again...

With hindsight, the decision to design and build the 707/KC135/367-80 was of course the best gamble Boeing ever made. It gave them the no. 1 position in larger civilian aircraft that they kept for decades, only to be shared with Airbus in recent years. De Havilland never really recovered from the Comet disaster and Douglas and Convair simply were too late to the party. The 707 defined how civilian airliners looked and still look. Imagine pulling up at the gate with a shiny 1957 707, painted in a modern livery. I guess that 90% of the passengers won't notice that they're looking at a 60-year old aircraft...

Had Boeing not received the USAF tanker order or had the 707 suffered technical / structural problems at that time, aviation would have looked much different.
 
uta999
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:18 pm

The L1011 nearly took out RR, or was it the other way round.
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MileHFL400
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:30 pm

chiki wrote:
What about 787 and A380 had A & B not been a duoploy they would surely have gone under


I believe that the 787 will be a real cash cow for Boeing in the coming years so I’m not sure that this counts. In addition the fact that Boeing had cash cows at the time such as the 777 and 737NG ensured that the cock up in development of the 787 didn’t bring the whole company down.

I think that projects that were close to bringing down an entire manufacturer probably didn’t have other products that were bringing in significant profits.
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:30 pm

TurboJet707 wrote:
The development of the 707/KC-135 was also a big gamble for Boeing. Huge amounts of Boeing's own money were invested in 'a step into the unknown'. Had Boeing not received the USAF tanker order or had the 707 suffered technical / structural problems at that time, aviation would have looked much different.
"big gamble"...."huge amounts"
I wish I could track down my previous post on this matter. Never mind - I'll start again from scratch.
Wikipedia wrote:
The Dash 80 first flew in 1954, less than two years from project launch. Its US$16 million cost was an enormous risk for Boeing,
I read the words "enormous risk", and then see the actual development cost ($16million) and wonder how the two equate.
Even allowing for inflation, and that the Dash 80 and the 707 were not 100% the same, something doesn't add up.

So what would $16million buy you in the 1950s?
Wikipedia wrote:
Boeing 707 Unit Cost (1955) = $4.3million

So, the development program equates to the same cost as the retail price of FOUR aircraft.
If there was 10% profit margin on each B707, the program breaks even after just 37 aircraft sales.

Hell - I'll take those odds any day of the week!

Can anybody shed light on why this simply does not add up?
Nothing to see here; move along please.
 
WIederling
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:33 pm

Newbiepilot wrote:
The Dornier 728 didn't almost bankrupt the manufacturer, some would argue it bankrupted two.


IMU carefully applied mismanagement. Compare Liesegang, Opel.
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 12:55 pm

uta999 wrote:
Concorde probably bought about the demise of the UK aircraft industry.
Concorde was as much a political football as a commercial venture.
Wikipedia wrote:
With only 7 airframes each being operated by the English and French, the per-unit cost were impossible to recoup, so the French and British governments absorbed the airframe and development costs
The question becomes a case of; did the two governments bail out the Concorde project, but then refuse to support any other aircraft programs?

Only the BAe146 built since and we all know how well that went.
Your statement can be read two ways; i.e. with or without sarcasm.
:thumbsup: With 387 aircraft produced, the Avro RJ/BAe 146 is the most successful British civil jet airliner programme.:thumbsup:
Or, alternatively
With 387 aircraft produced, the Avro RJ/BAe 146 lags way behind equivalent regional jets produced during that same period. :thumbsdown: :cry:

(In which case, how do we assess the Fokker F70/F100 with total sales of only 47+283 = 330 ?)
Nothing to see here; move along please.
 
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SheikhDjibouti
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:01 pm

VFW-614?
Nothing to see here; move along please.
 
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CARST
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:02 pm

SheikhDjibouti wrote:
TurboJet707 wrote:
The development of the 707/KC-135 was also a big gamble for Boeing. Huge amounts of Boeing's own money were invested in 'a step into the unknown'. Had Boeing not received the USAF tanker order or had the 707 suffered technical / structural problems at that time, aviation would have looked much different.
"big gamble"...."huge amounts"
I wish I could track down my previous post on this matter. Never mind - I'll start again from scratch.
Wikipedia wrote:
The Dash 80 first flew in 1954, less than two years from project launch. Its US$16 million cost was an enormous risk for Boeing,
I read the words "enormous risk", and then see the actual development cost ($16million) and wonder how the two equate.
Even allowing for inflation, and that the Dash 80 and the 707 were not 100% the same, something doesn't add up.

