enzo011 wrote:Stitch wrote:enzo011 wrote:If the price paid by HA is close to true I see a couple of issues for Boeing. If its only for 6 aircraft no big deal, but for future orders they have now set the lower floor for non launch prices for other airlines on what they are willing to sell the aircraft for. This will put pressure on their margins going forward if airlines that are more loyal to Boeing demand their bigger orders to be at the same or even lower prices.
Airlines can demand all they want from Boeing, but Boeing is not required to concede to those demands. And if $115 million a frame is the production price of an A350-900, it's not like they can say "We want $100 million or we will talk to Airbus" unless Airbus themselves are willing to sell A350's for below production cost (which will do wonders for their margins, as well).
If anything, the rumored average 787-9 sales price being only $10 million more than the rumored production cost of an A350-900 would be a worry for Airbus I would think as it gives Boeing more room to maneuver considering their production cost is rumored to be scores of millions lower than Airbus'.
I guess we will never know as we don't see the sales contracts and the prices paid and we don't know what either OEM is spending on producing a frame. It is all speculation and depends on what information people send out. But a couple of points on the rumored prices and figures.
If Boeing is selling the 787 at an average of $125m then they are offering a average discount of 55% or so per delivery. Now I may be mistaken but I am sure it has been reported that when an order is announced the the price is given for the total order value at list price it is mentioned that no-one pays list price and airlines can pay as much as 50% less. Now it seems that Boeing sells not at 50% of list but more on average.
Who knows what it costs to build a A350. Airbus want to be cash positive in early 2019. If we take the same discount that Boeing gives off list then this means that production costs could be around $120m to $140m currently (50% to 60% off list price). If Boeing sold HA the 787 for less than this its no surprise and right in the middle of the average sales price of the 787. Why would Airbus bring this up if this is what they paid? Is the cost for the A338 really that high that it would struggle to discount it to a level that would compete with this price? It doesn't seem clear to me that they sold it for less than the A350 production cost. That is as you point out slightly less than their average sales price for the 789 and would in no way be a story, other than Airbus is selling the A338 for a price that cannot compete with 789. That does not seem right to me.
As you point out as well that if Airbus can only get the A350 production cost down to $115m then they are in trouble if the 787 production is at $80m to $90m. How will they maintain margins or make profits on their programs if they will be competing against Boeing that is able to produce aircraft at 25% lower cost. Does that pass the smell test to you? What materials and or suppliers are Boeing using that is able to save them 25% of production cost of a similar sized aircraft? Or does adding 3 metres really add $25m to the production cost? I believe Airbus and Boeing uses most of the same suppliers as well so what would cause Boeing to have a 25% discount on production?
Maybe this is just where Airbus is currently with their production cost for the A350 though. Maybe it costs them $115m to produce a A359 at the moment and Boeing sold the 789 to HA for $110m. But that would mean Airbus is selling the A359 for less than this as well as they are not cash positive yet either. So is Airbus selling the A350 for less than Boeing is selling the 787? How does Airbus make profits in that case? Or is the suspicions correct that Airbus is actually nothing more than a jobs programs, but secretly it is a loss making jobs program that masquerades as a profitable business?
So what figures are we going to believe? I think it will depend on each individual poster if they never had to sign a NDA from either an airline or OEM. I am genuinely interested to know what figures could be right, is just speculation and what is made up with this story, because either way some of it doesn't make sense if you apply the same logic from one company to the other. Or is it just a case that two companies with similar profit margins and sales and production numbers and the same suppliers all over the world have such discrepancies with their figures?
I suspect that Boeing was just able to offer a good deal on the 789s on a timeframe that Airbus just wasn’t able to match with the A350, along with the other technically not related but doesn’t hurt deals like Boeing releasing the 767 leases early (doesn’t really hurt Boeing to do so, since they have a customer for the plane already lined up). Airbus was already at a disadvantage in terms of product as the 789 has HA’s desired range unlike the A339 while being closer to their desired size unlike the A359. Their advantage was that they were an incumbudent with the deal.
The “Boeing selling the planes below Airbus’s costs” sounds like spin/damage control being peddled through Leeham that some here are eating up. Remember who Mr. Hamilton spent all day with yesterday