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william
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Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:08 pm

https://www.bloomberg.com/news/articles ... ium-europe

A positive step for Airbus and it’s shareholders.
 
Amiga500
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:14 pm

But not its suppliers!
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:14 pm

From the OP link:
“We are in a price war on the wide-bodies, so we need to work on cost, especially on the A350,” Schöllhorn said Wednesday at the Paris Air Show. “We are pretty complex, sometimes too complex.” The study, reported last week by Bloomberg, concerns the whole industrial footprint, though that shouldn’t be seen as indicating factory closures, he said.

I am under the impression that Boeing basically declared a price war with the 787 production ramp up and per unit price reductions.

I could only speculate on the 779.

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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:18 pm

Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

In other words, 787 has been able to reduce manufacturing costs incredibly fast, something that has been reported by Leeham et al in the past, and echoed here on a.net multiple times.

The article links to https://www.bloomberg.com/news/articles ... lash-costs which has a pretty definitive statement from the Airbus CEO:

Boeing has more cost effectiveness than us and we need to address that,” Faury said at the Paris Air Forum on Friday.

Reminds me of some of the points raised on our long running shelving thread.

lightsaber wrote:
I am under the impression that Boeing basically declared a price war with the 787 production ramp up and per unit price reductions.

I could only speculate on the 779.

Meanwhile in the last week Boeing's CEO used the following words in regard to NMA:

We don’t see the NMA as a big technology push airplane. It’s much more about the future production system, and will the business case close based on that system? There’s a dual purpose here: not only the potential for a future product but also how, in parallel, we create a design and production transformation for the future.

No technology push, the purpose is to create a design and production transformation for the future: seems they are going to keep traveling down the road of per unit price reductions...

Ref: https://aviationweek.com/paris-airshow- ... automation
Last edited by Revelation on Thu Jun 20, 2019 5:27 pm, edited 1 time in total.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:24 pm

The structure was formalized in 2000 and Airbus, based in Toulouse, France, now builds jetliners at final-assembly plants in half a dozen countries, with significant operations elsewhere.

That's a feature, not a bug.

A plant in Hamburg, for example, delivers the double-decker A380 to clients in Europe and the Middle East, while Toulouse hands the plane over to buyers from other regions.

Not for long.
 
eurotrader85
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 5:36 pm

Not so positive for the workers at Broughton though, whom are very highly skilled, although potential reasoning is fair enough. I always wonder what a non-politicised AIRBUS would look like, without meddling from the French and German governments and left to make pure commercial decisions. Fewer factories, production lines more condenced and not spread over a continent, dare one say it, no manufacturing in France. Maybe BAE and EADS would have completed its merger?

Before the Boeing fanboys jump on, political interference is on both sides of the Atlantic.
 
DCA350
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 6:01 pm

Airbus better address costs quickly.. They should be able to do it as they were able to get A330 costs down dramatically. But until then Boeing will continue to win the battle.. The 787 and A350 are very close performance wise so cost is going to be the deciding factor in most RFPs.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 6:35 pm

I always wonder what a non-politicised AIRBUS would look like, without meddling from the French and German governments and left to make pure commercial decisions


A bit wrong headed in my view. The two governments own significant shares of Airbus and have provided huge subsidies. They have the right and obligation to have input. It is not 'meddling'. Airbus would not be in existence without France and Germany's money and strategic contributions, unless someone considers that meddling.
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Sooner787
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:03 pm

I think winding down A380 production will go along way
towards reducing their overall costs.
 
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Polot
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:05 pm

Sooner787 wrote:
I think winding down A380 production will go along way
towards reducing their overall costs.

I think they are looking more at individual program costs, not overall costs. Winding down the A380 program has little effect on the cost to build an A350 for example.
 
justloveplanes
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:08 pm

Revelation wrote:
Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

In other words, 787 has been able to reduce manufacturing costs incredibly fast, something that has been reported by Leeham et al in the past, and echoed here on a.net multiple times.

The article links to https://www.bloomberg.com/news/articles ... lash-costs which has a pretty definitive statement from the Airbus CEO:

Boeing has more cost effectiveness than us and we need to address that,” Faury said at the Paris Air Forum on Friday.

Reminds me of some of the points raised on our long running shelving thread.

lightsaber wrote:
I am under the impression that Boeing basically declared a price war with the 787 production ramp up and per unit price reductions.

I could only speculate on the 779.

