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

Sat Jun 22, 2019 12:58 am

This started as an article about Airbus reducing manufacturing costs, not Boeing accounting. Lets hold this to discussing to the cost of production, why that is important and what is being done by the manufacturers to improve costs. A good one to watch right now is the C Series (A220). I am sure Airbus is focusing on: a) current parts in production - changing terms and contracts from say 100 units to 500 units, changing payment terms, and the like. Saves cost of production so pricing can be lower, helping win orders. b) Simplify final assembly and the transportation of parts. If the assembly can change from being done in 8 building down to 3 buildings, all those transit costs can be removed. c) Making parts by 3D printing or other methods, will require a recertification so also simplify and lighten the part.

GE is doing a lot of things with its T901 engine, the replacement engine for the Blackhawks and Apache. It produces 50% more power and 25% more efficiency in a package that has the same inlet, outlet and mounts as the T700 with almost the same weight. Greatly reduced part counts due to 3D printing. Their design got them the contract award, now they must build it at locked in pricing. But their factory has a great backlog now. Probably totally new assembly line to be digital controlled machining with accuracies not possible a decade ago.



https://www.geaviation.com/military/eng ... aft-engine
 
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Revelation
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:12 am

Ruscoe wrote:
That's a good question. Taking away the MAX debacle, looking at their figures, they obviously have been doing some serious cost reductions. Several years ago, Boeing came to the conclusion that Airbus can build airplanes as well as they can, so the way to win is on price.
I believe the labour/industrial situation in the USA will allow Boeing to do this.
This might mean Airbus has to base more production in the USA, and this is where the structure of Airbus with France and Germany, along with Spain holding enough shares to give them a lot of influence, may let them down.
I know it is a hard one, for those not politically minded, but a lot of the "talk" by the new senior management at Airbus seems to have a larger political element than it should have.
Imagine if it became obvious that in order to increase efficiency that the Frenchs Airbus production had to move to Germany, how likely that would be to happen, so what chance moving Airbus production to the USA. I know about the 321, but that is a side show.
Specifically for the A350, I think the problem is that the remaining 600 or so 350's to produce have been sold with too little margin, in order to take the sale from the 787, and hence the need to cut costs, to save it.
It is not just that Airbus have to cut costs to sell the 350's. it is that they have to cut costs to make any decent money on the ones they have already sold, as well as procure future sales.
The root cause of Airbus 350 problems is very basic, it is the structure of the ownership, not the aircraft.
Ruscoe

I was told by a good source that one of the main reasons the A300 had GE engines originally was to avoid upsetting the work balance between the sponsor nations, so if your suggestion becomes true it might be history repeating itself.

However I'm not sure what advantages you see in the US labor market, and I surely see a lot of disadvantages to sending work over.
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9Patch
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:21 am

seabosdca wrote:
Airbus has been very good at incremental improvement and I'm sure it's not standing still either, though.

But if the 787 can do the job, it all comes down to price and availability.
 
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lightsaber
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:50 am

seabosdca wrote:
lightsaber wrote:
3. Weight reduction PIP occurs (rumored 2.5 tons)


:eyepopping:

That's one I hadn't heard before. A 2.5 t lighter 787-9 with 260 t MTOW is going to make a serious run at the current 280 t A350-900 with respect to payload range. And those changes will meaningfully expand the universe of TPAC and long TATL missions the 787-10 can fly with an economic payload.

Airbus has been very good at incremental improvement and I'm sure it's not standing still either, though.

Airbus, is not standing still.

At this time Boeing has a good production cost advantage and has been using it to it's advantage.

Boeing has orders out to 2030, but only has a firm backlog of 600. So at 168 per year, slots are available as that is just over 3 years of backlog with a long production tail. Boeing ramped up, at risk, that slots might not be filled.

Airbus has a similar backlog of 615 on the A350 and a much lower production rate, over 6 years of backlog. So Boeing has the slot advantage.

The A350 is good. To keep selling the 787, PIPs are required. I know the A350 is being PIP'd to.

But at this time:
The Boeing manufacturing cost advantage is enough to sell compared to the Airbus variable cost per revenue unit.

Neither has a positive book to bill ratio for 2017, 2018, and certainly not yet in 2019.

For the right sales terms, Boeing will offer mass short term slots. Alas, PIPs take time.

I could be very off on the PIP. However, I know there is still 1.5T in the wing/body join left to be removed. There is a swap of 3D printed titanium, done for cost, that will reduce weight.

But I could be projecting too large of numbers. However, the interest in the 787-10 seems to have increased. The 788 for AA is now the lighter and cheaper 789 shrink. The weight reductions of the -10 will flow down to the -9 and thus used as is for the new -8.

The A350, with normal PIPs, would still sell. However at much lower profit than a company should accept.

I believe Boeing is being much more agresive on 787 pricing. I believe this is necessary for the rumored Chinese order.

The improved 787-10 is perfect for India to the EU. It also opens up most (but not all) EU to China and vice versa.

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

Sat Jun 22, 2019 2:50 am

As I read through the comments, it is obvious that everybody has a different perspective. maybe I'm too literal, however it doesn't matter what the airplane or engine performance is, or the width of the seats, aisles, fuselage, or the company's accounting method... what matters is how much time and labor is expended from start of assembly until delivery. If your manufacturing line is a linear flow in one building plus either fully or partially moving, you save an equivalent of 10-12,000 man-hours over a processes that involves loading sections on dollies and towing them to the next assembly station. when you figure the labor rap rate at $250 and hour you're adding $2.5 -3 Million to each airplane's cost and those numbers are low. (rap rates include all the employee benefits, company management and facilities to name a few).

Add the differences in costs of a spun barrel versus a panel/ frame concept.. the panel /frame manufacture, and assembly will probably cost 3-4 times that of a single spun section.

The problem Airbus must address is how to minimize the added costs of an inefficient assembly plan and a manufacturing flow through a antiquated site.

Note the problem in reducing production costs has nothing to do with at the planes performance, or accounting methods. The biggest costs are unnecessary manpower, movement and equipment. section travel in a linear FAL are significantly lower than a non linear. Buildings with high-bay crane availability are cheaper than using low-bays requiring moving the fuselage to a high bay for tool loading and empennage attachment. However, everyone will view the issues from their own job knowledge or bias and swear they have the answer.. (5 blindman describing an elephant).

One thing to watch is when Airbus develops a new model, will they go with a purpose built facility or try to use the existing patchwork without costing out all process costs.
 
SteelChair
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 2:56 am

I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?
 
Sokes
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 4:33 am

ScottB wrote:
Sokes wrote:
I agree Boeing won't get bankrupt. I exaggerated to make a point that a company of the size of Boeing shouldn't spend huge amounts on share buybacks when according to the books they are close to bankruptcy.


