Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

 
bigjku
Posts: 1906
Joined: Sat Feb 17, 2007 10:51 pm

Re: Future of the A338

Thu Apr 12, 2018 10:46 am

Flyglobal wrote:
seahawk wrote:
The A330NEO is dead. Boeing is able to sell the 787 for less. This killed the business case.


This might be true: The strategy was obviously to crash the A330 NEO.
But what happens to the next contracts? Whoever from larger Airlines will want to buy the 787 above the 88 Mio mentioned? The one who signs something in the 100m may be kicked out at home.
To move 25.000.000.000 Dollars out of the books at 8.000.000 margin it Needs another > 3.000 787s to sell.
So accounting block moves 4.000 + ?

Anyhow if those prices continue, the mission to erase the A330 will probably be accomplished, however I do not believe that prices can go up again later.

And what effect will this price strategy have on the sales of the 777x. Better buy 2-3 789s instead of a 777x.
And how does the MOM Need to be priced.?

For us Fans it is interesting. For Airbus it is probably bad, but is it good for Boeing overall?

Flyglobal

.


I believe overall Boeing plans to shift to a strategy of lower margins on aircraft deliveries to drive more service revenue at higher margins and reduce how cyclical their business can be.

I also would point out that the $25 billion to be eaten up won’t all happen at the rate you describe. Most of the existing backlog is on the books for significantly higher dollar amounts. There seems to have been a pricing model change in the last 6 months or so.
 
marcelh
Posts: 1137
Joined: Wed Jun 19, 2013 12:43 pm

Re: Future of the A338

Thu Apr 12, 2018 11:42 am

Flyglobal wrote:
seahawk wrote:
The A330NEO is dead. Boeing is able to sell the 787 for less. This killed the business case.


This might be true: The strategy was obviously to crash the A330 NEO.
But what happens to the next contracts? Whoever from larger Airlines will want to buy the 787 above the 88 Mio mentioned? The one who signs something in the 100m may be kicked out at home.
To move 25.000.000.000 Dollars out of the books at 8.000.000 margin it Needs another > 3.000 787s to sell.
So accounting block moves 4.000 + ?

Anyhow if those prices continue, the mission to erase the A330 will probably be accomplished, however I do not believe that prices can go up again later.

And what effect will this price strategy have on the sales of the 777x. Better buy 2-3 789s instead of a 777x.
And how does the MOM Need to be priced.?

For us Fans it is interesting. For Airbus it is probably bad, but is it good for Boeing overall?

Flyglobal

.

Some interesting points you are mentioning. Perhaps those with more knowledge and insight in this matter are willing to give their opinion.
 
User avatar
par13del
Posts: 10446
Joined: Sun Dec 18, 2005 9:14 pm

Re: Future of the A338

Thu Apr 12, 2018 12:04 pm

MrHMSH wrote:
As a current 787 operator it also might have been more expensive for Airbus to get the A330neo in the door at AA than for Boeing to simply pitch an increase in what is already a sizeable fleet.

...I thought the A330NEO was compatible with the A330's that AA already operates through their merger with US, and with Airbus famous commonality, the cost should be a wash.
I am more inclined to believe that Boeing simply offered a better sale price.
 
User avatar
MrHMSH
Posts: 2712
Joined: Sat Oct 12, 2013 7:32 pm

Re: Future of the A338

Thu Apr 12, 2018 1:46 pm

seahawk wrote:
Those are old contracts. The AA deals indicates that Boeing did undercut Airbus in price, it is reasonable to assume they did the same at HA. If Boeing is able and willing to keep this up, they can kill the A330NEO.


Old contracts... but contracts that look very likely to go ahead. Given that TP's first A339 is already built and we're starting to see them emerge in final assembly for other customers (WW's is coming together now) I think we can say that they will be built and cancellations are not as likely. Wishful thinking to believe that all of them are vulnerable to the same strategy as at AA and HA. Do you think lowering the price alone will make AirAsia drop its order?