Meanwhile in the last week Boeing's CEO used the following words in regard to NMA:

We don’t see the NMA as a big technology push airplane. It’s much more about the future production system, and will the business case close based on that system? There’s a dual purpose here: not only the potential for a future product but also how, in parallel, we create a design and production transformation for the future.

No technology push, the purpose is to create a design and production transformation for the future: seems they are going to keep traveling down the road of per unit price reductions...

Ref: https://aviationweek.com/paris-airshow- ... automation


I think we are seeing the 787 modular manufacturing concept evolve to its original intent. It was a disaster to start, but the base concept of modular assembly supported by risk sharing partners across the globe is starting to show. It wasn't quick, it's been quite a while coming, but it's here now and so Boeing has a manufacturing advantage. In terms of performance, I don't think you could slip a paper between the 787 and 350, but the 787 is selling obviously on something else, which would have to be cost as well as TCO (Total Cost of Ownership). Lowered TCO was also part of the 787 concept and that might be a factor also.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:14 pm

justloveplanes wrote:
Revelation wrote:
Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

In other words, 787 has been able to reduce manufacturing costs incredibly fast, something that has been reported by Leeham et al in the past, and echoed here on a.net multiple times.

The article links to https://www.bloomberg.com/news/articles ... lash-costs which has a pretty definitive statement from the Airbus CEO:

Boeing has more cost effectiveness than us and we need to address that,” Faury said at the Paris Air Forum on Friday.

Reminds me of some of the points raised on our long running shelving thread.

lightsaber wrote:
I am under the impression that Boeing basically declared a price war with the 787 production ramp up and per unit price reductions.

I could only speculate on the 779.

Meanwhile in the last week Boeing's CEO used the following words in regard to NMA:

We don’t see the NMA as a big technology push airplane. It’s much more about the future production system, and will the business case close based on that system? There’s a dual purpose here: not only the potential for a future product but also how, in parallel, we create a design and production transformation for the future.

No technology push, the purpose is to create a design and production transformation for the future: seems they are going to keep traveling down the road of per unit price reductions...

Ref: https://aviationweek.com/paris-airshow- ... automation


I think we are seeing the 787 modular manufacturing concept evolve to its original intent. It was a disaster to start, but the base concept of modular assembly supported by risk sharing partners across the globe is starting to show. It wasn't quick, it's been quite a while coming, but it's here now and so Boeing has a manufacturing advantage. In terms of performance, I don't think you could slip a paper between the 787 and 350, but the 787 is selling obviously on something else, which would have to be cost as well as TCO (Total Cost of Ownership). Lowered TCO was also part of the 787 concept and that might be a factor also.



I agree. The systems integration was botched early on. Now it seems to be working as it was intended. Makes me wonder if Boeing is reconsidering their full up vertical integration plans that we have been seeing happen in the wake of the early 787 woes and thinking a bit more strategically about the long term. It may be worth having the issues early on if you can ramp up production on the tail end with better margins.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:28 pm

Sooner787 wrote:
I think winding down A380 production will go along way
towards reducing their overall costs.


That depends on where those costs go... Do you expect massive layoffs and factory closures? Or is Airbus just going to allocate those costs across other planes?
 
Strato2
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:44 pm

So this explains the slow reduction of the 787 deferred cost. Boeing seems to be throwing those planes out the door with very little profit and that is hurting Airbus. So a race to a bottom it seems.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:51 pm

Having watched an International documentary on the Boeing plant and their workers in South Carolina, I'd stay away from them.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 7:59 pm

Strato2 wrote:
So this explains the slow reduction of the 787 deferred cost. Boeing seems to be throwing those planes out the door with very little profit and that is hurting Airbus. So a race to a bottom it seems.


Here we go again with the deferred production cost rubbish.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 8:12 pm

Strato2 wrote:
So this explains the slow reduction of the 787 deferred cost. Boeing seems to be throwing those planes out the door with very little profit and that is hurting Airbus. So a race to a bottom it seems.


Yup definitely because the strategic goal of Boeing management, far ahead of producing returns for shareholders and raising the share price, is "hurting Airbus." Wall Street is absolutely in love with that strategy!!!

justloveplanes wrote:
=I think we are seeing the 787 modular manufacturing concept evolve to its original intent. It was a disaster to start, but the base concept of modular assembly supported by risk sharing partners across the globe is starting to show. It wasn't quick, it's been quite a while coming, but it's here now and so Boeing has a manufacturing advantage.