So what would $16million buy you in the 1950s?
Wikipedia wrote:
Boeing 707 Unit Cost (1955) = $4.3million

So, the development program equates to the same cost as the retail price of FOUR aircraft.
If there was 10% profit margin on each B707, the program breaks even after just 37 aircraft sales.

Hell - I'll take those odds any day of the week!

Can anybody shed light on why this simply does not add up?


Your problem is that you didn't adjust for inflation...

For the USA in USD, the 16.000.000 USD in 1955 would be worth 147.906.516,86 USD in September 2017 (I used the US Department of Labor Statistics Online Calculator).

This sounds about right. Back then development was much cheaper than today I guess. Less safety stuff, much faster programs from first planning to first flight. Less testing and so on.

A 707 would have cost the airlines 39 million in 2017 USD. If that is list price and got discounted by 40-50%, that's realistic, too. Perhaps it is even too much. Look at the worldwide civil airliner fleet in 1955. There were very few airlines, with just a tiny amount of airplanes comapred to 2017. Production runs of airlines were expected to don't last longer than 100 to 400 planes. What we know today, with thousands of orders for a single jet model, that was unthinkable of back then. Thus the Return of Investment had to come way earlier.

Look Boeing expected no more than 400 747s to be produced in 1969, 14 years later, when civil aviation was already big compared to 1955: http://www.bbc.com/news/business-37231980
 
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:04 pm

The 146 and Fokkers were built like tanks, still popular
Last edited by zeke on Thu Nov 02, 2017 1:04 pm, edited 1 time in total.
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WIederling
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:08 pm

CARST wrote:
..................


Didn't Boeing urgently need to get rid of profits from the B-* program?

So either Dash80+++ or some punitive taxation.
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:13 pm

SheikhDjibouti wrote:
VFW-614?


Difficult to tell during the programme VFW went through a lot of personality changes.
see ( translate first ) https://en.wikipedia.org/wiki/VFW-Fokker

The 614 was started at ERNO and Fokker buried it. (like Boeing the 717.)
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mwearley
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:15 pm

The Boeing 2707 SST comes to mind.
 
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SheikhDjibouti
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:16 pm

Bristol Brabazon?

Don't be fooled by appearances; this was a truly massive EIGHT engine aircraft.
Like the A380, it featured two decks, a separate cinema, hairdressing salon, and cocktail bar. (I may be making some that up)

Did it's costs bring down Bristol? Not if you read this great example of positive spin...
Wikipedia wrote:
Although considered a failure and a white elephant, the record of the Brabazon is not entirely unfavourable. At least half of the large sums spent on the project had been expended upon the construction of infrastructure, including £6 million for new large hangars and an extended runway at Filton. These improvements meant that Bristol was in an excellent position to continue production of other designs; the assembly hall was soon being used for building another transatlantic aircraft, the Britannia. In addition, many of the techniques which had developed during the Brabazon project were applicable to any aircraft...

Money well spent then?
Nothing to see here; move along please.
 
WIederling
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:17 pm

mwearley wrote:
The Boeing 2707 SST comes to mind.


Did Boeing spend a single dime of their own money on that "national" project?
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bigjku
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:32 pm

SheikhDjibouti wrote:
TurboJet707 wrote:
The development of the 707/KC-135 was also a big gamble for Boeing. Huge amounts of Boeing's own money were invested in 'a step into the unknown'. Had Boeing not received the USAF tanker order or had the 707 suffered technical / structural problems at that time, aviation would have looked much different.
"big gamble"...."huge amounts"
I wish I could track down my previous post on this matter. Never mind - I'll start again from scratch.
Wikipedia wrote:
The Dash 80 first flew in 1954, less than two years from project launch. Its US$16 million cost was an enormous risk for Boeing,
I read the words "enormous risk", and then see the actual development cost ($16million) and wonder how the two equate.
Even allowing for inflation, and that the Dash 80 and the 707 were not 100% the same, something doesn't add up.