Looking at an equity number of $232 million and declaring that means they're close to bankruptcy shows near-zero understanding of a balance sheet. All that tells us is that the company has been returning most excess capital to its shareholders. Holding on to cash isn't going to pay down deferred production cost simply because the deferred production cost was expended years ago -- funded out of cash flow and/or debt at the time of the program development. That deferred production cost right now sits on the balance sheet as an ASSET -- it is part of the company's inventories.

Sure, they could pay down some debt but Boeing's long-term debt is pretty modest for a company with $15 billion per year in operating cash flow.

After reducing B787 deferred cost by nearly a billion $ Boeing still made about 2.3 billion $ profit last quarter which they used to repurchase shares.
I think they should have reduced deferred B787 cost by 2 billion $. The one billion $ extra would have shrank deferred costs by an extra one billion $ on the asset side and shrank one billion $ debt on the liability side. The balance sheet would have shrank one billion. I agree, it wouldn't have increased equity.
The remaining 1.2 billion $ should have been used to replace debt with equity.

You are right about the long term debt part. Strange. I assume the astonishing 52 billion $ advances and progress billings enable such low long term debt.
One could argue that advances are also debt, but then there are 65 billion $ inventories. It's not like Boeing gambles with the advances.
11 billion $ long term debt isn't much if one makes 2.3 billion $ in a quarter. But then there are other liabilities which could be reduced. Pay your suppliers the day you receive the bill. They can invest. I know nobody does this.
I'm surprised myself that I have to argue that while debt level is no problem, equity level is. Consequence of a seller's market?
O.k., I agree with you on the debt part.

But in case the market suddenly turns you don't want to find yourself with 22 billion $ deferred cost on a plane and 232 million $ equity.
Here a chart of Dow Jones 1929. https://en.wikipedia.org/wiki/File:1929 ... _graph.svg
It had it's maximum in August/ September and minimum in the beginning of November.
O.k., I become historic. Did you foresee in 2007 what will happen the next year?
Suppose the economy crashes. Airlines don't get their credit renewed and are unable to pay for planes. Can Boeing simply stop accepting parts from suppliers or are there contractual obligations to continue buying parts? First that may be only a cash flow problem. But if many airlines suddenly act like this it may become a loss problem as well.

Something just irritates me about the proportion of equity to balance sheet.


Revelation wrote:
Don't take this personally either, but to use an American expression, I think you're over thinking this a bit.

Personally, I think A vs B is more tribalism than fiscal self interest.

If your explanation held we wouldn't see the the fervent tribalism of the Team A players most of whom have state pensions.

But like your post, this is just my opinion.

Thanks for answering. I always appreciate your posts and was concerned you may get annoyed. I criticised you when I wanted to criticise the retirement system.
Yes, overthinking is one of my usual problems.

Why do people go to football matches? Most humans enjoy being part of a group, independent of financial interest.
You make nations by having common enemies:
We are better because we only eat certain foods.
Bismarck united Germany by starting wars with neighbors.
Would India after Independence have fallen to pieces if not for the wars with Pakistan?
And I can imagine that German and French nationalists go well together in Brussel. Their opposition to Islam unites them.
Hey, somebody who hates Boeing or Airbus may at least not need hate Muslims.
There may be a genetic component to it. If people were too welcoming to strangers their area was in risk of being taken over. Not good, if you live in an agraic society.

Off topic: In the German retirement system those who work pay for those who are retired. That is so since Bismarck. We do not occupy our mind with what will happen to our pension and the pensions are safe even if we start world wars which wipe off savings from time to time.
Why can't the world be a little bit more autistic?
 
9Patch
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 4:36 am

SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?
 
9Patch
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 4:44 am

Sokes wrote:
Off topic: In the German retirement system those who work pay for those who are retired. T

It's the same in the American Social Security system. But SS generally replaces only one-third of your income.
Traditional pensions (fast disappearing) and personal savings make up the rest.
 
ScottB
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 5:06 am

smartplane wrote:
if Boeing acquires said production facilities, presumably product 787 is invoiced for the contracted price/s as negotiated with the original supplier, even if less than the cost to produce. Does product 787 wear the loss, or another Boeing business unit or cost centre? Ditto 748?

In other words, are the 'real' 787 cost reductions the same as the published reductions? Clearly massive reductions have been achieved, but is there an element of over statement? Likewise, is the 748 in reality much closer to breakeven or loss?


In the end it doesn't matter really outside of some internal Boeing Company reports. The acquired facilities/operations are likely to be incorporated into BCA so we probably wouldn't see numbers that would look meaningfully different for the business units regardless of whether they supplied 787 parts at contracted price, at cost, or some newly-negotiated price. Vendors might even choose to sell operations to Boeing not because they are unprofitable, but because they aren't meeting a desired ROIC.

Even if Boeing has been aggressively pushing its suppliers to lower prices, they also have an interest in making sure those suppliers stick around -- after all, they need those parts/assemblies for the 787 as well as other (possibly future) products. They're not going to destroy their supply chain just to "hurt Airbus."
 
strfyr51
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 5:19 am

[quote="DCA350"]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.[/quote

So? Is it A330 costs alone that are t fault? Or? Could it be duplicating production in multiple places around the world that are pushing it's costs?
Airbus might have to pare down where they're building Parts and Pieces to where the best suppliers ARE and let them do their thing..
 
ScottB
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 5:22 am

Sokes wrote:
After reducing B787 deferred cost by nearly a billion $ Boeing still made about 2.3 billion $ profit last quarter which they used to repurchase shares.
I think they should have reduced deferred B787 cost by 2 billion $. The one billion $ extra would have shrank deferred costs by an extra one billion $ on the asset side and shrank one billion $ debt on the liability side. The balance sheet would have shrank one billion. I agree, it wouldn't have increased equity.
The remaining 1.2 billion $ should have been used to replace debt with equity.


Nope, if they had chosen to reduce deferred cost by $2 billion instead of $1 billion, it would have merely reduced company profit by $1 billion and the inventory line of the balance sheet would have been reduced by $1 billion. The company's debts would have stayed exactly the same. (Actually they probably would have been able to reduce their tax liability but that's a whole different discussion.)

Again, deferred production cost is carried on the balance sheet as an asset -- part of inventory/partially completed goods. Reducing deferred cost doesn't reduce the company's debt. They certainly could have chosen to pay down debt with their cash flow instead of purchasing shares, but interest rates are exceedingly low these days for a large company like Boeing with good credit.
 
Sokes
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 6:30 am

ScottB wrote:
Sokes wrote:
After reducing B787 deferred cost by nearly a billion $ Boeing still made about 2.3 billion $ profit last quarter which they used to repurchase shares.
I think they should have reduced deferred B787 cost by 2 billion $. The one billion $ extra would have shrank deferred costs by an extra one billion $ on the asset side and shrank one billion $ debt on the liability side. The balance sheet would have shrank one billion. I agree, it wouldn't have increased equity.
The remaining 1.2 billion $ should have been used to replace debt with equity.