That was absolutely one of the key goals of the 787/Y2 program, and at the time I'm fairly certain the intent was to take the manufacturing advances learned and apply those to the Y1 (737 successor) and Y3 (777 successor) programs. But they screwed up the program execution and only now are they seeing the fruits of the modular approach. If the 787 had gone to plan, the 737MAX and 777X might never have seen the light of day.

I'd add that I think Boeing management also wanted to lessen its historic reliance on manufacturing in the Puget Sound area, especially considering their fractious relationship with their unions and numerous crippling strikes over the years. That's why some of the 787 final assembly is in Charleston -- there's a clear message that aircraft manufacturing doesn't have to stay in Washington long-term.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Thu Jun 20, 2019 8:29 pm

Yep, the followon impact to the 787 delayed startup was immense. We would have seen the 777X in an all carbon tube IMHO. And maybe Y1 with GTF...maybe.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 3:53 am

Strato2 wrote:
So this explains the slow reduction of the 787 deferred cost. Boeing seems to be throwing those planes out the door with very little profit and that is hurting Airbus. So a race to a bottom it seems.


Or maybe their production and supply chain costs are materializing as planned and they have lower costs? Plus you are speaking deferred cost and “very little profit” in same argument, which is it?

787 has sold more widebodies faster than any plane before and production is still ramping up. This should give Boeing a cost (then price) advantage.

Economies of scale work wonders.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 3:55 am

justloveplanes wrote:
Yep, the followon impact to the 787 delayed startup was immense. We would have seen the 777X in an all carbon tube IMHO. And maybe Y1 with GTF...maybe.


Would be a interesting thread topic to ponder, that is for sure.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 4:01 am

Can't help but notice a few people are drifting into some more biased fanboyish comments in comparing the 787 and a350. I'm pretty sure they are both fantastic aircraft that don't target the exact same market segments and have some differences. I really don't think one is better than the other, I do think they are better than older generations of widebodies.

As for production costs, I don't think Boeing has reduced their costs like they have without taking some unpopular and/or controversial actions. It's up to Airbus in deciding whether they really want to take those same hits in public perception in order to reduce costs in the same ways.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 5:27 am

A focus on this is good for Airbus. It's been clear for a couple of years that the production cost of the A350 was a drag on Airbus sales, and that Airbus was caught flat-footed (along with the rest of the industry) by Boeing's sudden success in that area with the 787.

The 777X better watch out! It's won a few contests lately against the A350, but a cheaper A350-1000 is likely to change the equation.
 
ITSTours
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 6:12 am

Is it Boeing doing well on cost reduction, or is it Airbus doing badly?
Or both?
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 6:15 am

Revelation wrote:
Meanwhile in the last week Boeing's CEO used the following words in regard to NMA:

We don’t see the NMA as a big technology push airplane. It’s much more about the future production system, and will the business case close based on that system? There’s a dual purpose here: not only the potential for a future product but also how, in parallel, we create a design and production transformation for the future.

No technology push, the purpose is to create a design and production transformation for the future: seems they are going to keep traveling down the road of per unit price reductions...

Ref: https://aviationweek.com/paris-airshow- ... automation

It makes sense to do that because there is only so much to be gained from lower fuel burn. Technological advances should not only happen from engines. A good and efficient production system will ensure that the production cost of the aircraft is reduced - this in turn means a lower selling price for it or a higher profit margin. Boeing will have more to play with when making their sales pitches.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 6:20 am

seabosdca wrote:
A focus on this is good for Airbus. It's been clear for a couple of years that the production cost of the A350 was a drag on Airbus sales, and that Airbus was caught flat-footed (along with the rest of the industry) by Boeing's sudden success in that area with the 787.

The 777X better watch out! It's won a few contests lately against the A350, but a cheaper A350-1000 is likely to change the equation.

I have heard many airline executives say that the A350 is a great aircraft but it is too expensive. Airbus will really need to address this issue in order to offer a more competitive proposition to prospective customers. Airbus has been streamlining and integrating its corporate structure the past few years and it should continue to make itself a lower cost operation. It is vital that they do so if they are to remain competitive.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 9:08 am

Jouhou wrote:
As for production costs, I don't think Boeing has reduced their costs like they have without taking some unpopular and/or controversial actions. It's up to Airbus in deciding whether they really want to take those same hits in public perception in order to reduce costs in the same ways.


