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mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 9:54 am

I believe in hefty profits for the 787 when I see a significant reduction of the deferred cost each quarter. Up to now the biggest reduction of the deferred cost was the write off of two early frames, I think #4 and #5.
If there should be a 30 million USD profit on each delivered frame, than we should see about (136/4=34 and 34*30=1,020) 1 billion reduction of the deferred cost each quarter.
If we do not see hefty reductions on the deferred cost, the profits on 787 deliveries are lower and any claim that the HA frames would have been sold at a profit should be taken with a huge grain of salt.
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 10:08 am

juliuswong wrote:
qcpilotxf wrote:
Flightglobal just reported that HA has not cancelled their A330s yet

https://www.flightglobal.com/news/artic ... ow-446147/

Can we calm down for a second now?

While this does not mean that there isn't a Boeing order in the works, it does mean the A338 isn't dead quite yet

It is good for HA to finally come forward and make a statement. I really hate Airbus and Boeing fanboys here getting so worked out for something that is not concrete or confirmed. That's the main this website is going downhill.

A bit of advice too all fanboys: You can't win all RFPs. You gain some, you lose some. There is no such thing is forever glory, ups and downs are normal for businesses.


So up to now a storm in a tea cup. The A330-800 order still stands.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 11:01 am

juliuswong wrote:
It is good for HA to finally come forward and make a statement.

While Hamilton did say the agreement was not announced, the HA statement makes it clear he overshot the mark by saying the A338 order was already cancelled.

I've commented a few times on how Leeham/Hamilton really needs a professional editor to improve the quality of the site, and this is another proof point.

The rest of stuff in the article is still very much in the realm of the possible, IMHO.

The FG article says:

Though the Honolulu-based airline confirms its agreement to buy the Airbus widebodies remains in place, Hawaiian declines to comment about whether a new deal with Boeing may be imminent, as has been reported.

"It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet. We have not signed an agreement with either manufacturer," Hawaiian says. "We look forward to announcing the conclusion of those negotiations when it is appropriate to do so."

So they confirm something is still in the works.

Maybe the Leeham report has caused Airbus to put more on the table.

Time will tell.

juliuswong wrote:
I really hate Airbus and Boeing fanboys here getting so worked out for something that is not concrete or confirmed. That's the main this website is going downhill.

Hate it?

C'mon, man, life's too short for hate.

Maybe you should consider removing airliners.net from your bookmarks and just point at airbus.com or boeing.com and read the press releases.

You will get concrete information, for sure.

Or use some other professionally operated subscriber oriented site that provides a buffer from rumor and speculation.

I kind of like airwaysmag.com for that kind of thing. They did run an article ( Airways: Hawaiian Airlines Looking To Swap Airbus A330-800 for Boeing 787-9 Order ) on this situation, and correctly framed it as HA "looking" to swap A338 for B789, and added an interesting tidbit:

To counteract the potential cancellation, Airbus has offered Hawaiian to cut the price of the A330-800neo, or given options for A350-900 slots.

... which suggests Airbus has put more on the table ( but without quoting an Airbus spokesman so perhaps rumor and speculation? ).

Or we can ban all rumor and speculation on a.net, and turn a.net into some sort of refereed academia-like utopia where posts are held till a squad of elite mods double-check the rock solid facts behind each post, but I doubt we can find such super-mods to do this for free.

Or you can self-police and add any member who engages in what you feel is rumor and speculation to your 'add foe' ignore member list, but I think you'd probably get rid of 80% of the posts you now see.

So what's to hate about rumors and speculation?

You say you hate the way others get worked up about them based on your own supposition on how worked up they actually are, and in turn you're opening yourself up for supposition about how worked up you are about how others might be having some fun considering what might be in the realm of the possible without being tied to two-source-verified factual bedrock.

So, yeah, it's the avgeeks equivalent of wondering about which Kardasian sister is sleeping with which dodgy dude, so perhaps there's some need for shame, but I don't think there will be any.
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 11:17 am

TWA1985 wrote:
I don’t get people on this forum, not only do you guys have some kind of an aversion to Chicago (O’Hare), but to Boeing as well ... which ironically is Chicago based. Smh.



HAHhA I feel the same way... ORD = No love on A.net
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 12:53 pm

astuteman wrote:
lightsaber wrote:
Boeing produces a 789 for $35 to $40 million less than an A359.


This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds


That is a horrendous mischaracterization of his point. One he stated that Boeing has cut the cost of the 787 around $20-$25 million over the last two years. Second it was stated that Airbus isn’t there yet and if they picked the correct industrial processes their cost should come down over the next couple years as the programs reach similar maturity. I believe he stated pretty much exactly that.

I think most agree the 789 should be somewhat cheaper than an A359 as it’s smaller. But it also seems like something that should be watched. Airbus and Boeing chose very different methods for the industrial process for the two airframes. It is possible that once established one method may be cheaper and more efficient than the other is it not?

The only comments that suggest gross incompetence in the whole thread was where someone suggested that the whole of Boeing senior management be fired. I think most here believe Airbus will get their cost down. But it’s not insane to suggest that it’s possible they made some expedient industrial process decisions on the A350 that reduced up front risk but might not produce optimized results now. They also might be just fine. Time will tell.
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 1:47 pm

bigjku wrote:
astuteman wrote:
lightsaber wrote:
Boeing produces a 789 for $35 to $40 million less than an A359.


This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds


That is a horrendous mischaracterization of his point. One he stated that Boeing has cut the cost of the 787 around $20-$25 million over the last two years. Second it was stated that Airbus isn’t there yet and if they picked the correct industrial processes their cost should come down over the next couple years as the programs reach similar maturity. I believe he stated pretty much exactly that.

I think most agree the 789 should be somewhat cheaper than an A359 as it’s smaller. But it also seems like something that should be watched. Airbus and Boeing chose very different methods for the industrial process for the two airframes. It is possible that once established one method may be cheaper and more efficient than the other is it not?

The only comments that suggest gross incompetence in the whole thread was where someone suggested that the whole of Boeing senior management be fired. I think most here believe Airbus will get their cost down. But it’s not insane to suggest that it’s possible they made some expedient industrial process decisions on the A350 that reduced up front risk but might not produce optimized results now. They also might be just fine. Time will tell.


Until there comes a serious move on the deferred cost, apart from making a write off, I have difficulties to believe that the 787 is making a good profit. That is the point to program accounting for cost, you make a loss the deferred cost go up (while declaring profits), when you make profits the deferred cost go down.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 2:15 pm

I love talk hereabouts concerning rumours. However there was always a rule in newspaper journalism that to go front page on a rumour it had to be confirmed by two credible sources. That way there was less chance of getting caught with your pants down in front of a libel judge.

What this thread demonstrates is that taking that one source and then nailing it to the mast as proven fact can rebound. There's a YouTuber who seems to be building an aviation news channel who also went big on this story, but all he's got is a video reporting the echo chamber stuff from Leeham. Again, no verification or second source.

The HA statement can be read multiple ways. It's actually quite cautious. They are either negotiating in the press to get concessions out of Airbus or they genuinely have got open bidding going on. That's why I had that thought that the Leeham rumour might have been someone at Airbus trying to flush out what's going on with Boeing by provoking a statement from HA.

HA could equally be trying to get a cracking deal for more Airbuses. Nobody knows.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 2:45 pm

astuteman wrote:
lightsaber wrote:
Boeing produces a 789 for $35 to $40 million less than an A359.


This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds

At this time, yes, a 789 is that much less to produce than the A359. As I noted Airbus will reduce costs. It is just where the A359 is in the production cycle. Boeing is taking advantage of first mover advantage. Boeing has performed one of the most aggressive cost cutting efforts I've ever seen in my whole career on the 787.