So what would $16million buy you in the 1950s?
Wikipedia wrote:
Boeing 707 Unit Cost (1955) = $4.3million

So, the development program equates to the same cost as the retail price of FOUR aircraft.
If there was 10% profit margin on each B707, the program breaks even after just 37 aircraft sales.

Hell - I'll take those odds any day of the week!

Can anybody shed light on why this simply does not add up?


I went back and dug up there 1954 and 1952 financial to get an idea about this because it’s an interesting question. I suspect that stance is because at the time taking such a risk to build an airplane prior to getting any orders as a flying demonstrator was fairly rare.

Looking at earnings in the early 50’s when they decided to build the Dash 80 it basically was risking a year of earnings on a plane that had no orders at the time. The decision would be the equivalent of building say a $6-7 billion dollar demonstrator without having launch orders today which no one would do.

I don’t see it as a bet the company thing only because Boeing was in the middle of massive contracts for B-47 and B-52 production. As an interesting side note the phrase one B-47 produced per working day appears in the 1952 financials which is an insane production rate for what was a highly advanced bomber at the time.

In retrospect if you don’t spend that money then I think you are in trouble as bomber production would eventually fall off a cliff. I would say an accurate statement would be to say it was a fairly ballsy decision for a company to bet a year of earnings on a demonstrator when they basically are a non entity in commercial aviation.

As a bet the company venture the 747 was much more financially dangerous at the time it was done as military income was taking a back seat at Boeing by then and the company would have been in true financial peril had that failed. If the 707 doesn’t come off Boeing just shrinks and gets bought out in 1970’s when B-52 and KC-135 run their course.
 
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Dutchy
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:38 pm

The decision to develop the Fokker 50 and 100 at the same time was probably the last straw Fokker could not take and let to its downfall. But it did let to bankruptcy, so I guess it does not count.
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chiad
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:39 pm

MileHFL400 wrote:
chiki wrote:
What about 787 and A380 had A & B not been a duoploy they would surely have gone under


I believe that the 787 will be a real cash cow for Boeing in the coming years so I’m not sure that this counts. In addition the fact that Boeing had cash cows at the time such as the 777 and 737NG ensured that the cock up in development of the 787 didn’t bring the whole company down.

I think that projects that were close to bringing down an entire manufacturer probably didn’t have other products that were bringing in significant profits.


IMHO neither the A380 nor the B787 was close to brin down the menufacturer.
The A380 is currently not a success, but I think the program is pretty much at breakeven. IMO the NEO will emerge and be in production for another 20 years.
The B787 program is currently a a huge loss, but it has a long life a head and could become very profitable.
 
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SheikhDjibouti
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 1:56 pm

SheikhDjibouti wrote:
The Dash 80 first flew in 1954... Its US$16 million cost was an enormous risk for Boeing
So what would $16million buy you in the 1950s?
Per Wikipedia; Boeing 707 Unit Cost (1955) = $4.3million
If there was 10% profit margin on each B707, the program breaks even after just 37 aircraft sales.

Hell - I'll take those odds any day of the week!

CARST wrote:
Your problem is that you didn't adjust for inflation...
.. and your problem is that you did. Even down to the last 86 cents :lol:

I am well aware of inflation, the word even featured in my original post.
What this thread needs is an assessment of whether this sum would have brought down Boeing, at that time, at those prices.
Thankfully, you did also address that, so I am grateful to you. :thumbsup:

CARST wrote:
Back then development was much cheaper than today I guess. Less safety stuff, much faster programs from first planning to first flight. Less testing and so on.

Look at the worldwide civil airliner fleet in 1955. There were very few airlines, with just a tiny amount of airplanes comapred to 2017. Production runs of airlines were expected to don't last longer than 100 to 400 planes.
Now you are talking!
"In 1956 BOAC ordered 15 Boeing 707s " - in those days, that was a very big deal.
But, taking a wider view, defence spending was quite substantial in those days. So, providing you didn't have all your eggs in one basket (civil aviation), you could always rely on a steady spending stream from the DoD.