Indeed. This didn't go down well in some quarters...
https://www.bloomberg.com/news/features ... -suppliers
 
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flee
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 9:20 am

RawSushi wrote:
Jouhou wrote:
As for production costs, I don't think Boeing has reduced their costs like they have without taking some unpopular and/or controversial actions. It's up to Airbus in deciding whether they really want to take those same hits in public perception in order to reduce costs in the same ways.


Indeed. This didn't go down well in some quarters...
https://www.bloomberg.com/news/features ... -suppliers

Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.
 
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Polot
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 9:59 am

flee wrote:
RawSushi wrote:
Jouhou wrote:
As for production costs, I don't think Boeing has reduced their costs like they have without taking some unpopular and/or controversial actions. It's up to Airbus in deciding whether they really want to take those same hits in public perception in order to reduce costs in the same ways.


Indeed. This didn't go down well in some quarters...
https://www.bloomberg.com/news/features ... -suppliers

Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.

Deferred production costs has little effect on actual production costs. The money has already been spent it is just how it is accounted for. If Boeing writes off all the production cost this evening after market closing their balance sheet will be firmly in the red for the quarter but it won’t change the cost to Boeing to build a 787 next week.
 
HaulSudson
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 11:53 am

If you're selling capital goods, your focus ought to be quality, quality and quality.

It tends to work very well in the long run.
 
raffy
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:01 pm

Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise. On the other hand, the disparity in total number of orders is not as great as that of deliveries: 1440 for the 787 and 893 for the A350. That's still a 1.6 to 1 advantage for Boeing for an aircraft that has been available about 2 years longer than its competitor. Obviously, Airbus management sees this disparity and realizes there must be a reason that Boeing is getting more airline orders for this class of aircraft than Airbus - and manufacturing costs are a large part of that. At least there is some competition in the airliner industry, LOL!

https://en.wikipedia.org/wiki/Boeing_787_Dreamliner

https://en.wikipedia.org/wiki/Airbus_A350_XWB
 
Amiga500
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:05 pm

RawSushi wrote:
Indeed. This didn't go down well in some quarters...
https://www.bloomberg.com/news/features ... -suppliers


Which comes back to bite you in the balls when looking for risk sharing partners for the next new product.

[I wonder are all of NMA's problems related to top level requirements or are a number of key suppliers telling Boeing to "do one, its too much risk for all you pay us back".]
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:15 pm

Amiga500 wrote:
RawSushi wrote:
Indeed. This didn't go down well in some quarters...
https://www.bloomberg.com/news/features ... -suppliers


Which comes back to bite you in the balls when looking for risk sharing partners for the next new product.

[I wonder are all of NMA's problems related to top level requirements or are a number of key suppliers telling Boeing to "do one, its too much risk for all you pay us back".]

I think Boeing will take them up on that.

They bypassed the traditional vendors for avionics on T-X and are doing their own hardware and software in house, and I suspect they will do the same for NMA.

I think you could make the argument for needing specialists for things like FBW and avionics networks a few decades ago, but now this stuff is all mature technology.

I think industry has gotten lazy about pawning off stuff to specialists who end up sucking all the profits out of programs.

I also see how industry partners seem to resist getting up to speed on the tools and techniques for model based engineering and by the time they do you have wasted a lot of time and energy you could have focused on your own people.

I think SpaceX and Tesla are showing that you are better off bringing a few specialists in house and doing it yourself.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:20 pm

DCA350 wrote:
Airbus better address costs quickly.. They should be able to do it as they were able to get A330 costs down dramatically. But until then Boeing will continue to win the battle.. The 787 and A350 are very close performance wise so cost is going to be the deciding factor in most RFPs.


Airbus sold 900 & has a 7 years A350 backlog, so must be doing alright on the A350. The much cheaper A330NEO are also starting selling again. Michael Schöllhorn, presenting this report, has learned fast since joining the Airbus / Aerospace 6 months ago. No A350 sales in Paris. (neither 777x)
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caljn
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:28 pm

[quote="raffy"]Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise.

"Inferior" is an offensive, inelegant and inaccurate (in this case) word and its use reminds one of (nameless) politicians knowingly repeating lies until they become accepted. Are you an engineer? Please enlighten us with specificity where the objective "inferiority" lies.
And omit any sour grapes.
 
raffy
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 1:57 pm

caljn wrote:
raffy wrote:
Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise.