Please recall how much more the 787 cost to produce even 4 or 5 years ago. Back then the 787 was costing, IIRC, $130 to $150 million each to build. Are you saying Airbus is such a better manufacturer that they are so much further along the normal economy of scale curve for CFRP than any other manufacturer has achieved?

We're not talking economy of scales of aluminum aircraft. CFRP aircraft have a longer learning curve for every assembly. But once the details are worked out, the manufacturing costs plummet far more than with aluminum parts due to the nature of the automation of CFRP production. Early examples, and most military examples, take an incredible amount of hand rework to get out the door. But once the manufacturing is locked in, costs plummet. But it costs engineering time to get the process in hand.

I'm sorry you feel I've drank the Cool Aid. But instead of accusing me of that, perhaps you should have asked for more details into why? You skipped over how I noted Airbus would rapidly cut their costs (not the words I used before, but it was in the numbers). Boeing squeezed Mitsubishi on the wings (I provided a link earlier). Since Airbus is still in early production ramp, they haven't been able to do that yet.

The advantage for Boeing is the woven barrels vs. bolt together fusalage. The later has less economy of scale cost reduction. When you have automated machinery, you can apply algorithms to increase the production rate per machine. I don't know exactly what Boeing has done, but all indications at that their CFRP part costs have plummeted, in particular the 789/787-10 tail (not so much the different 788 tail).

So yes, I do believe in 2018 a 789 costs $80 to $90 million to make and my best estimate is a A359 costs $125 million. Both will cost less next year. Airbus will reduce costs in the next two years more than Boeing as that is just where they are in the production cycle. Airbus also hasn't gone on the major cost reduction effort. Until they do, there is tens of millions of cost in the A359 that shouldn't be there. It isn't they can't, but they haven't yet.

I could post on how I believe Airbus makes a NEO for less than Boeing makes a MAX (in 2018) as that is where each is in the production cycle. :yawn: We just happen to be at a more extreme junction for costs on widebodies.

Will HA switch or not? I don't know. I'm certain they are renegotiating pricing no matter what. Rumor are Boeing is also going after AirAsia. The reality is the long delay on the 787 hurt Boeing. But the delay on the A330NEO is hurting airbus, in particular as there is no longer such a huge 787 backlog (availability).

I'm sure you are familiar with 3D printing. Boeing is switching Titanium part vendors to go with 3-D printing. I recently qualified my first 3D printed parts and it amazes me how much Aerospace is lagging with that cost saving technology. I know the A350 has limited 3D printed parts, 2018 is the year Boeing is going further ahead with them.
https://seekingalpha.com/article/410093 ... dreamliner

Here is an older article on Boeing getting 3D printed parts for the 787. Claim is it saved $2 to $3 million per plane. From what I've seen, Boeing could save *far* more. I've seen complicated parts come out at 5% of the prior manufacturing costs (simple parts need not apply as they are pricier 3D printed than machined, I admit to cherry picking the most extreme example of a titanium part where numerous heat treat and coating steps could be skipped if the part was built 3D printing). In particular, you can 3D print monolithic parts instead of having to weld together assemblies.
https://www.engadget.com/2017/04/11/boe ... etals-787/

I did find Airbus is 3D printing brackets for the A350. But look at the part the bracket is attached to, when will Airbus 3D print that part that is obviously hogged out on a 3D CNC machine that would have taken days! Look at all those tooling marks, cuts, alignment features, and welds that scream expensive to make part. I'm looking at a $30,000 part the 3D printed bracket is attached to and I'd bet that part could be made for less than $2,000 3D printed.
http://www.airbus.com/newsroom/press-re ... tion-.html

So I can look at one photo and figure out how to save $56,000 per A350. The 3D printed part would have fewer stress concentrations, so maybe it could be lighter?

A French company called Stella is trying to sell its 3D printing services and from what I've seen, they're ready:
https://newatlas.com/stelia-3d-printing ... nel/53470/

I know SAFRAN, another French company, has taken costs out of the landing gear system (no links, sorry). So it isn't as if Airbus and their vendors cannot solve the issue, it just isn't yet that time in the production cycle.

Sorry, but when I look at A350 parts, I can tell they haven't yet been optimized for manufacturing costs yet. Guess what, I did the same with 787 parts for a long time as we now see Aircraft in production for 3 or 4 years prior to the cost reduction effort really kicking in and if major re-engineering must occur (such as with the 787), it takes even longer.

So if it is drinking the cool aid to respect an extremely well executed cost reduction effort... OK. Just show me when Airbus has completed a similar effort. Or do you believe Airbus is so advanced they can launch an all new aircraft with far lower production costs than Boeing? Actually, I'll answer that. At the same juncture as the 788, the A359 costs about $10 to $20 million less per aircraft than the 788 did at the same development timeline. Some of that is benefitting from more conservative construction methods (that will provide less cost savings later, cest la vie, that is the engineering trade).

With Boeing getting their first 3D printed parts certified, I see them racing ahead to switch over to the new technology. But oh... the backlog for Aerospace grade 3D printing machines is 30 months FWIW. Any company that hasn't committed to the ordering of the $1 million+ machine tools is going to be behind the curve.

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mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:21 pm

I would say regarding 3D printing that Airbus is quite far along, you have 3D printed parts in most Airbus frames today, the numbers are increasing. Actually on titanium parts you see the biggest cost advantage. I visited the 3D printing facility at XFW last year.

Until I see the 787 cost reduction in actual decreasing deferred cost numbers, I have difficulties believing in them.

Airbus is talking about, that in middle of next year, 2019, the sales price of the A350 will start to cover the production cost. That will be combination of having finished the low price introductory frames and decreasing production cost. Traveled work, aka rework, has come down a lot on the A350-900.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:39 pm

enzo011 wrote:
lightsaber wrote:
If Boeing is selling at $101 to $106 million, they make about $2 billion in profit per year! Now Boeing required ROI probably has a floor today of $105 million.


I hate turning this into another accounting thread by Boeing, but when we talk about profits per plane of $25m-$40m if they sell at $105-$120m, does this take into account the deferred cost that needs to be written down or is the profits beside those cost? We have had articles where Boeing will need to write down something like $30m or more per frame in profit for the 787 due to the deferred cost (in this accounting block I know. When they increase it the number will be reduced). I had it that they then had to make a $45m profit per delivery to make a $15m profit on paper if they write off $30m per delivery on the books against the deferred cost. So making a $25m profit on the HA aircraft will not reduce the deferred cost that is still there, right?

I would speculate that the news we have seen recently of Boeing trying to increase production rates is an indication that they want to, as you mention, use economy of scale to reduce costs and increase profits. But surely if people are talking about Airbus being in a precarious position with the planned rate of 70 for the A320 if there is a world crises this counts just as much for Boeing with the historically high production rates for the 787. Or will there only be a single aisle bubble and the bigger more expensive aircraft will be immune from any world rumbles?

No, I didn't take into account the differed costs. Mostly as Boeing's total external debt is about 1/3rd of the differed costs. I'm trained to ignore sunk costs. Boeing's best move is to maximize future profit. At $2 to $4 billion per year plus aftermarket revenue, Boeing will at least break even.

Airbus is only in a precarious position selling widebodies at at profit going forward. Overall the company is tremendously profitable. I believe the A359 will make a profit.

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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:46 pm

I’ve no idea where the discussions between HA and the plane suppliers are at present.

What intrigues me is the timing of the ‘leak’ from Leeham.

The story broke on the day that Airbus delivered their first A350-1000 to QR in TLS.