Getting back on track; would an investment of $147.906.516,86 (2017 prices) be considered a "huge investment" by Boeing. In today's world that sum barely covers the price of a few coffees and a doughnut. :spin:
Nothing to see here; move along please.
 
bigjku
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 2:09 pm

chiad wrote:
MileHFL400 wrote:
chiki wrote:
What about 787 and A380 had A & B not been a duoploy they would surely have gone under


I believe that the 787 will be a real cash cow for Boeing in the coming years so I’m not sure that this counts. In addition the fact that Boeing had cash cows at the time such as the 777 and 737NG ensured that the cock up in development of the 787 didn’t bring the whole company down.

I think that projects that were close to bringing down an entire manufacturer probably didn’t have other products that were bringing in significant profits.


IMHO neither the A380 nor the B787 was close to brin down the menufacturer.
The A380 is currently not a success, but I think the program is pretty much at breakeven. IMO the NEO will emerge and be in production for another 20 years.
The B787 program is currently a a huge loss, but it has a long life a head and could become very profitable.


The A380 program has not come close to breakeven. They were briefly profitable on a per frame production cost basis when production peaked. They aren’t now but say they aren’t losing much. The A380 will never pay back its fixed cost for the most part. Most has been written off I believe though some portion of the launch aid balance airbus owes would presumably have to be repaid when production is halted. As far as I know Airbus does not breakdown what this number would be.

The 787 has a lot of cost to eat through to reach program break even but it appears they are making about $15 million or a bit more per plane delivered in the last quarter. They have 683 more currently sold and need to push their profit margin well up to chew through the program expenses. They may get there or they may not. I expect them to garner more sales for the model than they are currently projecting which will help a lot.

In both cases neither program really threatened the company. The cash on both is out the door. Airbus has recognized a good portion of its losses in its earnings. Boeing won’t until the end when it would be a charge that impacts its earnings but not its cash. Everyone knows pretty much exactly what that charge could be and doesn’t seem to worked up about it. Both companies make enough money to eat things like this fairly comfortably. Both programs spin off a lot of useful stuff. Neither were all that risky.
 
highflier92660
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 2:41 pm

Entire threads here at Anet have been devoted to the General Dynamics Convair 880 and 990 airliners. Howard Hughes wanted a better and faster airliner than Boeing and Douglas were offering so he turned to the San Diego corporation with a good track record of military technology. Unfortunately only TWA, Delta and a small handful of others purchased the 880. Then American Airlines' C.R. Smith played let's-make-a-deal for an 880 "with a few minor upgrades" that would be a .90 Mach coast-to-coast ultra-premium barn burner. It turned out to be a disaster, essentially an entirely new aircraft that never lived-up to its contract specifications even after all the 990A modifications.
 
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SheikhDjibouti
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 2:47 pm

Boeing 707 Unit Cost (1955) = $4.3million
So, the development program equates to the same cost as the retail price of FOUR aircraft.
If there was 10% profit margin on each B707, the program breaks even after just 37 aircraft sales.

Hell - I'll take those odds any day of the week!

bigjku wrote:
I went back and dug up there 1954 and 1952 financial to get an idea about this because it’s an interesting question. I suspect that stance is because at the time taking such a risk to build an airplane prior to getting any orders as a flying demonstrator was fairly rare.

I would argue the opposite; it was quite in order for lesser companies to develop a prototype and see who might be interested.
Off the top of my head I can only come up with a couple of examples. e.g. the De Havilland Mosquito - which turned out to be the best aircraft ever
And the Bristol Brabazon (see above)
How about the Douglas DC-4E? Douglas didn't fund it entirely on their own; UA, AA, EA, PAA & TWA provided $100,000 each toward the cost of development - although two later withdrew their funds.
And the Saunders-Roe Princess - another monster of the air. Six massive propellers, driven by ten (10) engines. That's crazy math!
The Airspeed Apollo.... and countless other designs that barely anybody can remember because the company built it without advance orders, and only the prototype exists.

bigjku wrote:
Looking at earnings in the early 50’s when they decided to build the Dash 80 it basically was risking a year of earnings on a plane that had no orders at the time. The decision would be the equivalent of building say a $6-7 billion dollar demonstrator without having launch orders today which no one would do.

It would be that equivalent for Boeing, today, as a hugely profitable company. But what about risks taken by smaller outfits? There is a world beyond Boeing & Airbus.
What about Bombardier; what were their annual earnings in comparison to the C-series development?
Or Embraer? (net income $335million (2014)
In all these case, wasn't initial design & development purely speculative, and only later did they gain a comfort-blanket from airlines exhibiting interest and/or placing orders. To state that the whole development program was speculative might be an exaggeration. Could that also be said for Boeing's $16million?