"Inferior" is an offensive, inelegant and inaccurate (in this case) word and its use reminds one of (nameless) politicians knowingly repeating lies until they become accepted. Are you an engineer? Please enlighten us with specificity where the objective "inferiority" lies.
And omit any sour grapes.


First of all, I don't have any favor toward either Boeing or Airbus, so no sour grapes either way! But I will prove my point that the A350 is, in SOME ways, superior in performance to the 787. For instance, the A350-900 has a range of 8100 nmi while the 787-9 (which has the longest range of the 787 family so far) has a range of 7635 nmi. The A350-1000 has an even longer range of 8700 nmi. Takeoff performance is 8500 ft for the A350-900 and 9300 ft for 787-9. So yes, in some ways the A350 has superior performance to the 787, which is exactly what I said above. That statement is proven by the figures just quoted. And all the above figures are listed in the Wikipedia links I provided in my earlier post.

Notice that I didn't say that the 787 is inferior in performance in EVERY way to the A350. That, of course, would not be the case or most of the airlines would be buying the A350 instead of the 787. The 787 does have somewhat higher fuel efficiency, carries a few more passengers, and, at present, is a somewhat better value for the money spent and apparently has a lower total life cycle cost. That sort of economics, of course, makes a big difference to the airlines and contributes to the increased sales of the 787 versus the A350. Therefore, for the economics of most airline routes the 787 probably makes more sense than the A350. But for some of the longer routes with lower passenger load, many airlines would probably choose the A350 over the 787. They both have their advantages and disadvantages.

To answer your question, yes, I am an aerospace engineer. And when I use terms like "inferior" or "superior", I do not use them in any pejorative sense. I use them in a specific absolute sense of grading performance in certain areas.
 
ScottB
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:07 pm

flee wrote:
Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.


In reality, deferred production costs would inflate the cost of producing each 787 as that translates to Boeing's profit & loss (P&L) statement. If they actually spend, hypothetically, $80 million to manufacture a 787 and want to write off $20 million in deferred production costs per frame, that raises the notional production cost of a 787 to $100 million until they're done with writing off deferred production costs.

So it's actually pretty remarkable that Boeing has gotten costs down sufficiently (in large part by pressuring suppliers) to both price 787s very aggressively and be able to amortize the deferred production costs within a reasonable accounting block for the program. Imagine how much more competitive they could be if they hadn't royally screwed up the development program...
 
Amiga500
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:15 pm

Revelation wrote:
I think Boeing will take them up on that.

I think SpaceX and Tesla are showing that you are better off bringing a few specialists in house and doing it yourself.


In some things, yes, you are absolutely correct. In others, nope - its still a job done quicker and cheaper with less mistakes by specialists.
 
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flee
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:24 pm

ScottB wrote:
flee wrote:
Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.


In reality, deferred production costs would inflate the cost of producing each 787 as that translates to Boeing's profit & loss (P&L) statement. If they actually spend, hypothetically, $80 million to manufacture a 787 and want to write off $20 million in deferred production costs per frame, that raises the notional production cost of a 787 to $100 million until they're done with writing off deferred production costs.

So it's actually pretty remarkable that Boeing has gotten costs down sufficiently (in large part by pressuring suppliers) to both price 787s very aggressively and be able to amortize the deferred production costs within a reasonable accounting block for the program. Imagine how much more competitive they could be if they hadn't royally screwed up the development program...

The impetus to find cost cuts will not be so strong had everything gone according to plan. Boeing had to take some desperate measures to bring the programme back on track. Yes, in that respect, kudos to them for the turnaround.
 
Sokes
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:25 pm

caljn wrote:
raffy wrote:
Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise.

"Inferior" is an offensive, inelegant and inaccurate (in this case) word and its use reminds one of (nameless) politicians knowingly repeating lies until they become accepted. Are you an engineer? Please enlighten us with specificity where the objective "inferiority" lies.
And omit any sour grapes.

Compromise: On a 300km flight both B787 and A350 are inferior to an ATR.
Why can't the world be a little bit more autistic?
 
jeffrey0032j
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:28 pm

ScottB wrote:
flee wrote:
Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.


In reality, deferred production costs would inflate the cost of producing each 787 as that translates to Boeing's profit & loss (P&L) statement. If they actually spend, hypothetically, $80 million to manufacture a 787 and want to write off $20 million in deferred production costs per frame, that raises the notional production cost of a 787 to $100 million until they're done with writing off deferred production costs.