I think Scott Hamilton was being entertained by Airbus in TLS at the time of his tweet. Did someone tell him something they shouldn’t have ? Seems a pretty rude way to thank Airbus. Who benefits from the timing, can’t see that Airbus would want their celebrations being overshadowed. After the debacle at the Dubai Airshow is this the way things are going to be now with Boeing raining on Airbus’s parade at every opportunity?

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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:52 pm

mjoelnir wrote:
Until I see the 787 cost reduction in actual decreasing deferred cost numbers, I have difficulties believing in them.

If Boeing increases the accounting block again based on the prospects of new sales you will still not see them, that can will get kicked down the road.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:55 pm

mjoelnir wrote:


Until I see the 787 cost reduction in actual decreasing deferred cost numbers, I have difficulties believing in them.


All that matters for Boeing and its shareholders now is that the cash costs for production are reduced enough to keep a healthy margin for oncoming sales campaigns. Get it into your head that the deferred costs have already be spent and accounted for in the financial statements, and that the whole shebang is merely income smoothing, which Airbus would have gladly done for all their programs if they were allowed by the relevant authorities.

If at the end of the 787s program life, there's still some deferred production cost left, then B will just write it off as a paper loss, as long as B still has been generating truckloads of cash from the program that's simply not nearly a big a deal as people think it is.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 3:59 pm

mjoelnir wrote:
Until I see the 787 cost reduction in actual decreasing deferred cost numbers, I have difficulties believing in them.


People will drown grasping that straw. And once they hit 1400, that straw only gets smaller..

But let's say, for mjoelnir's sanity, Boeing wrote off all deferred costs this year. Boom, they "lost" - let's say $28 BILLION in 2018. So what? What do you think will happen? What difference will it make today?
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 4:08 pm

I've sometimes believed that Airbus negotiates with itself through the press. Perhaps that's what's going on here, and LNC is the vessel?
-Dave


MAX’d out on MAX threads. If you are starting a thread, and it’s about the MAX - stop. There’s already a thread that covers it.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 4:09 pm

It makes little day to day difference. But also it cannot just be ignored. It does limit Boeings ability to compete on price overall - although exceptions can always be made for some contracts.

It is amazing how many frames a new frame takes to break even these days. The volumes are higher than most traditional frames sold in total!

Over the last year for the A350 the time from entry to the FAL to the flightline have dropped dramatically. This is the first and major step in reducing cost. Next it will be a part by part, weight and cost, analysis to identify the next targets. We know significant improvements tested on the -1000 are already headed to the -900.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 4:31 pm

mjoelnir wrote:
I would say regarding 3D printing that Airbus is quite far along, you have 3D printed parts in most Airbus frames today, the numbers are increasing. Actually on titanium parts you see the biggest cost advantage. I visited the 3D printing facility at XFW last year.

Until I see the 787 cost reduction in actual decreasing deferred cost numbers, I have difficulties believing in them.

Airbus is talking about, that in middle of next year, 2019, the sales price of the A350 will start to cover the production cost.

We're already seeing every quarter decreasing, how is $750 million per quarter and accelerating?


amp/s/seekingalpha.com/amp/article/4149799-boeing-787-profile-improves-2_4b

Good to hear Airbus will break even next year.

For 15+ months we've had proof the 787 was reducing differed costs.

So at $750 million for 30 ish 787s... That is $25 million in cash flow profit approximately per airframe. Or the 787 program could pay off 100% of Boeing's external debt in about 14 quarters before taxes or within my estimate of the 787 production run after taxes.

The 787 was a program management disaster until 2012 ish time frame. The A350 has during it's initial run been much better managed. But that might as well be ancient history. Boeing is now making far more money per 787 airframe at today's production costs.

The ramp to 168 787s per year is a volume play that is alone expected to cut costs 5%+ per 787 or say $4 million per 787.

If Airbus is ahead in 3D printing, execute.

I'll put it another way, from publically available data, the 789 should sell for about $105 to $110 to have good industry profit margins at 2018 production costs. 2020 deliveries should be priced $5 to $10 cheaper.

a.net obsesses over sunk costs. I'm trained to ignore them. The fact the 787 owes external to Boeing $10.5 billion that will be paid off in 14 or less quarters. The other $20 billion it owes to itself and will have a tax credit. :yawn:

Yes, Boeing will buy shares and companies so will still have debt. But we should see even higher profits per 787 even with discounting.

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mffoda
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 4:40 pm

csturdiv wrote:
rbavfan wrote:
Channex757 wrote:
Why does my cynical old brain get the impression someone at Airbus might have planted this story to get Leeham to broadcast this rumour, in order to flush Boeing and Hawaiian out?

Now that Hawaiian have had to publicly comment https://www.flightglobal.com/news/artic ... ow-446147/ the story moves on and the world knows what's going on.


So flight global notes when the A358 order was done Hawaiian did not fly to Asia. Uh,was The Manila not part of Asia in 2008 while Hawaiian was flying there in 2008?


They began service to Manila in April 2008, (https://newsroom.hawaiianairlines.com/r ... la-service) and they announced purchasing the A350-800 in February of 2008 (https://newsroom.hawaiianairlines.com/r ... y-aircraft)




But, they announced Manila in January 2008. So he was correct...

https://newsroom.hawaiianairlines.com/r ... la-flights
harder than woodpecker lips...
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:23 pm

StTim wrote:
It makes little day to day difference. But also it cannot just be ignored. It does limit Boeings ability to compete on price overall - although exceptions can always be made for some contracts.

To make this statement, you'd need to have evidence that Boeing's ability to compete on price overall is being limited by program accounting.

Please share.
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The heart has its beaches, its homeland and thoughts of its own
Wake now, discover that you are the song that the morning brings
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:26 pm

lightsaber wrote:
astuteman wrote:
lightsaber wrote:
Boeing produces a 789 for $35 to $40 million less than an A359.


This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds

At this time, yes, a 789 is that much less to produce than the A359. As I noted Airbus will reduce costs. It is just where the A359 is in the production cycle. Boeing is taking advantage of first mover advantage. Boeing has performed one of the most aggressive cost cutting efforts I've ever seen in my whole career on the 787.

Please recall how much more the 787 cost to produce even 4 or 5 years ago. Back then the 787 was costing, IIRC, $130 to $150 million each to build. Are you saying Airbus is such a better manufacturer that they are so much further along the normal economy of scale curve for CFRP than any other manufacturer has achieved?

We're not talking economy of scales of aluminum aircraft. CFRP aircraft have a longer learning curve for every assembly. But once the details are worked out, the manufacturing costs plummet far more than with aluminum parts due to the nature of the automation of CFRP production. Early examples, and most military examples, take an incredible amount of hand rework to get out the door. But once the manufacturing is locked in, costs plummet. But it costs engineering time to get the process in hand.

I'm sorry you feel I've drank the Cool Aid. But instead of accusing me of that, perhaps you should have asked for more details into why? You skipped over how I noted Airbus would rapidly cut their costs (not the words I used before, but it was in the numbers). Boeing squeezed Mitsubishi on the wings (I provided a link earlier). Since Airbus is still in early production ramp, they haven't been able to do that yet.

The advantage for Boeing is the woven barrels vs. bolt together fusalage. The later has less economy of scale cost reduction. When you have automated machinery, you can apply algorithms to increase the production rate per machine. I don't know exactly what Boeing has done, but all indications at that their CFRP part costs have plummeted, in particular the 789/787-10 tail (not so much the different 788 tail).