Nope, if they had chosen to reduce deferred cost by $2 billion instead of $1 billion, it would have merely reduced company profit by $1 billion and the inventory line of the balance sheet would have been reduced by $1 billion. The company's debts would have stayed exactly the same. (Actually they probably would have been able to reduce their tax liability but that's a whole different discussion.)

Again, deferred production cost is carried on the balance sheet as an asset -- part of inventory/partially completed goods. Reducing deferred cost doesn't reduce the company's debt. They certainly could have chosen to pay down debt with their cash flow instead of purchasing shares, but interest rates are exceedingly low these days for a large company like Boeing with good credit.


Truth being told, I am still not sure where the deferred production costs are hiding. I believe you it is in the inventories on the asset side.
If you reduce from the "asset" side you also have to reduce from the "liabilities and equity" side. To reduce deferred cost one has to reduce debt (or equity).
see p.3 of: http://s2.q4cdn.com/661678649/files/doc ... 9-10-Q.PDF

Suppose the A330 Neo would have got a fantastic engine which wouldn't allow new B787 sales with much profit. Would the already concluded sales have covered deferred costs? It's a real question, I don't know.
As long as it is a sellers market, Boeing is fine. Of course it is better to take debt for 3% and buy back shares with own profit as long as the market is good.

I married in India in 2004. I have seen the economy booming and property prices increasing. But I don't see many factories.
At the end of October 2018 there was nervousness in the Indian banking system. A credit crunch was nearing.
But Japan's Abe wants a strong India as a counterweight to China. So Abe made a currency swap with Modi over 75 billion $. I don't think the world even took notice, but I believe it was a critical moment and we were lucky. The next day markets were cool again.
https://economictimes.indiatimes.com/bl ... -sunshine/

There has never been a time when developing countries all over the world were flooded with such amounts of so cheap money.
That's great, because real poor people are so much better off now. But for our topic it's relevant if business stays as usual.
There is no historic precedent. I have no clue what will happen, but I somehow don't trust the peace. And that's why I argue the way I argue.

Normally a company with 1 billion $ profit is not supposed to pay back net debt or buyback shares. It's supposed to take another 2 billion $ debt and expand it's business. That's why one normally has debt/ equity ratios in certain limits. Why did Boeing not do that? Enjoy the duopoly in a seller market? Do the engine manufacturer lack ability to expand? Not enough engineers around?
Why can't the world be a little bit more autistic?
 
VV
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 7:17 am

I guess it is normal to try reducing your production cost, whatever the aircraft is.

Now, if Airbus says they need to do it for the A350 it may mean that they consider the production cost of the A350 is too high, whereas A330neo production cost is already low. It is proven by the recent A330neo orders announced at Paris airshow.

Whether it has anything to do with any "price war" is irrelevant.
 
gloom
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 8:45 am

lightsaber wrote:
We can debate until we are blue, but Boeing has sandwhiched the A350.


As you probably know, there are two ways to look at that. One is B making a gap smaller (which is what they exactly do, with 78J and MTOW raise). Other is A made a plane completely capable to fight at both ends (against 787 in 250-300seat market, and against 777X in 350+ market) for a cost of developing a single frame - not two. Both are true - but not completely. World is never white or black, as some a.netters claim.

I guess the market is still large enough for all above (and A330N as well). What we're looking for, is strenghtening position foreseeing a market slowdown, which is likely going to happen (maybe even starting now, judging by Paris). And I can't help a feeling big ones will hurt more. 777X even more than 350. I see 35J taking a place on replacements of 777, 359 being a fit where already placed (or at large fleets), and 787 selling better than ever. But 777X? Not really, bad time correlation. I think it's a sandwich, but not for a long time. It's the 380 story again, I guess.

But we'll see, both arguments seem logic, but only one will be true once the time flows. Or maybe some aggregate of both, as world is not white/black, it's just different shades of grey :)

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

Sat Jun 22, 2019 9:00 am

I think we have to remember the 787 supply chain and production system was built from the ground up on the basis of achieving an efficient system.

On the flip side the A350 supply chain and production system is largely based upon the A330 system which has its origins back to the pre Airbus days. The CFO used the word "legacy" for a reason.

For me, I see the A350 cost issues being a direct consequence of the smaller, cheaper and nearly as capable 787 competing with it in many sales campaigns. The problem for Airbus is when the 777-300ER replacement cycle starts in full earnest, the marke develop to a stage where it's leepfigs the A350 (and 787) for the bigger and more expensive 777X.

Looking at the A350 order list, you will note many airlines are either using the A350 to upgauge from the A330, are new wide body long range aircraft customers or are large airlines that typically fly a broad range of aircraft.

I have a suspicion the A350 could hit a sales / orders ceilings once the large airlines have placed their orders for the aircraft. For example I can't see some of the smaller airlines currently operating the 777 having the scale to absorb and swap out 777's with A350's. The economics of running a dual fleet, along with the inefficiencies associated with running two different sets of flight crews, warehousing spares and maintenance may be too much of a cost hurdle for Airbus to overcome.

On the upper end of the spectrum, once Boeing has delivered 400 777X aircraft, they may be in a position where all of the production and developed costs are fully paid off (considering it is a derivative aircraft). When this happens sales campaigns will be in an environment where Airbus us competing with cheaper fully paid off aircraft.

For me the 777 replacement market will be defining for the A350.
 
Absynth
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 10:10 am

The broader issue might be that the shift from hub-and-spoke to point-to-point with the arrival of the 321XLR (and soon the 797) creates a lot of pressure on the XWB market. Passenger growth is offset by the move to smaller planes on P2P destinations.

Boeing had a first mover advantage in which they aggressively ramped up production to bring cost down, and with the falling demand of XWB's, there's no room for Airbus to ramp up production and bring costs down like Boeing did. It doesn't help if you have a cheaper plane with almost the same capabilities for offer as well.

I think the 350 will continue to struggle well into the 30ies when the shift to P2P has completed with 321XLR/797 in wide use and the 747/380's mostly retired, and demand for XWB's picks up again.

Of course they can focus on optimising the production chain, but without the scale of 787 it won't go anywhere significant enough to turn the tables on Boeing.
 
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enzo011
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 10:58 am

Absynth wrote:
The broader issue might be that the shift from hub-and-spoke to point-to-point with the arrival of the 321XLR (and soon the 797) creates a lot of pressure on the XWB market. Passenger growth is offset by the move to smaller planes on P2P destinations.