So it's actually pretty remarkable that Boeing has gotten costs down sufficiently (in large part by pressuring suppliers) to both price 787s very aggressively and be able to amortize the deferred production costs within a reasonable accounting block for the program. Imagine how much more competitive they could be if they hadn't royally screwed up the development program...

Yes, which is why there is an urgency at Airbus to cut costs. Once the current 787 accounting block comes to an end, any 787 off the line will be production costs + profits only. Adding in PIPs and additional production efficiencies, the 787 will get even cheaper and better.
 
caljn
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:34 pm

raffy wrote:
caljn wrote:
raffy wrote:
Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise.

"Inferior" is an offensive, inelegant and inaccurate (in this case) word and its use reminds one of (nameless) politicians knowingly repeating lies until they become accepted. Are you an engineer? Please enlighten us with specificity where the objective "inferiority" lies.
And omit any sour grapes.


First of all, I don't have any favor toward either Boeing or Airbus, so no sour grapes either way! But I will prove my point that the A350 is, in SOME ways, superior in performance to the 787. For instance, the A350-900 has a range of 8100 nmi while the 787-9 (which has the longest range of the 787 family so far) has a range of 7635 nmi. The A350-1000 has an even longer range of 8700 nmi. Takeoff performance is 8500 ft for the A350-900 and 9300 ft for 787-9. So yes, in some ways the A350 has superior performance to the 787, which is exactly what I said above. That statement is proven by the figures just quoted. And all the above figures are listed in the Wikipedia links I provided in my earlier post.

Notice that I didn't say that the 787 is inferior in performance in EVERY way to the A350. That, of course, would not be the case or most of the airlines would be buying the A350 instead of the 787. The 787 does have somewhat higher fuel efficiency, carries a few more passengers, and, at present, is a somewhat better value for the money spent and apparently has a lower total life cycle cost. That sort of economics, of course, makes a big difference to the airlines and contributes to the increased sales of the 787 versus the A350. Therefore, for the economics of most airline routes the 787 probably makes more sense than the A350. But for some of the longer routes with lower passenger load, many airlines would probably choose the A350 over the 787. They both have their advantages and disadvantages.

To answer your question, yes, I am an aerospace engineer. And when I use terms like "inferior" or "superior", I do not use them in any pejorative sense. I use them in a specific absolute sense of grading performance in certain areas.




Your second paragraph beginning with "notice" is salient, and interestingly makes a stronger case than the first if I were in the market for an airliner. Rhetoric and semantics matter, "inferior" as a descriptor is lazy and misleading.
 
xwb565
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:47 pm

The 787 is much further down the road in terms of its production run. Airbus will find the reductions but so too will Boeing. Eventually though the curve will flatten out earlier for the 787.
 
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par13del
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:47 pm

Amiga500 wrote:
Revelation wrote:
I think Boeing will take them up on that.

I think SpaceX and Tesla are showing that you are better off bringing a few specialists in house and doing it yourself.


In some things, yes, you are absolutely correct. In others, nope - its still a job done quicker and cheaper with less mistakes by specialists.

I think you are both on the same page with regards to the work being done by specialist, it's just that the prior mantra was that those specialist should be vendors, a lot of companies are now finding that those specialist should now be employees.
 
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Polot
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:48 pm

xwb565 wrote:
The 787 is much further down the road in terms of its production run. Airbus will find the reductions but so too will Boeing. Eventually though the curve will flatten out earlier for the 787.

The question is what is the differential between the two when the curves are flattened out. Airbus is looking at making sure they are closer. Notice that they seem to be discussing more broad organizational changes than just learning how to screw apart some pieces quicker/cheaper.
Last edited by Polot on Fri Jun 21, 2019 2:49 pm, edited 1 time in total.
 
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lightsaber
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:48 pm

jeffrey0032j wrote:
ScottB wrote:
flee wrote:
Lets not forget that Boeing also has a different treatment for its costs. It is still carrying deferred production costs which have to be written off against each new frame of B787 produced. Airbus costs include all costs incurred. So that may help to explain why Boeing costs are apparently lower.


In reality, deferred production costs would inflate the cost of producing each 787 as that translates to Boeing's profit & loss (P&L) statement. If they actually spend, hypothetically, $80 million to manufacture a 787 and want to write off $20 million in deferred production costs per frame, that raises the notional production cost of a 787 to $100 million until they're done with writing off deferred production costs.