The AA deal however was tilted in favour of the 787 slightly: AA already operates a large fleet of them after all. The HA deal was different because it was an orphan model, but since the only remaining orders are for the A339 that cannot be repeated in the same way. Unless Boeing manage to flip at least DL and AirAsia X the plane will be built, it's not in a great place now but it's easy to forget that it does have more than 10 confirmed customers (including leased aircraft), and will pick up more.

par13del wrote:
...I thought the A330NEO was compatible with the A330's that AA already operates through their merger with US, and with Airbus famous commonality, the cost should be a wash.
I am more inclined to believe that Boeing simply offered a better sale price.


Boeing probably did offer a better sale price, but the future of the A330 at AA was not so secure anyway, the A333s we already know will be gone soonish and that leaves the A332 as an orphan in the fleet. Given that we know AA wants to simplify the fleet that favours aircraft with a longer term future at AA, which in this case means the 787.

We also don't know the exacts of the deal, not hard to imagine Boeing would go the extra mile for denying Airbus such a prestigious and secure customer, but can you see Boeing going that far for every single customer?
 
r2rho
Posts: 3096
Joined: Tue Feb 27, 2007 10:13 pm

Re: Future of the A338

Thu Apr 12, 2018 1:53 pm

The costs of keeping a program for a decade just praying someone will come in and revive it temporarily aren't justified to get a few freighters and tankers.

The cost of keeping the -800 on offer is zero. It is the same airplane as the -900, minus a couple fuselage frames, produced on the same line.
ATR still keeps the -42 around and produces a handful every year, for example.

if the A338 allows AB to put pressure on prices for strategic campaigns such as AA 767 replacement it may have its merit for AB without being a sales success: because it will lead to cheaper prices on 787s which doesn't exactly help Boeing in the long run.

Correct. That's why even if Airbus never sells a -800, it will still be a success. Because it sets a maximum price on the 787. In duopoly economics, that is very important.

One could actually argue that the -800 has already "paid" for its meager development costs, in the form of the discounts that Boeing has had to give HA and AA.
 
TheHunt3r
Posts: 18
Joined: Thu Apr 12, 2018 10:38 am

Re: Future of the A338

Thu Apr 12, 2018 2:15 pm

I think maybe the reason AB didnt go all in on the AA and HA bid was that they're both US based and so if the price offered by AB was seen as too low by Boeing they would for sure file a complaint and likely succed this time. Btw AA was lost anyway as there was almost no reason for them to opt for anything else than 787s.
 
User avatar
par13del
Posts: 10446
Joined: Sun Dec 18, 2005 9:14 pm

Re: Future of the A338

Thu Apr 12, 2018 2:32 pm

MrHMSH wrote:
We also don't know the exacts of the deal, not hard to imagine Boeing would go the extra mile for denying Airbus such a prestigious and secure customer, but can you see Boeing going that far for every single customer?

Why not????When Boeing was on its mantra that it only wanted Blue Chippers it assisted Airbus in increasing its market share on the A320 / 737 space, how is that situation looking now? Yes they reversed their thought process but the damage was already done, so............we know it works in the narrow body space so why not in the wide body?
The 777W and A340 had greater performance differences so it is not a comparable scenario.
 
PDPsol
Posts: 1226
Joined: Fri Feb 20, 2004 5:09 am

Re: Future of the A338

Thu Apr 12, 2018 2:38 pm

r2rho wrote:
The costs of keeping a program for a decade just praying someone will come in and revive it temporarily aren't justified to get a few freighters and tankers.

The cost of keeping the -800 on offer is zero. It is the same airplane as the -900, minus a couple fuselage frames, produced on the same line.
ATR still keeps the -42 around and produces a handful every year, for example.

if the A338 allows AB to put pressure on prices for strategic campaigns such as AA 767 replacement it may have its merit for AB without being a sales success: because it will lead to cheaper prices on 787s which doesn't exactly help Boeing in the long run.

Correct. That's why even if Airbus never sells a -800, it will still be a success. Because it sets a maximum price on the 787. In duopoly economics, that is very important.

