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sonicruiser wrote:Individually, none of of these programs are a major concern on their own. However, when put together, Boeing's outlook is nothing short of a catastrophe.
N766UA wrote:While not a civilian aircraft, technically, you could argue that the KC-46 belongs on the list, too, being derived from the 767. And it’s basically grounded with no end in sight.
JJ777 wrote:...sometimes those long term gains are more important than not having a fast selling aircraft today.
asr0dzjq wrote:JJ777 wrote:...sometimes those long term gains are more important than not having a fast selling aircraft today.
Correct. This is the mindset that ALL corporations need. Profits should not be the number one priority.
Max Q wrote:Obviously the Max is nothing but a huge cash drain, can’t see how the 747-8 makes money, the 777 8/ 9 are years from being in the black and the 787 really can’t hope to cover its development costs
That leaves the... 767 and 777 freighters ?
MIflyer12 wrote:sonicruiser wrote:Individually, none of of these programs are a major concern on their own. However, when put together, Boeing's outlook is nothing short of a catastrophe.
You and the OP need to learn how to read an income statement.
As a whole, Being 3Q2019 made more net income than Airbus did in the 1st HALF of 2019. For commercial aircraft alone, Boeing booked a $40 Million operating loss (nothing for a $100 Billion revenue/year company). Boeing's Defense and Global Services businesses together are rather larger than Commercial Airplanes and both showed healthy margins.
https://investors.boeing.com/investors/ ... fault.aspx
JJ777 wrote:I'll never understand why so many people want either Boeing or Airbus to fail. It's a teenage behavior.
JJ777 wrote:. Aviation is a hard game. The 787 and the MAX had their share of problems, but also brought Boeing some technological innovations and hard learned experiences which will be valuable down the road when they release their next new product. When thinking about the long term of a huge corporation like Boeing, sometimes those long term gains are more important than not having a fast selling aircraft today.
2175301 wrote:Max Q wrote:Obviously the Max is nothing but a huge cash drain, can’t see how the 747-8 makes money, the 777 8/ 9 are years from being in the black and the 787 really can’t hope to cover its development costs
That leaves the... 767 and 777 freighters ?
I believe that your basic premise is wrong:
The 747, 767, and 787 are all profitable at this time and generating positive cash flow for Boeing. The 748 may not be making much money; but, Boeing has been adamant that they would not accept orders that would be produced at a production loss (and has cited past cases where they turned down orders).
Admittedly, almost all of that cash has been sunk into produced 737 awaiting delivery.
Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money. They don't own any creditors this money. So for example the commercial production department for the 787 pays money to the internal commercial product development department; both being part of the commercial aircraft division (those are not the real names - but, that is how it works). It's a bookkeeping method of amortization that affects when they have to pay taxes on the money. It has "zero" effect on cash flow.
Have a great day,
SEPilot wrote:Every 787 that Boeing delivers brings in considerably more money than it costs to build at this point. As long as that is the case that is money Boeing can work with. All the money spent developing it at this point is irrelevant; the only case in which it would matter is if Boeing had borrowed the money and now had to pay it back. But that isn’t the case. In fact, it is probably a good thing for Boeing at this point because it is a huge tax write-off.
2175301 wrote:The 747, 767, and 787 are all profitable at this time and generating positive cash flow for Boeing.
Weatherwatcher1 wrote:2175301 wrote:Max Q wrote:Obviously the Max is nothing but a huge cash drain, can’t see how the 747-8 makes money, the 777 8/ 9 are years from being in the black and the 787 really can’t hope to cover its development costs
That leaves the... 767 and 777 freighters ?
I believe that your basic premise is wrong:
The 747, 767, and 787 are all profitable at this time and generating positive cash flow for Boeing. The 748 may not be making much money; but, Boeing has been adamant that they would not accept orders that would be produced at a production loss (and has cited past cases where they turned down orders).
Admittedly, almost all of that cash has been sunk into produced 737 awaiting delivery.
Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money. They don't own any creditors this money. So for example the commercial production department for the 787 pays money to the internal commercial product development department; both being part of the commercial aircraft division (those are not the real names - but, that is how it works). It's a bookkeeping method of amortization that affects when they have to pay taxes on the money. It has "zero" effect on cash flow.