So it's actually pretty remarkable that Boeing has gotten costs down sufficiently (in large part by pressuring suppliers) to both price 787s very aggressively and be able to amortize the deferred production costs within a reasonable accounting block for the program. Imagine how much more competitive they could be if they hadn't royally screwed up the development program...

Yes, which is why there is an urgency at Airbus to cut costs. Once the current 787 accounting block comes to an end, any 787 off the line will be production costs + profits only. Adding in PIPs and additional production efficiencies, the 787 will get even cheaper and better.

This is a good point. Once five events happen, the 787 will be far more competitive:
1. Differed costs paid off or enough sales happen to extend the block.
2. 787-10 production ramps up. There are still links in the transition.
3. Weight reduction PIP occurs (rumored 2.5 tons)
4. MTOW increase occurs (rumored 6 tons)
5. GE CMC PIP from GE9x happens (I assume RR will follow, but when?)

I also believe the 778/9 will pressure A350-1000 pricing. We can debate until we are blue, but Boeing has sandwhiched the A350.

Lightsaber
IM messages to mods on warnings and bans will be ignored and nasty ones will result in a ban.
 
xwb565
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:52 pm

Polot wrote:
xwb565 wrote:
The 787 is much further down the road in terms of its production run. Airbus will find the reductions but so too will Boeing. Eventually though the curve will flatten out earlier for the 787.

The question is what is the differential between the two when the curves are flattened out.


I suspect it will be relatively even despite the mythical barrel advantage. The current COO at Airbus has a reputation with some of his former colleagues as being extremely thorough. The fact that he has confronted the need for cuts publicly shows he is already on the job.
 
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par13del
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:52 pm

Funny this is that we can now see the real possibility of the 787 being sold at the initial prices of a leggo a/c slapped together in 7 days or so.
 
raffy
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:53 pm

Sokes wrote:
caljn wrote:
raffy wrote:
Well, according to Wikipedia, Boeing has delivered about 840 787's, while Airbus had delivered about 278 A350's. That's a 3 to 1 advantage in favor of Boeing for an aircraft that is equivalent to and perhaps, in some ways, even slightly inferior to the A350 performance-wise.

"Inferior" is an offensive, inelegant and inaccurate (in this case) word and its use reminds one of (nameless) politicians knowingly repeating lies until they become accepted. Are you an engineer? Please enlighten us with specificity where the objective "inferiority" lies.
And omit any sour grapes.

Compromise: On a 300km flight both B787 and A350 are inferior to an ATR.


Good point. It's all about design requirements! What is the passenger load of the route in question? Neither the B787 or A350 would make sense on an extremely short route like 300 km, because passenger loads are typically low and wouldn't use the capacity of the aircraft. In many parts of the world, passengers would prefer to take the train or drive over flying for a 300 km route. However, many airlines choose to use a CRJ, ERJ, Boeing 717 or even a Boeing 737 instead of an ATR on short routes that are viable. In the USA (which no longer has much of a passenger train network outside of the Northeast), even most of the very short airline routes use some sort of jet (in most cases, a regional jet but sometimes something a bit larger). In my locality in the southeastern USA, airlines at our local airport operate a large variety of smaller airliners for passenger ops - ATR-42/72, CRJ-700/900, ERJ-175/190, 717. Routes are typically anywhere from 250 km up to about 1500 km or so but with low passenger loads per flight of 70 to 100 in most cases.
 
xwb565
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:54 pm

lightsaber wrote:

I also believe the 778/9 will pressure A350-1000 pricing. We can debate until we are blue, but Boeing has sandwhiched the A350.

Lightsaber


You ignore the a330neo which sandwiches the 787 with the a350 on top. There is momentum now with that project and the 787 will not have it easy at the bottom end.
 
Sokes
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Fri Jun 21, 2019 2:55 pm

VV wrote:
Strato2 wrote:
So this explains the slow reduction of the 787 deferred cost. Boeing seems to be throwing those planes out the door with very little profit and that is hurting Airbus. So a race to a bottom it seems.


Here we go again with the deferred production cost rubbish.


http://www.boeing.com/investors/account ... production

In 11 Quaters the sum of defered production cost and unamortised tooling and other non recurring cost came down from 31,380 billion $ to 24,561 billion $.
78.3% of defered production cost and unamortised tooling and other non recurring cost from 2Q16 is still not paid back.

I think it's a fair point to say that Boeing whith this amount of deferred costs shouldn't sell B787s cheap.
Why can't the world be a little bit more autistic?

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