Boeing had a first mover advantage in which they aggressively ramped up production to bring cost down, and with the falling demand of XWB's, there's no room for Airbus to ramp up production and bring costs down like Boeing did. It doesn't help if you have a cheaper plane with almost the same capabilities for offer as well.

I think the 350 will continue to struggle well into the 30ies when the shift to P2P has completed with 321XLR/797 in wide use and the 747/380's mostly retired, and demand for XWB's picks up again.

Of course they can focus on optimising the production chain, but without the scale of 787 it won't go anywhere significant enough to turn the tables on Boeing.


I don't know what the A321 and 797 has to do with the A359. There are 4 models between the A359 and the A321 currently, A338/A339/788/789, and they will be squeezed even further than the A359 by the impact of those aircraft before it reaches the A350. If anything the cost cutting by Boeing has affected the 797 as they can offer the 787 at competitive prices and Airbus can offer the A321 so the market for the 797 may be even more marginal. The markets for the 440 seat A350 is very much different to the A321/797 so I fail to see how they can be compared or how they would compete for the same RFP campaigns from airlines.

The market for the A350 will still be the same as before and it will still sell well enough with PIPs and cost reductions. We should not forget that Boeing has a massive headstart over the A350 with the 787, so any costs that they were able to cut should still be ahead of Airbus. Roll-out of the first models were six years apart, that is a lot of time to produce aircraft and learn on production. The 787 has been in full production for a lot longer than the A350 so unless the feeling is that Boeing can do things Airbus cannot, then you would expect the same learning curve as both companies would be very well acquainted with each other and will be aware what they other is doing.
 
Absynth
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 11:12 am

enzo011 wrote:
Absynth wrote:
The broader issue might be that the shift from hub-and-spoke to point-to-point with the arrival of the 321XLR (and soon the 797) creates a lot of pressure on the XWB market. Passenger growth is offset by the move to smaller planes on P2P destinations.

Boeing had a first mover advantage in which they aggressively ramped up production to bring cost down, and with the falling demand of XWB's, there's no room for Airbus to ramp up production and bring costs down like Boeing did. It doesn't help if you have a cheaper plane with almost the same capabilities for offer as well.

I think the 350 will continue to struggle well into the 30ies when the shift to P2P has completed with 321XLR/797 in wide use and the 747/380's mostly retired, and demand for XWB's picks up again.

Of course they can focus on optimising the production chain, but without the scale of 787 it won't go anywhere significant enough to turn the tables on Boeing.


I don't know what the A321 and 797 has to do with the A359. There are 4 models between the A359 and the A321 currently, A338/A339/788/789, and they will be squeezed even further than the A359 by the impact of those aircraft before it reaches the A350. If anything the cost cutting by Boeing has affected the 797 as they can offer the 787 at competitive prices and Airbus can offer the A321 so the market for the 797 may be even more marginal. The markets for the 440 seat A350 is very much different to the A321/797 so I fail to see how they can be compared or how they would compete for the same RFP campaigns from airlines.

The market for the A350 will still be the same as before and it will still sell well enough with PIPs and cost reductions. We should not forget that Boeing has a massive headstart over the A350 with the 787, so any costs that they were able to cut should still be ahead of Airbus. Roll-out of the first models were six years apart, that is a lot of time to produce aircraft and learn on production. The 787 has been in full production for a lot longer than the A350 so unless the feeling is that Boeing can do things Airbus cannot, then you would expect the same learning curve as both companies would be very well acquainted with each other and will be aware what they other is doing.


I think I explain very well why they relate to each other in an indirect way. As an example, a lot of people travelling from eastern europe to the states do so via London or Paris. There just isnt the amount of traffic for direct flights with a 787/350/777. The XLR/797 will mean a lot more direct flights at least to east coast from eastern europe. Why do you think WizzAir is interested in the XLR? These are all flights where the XLR/797 replaces both a 737/320 flight and a 787/350/777 flight.
 
smartplane
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 11:24 am

ScottB wrote:
smartplane wrote:
if Boeing acquires said production facilities, presumably product 787 is invoiced for the contracted price/s as negotiated with the original supplier, even if less than the cost to produce. Does product 787 wear the loss, or another Boeing business unit or cost centre? Ditto 748?

In other words, are the 'real' 787 cost reductions the same as the published reductions? Clearly massive reductions have been achieved, but is there an element of over statement? Likewise, is the 748 in reality much closer to breakeven or loss?


In the end it doesn't matter really outside of some internal Boeing Company reports. The acquired facilities/operations are likely to be incorporated into BCA so we probably wouldn't see numbers that would look meaningfully different for the business units regardless of whether they supplied 787 parts at contracted price, at cost, or some newly-negotiated price. Vendors might even choose to sell operations to Boeing not because they are unprofitable, but because they aren't meeting a desired ROIC.


Does matter if the 787 sales team are unaware of excluded costs when it comes to pricing / under-pricing, and actual 787 unit profitability.

ScottB wrote:
Even if Boeing has been aggressively pushing its suppliers to lower prices, they also have an interest in making sure those suppliers stick around -- after all, they need those parts/assemblies for the 787 as well as other (possibly future) products. They're not going to destroy their supply chain just to "hurt Airbus."


They have harmed the supply chain. In respect to the 787, suppliers bought new high tech equipment and took on staff, and then experienced a cash flow hiatus as a result of the grounding. Others affected by the failure to achieve promised 748 targets.

Boeing built in escape clauses, so they could bring production in-house later, only to find it was in most cases activated by the supplier wanting to exit. In some cases, those same contractors are still making the parts, now operating equipment owned by Boeing.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 11:33 am

xwb565 wrote:
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.


And how well did sandwiching the 77X between the A350 and the A380 work... out.

Sandwiching only helps of the bigger aircraft is quite a bit more economic... and it would seem nothing above the 789/A359 is good enough to go bigger.

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

Sat Jun 22, 2019 11:53 am

A flightglobal artical from 2017 (only 80 A350 in service) describes the A350 as a plane used mostly in Asia with only 16% of flights having more than 5000nm.
https://www.flightglobal.com/news/artic ... wo-437274/
Anybody has newer numbers?
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 12:32 pm

9Patch wrote:
SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?


Please. Lets not get into the whole program accounting thing. Its been rehashed to death. The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:05 pm

SteelChair wrote:
9Patch wrote:
SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?


Please. Lets not get into the whole program accounting thing. Its been rehashed to death. The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.


Slightly off-topic, but this is an interesting point moving forward post-MAX. Effectively, the succesful 737 business paid for the 787 developement. The 797 program won't have that luxury with MAX pricing needing to become more competitive. If the 797 as an NMA does get the green light, that will put upward pricing pressure on the 737 and 787, which I don't think Boeing will allow for. Boeing might change course and develope a 737/757 successor to take on the 320 series head on and leave the 767 niche to the A330.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:08 pm

SteelChair wrote:
The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.