One could actually argue that the -800 has already "paid" for its meager development costs, in the form of the discounts that Boeing has had to give HA and AA.


Absolutely agree, 100%. In fact, if Boeing is forced to sell its Dreamliners at sub-$90 million levels and only earn circa $10 profit margin on each frame sold, it will have so sell A LOT of frames to burn-off the $10+ billion balance sitting on its balance sheet. No one says Boeing cannot come up with 1,000 new additional orders for the model to fully 'pay-off' its development investment balances, but with 650 pending orders to be delivered and 670 deliveries to-date, one would imagine the 330neo program should get its share of future orders as well!
 
User avatar
MrHMSH
Posts: 2712
Joined: Sat Oct 12, 2013 7:32 pm

Re: Future of the A338

Thu Apr 12, 2018 3:20 pm

par13del wrote:
Why not????When Boeing was on its mantra that it only wanted Blue Chippers it assisted Airbus in increasing its market share on the A320 / 737 space, how is that situation looking now? Yes they reversed their thought process but the damage was already done, so............we know it works in the narrow body space so why not in the wide body?
The 777W and A340 had greater performance differences so it is not a comparable scenario.


Because they want to get good revenue from the 787, and lowering the price for everyone means it won't be as much of a cash cow as Boeing wants it to be. I think we can see that Boeing wants to be able to price at least some premium on the 787: weren't there a few complaints about the price of the 78X a few years back? Boeing could easily lower the price on it and sales would increase drastically, but they've held firm for the most part. The price of the 787 to produce may be low now, but to beat out the A330neo it does still have to be priced quite low as well, and if Boeing do that for every customer they'll struggle more to recover the deferred production costs and won't have as much revenue as they'd like.
 
User avatar
par13del
Posts: 10446
Joined: Sun Dec 18, 2005 9:14 pm

Re: Future of the A338

Thu Apr 12, 2018 3:41 pm

So ancillary revenue and the potential of future orders down the road when replacements are required means never no mind...
Ok.
 
bob75013
Posts: 1023
Joined: Tue Jun 23, 2015 5:05 pm

Re: Future of the A338

Thu Apr 12, 2018 3:56 pm

r2rho wrote:
The costs of keeping a program for a decade just praying someone will come in and revive it temporarily aren't justified to get a few freighters and tankers.

The cost of keeping the -800 on offer is zero. It is the same airplane as the -900, minus a couple fuselage frames, produced on the same line.
ATR still keeps the -42 around and produces a handful every year, for example.

if the A338 allows AB to put pressure on prices for strategic campaigns such as AA 767 replacement it may have its merit for AB without being a sales success: because it will lead to cheaper prices on 787s which doesn't exactly help Boeing in the long run.

Correct. That's why even if Airbus never sells a -800, it will still be a success. Because it sets a maximum price on the 787. In duopoly economics, that is very important.

One could actually argue that the -800 has already "paid" for its meager development costs, in the form of the discounts that Boeing has had to give HA and AA.


Take a look at Boeing's financials. Please show us the slightest bit of evidence that proves that Airbus is doings things that diminish Boeing's profits.
 
Kikko19
Posts: 682
Joined: Sat Apr 22, 2017 4:45 pm

Re: Future of the A338

Thu Apr 12, 2018 4:10 pm

PDPsol wrote:
r2rho wrote:
The costs of keeping a program for a decade just praying someone will come in and revive it temporarily aren't justified to get a few freighters and tankers.

The cost of keeping the -800 on offer is zero. It is the same airplane as the -900, minus a couple fuselage frames, produced on the same line.
ATR still keeps the -42 around and produces a handful every year, for example.

if the A338 allows AB to put pressure on prices for strategic campaigns such as AA 767 replacement it may have its merit for AB without being a sales success: because it will lead to cheaper prices on 787s which doesn't exactly help Boeing in the long run.

Correct. That's why even if Airbus never sells a -800, it will still be a success. Because it sets a maximum price on the 787. In duopoly economics, that is very important.

One could actually argue that the -800 has already "paid" for its meager development costs, in the form of the discounts that Boeing has had to give HA and AA.