So yes, I do believe in 2018 a 789 costs $80 to $90 million to make and my best estimate is a A359 costs $125 million. Both will cost less next year. Airbus will reduce costs in the next two years more than Boeing as that is just where they are in the production cycle. Airbus also hasn't gone on the major cost reduction effort. Until they do, there is tens of millions of cost in the A359 that shouldn't be there. It isn't they can't, but they haven't yet.

I could post on how I believe Airbus makes a NEO for less than Boeing makes a MAX (in 2018) as that is where each is in the production cycle. :yawn: We just happen to be at a more extreme junction for costs on widebodies.

Will HA switch or not? I don't know. I'm certain they are renegotiating pricing no matter what. Rumor are Boeing is also going after AirAsia. The reality is the long delay on the 787 hurt Boeing. But the delay on the A330NEO is hurting airbus, in particular as there is no longer such a huge 787 backlog (availability).

I'm sure you are familiar with 3D printing. Boeing is switching Titanium part vendors to go with 3-D printing. I recently qualified my first 3D printed parts and it amazes me how much Aerospace is lagging with that cost saving technology. I know the A350 has limited 3D printed parts, 2018 is the year Boeing is going further ahead with them.
https://seekingalpha.com/article/410093 ... dreamliner

Here is an older article on Boeing getting 3D printed parts for the 787. Claim is it saved $2 to $3 million per plane. From what I've seen, Boeing could save *far* more. I've seen complicated parts come out at 5% of the prior manufacturing costs (simple parts need not apply as they are pricier 3D printed than machined, I admit to cherry picking the most extreme example of a titanium part where numerous heat treat and coating steps could be skipped if the part was built 3D printing). In particular, you can 3D print monolithic parts instead of having to weld together assemblies.
https://www.engadget.com/2017/04/11/boe ... etals-787/

I did find Airbus is 3D printing brackets for the A350. But look at the part the bracket is attached to, when will Airbus 3D print that part that is obviously hogged out on a 3D CNC machine that would have taken days! Look at all those tooling marks, cuts, alignment features, and welds that scream expensive to make part. I'm looking at a $30,000 part the 3D printed bracket is attached to and I'd bet that part could be made for less than $2,000 3D printed.
http://www.airbus.com/newsroom/press-re ... tion-.html

So I can look at one photo and figure out how to save $56,000 per A350. The 3D printed part would have fewer stress concentrations, so maybe it could be lighter?

A French company called Stella is trying to sell its 3D printing services and from what I've seen, they're ready:
https://newatlas.com/stelia-3d-printing ... nel/53470/

I know SAFRAN, another French company, has taken costs out of the landing gear system (no links, sorry). So it isn't as if Airbus and their vendors cannot solve the issue, it just isn't yet that time in the production cycle.

Sorry, but when I look at A350 parts, I can tell they haven't yet been optimized for manufacturing costs yet. Guess what, I did the same with 787 parts for a long time as we now see Aircraft in production for 3 or 4 years prior to the cost reduction effort really kicking in and if major re-engineering must occur (such as with the 787), it takes even longer.

So if it is drinking the cool aid to respect an extremely well executed cost reduction effort... OK. Just show me when Airbus has completed a similar effort. Or do you believe Airbus is so advanced they can launch an all new aircraft with far lower production costs than Boeing? Actually, I'll answer that. At the same juncture as the 788, the A359 costs about $10 to $20 million less per aircraft than the 788 did at the same development timeline. Some of that is benefitting from more conservative construction methods (that will provide less cost savings later, cest la vie, that is the engineering trade).

With Boeing getting their first 3D printed parts certified, I see them racing ahead to switch over to the new technology. But oh... the backlog for Aerospace grade 3D printing machines is 30 months FWIW. Any company that hasn't committed to the ordering of the $1 million+ machine tools is going to be behind the curve.

Lightsaber


????
I haven't got a lot of time so I'll stick on the 3D printing.
We went through this ages ago on the A320NEO, and then across the range.
Airbus are WAY into 3D printing.
And having completed the 3D printing cycle on the titanium parts they are now turning to other 3D printed parts.
The classic example was the bionic bulkhead.

It's no surprise that boeing are pushing so hard for titamium 3D printing - the 787 has more titanium parts on it than the A350.
And titanium is expensive no matter how efficient your production process is.

You're obviously near what Boeing are doing, but your lack of awareness of Airbus's 3D printing suggests you are not near what they are doing.

There's no question an A350-900 will always be more expensive - it's 10% bigger.
But even with all the learning curve I don't believe a 2018 A350-900 is $40m more to produce than a 2018 787-9 or even close to that.
Don't forget Airbus are going from rate 8 to rate 10 in 2018 and will be 200+ frames into a production run that wasn't screwed up like the 787 was
Airbus are selling A350's at $125M and making money on them. Clearly

If they weren't, then Boeing creating a space for MOM is a complete waste of time, as Airbus clearly have SO MUCH margin on the A320 series - enough to make double digit margin even though the A330 and A350 have to be sold at cost, and the A380 at a loss.
Can you imagine that? It implies near 20% margin on the A320 series.
No MOM is ever going to work if that's true.

So no. I don't buy the cost delta, and especially not for the reasons you cite.

The real issues on this thread are being overlooked in my opinion.

Firstly, there's no mention of the 787-8. The competition is between the 787-9 and A350-900

Secondly, HA re-affirm they have not cancelled their order.
The wording of their statement actually suggests the RFQ is for additions to the fleet, not a replacement for the A338 order.
and i can play the game of bolding the bits that suit if you really want.

Thirdly, the real kicker for me.
The comment about Boeing pricing the 787-9 below the production cost of an A350-900 clearly suggests that they are trying to back Airbus into a place where they can play the "dumping" card with the A350-900 if HA order it.
Something they will be unable to with a 787-9 vs the A330-800

Sorry for the earlier harsh wording, but still think the argument and the thread have lost touch with reality.

Rgds
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:36 pm

Revelation wrote:
StTim wrote:
It makes little day to day difference. But also it cannot just be ignored. It does limit Boeings ability to compete on price overall - although exceptions can always be made for some contracts.

To make this statement, you'd need to have evidence that Boeing's ability to compete on price overall is being limited by program accounting.

Please share.


Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:39 pm

It's funny to watch so many Airbus fans lose their minds over this, or the indignation at the thought that another manufacturer may have swiped a customer. Or that Boeing might be further along in reducing costs to build on a aircraft that's been built a little bit longer, and how it is impossible for it to be made so much cheaper than a larger plane.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:41 pm

astuteman wrote:
Secondly, HA re-affirm they have not cancelled their order.
The wording of their statement actually suggests the RFQ is for additions to the fleet, not a replacement for the A338 order.


I caught that sense as well, although I thought it left space to convert the 338 order to 339s or end-of-line 332s as alternates.

339s would have similar capability to HA's earliest 332s, and some of the routes HA uses those on could be ready for up-guaging.

That would leave the new 6 x 789s specifically for long haul extension of HA's present network - say three new routes on a daily basis, or something like that.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 5:52 pm

lightsaber wrote:

So at $750 million for 30 ish 787s... That is $25 million in cash flow profit approximately per airframe. Or the 787 program could pay off 100% of Boeing's external debt in about 14 quarters before taxes or within my estimate of the 787 production run after taxes.

