The carrier probably paid US$1.4 billion to US$1.7 billion for 60 Airbus A220-300 jets, or between US$23 million and US$28 million per plane, Moody’s analyst Jonathan Root said in a report Friday, citing estimates by appraisers and price breaks that are typical for large orders. That’s a discount of as much as 72 per cent from the deal’s list value, he said.
How do analysts come up with this type of estimates?
Aerospace people gossip a bunch. Honestly, those numbers are $1 million higher than my estimates.
$22 million for a plane whose MTOW, allowed fuel load and thrust is less than what DL ordered.
$27 million for maximum capabilities (best dongles) and lighter fittings (CFRP and titanium costs more than aluminum).
You can find enough information to get tight estimates from quarterly reports. Sometimes actual contracts are seen by the press in violation of NDAs.
I can estimate within 10% (usually within 5%) doing price estimates as a hobby and getting to see real numbers to calibrate my estimates here and there. An analyst should know better.
The fact this analyst has a range tells me the individual actually has a good understanding of how aircraft are sold.
Both Boeing and Airbus make a nice profit off anxillary services which includes everything from Goldcare, help desk, customized maintenance plans (cuts costs), and increasing capabilities.
I hope everyone realizes the new aircraft are now software platforms. For example the C-series er... A220 has had a climate control software patch that reduced startup wear and tear and a tiny amount of fuel burn.
Aircraft are now finally to where machine tools we're in 2000. If you know what to do, software upgrades improve efficiency every year. I remember a team cutting production costs in half by figuring out when to slow and speed up cutting rates to reduce tool wear and get part production in sync with the people schedule.
With aircraft, optimizing acceleration and velocity of actuators to minimize wear or improve fuel burn. Thankfully the avionics stagnation has ended and we have some improvement ahead. Seriously, avionics took a 15 year pause in real hardware improvements. UAS systems forced improvements and now commercial aviation is benefitting.
Let's be real, prior generation didn't even use fiber optics for data nor proper routers. Now with far better command, data, and power distribution... We can do more. Heck, the 787 came out before those neat solid state transformers that clip any aircraft power supply to variable frequency AC or more precise DC voltage control.
Take my previous car's fan. It had a variable frequency 4 phase AC (square wave) that set the radiator fan to precisely the RPM to maintain precisely the same temperature. That technology is now cheap, so components last much longer, have far smoother startups, and thus control more precisely and thus save fuel.
The A220 saves 3% in fuel burn using that technology on secondary systems. I fully expect a PIP to further cut fuel burn (only a quarter percent or so) and increase component mean time between failure and better early warning of needed component R&R.
The 787 is doing this. EIS was troublesome, but now all that software is better than promise on maintenance. At least on the GE engines.
The first JetBlue A220s are in 2020. By then the A220 reliability and maintenance should be top notch.
Embraer really showed the value of better software development with the outstanding E2-190 EIS. If they can sell more they will be a contender.
Software has infinite economics of scale. So if you sell a software PIP as an upgrade or as part of an annual maintenance plan, all it takes is quantity in the field buying the upgrade to pay engineers to update the code.
So this analyst gets pricing and gets how aircraft are going to the anxillary revenue model. Pay more for support to save money on maintenance...
This is why I pound on economy of scale. When the number of aircraft paying for support contracts drops below 500, find a new use for the software team. The extreme example is the MD-80 where every airline cancelled support contracts so Boeing had to cut up vendor contracts and shut down the help desk.
Airbus needs to get A220 sales over 500 soon (soon being 2 years). Same goes for every other new software intensive airframe.
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.