Let's not over think this.

As above, the $24B deferred cost is a spreadsheet entry representing money owed by Boeing to Boeing.

If at any point in time Boeing decides the best thing to do is to not pay Boeing the money it owes to Boeing and write the whole thing off, poof, it's gone.

Investors will be upset but the actual cash has long been paid to vendors, employees, etc.

And the idea that it will never pay it off is so remote that it doesn't deter investors from buying more Boeing.

Chances are high that it will be totally paid off, and if not, they'll find some convenient ugly quarter to write off the remainder.

If we get to a point where the deferred costs are actually meaningful, then something very very very bad has happened to Boeing, which in turn means something really bad happened to the US economy, which in turn means there's a lot more to worry about than an entry in Boeing's spreadsheet.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:15 pm

Revelation wrote:
SteelChair wrote:
The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.

Let's not over think this.

As above, the $24B deferred cost is a spreadsheet entry representing money owed by Boeing to Boeing.

If at any point in time Boeing decides the best thing to do is to not pay Boeing the money it owes to Boeing and write the whole thing off, poof, it's gone.

Investors will be upset but the actual cash has long been paid to vendors, employees, etc.

And the idea that it will never pay it off is so remote that it doesn't deter investors from buying more Boeing.

Chances are high that it will be totally paid off, and if not, they'll find some convenient ugly quarter to write off the remainder.

If we get to a point where the deferred costs are actually meaningful, then something very very very bad has happened to Boeing, which in turn means something really bad happened to the US economy, which in turn means there's a lot more to worry about than an entry in Boeing's spreadsheet.



I agree it's irrelevant to the current 787 program, but it will be relevant to the 797 program and the next-gen 787.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:16 pm

SteelChair wrote:
9Patch wrote:
SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?


Please. Lets not get into the whole program accounting thing. Its been rehashed to death. The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.

Please. You're the one who brought up dumping, which has nothing to do with program accounting.
I agree program accounting has be rehashed to death. So why did you bring it up again?
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:17 pm

SteelChair wrote:
9Patch wrote:
SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?


Please. Lets not get into the whole program accounting thing. Its been rehashed to death. The 787 program is still $20-30B in the hole the last I saw. It may never pay off its development costs.

The 787 is the program printing cash for Boeing right now. Everyone keeps getting tied up on money previously spent. That is a sunk cost.

What matters is Boeing has substantially reduced the cost of making 787s. This changes the business case for airlines:
Fixed costs
Variable costs
Revenue potential

Both the A330NEO and A350 must reduce production costs. That is just competition.

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

Sat Jun 22, 2019 1:22 pm

Absynth wrote:
I agree it's irrelevant to the current 787 program, but it will be relevant to the 797 program and the next-gen 787.

It may be less so if the 797 uses the technology developed by the 787 program.
Factories and suppliers already exist, if enhancements are needed the cost will be lower than when the factory was built from scratch. If Boeing has really spent 1billion on the 777X wing factory, is that just a sole a/c facility, it may be but I doubt it. Suppliers as far away as Japan are doing 787 work, they have a leg up if the 797 use similar technology.
Of course, nothing can predict whether some nut job will order fastners late, or the wrong type, or provide incorrect specs, or not properly review contracts, but if we stick to what can be, if the 787 tech is reused, the initial development cost of the 797 will be lower.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 1:52 pm

VV wrote:
I guess it is normal to try reducing your production cost, whatever the aircraft is.

Now, if Airbus says they need to do it for the A350 it may mean that they consider the production cost of the A350 is too high, whereas A330neo production cost is already low. It is proven by the recent A330neo orders announced at Paris airshow.

Whether it has anything to do with any "price war" is irrelevant.

So every time Airbus sells an A330 it proves the production cost is low?
It may be lower than the A350, but the cost of producing a 787 is what's relevant.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 2:04 pm

par13del wrote:
Absynth wrote:
I agree it's irrelevant to the current 787 program, but it will be relevant to the 797 program and the next-gen 787.

It may be less so if the 797 uses the technology developed by the 787 program.
Factories and suppliers already exist, if enhancements are needed the cost will be lower than when the factory was built from scratch. If Boeing has really spent 1billion on the 777X wing factory, is that just a sole a/c facility, it may be but I doubt it. Suppliers as far away as Japan are doing 787 work, they have a leg up if the 797 use similar technology.
Of course, nothing can predict whether some nut job will order fastners late, or the wrong type, or provide incorrect specs, or not properly review contracts, but if we stick to what can be, if the 787 tech is reused, the initial development cost of the 797 will be lower.

Yes, and Boeing speaks of using improved design and production technology using model based engineering, but that has been developed over the years largely funded by the generic R&D budget (google 'boeing project black diamond') and the effort to win the USAF T-X contract.

Another vector is we have been told that 77x is upgrading its system tech based on 787 so NMA will be the third iteration, just like the NMA wing will be the third iteration to use the 787 wing design.

Some people view NMA as a A380/787 style 'moon shot' but it's really more of a derivative like A350 was an A380 derivative.

Of course we see 787 had a lot of focus on manufacturability, and it seems clear NMA will have even more focus on this, because it's being used as a pre-cursor to a high volume NSA narrowbody.

It will be interesting to see when and where we see the impact of the study that the ex-Bosch guy is leading.

It seems Airbus doesn't have a great record of importing experts from other companies ( Streiff, Shulz, et al ) so let's hope this guy gets on better.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 2:06 pm

smartplane wrote:
They have harmed the supply chain. In respect to the 787, suppliers bought new high tech equipment and took on staff, and then experienced a cash flow hiatus as a result of the grounding. Others affected by the failure to achieve promised 748 targets.

Didn't Boeing continue to produce 787 and store them during the three month grounding?

Boeing built in escape clauses, so they could bring production in-house later, only to find it was in most cases activated by the supplier wanting to exit. In some cases, those same contractors are still making the parts, now operating equipment owned by Boeing.

Can you provide any real world examples of this?
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 2:10 pm

Weatherwatcher1 wrote:
So is there any information on what Airbus actually plans to do to reduce A350 production costs? The sales gap between the A350 and 787 certainly implies that sales would benefit from lower production costs.

Long lead times don’t appear to be an issue with A350 in the last 3 years:
  • starlux secured 2021 delivery slots with their 2019 order
  • Turkish got 2020 slots with their 2018 order
  • China Southern go 2019 slots with their 2017 order

Last 3 years Boeing has handily outsold Airbus, by almost a factor of 2X. So from the same sales information, I conclude the opposite. The two have about the same firm backlog, but Boeing is producing 787s at about 150% of the A350 rate.

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

Sat Jun 22, 2019 2:43 pm

frmrCapCadet wrote:
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.