Lightsaber


Where do you get 750 million USD between quarters? Last year, 2017, the change between quarters averages 487 million, with Q3 to Q4 at 590.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 6:02 pm

I have no idea if a deal has been made or not, but we should not forget that unlike Leeham.net, any statement made by Hawaiian Airlines on their aircraft purchases would be considered to have material affect on their finances. So even if HA has a deal in place with Airbus and Boeing to cancel their A330-800s and order 787-9s and someone with knowledge of that deal leaked it to Scott Hamilton, until the HA Board of Directors approve the deal and the relevant financial (NASDAQ) and regulatory (SEC) authorities are formally informed, HA cannot publicly confirm such a deal has been made. Nor could Airbus announce a cancellation nor Boeing an order (even as a UFO).
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 6:07 pm

For those complaining about material costs, material is typically 3% to 5% of the cost of the final part. Yes, it seems the raw ingredients for Titanium 3D printing are going up, but since they waste so little, the material costs are less.


astuteman wrote:
lightsaber wrote:
astuteman wrote:

This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds

At this time, yes, a 789 is that much less to produce than the A359. As I noted Airbus will reduce costs. It is just where the A359 is in the production cycle. Boeing is taking advantage of first mover advantage. Boeing has performed one of the most aggressive cost cutting efforts I've ever seen in my whole career on the 787.

Please recall how much more the 787 cost to produce even 4 or 5 years ago. Back then the 787 was costing, IIRC, $130 to $150 million each to build. Are you saying Airbus is such a better manufacturer that they are so much further along the normal economy of scale curve for CFRP than any other manufacturer has achieved?

We're not talking economy of scales of aluminum aircraft. CFRP aircraft have a longer learning curve for every assembly. But once the details are worked out, the manufacturing costs plummet far more than with aluminum parts due to the nature of the automation of CFRP production. Early examples, and most military examples, take an incredible amount of hand rework to get out the door. But once the manufacturing is locked in, costs plummet. But it costs engineering time to get the process in hand.

I'm sorry you feel I've drank the Cool Aid. But instead of accusing me of that, perhaps you should have asked for more details into why? You skipped over how I noted Airbus would rapidly cut their costs (not the words I used before, but it was in the numbers). Boeing squeezed Mitsubishi on the wings (I provided a link earlier). Since Airbus is still in early production ramp, they haven't been able to do that yet.

The advantage for Boeing is the woven barrels vs. bolt together fusalage. The later has less economy of scale cost reduction. When you have automated machinery, you can apply algorithms to increase the production rate per machine. I don't know exactly what Boeing has done, but all indications at that their CFRP part costs have plummeted, in particular the 789/787-10 tail (not so much the different 788 tail).

So yes, I do believe in 2018 a 789 costs $80 to $90 million to make and my best estimate is a A359 costs $125 million. Both will cost less next year. Airbus will reduce costs in the next two years more than Boeing as that is just where they are in the production cycle. Airbus also hasn't gone on the major cost reduction effort. Until they do, there is tens of millions of cost in the A359 that shouldn't be there. It isn't they can't, but they haven't yet.

I could post on how I believe Airbus makes a NEO for less than Boeing makes a MAX (in 2018) as that is where each is in the production cycle. :yawn: We just happen to be at a more extreme junction for costs on widebodies.

Will HA switch or not? I don't know. I'm certain they are renegotiating pricing no matter what. Rumor are Boeing is also going after AirAsia. The reality is the long delay on the 787 hurt Boeing. But the delay on the A330NEO is hurting airbus, in particular as there is no longer such a huge 787 backlog (availability).

I'm sure you are familiar with 3D printing. Boeing is switching Titanium part vendors to go with 3-D printing. I recently qualified my first 3D printed parts and it amazes me how much Aerospace is lagging with that cost saving technology. I know the A350 has limited 3D printed parts, 2018 is the year Boeing is going further ahead with them.
https://seekingalpha.com/article/410093 ... dreamliner

Here is an older article on Boeing getting 3D printed parts for the 787. Claim is it saved $2 to $3 million per plane. From what I've seen, Boeing could save *far* more. I've seen complicated parts come out at 5% of the prior manufacturing costs (simple parts need not apply as they are pricier 3D printed than machined, I admit to cherry picking the most extreme example of a titanium part where numerous heat treat and coating steps could be skipped if the part was built 3D printing). In particular, you can 3D print monolithic parts instead of having to weld together assemblies.
https://www.engadget.com/2017/04/11/boe ... etals-787/

I did find Airbus is 3D printing brackets for the A350. But look at the part the bracket is attached to, when will Airbus 3D print that part that is obviously hogged out on a 3D CNC machine that would have taken days! Look at all those tooling marks, cuts, alignment features, and welds that scream expensive to make part. I'm looking at a $30,000 part the 3D printed bracket is attached to and I'd bet that part could be made for less than $2,000 3D printed.
http://www.airbus.com/newsroom/press-re ... tion-.html

So I can look at one photo and figure out how to save $56,000 per A350. The 3D printed part would have fewer stress concentrations, so maybe it could be lighter?

A French company called Stella is trying to sell its 3D printing services and from what I've seen, they're ready:
https://newatlas.com/stelia-3d-printing ... nel/53470/

I know SAFRAN, another French company, has taken costs out of the landing gear system (no links, sorry). So it isn't as if Airbus and their vendors cannot solve the issue, it just isn't yet that time in the production cycle.

Sorry, but when I look at A350 parts, I can tell they haven't yet been optimized for manufacturing costs yet. Guess what, I did the same with 787 parts for a long time as we now see Aircraft in production for 3 or 4 years prior to the cost reduction effort really kicking in and if major re-engineering must occur (such as with the 787), it takes even longer.

So if it is drinking the cool aid to respect an extremely well executed cost reduction effort... OK. Just show me when Airbus has completed a similar effort. Or do you believe Airbus is so advanced they can launch an all new aircraft with far lower production costs than Boeing? Actually, I'll answer that. At the same juncture as the 788, the A359 costs about $10 to $20 million less per aircraft than the 788 did at the same development timeline. Some of that is benefitting from more conservative construction methods (that will provide less cost savings later, cest la vie, that is the engineering trade).

With Boeing getting their first 3D printed parts certified, I see them racing ahead to switch over to the new technology. But oh... the backlog for Aerospace grade 3D printing machines is 30 months FWIW. Any company that hasn't committed to the ordering of the $1 million+ machine tools is going to be behind the curve.

Lightsaber


????
I haven't got a lot of time so I'll stick on the 3D printing.
We went through this ages ago on the A320NEO, and then across the range.
Airbus are WAY into 3D printing.
And having completed the 3D printing cycle on the titanium parts they are now turning to other 3D printed parts.
The classic example was the bionic bulkhead.

It's no surprise that boeing are pushing so hard for titamium 3D printing - the 787 has more titanium parts on it than the A350.
And titanium is expensive no matter how efficient your production process is.

You're obviously near what Boeing are doing, but your lack of awareness of Airbus's 3D printing suggests you are not near what they are doing.

There's no question an A350-900 will always be more expensive - it's 10% bigger.
But even with all the learning curve I don't believe a 2018 A350-900 is $40m more to produce than a 2018 787-9 or even close to that.
Don't forget Airbus are going from rate 8 to rate 10 in 2018 and will be 200+ frames into a production run that wasn't screwed up like the 787 was
Airbus are selling A350's at $125M and making money on them. Clearly

If they weren't, then Boeing creating a space for MOM is a complete waste of time, as Airbus clearly have SO MUCH margin on the A320 series - enough to make double digit margin even though the A330 and A350 have to be sold at cost, and the A380 at a loss.
Can you imagine that? It implies near 20% margin on the A320 series.
No MOM is ever going to work if that's true.

So no. I don't buy the cost delta, and especially not for the reasons you cite.

The real issues on this thread are being overlooked in my opinion.

Firstly, there's no mention of the 787-8. The competition is between the 787-9 and A350-900

Secondly, HA re-affirm they have not cancelled their order.
The wording of their statement actually suggests the RFQ is for additions to the fleet, not a replacement for the A338 order.
and i can play the game of bolding the bits that suit if you really want.