I don’t see it as a bet the company thing only because Boeing was in the middle of massive contracts for B-47 and B-52 production. As an interesting side note the phrase one B-47 produced per working day appears in the 1952 financials which is an insane production rate for what was a highly advanced bomber at the time.
Agreed. Also see my other post for comments about military spending being a useful safety net.

it was a fairly ballsy decision for a company to bet a year of earnings on a demonstrator when they basically are a non entity in commercial aviation.

Again - we agree. :)
Was it really the case that Boeing were a non-entity? The Boeing 314 Clipper was acknowledged as a great ship, and the ONLY way to cross the Atlantic for some years. It was always first choice for British Prime Minister Winston Churchill. I concede that a production run of only 12 is not going to make it a winner. Likewise the Model 377 was limited to 56 sales, whilst the overall design was saved by 888 C-97/KC-97s.
Now where have I heard that story before...... :scratchchin:

If the 707 doesn’t come off Boeing just shrinks and gets bought out in 1970’s when B-52 and KC-135 run their course.

And right now we would all be flying around in MD-80s, and whatever design Convair might have introduced to fit under it's CV-990. :lol:
Nothing to see here; move along please.
 
bigjku
Posts: 1906
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 3:19 pm

The C-series is an interesting comparison point. It was several multiples of earnings for BBD but some of the launch expense was shared. This is likely why many in the industry thought it was insane. Simply put there never seemed to be any prospect that BBD would have on hand the cash necessary nor the ongoing earnings to finance not only the R&D but to spin up production to the point it would be cost competitive.

Probably a better way to look at measuring risk would be to take cash on hand, plus expected positive cash flow until you can project a cash positive production basis and assess what % of that number your expected cash useage for the program will be. I don’t have the time or energy to do that right now.

BBD took what was relative to its size a huge risk. It’s the same reason you don’t see new builders of high volume production cars either I suspect (Tesla being a possible strange exception with tons of conflicting opinions).

I do miss the old days when someone likes North American could respond to a contract to build P-40’s with a fresh design for the p-51 on their own hook. As industries get more established it seems like that becomes much harder.

Of all the examples of established companies doing things I would say BBD’s may be most extreme in modern times. They took all their cash at the time, plus what the expected to earn, plus some they got from governments and suppliers and bet it on something closer to a number than red or black. It straddles the line between ballsy and insane.
 
OSL777FLYER
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 3:40 pm

The Embraer 123, a 19-seat push-prop regional airliner. Heavily advertised at the beginning of the 90's. Almost broke Embraer.
 
twincessna340a
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 4:39 pm

uta999 wrote:
The L1011 nearly took out RR, or was it the other way round.


The L1011 didn't nearly take out RR, it took it out completely. as Rolls-Royce as we know it today is not the same company that started development of the RB.211.

Important to note that the delay meant the DC-10 had a year head start to which the L1011 was unable to make up.

https://en.wikipedia.org/wiki/Rolls-Roy ... nalisation
https://en.wikipedia.org/wiki/Rolls-Roy ... _aftermath

<- TL;DR ->
- Rolls Royce Ltd (original company founded in 1904) started development of the RB.211
- Mismangement and misengeering of the RB.211 put the company into insolvency
- A new government owned company was created, Rolls Royce (1971) Ltd and assets transferred -> "Too Big to Fail"
- Rolls Royce Ltd (1904 original) was subsequently liquidated
- Rolls Royce 1971 drops '1971' 1977, went public in 1987, transferred to Rolls-Royce Holdings plc in 2003
 
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Phosphorus
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Re: Airliners Which Almost Bankrupted Manufacturers

Thu Nov 02, 2017 10:04 pm

Out of more recent examples, RRJ program (that later morphed into SSJ-100) needed bailouts. It didn't "come close to bankrupting the manufacturer" -- the manufacturer is a state-owned group, and the whole program had implicit backstop from the government -- but the manufacturer had to invoke it, going back to the government for cash.
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CARST
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 8:02 am

WIederling wrote:
CARST wrote:
..................