Absolutely agree, 100%. In fact, if Boeing is forced to sell its Dreamliners at sub-$90 million levels and only earn circa $10 profit margin on each frame sold, it will have so sell A LOT of frames to burn-off the $10+ billion balance sitting on its balance sheet. No one says Boeing cannot come up with 1,000 new additional orders for the model to fully 'pay-off' its development investment balances, but with 650 pending orders to be delivered and 670 deliveries to-date, one would imagine the 330neo program should get its share of future orders as well!


Odd. Why not to price with 10mil more? Even if you lose half of the order you close the gap in half the time. So even less interests paid.
 
User avatar
Polot
Posts: 11063
Joined: Thu Jul 28, 2011 3:01 pm

Re: Future of the A338

Thu Apr 12, 2018 4:38 pm

bob75013 wrote:
r2rho wrote:
The costs of keeping a program for a decade just praying someone will come in and revive it temporarily aren't justified to get a few freighters and tankers.

The cost of keeping the -800 on offer is zero. It is the same airplane as the -900, minus a couple fuselage frames, produced on the same line.
ATR still keeps the -42 around and produces a handful every year, for example.

if the A338 allows AB to put pressure on prices for strategic campaigns such as AA 767 replacement it may have its merit for AB without being a sales success: because it will lead to cheaper prices on 787s which doesn't exactly help Boeing in the long run.

Correct. That's why even if Airbus never sells a -800, it will still be a success. Because it sets a maximum price on the 787. In duopoly economics, that is very important.

One could actually argue that the -800 has already "paid" for its meager development costs, in the form of the discounts that Boeing has had to give HA and AA.


Take a look at Boeing's financials. Please show us the slightest bit of evidence that proves that Airbus is doings things that diminish Boeing's profits.

Diminish potential profit, not actual profit.

Of course the A338 is not really necessary to do that. The 789 acts as a cap to the 788’s price (very few airlines would be willing to pay a lot more for a smaller, less capable, and less popular plane) and the A339 and A350 both put price pressure on that aircraft.
 
User avatar
AI126
Topic Author
Posts: 83
Joined: Thu Nov 17, 2016 2:03 am

Re: Future of the A338

Thu Apr 12, 2018 4:59 pm

Lots of comments here about the 338 keeping a cap on the 787 for Boeing, but I remember reading the following article saying that making a substantial profit on the 787 and making it a cash cow like the 747 or the 777 is most likely not going to happen. Based on the news that Boeing is severely discounting Dreamliners, it doesn't seem like this is too far off a statement. That being said, since Boeing is already selling its planes to customers at such low price points, relatively speaking, what use is Airbus keeping the A338 on the books even achieving? Of course, there's virtually no cost to develop the 338 from an investment perspective since its essentially just a few frames off the 339's fuselage, but that still brings up the question of why Airbus even built a test plane for the model in the first place.

https://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overall-profit-analysts-grow-more-skeptical/
 
armchairceonr1
Posts: 293
Joined: Sun Jul 30, 2017 8:09 am

Re: Future of the A338

Thu Apr 12, 2018 5:06 pm

Many conclusions here about AA 787 order. 787-8 hasn't been hot seller during last years and is not going to be so. Majority of new orders has based to purchase rights which was case with AA also. I dont't believe that Boeing is willing or capable sell 787 much cheaper than couple years ago. A330-800 will be fine, chinese customers buys at least 50 of them..
 
astuteman
Posts: 7200
Joined: Mon Jan 24, 2005 7:50 pm

Re: Future of the A338

Thu Apr 12, 2018 7:11 pm

jagraham wrote:
Jayafe wrote:
jagraham wrote:
Less expensive? American Airlines doesn't think so

Airbus told Bloomberg last week that its talks with American ended because Boeing's price for the long-haul jets was too low to match.

https://www.bizjournals.com/seattle/new ... order.html


The bird is indeed objectively less expensive. The fact that US legislation allows Boeing to dump the price and give huge discounts to get the deal done is a different topic.