Thirdly, the real kicker for me.
The comment about Boeing pricing the 787-9 below the production cost of an A350-900 clearly suggests that they are trying to back Airbus into a place where they can play the "dumping" card with the A350-900 if HA order it.
Something they will be unable to with a 787-9 vs the A330-800

Sorry for the earlier harsh wording, but still think the argument and the thread have lost touch with reality.

Rgds

I readily admit to not being near A350 3D printing. If my estimate of A350 production costs is high, educate me.

But I see photos of Airbus parts, I provided a link before, where they should be 3D printed.

I have seen A350 parts being made conventionally just a few years ago that should be 3D printed but Airbus was still buying conventional CNC machines. Great (IMHO the best for what was being made), machines, but conventional 6-axis and something like 60 tool machines to enable lights out work.

If the parts are now 3D printed great. The industry is Changing fast. I haven't been given good insight into Airbus for a few years. Considering the ocean between me and their HQ... Not surprising.


My employer just scrapped tens of millions worth of 6-axis machines and replaced every 2 with one 3D printer. Now that is a fraction of a shop.

What I know is we make 3D printed titanium for much less than prior conventional aluminum. The Aluminum we've 3D printed wasn't as complex.

I'll look more into HA. If a top off orders... Interesting.

It comes down to costs. If my A350 estimate is high, correct it.

What I know is Boeing was more agressive cutting 787 costs in 2015-2017 than I've ever seen on a production aircraft. I have less insight into the MAX, but I hear the same team is focusing on that aircraft now with longer term 787 cost reduction efforts still underway.

My understanding is the 789 previously sold in the $125 million range and is trending down due to A359 competition. My understanding is due to a less mature production process, the A359 costs significantly more to make, but only sells for $10 million more or so. Airbus' executives we're quoted by others saying they hit break even next year.

But unless Airbus broke all president and focused on costs during initial production ramp, I do not see how they matched Boeing's effort.

I'd like to know more about what Airbus is 3D printing. I know Boeing is trying to do some big parts with custom machines, but where they are in the process, I don't know.

In my opinion, the first aircraft integrator to 3D print a landing gear bay wins. There is so much cost and weight to be removed in those 3 assemblies (and yes, two are integrated into the wing box).

But oh, watching machines weave CFRP without human touch is lovely. It is like that Lexus factory where workers service the machines instead of assemble the cars. Or what Tesla is trying to do. For the first time in my long career, Aerospace companies are going full automated on certain parts. It sort of disgusts me how much hand work still goes on. I built stuff in 2000 that was more automated than any commercial production prior to 2015.

If Airbus is doing that well, they'll have A359 production costs down to $80 million before Boeing gets to $70 million.

Yes, that is where the industry is going. Let me repeat, I think an A359 should sell for $10 million more than a 789. Even a few million more than a 787-10.

To others:. I'm not talking 788 as every improvement benefits larger airframes more than smaller. e.g., get the cost of a rib or panel down 20% and the aircraft with more benefits more. If more than 30 more 788s are sold (net, including options), I'll be shocked.

The A330NEO has less space to compete. IMHO the A338F will do well. Better by a factor of 2 or 3 than the A332 based factory freighter (assuming the MTOW increase goes through). But for pax duty, I"m not finding economics to outshine the 789.

Let me point out where I'm excited about an Airbus widebody:. A350-1000. It has a clear and uncontested market space. While I think a 777X wing will eventually cost less than a 77W wing, the A350-1000 will have a manufacturing cost about $20 to 25 million less than a 777X thanks to economies of scale and certain design features. Now I see a 777X market, but the next dominant widebodies will be the 789 and A350-1000. Which and what ratio I cannot guess. The A359 will be profitable; but I already think of it as the 777-200ER (my favorite 777 FWIW); it is the successful starter airframe into the big market.

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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 6:34 pm

Well one thing is sure now a lot of people know how cheap is a 789... and has a aA359 ballpark cost.... weird no matter how things pan out (Ha cancels orders or keeps its news and orders more A359).
The dumping accusation possibility that Astuteman points out seems plausible, or corner Airbus into showing its hand....

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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 6:37 pm

StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.


limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 7:29 pm

StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss.

Yes, that's the narrative that's been spread around a.net for a long time now, and it's always been questionable.

It's always been expected as time moved forward:
a) The impact of early frames sold cheap would no longer be a factor
b) The reduction in the cost of production as Boeing moved down the learning curve would become a big factor
c) As orders increase, the size of the accounting block can be expanded.

All of these have become true.

Add to it what Lightsaber is pointing out:
d) Increase in production rate means fixed costs are amortized across more aircraft per unit time so more profit per airframe
e) Boeing has leaned heavily on suppliers for concessions and they've gotten them

And things are proceeding even better than pessimists (appropos to this thread, Scott Hamilton being one of them) presumed they would.

That narrative is even more questionable now when we have plenty of real world evidence (with or without HA taking 789s) that Boeing is being aggressive on price.

I'm sure Boeing has limits on ability to compete on price (every vendor does) but all of the above should make it clear that program accounting is not a limiting factor. Any sale above the cost of production means actual cash flowing into the company. That's far more important than making the deferred accounting spreadsheet look better.
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 8:00 pm

lightsaber wrote:
What I know is Boeing was more agressive cutting 787 costs in 2015-2017 than I've ever seen on a production aircraft. I have less insight into the MAX, but I hear the same team is focusing on that aircraft now with longer term 787 cost reduction efforts still underway. Lightsaber

This thread seems off topic, but....

They most certainly have, not realised from 3D printing, but from leaning very hard on sub-contractors, such that a record number have exercised put options to terminate. The speed of 3D adoption at Boeing is defensive at this stage, to maintain / increase production, though I'm sure management is stressing future production cost reductions to the Board.
 
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 8:59 pm

WIederling wrote:
StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.


limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.
 
trex8
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 9:51 pm

Maybe I missed it but where are the links showing these prices being paid for these various models?
 
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FBWFTW
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Fri Feb 23, 2018 11:51 pm

texl1649 wrote:
william wrote:
MIflyer12 wrote:
Do we need to remind Leeham that an aircraft sold from Washington state to Hawaiian isn't international commerce? I guess we do.


I don't know why this is so funny to me...... :rotfl:


To be fair, it is closer if it is from a “red” state like right to work South Carolina. Resist!


It’s a Scabb’n Eighty Scabb’n :-p
Avgeek & Airbus fan
Flown-712 722 732/5/8/9 741 752 762/3ER, L10, DC8/9/10 MD88 E75/90 A320/21 A332/3
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https://my.flightradar24.com/FBWFTW#
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 12:37 am

Bricktop wrote:
WIederling wrote:
StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.


limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.


But the profits that will be expected have already been declared and spend. If Boeing would declare the hit today, they would declare a 25.4 billion USD loss, 25.4 billion USD less inventory and 25.4 billion USD negative equity, that means some 25 billion less assets than liabilities. If you add the Unamortized Tooling and Other Non-Recurring Cost, you get to about 28.5 billion USD.
That would about wipe out the profits for the last five or six years.
 
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william
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 12:48 am

mjoelnir wrote:
Bricktop wrote:
WIederling wrote:

limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.


But the profits that will be expected have already been declared and spend. If Boeing would declare the hit today, they would declare a 25.4 billion USD loss, 25.4 billion USD less inventory and 25.4 billion USD negative equity, that means some 25 billion less assets than liabilities. If you add the Unamortized Tooling and Other Non-Recurring Cost, you get to about 28.5 billion USD.
That would about wipe out the profits for the last five or six years.