Didn't Boeing urgently need to get rid of profits from the B-* program?

So either Dash80+++ or some punitive taxation.


Looking back at Boeings history and the overall history of jet-powered civil airplanes, would you really rate the Dash80 a program born out of the necessity to reduce taxes?

By all your love for European manufacturers, but the Dash80 or 707, was the jet-airplane which revolutionised air travel the most. Every airplane afterwards was kind of based on lessons learned by designing this airplane. Every airplane until today looks like a 707, with some minor tweaks here and there. And this sets the 707 apart from earlier tries getting into the jet age; like the Comet. Not speaking about the huge success compared to all other airliners at the time.

SheikhDjibouti wrote:
"In 1956 BOAC ordered 15 Boeing 707s " - in those days, that was a very big deal.
But, taking a wider view, defence spending was quite substantial in those days. So, providing you didn't have all your eggs in one basket (civil aviation), you could always rely on a steady spending stream from the DoD.


You are right. But that hasn't much changed today. I think the opposite is true actually. The manufacturers today are profiting way more from the "defence" spending than they did back then. Because back then, just look at the number of manufacturers available in the US and Europe. And then look how many are left over today. The the bigger budget back then, was split under many, many companies, while today it goes to just a few companie left.

Back then we had these military manufacturers for airplanes and helicopters in the NATO countries (and I'm sure some are still missing):
Aerospatiale
Avia
Avro
BAC
Beechcraft
Bell
Boeing
Breguet
Canadair
Convair
Dassault
de Havilland Canada
de Havilland
Dornier
Douglas
English Electric
FAF
Fairchild
Fairey
Fiat Aeritalia
Fokker
Folland/Hawker
Gloster
Goodyear
Grumman
Handley Page
Hawker/Armstrong WHitworth
Lockheed
Martin
McDonell
Nord
North American
Northrop
Piasecki
Republic
Ryan
Saab
Saunders-Roe
Short
Sikorsky
Sud-Ouest
Supermarine
Vickers
Vought
Westland

What is left today in the NATO countries???
Airbus
Boeing
Dassault
General Atomics
Lockheed
Northrop Grumman
Sikorsky

SheikhDjibouti wrote:
Getting back on track; would an investment of $147.906.516,86 (2017 prices) be considered a "huge investment" by Boeing. In today's world that sum barely covers the price of a few coffees and a doughnut. :spin:


Yeah, it seems, even inflation corrected, everything was really cheap back then. But I guess that is the price for better systems and especially way higher safety. I think we don't need to compare number of civillian aircraft crashes back then and today. And don't forget efficiancy. How much testing is put into shaving weight of the airplane until its just meets minimum safety criterias, but is as light as possible. Back then you just had tanks flying around...
 
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CARST
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 8:08 am

OSL777FLYER wrote:
The Embraer 123, a 19-seat push-prop regional airliner. Heavily advertised at the beginning of the 90's. Almost broke Embraer.


As the E145 is basically a super-sized 123 with jet-engines, one could argue that all the money poured into the 123 made Embraer a lot of money in the end through their jungle-jet program.

As the 123 was started as a joint-venture with the Argentinians, I guess only Argentinia lost in this deal and Brazil came away quite good with Embraer entering the world stage with the E145.
 
WIederling
Posts: 9348
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 8:17 am

CARST wrote:
WIederling wrote:
CARST wrote:
..................


Didn't Boeing urgently need to get rid of profits from the B-* program?

So either Dash80+++ or some punitive taxation.


Looking back at Boeings history and the overall history of jet-powered civil airplanes, would you really rate the Dash80 a program born out of the necessity to reduce taxes?

By all your love for European manufacturers, but the Dash80 or 707, was the jet-airplane which revolutionised air travel the most. Every airplane afterwards was kind of based on lessons learned by designing this airplane. Every airplane until today looks like a 707, with some minor tweaks here and there. And this sets the 707 apart from earlier tries getting into the jet age; like the Comet. Not speaking about the huge success compared to all other airliners at the time.


Aren't you back annotating things here?