Have a great day,
Good point regarding the 747-8. It is a very unique freighter. Nothing else can compete with it except used 74-400Fs. It might not be widely popular, but for the freight airlines that haul heavy and oddsized cargo, nothing can compete with it. I would expect Boeing to have quite a bit of margin in order to keep building it at such a low rate.
mjoelnir wrote:SEPilot wrote:Every 787 that Boeing delivers brings in considerably more money than it costs to build at this point. As long as that is the case that is money Boeing can work with. All the money spent developing it at this point is irrelevant; the only case in which it would matter is if Boeing had borrowed the money and now had to pay it back. But that isn’t the case. In fact, it is probably a good thing for Boeing at this point because it is a huge tax write-off.
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
MIflyer12 wrote:sonicruiser wrote:Individually, none of of these programs are a major concern on their own. However, when put together, Boeing's outlook is nothing short of a catastrophe.
You and the OP need to learn how to read an income statement.
As a whole, Being 3Q2019 made more net income than Airbus did in the 1st HALF of 2019. For commercial aircraft alone, Boeing booked a $40 Million operating loss (nothing for a $100 Billion revenue/year company). Boeing's Defense and Global Services businesses together are rather larger than Commercial Airplanes and both showed healthy margins.
https://investors.boeing.com/investors/ ... fault.aspx
sonicruiser wrote:Individually, none of of these programs are a major concern on their own. However, when put together, Boeing's outlook is nothing short of a catastrophe.
Revelation wrote:N766UA wrote:While not a civilian aircraft, technically, you could argue that the KC-46 belongs on the list, too, being derived from the 767. And it’s basically grounded with no end in sight.
...deliveries aren't "grounded" nor are the planes themselves.
N766UA wrote:Revelation wrote:N766UA wrote:While not a civilian aircraft, technically, you could argue that the KC-46 belongs on the list, too, being derived from the 767. And it’s basically grounded with no end in sight.
...deliveries aren't "grounded" nor are the planes themselves.
Except they are, though.
https://www.upi.com/Defense-News/2019/0 ... 568649681/
https://www.defensenews.com/air/2019/11 ... nths-away/
The U.S. Air Force barred its KC-46 tanker planes from carrying cargo or passengers until a problem with cargo locks is resolved.
MIflyer12 wrote:sonicruiser wrote:Individually, none of of these programs are a major concern on their own. However, when put together, Boeing's outlook is nothing short of a catastrophe.
You and the OP need to learn how to read an income statement.
As a whole, Being 3Q2019 made more net income than Airbus did in the 1st HALF of 2019. For commercial aircraft alone, Boeing booked a $40 Million operating loss (nothing for a $100 Billion revenue/year company). Boeing's Defense and Global Services businesses together are rather larger than Commercial Airplanes and both showed healthy margins.
https://investors.boeing.com/investors/ ... fault.aspx
2175301 wrote:Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money.
mjoelnir wrote:
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
DfwRevolution wrote:mjoelnir wrote:SEPilot wrote:Every 787 that Boeing delivers brings in considerably more money than it costs to build at this point. As long as that is the case that is money Boeing can work with. All the money spent developing it at this point is irrelevant; the only case in which it would matter is if Boeing had borrowed the money and now had to pay it back. But that isn’t the case. In fact, it is probably a good thing for Boeing at this point because it is a huge tax write-off.
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
What does this observation have to do with the thread topic or SEPilot's reply? Shareholder equity does not tell you whether Boeing's commercial aircraft programs are profitable.
Sokes wrote:2175301 wrote:Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money.mjoelnir wrote:
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
That's something I don't understand. How can share prices be so high when there is no equity? And I don't understand why banks lend money to a high risk industry, if the concerned company has no equity. Maybe politicians get favors/ advisory contracts from Boeing and in turn ask banks for a favor?
And while I assume the B787 brings a lot of needed cash flow at the moment, I don't understand how deferred production cost can be seen any different than a loss.
That apart I also believe the negative cash flow from the MAX is no problem. The money will come in once deliveries begin.
Faro wrote:I humbly submit that many of our kind posters would benefit from an introduction to the basic principles of accounting...it's an arid and thankless domain, but would do much to introduce clarity to our discussion...will try to do a little write up tonight or tomorrow...