And if they wrote it off they would have a better profit ratio than 11%.
 
strfyr51
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 1:00 am

before we gat all melodramatic? It could be that nobody in the US was going to be of any logistical help TO Hawaiian in a pinch. I mean How much actual commonality would the A338 have at American United or Delta were they to go AOG while enroute to the east coast from Hawaii? And being the size of Hawaian? It's NOT likew they don't have to depend on anybody Else in a pinch.
 
trex8
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 1:04 am

strfyr51 wrote:
before we gat all melodramatic? It could be that nobody in the US was going to be of any logistical help TO Hawaiian in a pinch. I mean How much actual commonality would the A338 have at American United or Delta were they to go AOG while enroute to the east coast from Hawaii? And being the size of Hawaian? It's NOT likew they don't have to depend on anybody Else in a pinch.

neo is supposed to have 95% parts commonality with ceo. DL are getting A339 , there cant be that much difference between a A338 vs A339 than A333 vs A332.
 
VV
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 9:02 am

Sorry if it has been discussed here.

Hawaiian currently has 24 A330-200 powered by Rolls-Royce Trent 772B according to planespotters.net.

If the order for 6 787-9 is confirmed, do you guys think it would be the beginning of all 24 A330-200 replacement by 787-9. or are they trying to keep a mixed widebody fleet?
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 9:23 am

strfyr51 wrote:
before we gat all melodramatic? It could be that nobody in the US was going to be of any logistical help TO Hawaiian in a pinch. I mean How much actual commonality would the A338 have at American United or Delta were they to go AOG while enroute to the east coast from Hawaii? And being the size of Hawaian? It's NOT likew they don't have to depend on anybody Else in a pinch.


What would you need in a pinch? A fuselage? Somebody with a A330-900 would have the things you could need in pinch for a A330-800. Somebody running a A330-200/300 could have also quite a few things you need.
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 9:31 am

Revelation wrote:
juliuswong wrote:
It is good for HA to finally come forward and make a statement.

While Hamilton did say the agreement was not announced, the HA statement makes it clear he overshot the mark by saying the A338 order was already cancelled.

I've commented a few times on how Leeham/Hamilton really needs a professional editor to improve the quality of the site, and this is another proof point.

The rest of stuff in the article is still very much in the realm of the possible, IMHO.

The FG article says:

Though the Honolulu-based airline confirms its agreement to buy the Airbus widebodies remains in place, Hawaiian declines to comment about whether a new deal with Boeing may be imminent, as has been reported.

"It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet. We have not signed an agreement with either manufacturer," Hawaiian says. "We look forward to announcing the conclusion of those negotiations when it is appropriate to do so."

So they confirm something is still in the works.

Maybe the Leeham report has caused Airbus to put more on the table.

Time will tell.

juliuswong wrote:
I really hate Airbus and Boeing fanboys here getting so worked out for something that is not concrete or confirmed. That's the main this website is going downhill.

Hate it?

C'mon, man, life's too short for hate.

Maybe you should consider removing airliners.net from your bookmarks and just point at airbus.com or boeing.com and read the press releases.

You will get concrete information, for sure.

Or use some other professionally operated subscriber oriented site that provides a buffer from rumor and speculation.

I kind of like airwaysmag.com for that kind of thing. They did run an article ( Airways: Hawaiian Airlines Looking To Swap Airbus A330-800 for Boeing 787-9 Order ) on this situation, and correctly framed it as HA "looking" to swap A338 for B789, and added an interesting tidbit:

To counteract the potential cancellation, Airbus has offered Hawaiian to cut the price of the A330-800neo, or given options for A350-900 slots.

... which suggests Airbus has put more on the table ( but without quoting an Airbus spokesman so perhaps rumor and speculation? ).

Or we can ban all rumor and speculation on a.net, and turn a.net into some sort of refereed academia-like utopia where posts are held till a squad of elite mods double-check the rock solid facts behind each post, but I doubt we can find such super-mods to do this for free.

Or you can self-police and add any member who engages in what you feel is rumor and speculation to your 'add foe' ignore member list, but I think you'd probably get rid of 80% of the posts you now see.

So what's to hate about rumors and speculation?

You say you hate the way others get worked up about them based on your own supposition on how worked up they actually are, and in turn you're opening yourself up for supposition about how worked up you are about how others might be having some fun considering what might be in the realm of the possible without being tied to two-source-verified factual bedrock.

So, yeah, it's the avgeeks equivalent of wondering about which Kardasian sister is sleeping with which dodgy dude, so perhaps there's some need for shame, but I don't think there will be any.


But Hawaiian neither said, we are about to order the 787, nor we will order the 787, or we have canceled the A330, or we will cancel the A330. The point is, Hawaiian still has 6 A330-800 on order and the first frame they were to take is already produced.
 
WIederling
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 9:45 am

Bricktop wrote:
WIederling wrote:
StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.


limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone.


Reading comprehension. neither StTim nor I was writing about dev cost. Those have been written off.
This is about deferred production cost,
there you have loop of lowballing for more sales to extend the acc. block while that same act demands extending the acc. block
due to less revnue to pay back ...
Bricktop like jarhead is supposed to be a hairstyle, isn't it?
Murphy is an optimist
 
mjoelnir
Posts: 9411
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 9:59 am

Bricktop wrote:
WIederling wrote:
StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.


limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.


The 25 billion or more development cost have been spent and written off.

The deferred cost have nothing to do with development, they are production losses that are not yet booked as cost. Up to now it has cost over 25 billion USD more to produce the 636 delivered 787, than Boeing has sold them for.
 
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flee
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 10:12 am

Bricktop wrote:
WIederling wrote:
StTim wrote:
Because if they do not pay down the deferred costs within the block they will have to take a loss. That is something on a successful project they are desperate not to do. It is face saving.

limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.

I am sorry to say that this will be the case as long as deferred costs remain in the Boeing balance sheet. These are not development costs - they are production costs and have nothing to do with development. Boeing has stated that the costs will not be written off as they are incurred. Instead they will be capitalised as an asset and be amortised over the production block. As such, these costs have not been accounted for through the profit and loss account. Every 787 frame that is now made has to bear these production costs that were incurred earlier. This will go until the last unit of the accounting block that Boeing has predetermined.

These deferred production costs is what is preventing Boeing from selling the 787 too cheap - they are part of cost of production. If Boeing sold the 787 too cheap, they would not be making profits and may even incur losses.
 
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neutrino
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 10:30 am

godsbeloved wrote:
Savings on maintenance are real. Non flying dreamliners require extremely low amounts of maintenance. The costs are so low that airlines can now afford to fly leased A330's and A340's instead...

Being smart is good.
TRYING to be smart, not so much!
Potestatem obscuri lateris nescitis
 
marcelh
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 10:40 am

flee wrote:
Every 787 frame that is now made has to bear these production costs that were incurred earlier.

As mentioned earlier in this thread, in Q4-2017 it was about $16.4 M per plane.
This will go until the last unit of the accounting block that Boeing has predetermined.

If Boeing wants to reduce the deferred costs to $0 within the current accounting block (1,400 planes), they have to double it. IMO Boeing will (and have to) further extend the accounting blockf
 
WIederling
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 11:49 am

marcelh wrote:
flee wrote:
Every 787 frame that is now made has to bear these production costs that were incurred earlier.

As mentioned earlier in this thread, in Q4-2017 it was about $16.4 M per plane.
This will go until the last unit of the accounting block that Boeing has predetermined.