I would beg to differ. Governments owning shares to influence for their own political agendas is meddling.

Airbus was founded by the governments of France, West Germany and the UK in the 1960s, and so while hardly surprising manufacturing centres around these three, in 2019 commercial reality could be expected to help drive down the costs and efficiencies for what is supposed to be a commercial company and not the play thing for the French and German governments to drive local employment.

It is not just those two countries that provide subsidies. Many countries provide seed capital for aircraft development (as opposed to tax breaks Boeing receives). Some of these countries have done very well out of the dividends received back, on aircraft such as the 320, while on the 380...not so well...

We can go into the politics of Angela Merkel effectively blocking the BAE/EADS merger as France would have had a greater stake in the new company than Germany and what the benefits for the military arm of Airbus could have been. We could also talk of the fact the UK government would not have allowed, in such merger, German and French board representation of the new company due to political meddling. But all this should probably be put on a different feed.

Reality is while Airbus has to make decisions taking "sensitivities" of "vested interests" into consideration, it hurts its ability to be efficient and compete against B. No one is saying sack the labour force and shut a ton of factories, as many of those are highly skilled workers and in a global supply chain do provide the best output for AIRBUS. But the company must be free to make rational economic decisions to be cost effective without the ire of government interference for different agendas. I would bet the current supply chain and assembly would look very different without this.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 3:12 pm

eurotrader85 wrote:
We can go into the politics of Angela Merkel effectively blocking the BAE/EADS merger as France would have had a greater stake in the new company than Germany and what the benefits for the military arm of Airbus could have been. We could also talk of the fact the UK government would not have allowed, in such merger, German and French board representation of the new company due to political meddling. But all this should probably be put on a different feed.

We are told Enders was to have some 1:1 time with Frau Merkel but he had to cancel because he got injured in a parachute jump.

Perhaps one of the great "what ifs" of the EU aerospace industry.

Yet in the end it might have been the right outcome given how the political climate in the UK has shifted.

eurotrader85 wrote:
Reality is while Airbus has to make decisions taking "sensitivities" of "vested interests" into consideration, it hurts its ability to be efficient and compete against B. No one is saying sack the labour force and shut a ton of factories, as many of those are highly skilled workers and in a global supply chain do provide the best output for AIRBUS. But the company must be free to make rational economic decisions to be cost effective without the ire of government interference for different agendas. I would bet the current supply chain and assembly would look very different without this.

Good points and IMO on topic with respect to A350 production.

It'd be fascinating to know if Airbus has a proposal somewhere for building A350 in a green field site with whatever labor force they preferred, along with comparison to how they now do it.

They must already have some interesting data comparing their newest A320 FAL (XFW #4? BFM?) to their oldest one.

As above, it'll be interesting to see what influence the new report will have.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 3:16 pm

lightsaber wrote:
BREECH wrote:
Polot wrote:
The A359 is not a much larger airliner than the 787-10.

60 tons difference in MTOW, 10 tons difference in payload... that's 20% in my book. Oh, and a foot of fuselage width.

Now estimate the revenue benefit and variable cost difference. Discuss the business case.

For DL TPAC, I see your point. But UA flies 787s to North China as that is the best solution.

If bigger is better, compare to the 779, very optimized for payload at range. Wider too.

The example is taxis. My father always wants the cheapest Uber or taxi and complains if the car is too small. I go cheap most days, but if I want big, I have a limo service. What are customers willing to pay for? The answer is airline and even route specific.

Lightsaber

You forgot where you started. You said A350 is more expensive. I merely reminded you that it's a larger plane hence the higher price. If you compare 787 to A320, the latter would be much cheaper and much better suited for the missions it flies.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 3:19 pm

ScottB wrote:
BREECH wrote:
60 tons difference in MTOW, 10 tons difference in payload


This is only meaningful for carriers who need the additional payload/range and are willing to accept the higher acquisition and operating costs to get them.

Name ONE that doesn't need additional payload.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 4:15 pm

BREECH wrote:
ScottB wrote:
BREECH wrote:
60 tons difference in MTOW, 10 tons difference in payload


This is only meaningful for carriers who need the additional payload/range and are willing to accept the higher acquisition and operating costs to get them.

Name ONE that doesn't need additional payload.


I can name a bunch: everyone that bought a 787.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 6:50 pm

BREECH wrote:
ScottB wrote:
BREECH wrote:
60 tons difference in MTOW, 10 tons difference in payload


This is only meaningful for carriers who need the additional payload/range and are willing to accept the higher acquisition and operating costs to get them.

Name ONE that doesn't need additional payload.


Additional payload beyond normal passenger and luggage weight is dependent on steady additional cargo weights. There are indeed some routes where more cargo than a 787 can handle exist, and a A350 fits. But, it is not a large number of routes. I might suggest that if there is actually a large amount of steady cargo expect a 777 instead of a 787 or A350 for that route, or perhaps even a dedicated routine freighter flight to handle that cargo, witch negates the need to carry much cargo on the passenger aircraft.

Please note that in the studies for the Boeing NMA, that it has been widely reported multiple times that with the exception of some of the Asian carriers that anything more than limited extra cargo capacity was not desired by the airlines. They want the lightest cheapest people mover. Not a people and cargo mover.

My conclusion is that most airlines buy passenger aircraft to essentially move people - and not to move cargo; although some routes have good cargo flow with the passenger aircraft due to extra cargo capacity.

Have a great day,
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 8:14 pm

2175301 wrote:
Additional payload beyond normal passenger and luggage weight is dependent on steady additional cargo weights. There are indeed some routes where more cargo than a 787 can handle exist, and a A350 fits. But, it is not a large number of routes. I might suggest that if there is actually a large amount of steady cargo expect a 777 instead of a 787 or A350 for that route, or perhaps even a dedicated routine freighter flight to handle that cargo, witch negates the need to carry much cargo on the passenger aircraft.

Please note that in the studies for the Boeing NMA, that it has been widely reported multiple times that with the exception of some of the Asian carriers that anything more than limited extra cargo capacity was not desired by the airlines. They want the lightest cheapest people mover. Not a people and cargo mover.

My conclusion is that most airlines buy passenger aircraft to essentially move people - and not to move cargo; although some routes have good cargo flow with the passenger aircraft due to extra cargo capacity.

Have a great day,

That sums up s part of the market.

There is a quote out there on how LH needed more cargo capacity than the 787. LH receives a premium on cargo (as does EK and quite a few others), so there are different markets.

If the 787 empty weight is significantly reduced (just the 3D printed stuff going on at the end of this year should remove about 500kg), this will nicely open up the payload/range charts.

The NMA is for non-cargo routes. Obviously airlines flying in/out of SFO, LAX, JFK, MIA, LHR, FRA, MUC, CDG, PVG, PEK, HKG, SYD, and SIN will forfeit good cargo revenue. While I missed some high premium cargo destinations, most airports are not in that category.