There is one thing going for Boeing that didn't happen elsewhere.
The massive infusion of theoretical research data from Germany made available to Boeing
( who else got early access to those?), whose reach was understood and leveraged. Bright guy!
Result:
a range of swept wing jet bombers and to finish it off a jet passenger plane to the same layout.
( excessive profits from military procurement projects held punitive action. Made all sense to do the Dash80.)
IMU the success of the 707 was not "planned" as you suggest.
Murphy is an optimist
 
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SheikhDjibouti
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 11:10 am

bigjku wrote:
I went back and dug up there 1954 and 1952 financial to get an idea about this because it’s an interesting question.
Looking at earnings in the early 50’s when they decided to build the Dash 80 it basically was risking a year of earnings on a plane that had no orders at the time.
I don’t see it as a bet the company thing only because Boeing was in the middle of massive contracts for B-47 and B-52 production. As an interesting side note the phrase one B-47 produced per working day appears in the 1952 financials which is an insane production rate for what was a highly advanced bomber at the time.

$16million = "risking a year of earnings" and "one B-47 produced per working day "
I'm not a professional accountant, and I haven't viewed the balance sheets (unlike yourself) but it sounds like yet more creative accounting.
Did Boeing really only make ~$16 million annual earnings in those years?

The B-47E was sold at $1.9million each, and I had always understood that military contracts allowed for 10% margin
(plus whatever little tricks the company could slip past the auditors, like $1200 wrenches) ;)
If they produced one B-47 per working day, that's 250+ in a whole year, at $190,000 profit per a/c = $47million profit just there alone.
$47 million! Is that a spooky coincidence or what? :twisted:

In those years they were also churning out 370 B-50s at $1.1million each, and 888 KC-97s presumably at a similar price. Not all in a single year. Nor necessarily at a rate of one a day, although I suspect both types approached that figure. I can see Boeing easily having $120 million "play money" each year.

Are you standing by your "risking a year of earnings" statement?
At the very least the balance sheet looks more like $32million actual gross profit, less $16million written down as "investment" in the Dash-80. So half a years profits.
But with those B-47 numbers, that is a very conservative estimate.

bigjku wrote:
I don’t see it as a bet the company thing
I'm just repeating your comment so that everybody realises we are very much in agreement with each other (I hope) - just discussing the detail for laughs. :D
Nothing to see here; move along please.
 
bigjku
Posts: 1906
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 1:17 pm

SheikhDjibouti wrote:
bigjku wrote:
I went back and dug up there 1954 and 1952 financial to get an idea about this because it’s an interesting question.
Looking at earnings in the early 50’s when they decided to build the Dash 80 it basically was risking a year of earnings on a plane that had no orders at the time.
I don’t see it as a bet the company thing only because Boeing was in the middle of massive contracts for B-47 and B-52 production. As an interesting side note the phrase one B-47 produced per working day appears in the 1952 financials which is an insane production rate for what was a highly advanced bomber at the time.

$16million = "risking a year of earnings" and "one B-47 produced per working day "
I'm not a professional accountant, and I haven't viewed the balance sheets (unlike yourself) but it sounds like yet more creative accounting.
Did Boeing really only make ~$16 million annual earnings in those years?

The B-47E was sold at $1.9million each, and I had always understood that military contracts allowed for 10% margin
(plus whatever little tricks the company could slip past the auditors, like $1200 wrenches) ;)
If they produced one B-47 per working day, that's 250+ in a whole year, at $190,000 profit per a/c = $47million profit just there alone.
$47 million! Is that a spooky coincidence or what? :twisted:

In those years they were also churning out 370 B-50s at $1.1million each, and 888 KC-97s presumably at a similar price. Not all in a single year. Nor necessarily at a rate of one a day, although I suspect both types approached that figure. I can see Boeing easily having $120 million "play money" each year.

Are you standing by your "risking a year of earnings" statement?
At the very least the balance sheet looks more like $32million actual gross profit, less $16million written down as "investment" in the Dash-80. So half a years profits.
But with those B-47 numbers, that is a very conservative estimate.

bigjku wrote:
I don’t see it as a bet the company thing
I'm just repeating your comment so that everybody realises we are very much in agreement with each other (I hope) - just discussing the detail for laughs. :D


If I went through more years I suspect the profit moved around a lot. It was just a quick glance. I suspect profits were depressed by spending on getting the B-52 line up and running along with R&D on the same.