Leeham believes 789 costs are down to about $80 million. They also estimate price of the AA 787s at $88 million. Not a lot of profit, but not dumping either.


I hadn't seen that. Do you have a link?

Rgds
 
tjh8402
Posts: 957
Joined: Sat Jan 12, 2013 4:20 am

Re: Future of the A338

Thu Apr 12, 2018 7:13 pm

par13del wrote:
MrHMSH wrote:
As a current 787 operator it also might have been more expensive for Airbus to get the A330neo in the door at AA than for Boeing to simply pitch an increase in what is already a sizeable fleet.

...I thought the A330NEO was compatible with the A330's that AA already operates through their merger with US, and with Airbus famous commonality, the cost should be a wash.
I am more inclined to believe that Boeing simply offered a better sale price.


AA has simplified their future fleet dramatically assuming it ends up all 787/777. Their widebodies will have a common pilot pool with a shared type rating which will help operational flexibility a lot. If/when all the 77Es are replaced by (GE powered) 787s and 77Xs, they’ll also have simplified their widebody engines to an all GE fleet. It was noted in the AA discussion that GE played a role in this to this, and the deal supposedly involved not just the 787s, but their CFM powered A321NEOs on order as well. Never underestimate the benefit GECAS brings to GE and any airframe carrying their engines, as well as what sort of roll service contracts plays when you have an airline that could feature as many GE family powered planes as AA.
 
Planeflyer
Posts: 1528
Joined: Fri Mar 14, 2014 3:49 am

Re: Future of the A338

Thu Apr 12, 2018 11:30 pm

There are almost 1000 332 and 767 in service so it seems to me there is a market for the 787. Of course if the 797 is launched than this changes the game.

I’ve said before but the 330neo is to the 787 what the 767 was to the original 330.boeing will capture 70% of the medium wide body market and 90% if they launch the 797.

Curious can the -800 test aircraft be converted to tankers ?
 
tjh8402
Posts: 957
Joined: Sat Jan 12, 2013 4:20 am

Re: Future of the A338

Fri Apr 13, 2018 2:03 am

Planeflyer wrote:

Curious can the -800 test aircraft be converted to tankers ?


Part of the sales pitch of the MRTT is that it can easily convert back to a conventional A330. However, I thought it uses the empty outboard engine pylon mounting points and reinforcements from the shared A340 wing for refueling pods. Supposedly I thought the NEO wing is lighter because all that reinforcement has been removed. Would the wing have to be reeingineered for tanker duty?
 
jagraham
Posts: 1153
Joined: Sun Jul 17, 2016 11:10 pm

Re: Future of the A338

Fri Apr 13, 2018 2:46 am

astuteman wrote:
jagraham wrote:
Jayafe wrote:

The bird is indeed objectively less expensive. The fact that US legislation allows Boeing to dump the price and give huge discounts to get the deal done is a different topic.


Leeham believes 789 costs are down to about $80 million. They also estimate price of the AA 787s at $88 million. Not a lot of profit, but not dumping either.


I hadn't seen that. Do you have a link?

Rgds



787 production costs
https://leehamnews.com/2018/02/20/boein ... 800-order/
 
mffoda
Posts: 1099
Joined: Thu Apr 15, 2010 4:09 pm

Re: Future of the A338

Fri Apr 13, 2018 3:36 am

jagraham wrote:
astuteman wrote:
jagraham wrote:

Leeham believes 789 costs are down to about $80 million. They also estimate price of the AA 787s at $88 million. Not a lot of profit, but not dumping either.


I hadn't seen that. Do you have a link?

Rgds



787 production costs
https://leehamnews.com/2018/02/20/boein ... 800-order/



Here's what Leeham actually said:

"if the alleged pricing below the cost to produce the Airbus is true, then Boeing offered the 787-9 for something less than $115m and perhaps less than $100m
The normal sales price of a 787-9 is in the $125m range, market intelligence indicates. The cost to produce a 787-9 is now believed to be between $80m and $90m, Wall Street analysts suggest."