If Boeing wants to reduce the deferred costs to $0 within the current accounting block (1,400 planes), they have to double it. IMO Boeing will (and have to) further extend the accounting blockf


Much more than that. The _average_ for the remaining frames has to show ~~~$30m or thereabouts
( $15m average is per every and each frame in an assumed acc block of 1800 and deferred cost bucket of $28B overall. )
i.e. at the end of the current target to ZERO $60m per frame would have to be expected. 50..55% of revenue :-)
Murphy is an optimist
 
Bricktop
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 12:43 pm

flee wrote:
These deferred production costs is what is preventing Boeing from selling the 787 too cheap - they are part of cost of production. If Boeing sold the 787 too cheap, they would not be making profits and may even incur losses.

No, they are water under the bridge. You can play paper games with how you allocate those costs, but let the tax and treasury departments worry about that. The cash is spent, what's done is done. Just like on the A380, the only thing that matters is can Boeing make money (or similarly tolerable potential losses in re A380 for Airbus) on a cash over cash basis on current and future frame production. And what determines that is what the market will bear.

Here's a hypothetical for your consideration, using made up numbers. Actual cost to build plane X: $100 million. Deferred Cost allocation per plane: $40 million. Airline customer willing to pay: $120 million. Do you build that plane or not? I know what I would do.
 
Newbiepilot
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 12:58 pm

flee wrote:
Bricktop wrote:
WIederling wrote:
limited returns. low ball sales for more overall sales to extend the accounting block.
stretches consumation of the deferred cost ... requiring the extension of the ...

Still wrapped around that axle, aren't we. The dev money has been spent, gone. As someone correctly pointed out upthread, if Boeing suddenly decided to take the P&L hit on the deferred costs, it wouldn't matter one bit to the pricing of any order downstream. And just like Airbus, they try to get as much for each sale that they make. Neither side leaves money on the table. No lowballing. No reality to the fantasy, sorry.

I am sorry to say that this will be the case as long as deferred costs remain in the Boeing balance sheet. These are not development costs - they are production costs and have nothing to do with development. Boeing has stated that the costs will not be written off as they are incurred. Instead they will be capitalised as an asset and be amortised over the production block. As such, these costs have not been accounted for through the profit and loss account. Every 787 frame that is now made has to bear these production costs that were incurred earlier. This will go until the last unit of the accounting block that Boeing has predetermined.

These deferred production costs is what is preventing Boeing from selling the 787 too cheap - they are part of cost of production. If Boeing sold the 787 too cheap, they would not be making profits and may even incur losses.


Boeing is still a profit maximizing company in economic terms regardless of what deferred costs are. They want to earn the most money possible. They can lower prices, increase rate and try to steal market share or they can maintain higher prices but sell fewer airplanes. Sales price should be based on current production cost. If profit is maximized, deferred costs naturally will decline faster.

Indications are showing that Boeing is increasing rate and willing to get aggressive on price to capture market share versus the competition. Building 168 airplanes with 23 Million in profit will earn more than 144 airplanes at 25 Million profit. Add to that the higher rate should lower costs even more. Going up in rate should allow Boeing to drop price a little. 2-3 Million may or may not have been enough to win over Hawaiian. The significant drop in production cost as is shown by the current $16 Million drop in deferred production cost per plane could also explain why Boeing can now get more aggressive on price. Two years ago deferred costs were still increasing.
 
mjoelnir
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 1:50 pm

Newbiepilot wrote:

Boeing is still a profit maximizing company in economic terms regardless of what deferred costs are. They want to earn the most money possible. They can lower prices, increase rate and try to steal market share or they can maintain higher prices but sell fewer airplanes. Sales price should be based on current production cost. If profit is maximized, deferred costs naturally will decline faster.

Indications are showing that Boeing is increasing rate and willing to get aggressive on price to capture market share versus the competition. Building 168 airplanes with 23 Million in profit will earn more than 144 airplanes at 25 Million profit. Add to that the higher rate should lower costs even more. Going up in rate should allow Boeing to drop price a little. 2-3 Million may or may not have been enough to win over Hawaiian. The significant drop in production cost as is shown by the current $16 Million drop in deferred production cost per plane could also explain why Boeing can now get more aggressive on price. Two years ago deferred costs were still increasing.


Up to now all Boeing has to show for the 787 is a loss. Here are thrown around numbers like 23 or 25 million profit on a 787 delivered. End of Q2 2017 the deferred cost on the 787 were 25.348 billion USD. End of Q4 it was 25.358. That makes 590 million reduction of deferred cost. In Q4 36 787 were delivered, that comes out to 16.4 million USD profit per frame. At 636 frames delivered Boeing should be quite near to the point were it gets difficult to cut out a lot of the production cost. There are 764 frames left in the block of 1400 frames. To finish the block and clear out the deferred cost Boeing needs on average 34 million USD profit per frame to break even on the whole production. Let us go to a 2000 frame block, that still would mean 19 million USD profit per frame needed, more than Boeing managed last quarter, and it would still mean that Boeing would have managed just to get back what it had cost to produce those 2000 frames.
If Boeing wants a return on the 25 billion development cost of the 787 in the 1400 block we look at over 60 million USD per frame needed and if we look at 2000 frames there will be nearly 40 million USD per frame needed. All that just to get the money back, without showing a profit overall.
 
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Polot
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Re: A330-800 out, B787-9 in at Hawaiian? -Leeham

Sat Feb 24, 2018 2:04 pm

mjoelnir wrote:
Newbiepilot wrote:

Boeing is still a profit maximizing company in economic terms regardless of what deferred costs are. They want to earn the most money possible. They can lower prices, increase rate and try to steal market share or they can maintain higher prices but sell fewer airplanes. Sales price should be based on current production cost. If profit is maximized, deferred costs naturally will decline faster.

Indications are showing that Boeing is increasing rate and willing to get aggressive on price to capture market share versus the competition. Building 168 airplanes with 23 Million in profit will earn more than 144 airplanes at 25 Million profit. Add to that the higher rate should lower costs even more. Going up in rate should allow Boeing to drop price a little. 2-3 Million may or may not have been enough to win over Hawaiian. The significant drop in production cost as is shown by the current $16 Million drop in deferred production cost per plane could also explain why Boeing can now get more aggressive on price. Two years ago deferred costs were still increasing.


Up to now all Boeing has to show for the 787 is a loss. Here are thrown around numbers like 23 or 25 million profit on a 787 delivered. End of Q2 2017 the deferred cost on the 787 were 25.348 billion USD. End of Q4 it was 25.358. That makes 590 million reduction of deferred cost. In Q4 36 787 were delivered, that comes out to 16.4 million USD profit per frame. At 636 frames delivered Boeing should be quite near to the point were it gets difficult to cut out a lot of the production cost. There are 764 frames left in the block of 1400 frames. To finish the block and clear out the deferred cost Boeing needs on average 34 million USD profit per frame to break even on the whole production. Let us go to a 2000 frame block, that still would mean 19 million USD profit per frame needed, more than Boeing managed last quarter, and it would still mean that Boeing would have managed just to get back what it had cost to produce those 2000 frames.
If Boeing wants a return on the 25 billion development cost of the 787 in the 1400 block we look at over 60 million USD per frame needed and if we look at 2000 frames there will be nearly 40 million USD per frame needed. All that just to get the money back, without showing a profit overall.

At some point the question becomes who cares? What is done is done, Boeing already spent the $28B+ years ago. Boeing may have already accepted that the 787 program as a whole will never be some huge net profit maker when you take into account all the production costs. But that doesn’t mean you should just roll over and stop aggressively selling planes. As long as the sales price is greater than the price to build it is netting Boeing more cash than if they had not done the deal, and puts another frame in service to get additional revenue from in the future from sales and support.

If they have to write it (787’s production costs) off they write it off and the world moves on, just like with Airbus and the A380 and A400M. It doesn’t actually change anything. People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

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