Faro
mjoelnir wrote:DfwRevolution wrote:mjoelnir wrote:
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
What does this observation have to do with the thread topic or SEPilot's reply? Shareholder equity does not tell you whether Boeing's commercial aircraft programs are profitable.
It is an answer to the claim SEPilot makes about Boeing not borrowing, as Boeing has borrowed huge amounts, that some day have to be returned. All liabilities not covered by equity are borrowed, not only liabilities declared as loans.
Regarding profitability, Program for cost accounting allows you to show more profit than you make in reality, projecting a fake high profitability, by moving losses to the future. This fake profit exists as long as there are deferred cost. When one program is lowering it's deferred cost, the next program is there to accumulate it again.
mjoelnir wrote:Regarding profitability, Program for cost accounting allows you to show more profit than you make in reality, projecting a fake high profitability, by moving losses to the future. This fake profit exists as long as there are deferred cost. When one program is lowering it's deferred cost, the next program is there to accumulate it again.
Airbus shows its revenues and costs on a division level but not on a program level. It is therefore not possible to know how much the first A350s cost Airbus to produce; it is hidden together with the margins that Airbus makes on other programs like the A320 and A330.
The real production costs of an aircraft like the 787 or A350 are very high for the first units. The financial data which is presented in connection with Program Accounting makes it possible to understand the real production costs of the 787 with good precision... The key take-away is not the figures but that fact that Program Accounting gives the external person a chance to understand the true production costs of an aircraft whereas unit accounting doesn’t.
The average production cost for the first 50 787 units can be estimated from Boeing’s accounting as $450m a copy (the first units cost over $1bn). The production cost of unit 50 can be estimated to $200m. With a learning curve of 85%, which is the normal in the industry (and which seems to be followed by the 787 after the initial troubled aircraft), the cost for aircraft 100 shall be 15% lower, or about $170m per aircraft. Double that again to unit 200 and we are at $145m. Right now, unit 330 goes out the door, which should have a production cost of around $125m. These values can be a bit off but not by much; the accounting around Boeing’s deferred production costs makes the figures pretty predictable.
Airbus and Boeing represent the two different ways of how the costs of production aircraft can be presented. Of the two, the more involved method, Program Accounting, contains a number of assumptions over future costs and the learning curve effect. At first glance this makes the understanding of the true costs of the aircraft program less transparent.
As the practice leads to the company presenting the deferred costs each quarter, combined with statements of how fast the cost break even point will be reached, Program Accounting enables an analysis of the production costs that Unit Accounting doesn’t.
9Patch wrote:mjoelnir wrote:Regarding profitability, Program for cost accounting allows you to show more profit than you make in reality, projecting a fake high profitability, by moving losses to the future. This fake profit exists as long as there are deferred cost. When one program is lowering it's deferred cost, the next program is there to accumulate it again.
Bjorn Fehrm addressed the differences between program accounting and unit counting in a 2015 article and says that program accounting is more transparent:Airbus shows its revenues and costs on a division level but not on a program level. It is therefore not possible to know how much the first A350s cost Airbus to produce; it is hidden together with the margins that Airbus makes on other programs like the A320 and A330.The real production costs of an aircraft like the 787 or A350 are very high for the first units. The financial data which is presented in connection with Program Accounting makes it possible to understand the real production costs of the 787 with good precision... The key take-away is not the figures but that fact that Program Accounting gives the external person a chance to understand the true production costs of an aircraft whereas unit accounting doesn’t.The average production cost for the first 50 787 units can be estimated from Boeing’s accounting as $450m a copy (the first units cost over $1bn). The production cost of unit 50 can be estimated to $200m. With a learning curve of 85%, which is the normal in the industry (and which seems to be followed by the 787 after the initial troubled aircraft), the cost for aircraft 100 shall be 15% lower, or about $170m per aircraft. Double that again to unit 200 and we are at $145m. Right now, unit 330 goes out the door, which should have a production cost of around $125m. These values can be a bit off but not by much; the accounting around Boeing’s deferred production costs makes the figures pretty predictable.Airbus and Boeing represent the two different ways of how the costs of production aircraft can be presented. Of the two, the more involved method, Program Accounting, contains a number of assumptions over future costs and the learning curve effect. At first glance this makes the understanding of the true costs of the aircraft program less transparent.