In general I think military related profits can often be over stated in casual terms. The whole process is undoubtedly a mess. I am not so sure the giant numbers actual end up as profit today so much as it’s spent hiring legions of government compliance specialist and performing gobs of unnecessary testing.

On the original bet the company topic I would say he best measure if one wanted to see how crazy something was would be current cash plus projected cash flow earned over projected time to project break even divided by projected cost (R&D and production startup to breakeven). Earnings can vary a lot. That would measure on hand assets plus expected earned assets against the risk and should quantify it fairly well.
 
WIederling
Posts: 9348
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Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 1:25 pm

This is what I found after some searching on Dash80 funding and profits:
Seattle Times :: The tale of Boeing's high-risk flight into the jet age wrote:
Actually, (Bill) Allen, the lawyer, had discovered something very interesting about the question of whose money the company would be spending. During the Korean War, Congress had put an "excess profits tax" in effect, intended to prevent military companies from making out too well because of increased demand during a war. As it happened, the law essentially defined "excess profits" as anything above what a company had made during the peacetime period of 1946-1949. For Boeing, of course, peace had been a sock to the pocketbook; it had hardly made anything in that time. Therefore, as orders ramped up for the war, Boeing stood to face the "excess profits" tax on virtually every dollar of its profit, while a company such as Douglas, which had had its hands full rolling out propeller-driven airliners after the war, wouldn't face the higher trigger until its military sales equaled the bonanza it had made on commercial sales.

full article:
http://old.seattletimes.com/html/pacificnw/2012956268_pacificpjetage03.html
Murphy is an optimist
 
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SheikhDjibouti
Posts: 2281
Joined: Sat Sep 30, 2017 4:59 pm

Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 1:35 pm

WIederling: Seattle Times :: The tale of Boeing's high-risk flight into the jet age wrote:
During the Korean War, Congress had put an "excess profits tax" in effect, ..... the law essentially defined "excess profits" as anything above what a company had made during the peacetime period of 1946-1949. For Boeing, peace had been a sock to the pocketbook; it had hardly made anything in that time.

full article:
http://old.seattletimes.com/html/pacificnw/2012956268_pacificpjetage03.html[/quote]

Most excellent research! :thumbsup:

So in those days the sun (& Congress) was shining on Douglas, not Boeing. How times change.....
Nothing to see here; move along please.
 
WIederling
Posts: 9348
Joined: Sun Sep 13, 2015 2:15 pm

Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 1:50 pm

SheikhDjibouti wrote:
WIederling: Seattle Times :: The tale of Boeing's high-risk flight into the jet age wrote:
During the Korean War, Congress had put an "excess profits tax" in effect, ..... the law essentially defined "excess profits" as anything above what a company had made during the peacetime period of 1946-1949. For Boeing, peace had been a sock to the pocketbook; it had hardly made anything in that time.

full article:
http://old.seattletimes.com/html/pacificnw/2012956268_pacificpjetage03.html


Most excellent research! :thumbsup:

So in those days the sun (& Congress) was shining on Douglas, not Boeing. How times change.....[/quote]

A range of blingy but uncompetitve civilian products. The tech infusion really gave them a lift up.
Murphy is an optimist
 
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Balerit
Posts: 624
Joined: Sun Aug 23, 2015 9:14 am

Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 2:29 pm

Archer wrote:
How about DeHavilland with the Comet? Vickers and the Vanguard. I'm not sure what happened with Martin after the 404.
These may not answer the question exactly.


The Bristol Brabazon is probably the most famous.
Licensed Aircraft Maintenance Engineer (retired).
 
WIederling
Posts: 9348
Joined: Sun Sep 13, 2015 2:15 pm

Re: Airliners Which Almost Bankrupted Manufacturers

Fri Nov 03, 2017 5:06 pm

Balerit wrote:
Archer wrote:
How about DeHavilland with the Comet? Vickers and the Vanguard. I'm not sure what happened with Martin after the 404.
These may not answer the question exactly.


The Bristol Brabazon is probably the most famous.


Who paid for the Brabazon?

Ha, found it, Empire strikes back^WH pays check :-)
Bristol decided to submit the Type 167 proposal to meet Air Ministry Specification 2/44;
following a brief evaluation period,
a contract to built a pair of prototypes was awarded to Bristol.
Murphy is an optimist

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