So yes, most widebodies are bought to move people. The airlines that lack a great specialty cargo handling operation (LH for high value, EK for chilled, and of course fish) only get paid for cargo at discount Y rates on a per kg basis

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

Sat Jun 22, 2019 8:19 pm

BREECH wrote:
lightsaber wrote:
BREECH wrote:
60 tons difference in MTOW, 10 tons difference in payload... that's 20% in my book. Oh, and a foot of fuselage width.

Now estimate the revenue benefit and variable cost difference. Discuss the business case.

For DL TPAC, I see your point. But UA flies 787s to North China as that is the best solution.

If bigger is better, compare to the 779, very optimized for payload at range. Wider too.

The example is taxis. My father always wants the cheapest Uber or taxi and complains if the car is too small. I go cheap most days, but if I want big, I have a limo service. What are customers willing to pay for? The answer is airline and even route specific.

Lightsaber

You forgot where you started. You said A350 is more expensive. I merely reminded you that it's a larger plane hence the higher price. If you compare 787 to A320, the latter would be much cheaper and much better suited for the missions it flies.


It is not a larger plane. Heck, airlines with both 787-10 and A359 in similar configs seat 20 to 30 more in the 787-10. The MTOW difference is not 60 tons. 254 tons vs 280 tons = 26 tons and if the 260 ton 787 is indeed true, that goes down further.

Yes, the A359 is more capable from a payload/range perspective, but is not larger.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 9:02 pm

9Patch wrote:
SteelChair wrote:
I wonder if Airbus considered suing Boeing for price dumping (CSeries) instead of addressing their own cost and production issues?

'Dumping' means selling them for less than they cost to produce.
Where is the evidence of that?


Ok people, according to Investopia: “Dumping is a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market.Apr 14, 2019.” It has nothing to do with the production cost of the good. The reason it is illegal is to prevent damaging a country’s domestic industry in order to corner a market. The example I used before is China selling steel in the U.S. for $75 per ton and $200 per ton in China. This allows one country to destroy another country’s domestic industry and then command whatever price they want because there is no competition.

Selling something below cost in either a foreign or domestic market is not per se illegal. If Boeing sold 787s below cost to Hawaiian and at the sample price to JAL, there would be no dumping. There might be anti-trust violations, but not dumping. If selling below cost were dumping, then almost every manufacturer would be guilty of dumping at the beginning of production. Of, course, to make dumping illegal, there must be a domestic industry to damage. Britain and Spain don’t have domestic manufacture of large commercial aircraft. They do make components, but not complete planes.

Please stop blathering about things you don’t understand. I would wager that nobody on this blog knows how much it actually costs to build 787s, A330s or A350s. Nor does anyone on here actually know what they sell for. Quit making claims based on what you think, or more likely, Hope.
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sat Jun 22, 2019 9:36 pm

[quote="seabosdca"]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.[


So? exactly who is the A350 competing against? The B787 or the B777X?? If they wanted to compete against the B787? Then it's going to have to be on Range and efficiency.. Because the B777X will be quite a bit Larger for the -9 and more similar to the -8 Which might have quite a bit more range than the -9. And you can Bet that both Rolls and GE are maximizing their efforts to insure that the range is there for BOTH of those models..
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sun Jun 23, 2019 12:07 am

strfyr51 wrote:
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.

It all depends on how successful Airbus is in bringing A350 costs down.

COO Schöllhorn said, “Everything needs to be done in a responsible, balanced manner because founding states still have a vested interest.”

Good luck with that.
 
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Re: Bloomberg:Airbus Says It Must Slash A350 Costs to Win Wide-Body Price War

Sun Jun 23, 2019 1:07 am

9Patch wrote:
strfyr51 wrote:
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.

It all depends on how successful Airbus is in bringing A350 costs down.

COO Schöllhorn said, “Everything needs to be done in a responsible, balanced manner because founding states still have a vested interest.”

Good luck with that.

Those statements do not match. Responsible, balanced or significant cost cutting. You cannot have both. If the 779/8 is winning by a small margin, it will maintain the advantage.

Airbus must be agresive in cost cutting.

Lightsaber
IM messages to mods on warnings and bans will be ignored and nasty ones will result in a ban.
 
smartplane
Posts: 981
Joined: Fri Aug 03, 2018 9:23 pm

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

Sun Jun 23, 2019 1:31 am

The 777X, A330NEO and A350 are all facing stiff pricing competition from the 787 family, and increasingly capability.

Either Boeing continues to stunt 787 performance and pricing at the top end, to protect the 777X niche, or shift the 777X game plan by increasing it's size, or it's cancelled. Just like Airbus are stunting A330NEO performance and pricing at the top end to protect the A350.

Who will blink first?
 
Sokes
Posts: 102
Joined: Sat Mar 09, 2019 4:48 pm

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

Sun Jun 23, 2019 2:22 am

Sokes wrote:
After reducing B787 deferred cost by nearly a billion $ Boeing still made about 2.3 billion $ profit last quarter which they used to repurchase shares.
I think they should have reduced deferred B787 cost by 2 billion $. The one billion $ extra would have shrank deferred costs by an extra one billion $ on the asset side and shrank one billion $ debt on the liability side. The balance sheet would have shrank one billion. I agree, it wouldn't have increased equity.
The remaining 1.2 billion $ should have been used to replace debt with equity.
...
11 billion $ long term debt isn't much if one makes 2.3 billion $ in a quarter.
...

I correct myself:
Normally in a society there are people who save. Business and to a lesser degree government are supposed to absorb that saving and put it to productive use.
Boeing has 11.4 billion $ long term debt. Deferred cost of B787 is 22 billion $.
Ignoring the MAX issue: If I argue the profit of five quarters should be used to reduce deferred costs from 22 billion $ to 11 billion $, Boeing won't have any more long term debt.
That's not even useful for a normal country. But America on top is the reserve currency. They are supposed to have higher debts. As the B787 is probably fine the next five years anyway, I suggest the following:
Boeing stops share buybacks, reduces the deferred production costs of B787 as before and uses profits to increase equity till they reach an equity level of 5-7 billion $. If they do this with business as usual, the added equity would replace debt. Not useful.
It's rather useful they add equity of 7 billion $ and 15-20 billion $ new debt.
It's really time they start the B797 and maybe even a second plane at the same time.
What a funny balance sheet. I guess consequence of many years seller market.

As before I find 339 million $ equity totally inacceptable for a company which is a) the size of Boeing and b) operates in a cyclical business.
I believe this even if their debt is, I admit, low.
Why can't the world be a little bit more autistic?
 
bob75013
Posts: 745
Joined: Tue Jun 23, 2015 5:05 pm

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

Sun Jun 23, 2019 3:42 am

Sokes wrote:
Sokes wrote:
After reducing B787 deferred cost by nearly a billion $ Boeing still made about 2.3 billion $ profit last quarter which they used to repurchase shares.
I think they should have reduced deferred B787 cost by 2 billion $. The one billion $ extra would have shrank deferred costs by an extra one billion $ on the asset side and shrank one billion $ debt on the liability side. The balance sheet would have shrank one billion. I agree, it wouldn't have increased equity.
The remaining 1.2 billion $ should have been used to replace debt with equity.
...
11 billion $ long term debt isn't much if one makes 2.3 billion $ in a quarter.
...

I correct myself:
Normally in a society there are people who save. Business and to a lesser degree government are supposed to absorb that saving and put it to productive use.
Boeing has 11.4 billion $ long term debt. Deferred cost of B787 is 22 billion $.
Ignoring the MAX issue: If I argue the profit of five quarters should be used to reduce deferred costs from 22 billion $ to 11 billion $, Boeing won't have any more long term debt.
That's not even useful for a normal country. But America on top is the reserve currency. They are supposed to have higher debts. As the B787 is probably fine the next five years anyway, I suggest the following:
Boeing stops share buybacks, reduces the deferred production costs of B787 as before and uses profits to increase equity till they reach an equity level of 5-7 billion $. If they do this with business as usual, the added equity would replace debt. Not useful.
It's rather useful they add equity of 7 billion $ and 15-20 billion $ new debt.
It's really time they start the B797 and maybe even a second plane at the same time.
What a funny balance sheet. I guess consequence of many years seller market.

As before I find 339 million $ equity totally inacceptable for a company which is a) the size of Boeing and b) operates in a cyclical business.
I believe this even if their debt is, I admit, low.



How many times do people need to be tolda that deferred production costs are money that Boeing loaned itself in the form of cash. Repayment of deferred production involves Boeing paying Boeing back. It is absolutely meaningless from a financial standpoint. Boeing Paying Boeing bill is a very different animal than Boeing paying a real creditor.

What matters is the market value of Boeing: $209 BILLION as of EOD yesterday,and is sitting on almost $7 BILLION in cash,
 
JayinKitsap
Posts: 1339
Joined: Sat Nov 26, 2005 9:55 am

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

Sun Jun 23, 2019 3:57 am

Those analysis bring the data to make the right decision. They decide if 5,10,20, or 100 of a model make sense - ie what percent increased profit do the reviewed planes have compared to the alternates and how many is the right amount. A huge contender is the existing aircraft in the fleet, the purchase price has to cover the difference over the existing choice or it is no go. Between choices including all the operating costs a few percent can lock the deal. Remember the airlines are operating on 5 to 10% margins, they just can't give up a few percent or their competition will eat their lunch.

To keep the offered price as low as possible suppliers are pressured, labor efficiencies are worked on, new production techniques, new design methods, etc. Also, things like cutting weight (as noted elsewhere in this post at $500/kg), the airlines are willing to add $ 500 to the price for each kg saved, as that kg saved will save more than enough fuel to cover that kg. Adding to MTOW allows for more payload, but less effective for the airline as an OEW saving.

If Boeing is able to reduce the cost of a 787 by $ 4M, that is an additional cost saving that Airbus needs to make just to stay even in the bidding process.



lightsaber wrote:
Boeing was brutal with suppliers to cut costs. Later this year Boeing switches to 3D printed parts that save a further $2million to $3 million per 787.

I've seen a study on the A350 that showed how to save $1 million per A350 switching parts to 3D printing. It isn't as if Airbus doesn't adopt tech, the competitor was brutal in cost cutting which put the A350 at a disadvantage.

The upcoming PIPs will make the 787 even more competitive. I only know rumors of the weight removal, but every kg removed improves the value of an aircraft $500v(USD). Boeing is working to remove 2,500kg or a $1,250,000 value improvement or $210 million usd per year (for 168 B787s per year, assuming all models benefit). Boeing is working to improve MTOW.

Do not get hung up on IAM claims. Airlines demand extreame quality.

They all compete on economics. That can be fixed or variable costs. With 787s coming off the line in 3 years having cost reduction and value improvement of about $4 million per aircraft. The bar is moving.

Airbus must reduce the cost per A350. It is a great aircraft. But don't get hung up on fanboyism, it is too expensive to manufacture. Efficiency is relative.

Part of that is Boeing is trying to close the window for the C929. By obsoleting an aircraft before EIS, they can reduce Chinese state funding to COMAC.

Airlines like the 787. They like the A350. Unfortunately for Airbus, that means picking one over the other is just by business case.

Variable costs
Fixed costs
Revenue potential

We argue here over details that feed the above three criteria. At the end of the day, an airline sets up a large spreadsheet what simulates perhaps 200 missions. Each on cost to fly and revenue. The winner is the highest rate of returns.

The winning airlines now do system analysis where they bid off a hypothetical mixed fleet to maximize potential and put in risks such as a recession or a fuel price spike.
So if, for example, QF is bidding a mix of A339/A359/A35K vs. 789/787-10/778/779, you do not get hung up on details, but buy the best mix of aircraft. It might be 789+A359+779 or any mix of the above.

These spreadsheets have part costs, engine costs, tire costs, financing, and everything that might change the decision (e.g., Airbus has tipped the scales on pilot training costs).

But to get serious, fixed costs must drop on the A359 and A35K.

Lightsaber
 
Sokes
Posts: 102
Joined: Sat Mar 09, 2019 4:48 pm

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

Sun Jun 23, 2019 4:02 am

bob75013 wrote:
How many times do people need to be tolda that deferred production costs are money that Boeing loaned itself in the form of cash. Repayment of deferred production involves Boeing paying Boeing back. It is absolutely meaningless from a financial standpoint. Boeing Paying Boeing bill is a very different animal than Boeing paying a real creditor.

What matters is the market value of Boeing: $209 BILLION as of EOD yesterday,and is sitting on almost $7 BILLION in cash,


I believe until "liability and equity" consists of no more liabilities (=equity only).
I correct myself:
As before I find 339 million $ equity totally inacceptable for a company which is a) the size of Boeing, b) operates in a cyclical business and c) operates in a high risk business.
With high risk business I mostly mean early engine troubles for B747, Lockheed Tristar or, worst, A340. Supplier problems can also be there. Or trouble like the MAX.
Therefore an airline manufacturer needs to have equity which allows for a few quarters of losses. There is a reason that Warren Buffet isn't interested in the business. I think it's inherent in the business, even though we had many years a seller market.
I believe this even if Boeing's debt is, I admit, low.
On the other side: Boeing is too big to fail, so I might be wrong.
Why can't the world be a little bit more autistic?

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