As the practice leads to the company presenting the deferred costs each quarter, combined with statements of how fast the cost break even point will be reached, Program Accounting enables an analysis of the production costs that Unit Accounting doesn’t.
https://leehamnews.com/2015/09/11/bjorn ... ion-costs/
scbriml wrote:2175301 wrote:The 747, 767, and 787 are all profitable at this time and generating positive cash flow for Boeing.
767 freighters are most likely nicely profitable, but the KC-46 is costing big bucks.
Sokes wrote:2175301 wrote:Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money.mjoelnir wrote:
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
That's something I don't understand. How can share prices be so high when there is no equity? And I don't understand why banks lend money to a high risk industry, if the concerned company has no equity. Maybe politicians get favors/ advisory contracts from Boeing and in turn ask banks for a favor?
And while I assume the B787 brings a lot of needed cash flow at the moment, I don't understand how deferred production cost can be seen any different than a loss.
That apart I also believe the negative cash flow from the MAX is no problem. The money will come in once deliveries begin.
Revelation wrote:N766UA wrote:While not a civilian aircraft, technically, you could argue that the KC-46 belongs on the list, too, being derived from the 767. And it’s basically grounded with no end in sight.
That's a poor characterization of the program, especially with regard to the topic of this thread which is revenue in the present year. https://docs.google.com/spreadsheets/d/ ... 2121076296 tells us 25 KC-46s have been delivered (see KC-46 tab) so deliveries aren't "grounded" nor are the planes themselves. Since most of these planes were built in earlier years their cost was in the books already so the revenue they provide is almost all taken as profit in this year.
mjoelnir wrote:In the moment Boeing is moving down the deferred cost on the 787 program, but it has already begun to run up the deferred cost on the 777X and 737MAX program.
So Boeing will keep showing more accumulated profits, than if they would be doing unit cost accounting, like the rest of the world.
And to be more transparent, Boeing would need to show their deferred cost on all programs, not only the 787.
JohanTally wrote:Boeing doesn't just build the 77W and 748 just for nostalgia. Deferred production costs and realized profits are very different on the 787 program. We don't know when the program turns cash positive or if it already has all we know is when they expect to get the profits originally forecasted for the smaller accounting block. Considering what they are experiencing with the MAX their balance sheet is quite healthy.
strfyr51 wrote:scbriml wrote:2175301 wrote:The 747, 767, and 787 are all profitable at this time and generating positive cash flow for Boeing.
767 freighters are most likely nicely profitable, but the KC-46 is costing big bucks.
the KC-46 and the 767 have only the Airframe in common, Not even the Windshields are common to both airplanes and more than likely the Landing gear and the Engines may be common to both Airplanes. The USAF made so many changes to the airplane that any civil model would be a downgrade from the KC-46.
9Patch wrote:mjoelnir wrote:In the moment Boeing is moving down the deferred cost on the 787 program, but it has already begun to run up the deferred cost on the 777X and 737MAX program.
So Boeing will keep showing more accumulated profits, than if they would be doing unit cost accounting, like the rest of the world.
And to be more transparent, Boeing would need to show their deferred cost on all programs, not only the 787.
Doesn't program accounting apply to each program, 787, 77X and MAX?
Don't each have their own accounting block since each is a separate program?
Under program accounting Boeing is showing less profit now, than they would if they had written them all off earlier doing unit cost accounting.
kitplane01 wrote:JohanTally wrote:Boeing doesn't just build the 77W and 748 just for nostalgia. Deferred production costs and realized profits are very different on the 787 program. We don't know when the program turns cash positive or if it already has all we know is when they expect to get the profits originally forecasted for the smaller accounting block. Considering what they are experiencing with the MAX their balance sheet is quite healthy.
The 787 turned cash positive in 1Q 2016. In other words, it started bring cash into Boeing beyond production costs then. If you want a long conversation of deferred costs, see any number of past threads. No need to repeat what has already been angrily repeated many times before.
mjoelnir wrote:9Patch wrote:mjoelnir wrote:In the moment Boeing is moving down the deferred cost on the 787 program, but it has already begun to run up the deferred cost on the 777X and 737MAX program.
So Boeing will keep showing more accumulated profits, than if they would be doing unit cost accounting, like the rest of the world.
And to be more transparent, Boeing would need to show their deferred cost on all programs, not only the 787.
Doesn't program accounting apply to each program, 787, 77X and MAX?
Don't each have their own accounting block since each is a separate program?
Under program accounting Boeing is showing less profit now, than they would if they had written them all off earlier doing unit cost accounting.
Yes, but only the deferred cost of the 787 is declared by Boeing. As only production cost are deferred, the biggest deferrals for the 737MAX will be done this year and the deferrals for the 777X have just started,
9Patch wrote:mjoelnir wrote:9Patch wrote:
Doesn't program accounting apply to each program, 787, 77X and MAX?
Don't each have their own accounting block since each is a separate program?
Under program accounting Boeing is showing less profit now, than they would if they had written them all off earlier doing unit cost accounting.
Yes, but only the deferred cost of the 787 is declared by Boeing. As only production cost are deferred, the biggest deferrals for the 737MAX will be done this year and the deferrals for the 777X have just started,
So Boeing will show the deferred cost on all programs.
Sokes wrote:2175301 wrote:Most people cannot seem to grasp that the deferred production cost is not a real "loss". One branch of Boeing owes another branch of Boeing the money.mjoelnir wrote:
There is not one US dollar in the whole Boeing operation that is not borrowed. If Boeing would own something, that is not bought with borrowed money, Boeing would be able to show some equity. Equity is the difference between what you own and what you owe.
In the Q3 2019 10-Q report, the shareholders equity is minus 4,116 million USD. that tells us that Boeing owes that amount more than Boeing owns.
That's something I don't understand. How can share prices be so high when there is no equity? And I don't understand why banks lend money to a high risk industry, if the concerned company has no equity. Maybe politicians get favors/ advisory contracts from Boeing and in turn ask banks for a favor?
And while I assume the B787 brings a lot of needed cash flow at the moment, I don't understand how deferred production cost can be seen any different than a loss.
That apart I also believe the negative cash flow from the MAX is no problem. The money will come in once deliveries begin.
2175301 wrote:I cannot wait to see their financial report after they deliver much of the stored 737's; and of course the 787 program will continue to spin off cash and reduce the "inventory" value.
Have a great day,
tommy1808 wrote:2020 is probably going to be an awesome year for Boeing.
Spiderguy252 wrote:tommy1808 wrote:2020 is probably going to be an awesome year for Boeing.
That is under the assumption that the 737 MAX issue will be solved in 2020.
tommy1808 wrote:2175301 wrote:I cannot wait to see their financial report after they deliver much of the stored 737's; and of course the 787 program will continue to spin off cash and reduce the "inventory" value.
Have a great day,
2020 is probably going to be an awesome year for Boeing. But as things stand right now cash coming in from the 787 will drop a lot, as they have a lot less deliveries than available production slot going forward from there.
Anyone an idea how flexible Boeing is with volume from the supplier side? If we have a 168 order/year frame agreement we may be fine with just 150 units being taken up.... but at some point below that we are just going to park the rest on his doorstep and send the invoice .....
Best regards
Thomas
DfwRevolution wrote:
1. Share price is the financial market’s valuation of a firm’s future free cash flow.
DfwRevolution wrote:
Today’s equity is merely a boundary condition on a forward-looking analysis.
kayik wrote:Boeing has $54b worth of its own shares. This is an asset.
kayik wrote:Equity is what you owe to your shareholders which is a liability.
kayik wrote:They classified their own shares in equity as a minus item to their liability to shareolders. Carry that 54b to assets, you will end up with 50b equity. Capish?
SEPilot wrote:From what I have seen Boeing is not borrowing significant amounts of money...
SEPilot wrote:... nor is their cash on hand is dramatically shrinking, nor are they offering any new stock. And I have not heard of any creditors pounding on their doors. So somehow Boeing is managing to absorb all the costs of the MAX debacle without any visible distress. All of this should be evident in their annual report. They are also not in any distress from the deferred production costs of the 787.
WBM wrote:...
Currently the markets say value of the business that Boeing owns less the liabilities it owes is about 197 billion dollars. Markets are not perfect, but as an accountant I will tell you they are on the whole way more accurate than book value minus liabilities.