Nowhere did he state AA paid $88M...
harder than woodpecker lips...
 
jagraham
Posts: 1153
Joined: Sun Jul 17, 2016 11:10 pm

Re: Future of the A338

Fri Apr 13, 2018 5:35 am

seahawk wrote:
MrHMSH wrote:
seahawk wrote:
The A330NEO is dead. Boeing is able to sell the 787 for less. This killed the business case.


Someone should inform the multiple customers and lessors with 200+ orders.


Those are old contracts. The AA deals indicates that Boeing did undercut Airbus in price, it is reasonable to assume they did the same at HA. If Boeing is able and willing to keep this up, they can kill the A330NEO.


One thing in favor of the A330neo - its development cost was low.

The 787 has to recoup about $26 billion of costs over about 740 planes. Or about $35 million per plane. From the Leeham article:

Boeing held its 1H2017 call yesterday, giving further information on how the 787 deferred costs decline. The payback in 2Q2017 was $16m per aircraft.

Boeing needed to achieve a $36m per-plane reduction, based on our analysis, to not increase the payback amount per aircraft for the remaining aircraft in the current accounting block.

The $16m is still a low rate, although better than the $11m 1Q2017, given that the remaining $26.5bn deferred production costs must be amortized over the Program accounting’s remaining 735 units of a 1,300 units block.

https://leehamnews.com/2017/07/27/boein ... 787-debts/

Boeing is up to about 1450 total 787s, with about 700 delivered.

I would assume that the $16 million profit per plane is at the typical 50% discount.
 
User avatar
seahawk
Posts: 9863
Joined: Fri May 27, 2005 1:29 am

Re: Future of the A338

Fri Apr 13, 2018 5:42 am

It could easily be that Boeing decided to push the A330NEO out of the market and accept to need more frames to pay back the deferred costs in return. Without a competition it would be sensible to increase the number of frames they expect to build.
 
CFRPwingALbody
Posts: 387
Joined: Thu Oct 19, 2017 8:13 pm

Re: Future of the A338

Fri Apr 13, 2018 12:55 pm

1) What has it cost Airbus to develop the A330NEO family (A338 and A339), and what was the additional cost to develop the A338. I can't imagine it has cost more than 2 billion. Airbus has sold 214 A339s. If the margin on a A339 is 10 million, Airbus can return it's investment with the A339s already sold.
2) As of March 2018; Airbus has a backlog of 89 A330CEO and 214 A330NEO (17 A330MRTT or private jets). At the current production rate of 66 A330s annually this backlog equals 4 1/2 years of production. So the current order-book last to roughly end 2022.
3) Airbus is in the middle of the certification proces of the A330NEOs. Planes sell slow during the certification proces. Boeing lost lots of orders for the 787 during this period. Airbus is losing A330NEO orders, and did lose A350 orders during the certification proces.
After a new plane is certified and has some operational experience, the orders start flowing in again. So 2018 is the slow selling year for the A330NEO. Next year or at the earliest at the end of this year the orderflow for the A330NEO should be starting again.
5) Airbus has a incremental plane improvement strategy. Airbus is continuously developing improvements for their products. So how long do we expect Airbus will keep producing these versions of the A330NEO?
We know that the A330NEO still has the high mounted, short front landing gear. This causes the nose to pitch down on the ground. Also the A330NEO is still smaller at the tale causing the reduction of one seat on the last four rows. The Rolls Royce Advanced is expected to be ready around 2020 and the UltraFan around 2025. After 2020 the effects of Brexit will be known. And Airbus should have succeeded ramping up the CSeries, A320 and A350 production. Nice timing to put resources in the upgrades of the different plane families.
After the A380, the A330NEO is the most demanding a further upgrade.
6) If Airbus does a incremental improvement of the A330NEO, as was the change from CEO to NEO, Airbus can improve both the A339 and the A338 at nearly the same cost of improving only one of them. So if the A338 doesn't sell at all, having developed it still helps with the further improvement of the A330 family. But I expect the A338 will be selling at low numbers.

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos