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jbs2886
Posts: 3337
Joined: Wed Apr 01, 2015 9:07 pm

Re: Emirates first Boeing 777X pushed back to 2023

Wed Jan 27, 2021 9:50 pm

FluidFlow wrote:
Chances are that is not the case for the first 100-200 built. The past shows that almost all programs lost money on the first builds (787 deferred costs show that, same for 747-8 and we also know the 350 only turned profitable in 2018). And with a production rate of 2 and also retrospective credits for late deliveries and launch customer discounts Boeing might lose a lot on the first 200 aircraft. It might well be in the 20 million dollar per frame region.


I'd guess those credits for late deliveries aren't going to be as significant, the release specifically noted this was done after discussion with customers - no airline wants the expense of hundreds of millions per aircraft when they are just trying to stay afloat (look at those with large orders - Cathay wants delayed deliveries, ANA likely does as its retiring half of its 777 fleet, etc.). Heck, Emirates isn't even planning to return all A380 to service until 2022 and you can bet they won't be flying a full schedule. In my mind, this is a win-win for Boeing and its customers as Boeing gets to slow development costs a bit and take its time on certification, while customers get to delay orders to better match supply with demand.
 
Airlinerdude
Posts: 255
Joined: Tue Mar 30, 2010 3:07 am

Re: Emirates first Boeing 777X pushed back to 2023

Wed Jan 27, 2021 11:46 pm

jbs2886 wrote:
I'd guess those credits for late deliveries aren't going to be as significant, the release specifically noted this was done after discussion with customers - no airline wants the expense of hundreds of millions per aircraft when they are just trying to stay afloat (look at those with large orders - Cathay wants delayed deliveries, ANA likely does as its retiring half of its 777 fleet, etc.). Heck, Emirates isn't even planning to return all A380 to service until 2022 and you can bet they won't be flying a full schedule. In my mind, this is a win-win for Boeing and its customers as Boeing gets to slow development costs a bit and take its time on certification, while customers get to delay orders to better match supply with demand.


The problem is Boeing has now made a several billion dollar bet on airlines not needing their wide-body replacements for quite some time yet. BA, EK, SQ, and QR have all either retired, or are in the process of retiring, wide-body aircraft with the anticipation that they won't need them in the interim until demand recovers, at which point they'll have new 777Xs arriving to match demand. I'm not sure I've seen or read anything convincing enough to tell me that the level of supply (both for passenger and cargo) that these now retired wide-bodies provided, won't be needed until 2023+. Time will tell on this one.

Jetport wrote:
It looks like Calhoun thinks the 777X will do just fine in the long run, and I am 100% sure he has far more data/information than anyone else on the planet. Even more than the basement keyboard surfers on Anet. :o

Over the longer term, “we think it’s going to be one of the real money-makers for our company,” Calhoun told CNBC.

https://www.cnbc.com/video/2021/01/27/b ... idity.html


The accountants at Boeing, and their auditors, think otherwise. If that were true, they wouldn't have concluded the 6.5bn write-off was necessary.

Be it changing market conditions or whatever excuse, this announcement says is that Boeing anticipates producing/delivering far fewer 777Xs than what was originally anticipated.
 
jbs2886
Posts: 3337
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Re: Emirates first Boeing 777X pushed back to 2023

Thu Jan 28, 2021 12:53 am

Airlinerdude wrote:
jbs2886 wrote:
I'd guess those credits for late deliveries aren't going to be as significant, the release specifically noted this was done after discussion with customers - no airline wants the expense of hundreds of millions per aircraft when they are just trying to stay afloat (look at those with large orders - Cathay wants delayed deliveries, ANA likely does as its retiring half of its 777 fleet, etc.). Heck, Emirates isn't even planning to return all A380 to service until 2022 and you can bet they won't be flying a full schedule. In my mind, this is a win-win for Boeing and its customers as Boeing gets to slow development costs a bit and take its time on certification, while customers get to delay orders to better match supply with demand.


The problem is Boeing has now made a several billion dollar bet on airlines not needing their wide-body replacements for quite some time yet. BA, EK, SQ, and QR have all either retired, or are in the process of retiring, wide-body aircraft with the anticipation that they won't need them in the interim until demand recovers, at which point they'll have new 777Xs arriving to match demand. I'm not sure I've seen or read anything convincing enough to tell me that the level of supply (both for passenger and cargo) that these now retired wide-bodies provided, won't be needed until 2023+. Time will tell on this one.

Jetport wrote:
It looks like Calhoun thinks the 777X will do just fine in the long run, and I am 100% sure he has far more data/information than anyone else on the planet. Even more than the basement keyboard surfers on Anet. :o

Over the longer term, “we think it’s going to be one of the real money-makers for our company,” Calhoun told CNBC.

https://www.cnbc.com/video/2021/01/27/b ... idity.html


The accountants at Boeing, and their auditors, think otherwise. If that were true, they wouldn't have concluded the 6.5bn write-off was necessary.

Be it changing market conditions or whatever excuse, this announcement says is that Boeing anticipates producing/delivering far fewer 777Xs than what was originally anticipated.


I'm confused are you saying Boeing should be delivering sooner than 2023? I think the shear about of retirements by airlines tells you demand won't recover and there have been significant, including IATA reports, of 2025 or so. I also don't think it is a "problem" because I think the airlines also wanted the delay.

Re: the write-off, its the perfect time to do it because of the other financial reports. Frankly, with this write-off it may become a money maker. I'd also hazard to guess the delay caused timing recognition issues causing the write-off, in part.
 
iamlucky13
Posts: 1448
Joined: Wed Aug 08, 2007 12:35 pm

Re: Emirates first Boeing 777X pushed back to 2023

Thu Jan 28, 2021 3:13 am

Airlinerdude wrote:
jbs2886 wrote:
I'd guess those credits for late deliveries aren't going to be as significant, the release specifically noted this was done after discussion with customers - no airline wants the expense of hundreds of millions per aircraft when they are just trying to stay afloat (look at those with large orders - Cathay wants delayed deliveries, ANA likely does as its retiring half of its 777 fleet, etc.). Heck, Emirates isn't even planning to return all A380 to service until 2022 and you can bet they won't be flying a full schedule. In my mind, this is a win-win for Boeing and its customers as Boeing gets to slow development costs a bit and take its time on certification, while customers get to delay orders to better match supply with demand.


The problem is Boeing has now made a several billion dollar bet on airlines not needing their wide-body replacements for quite some time yet. BA, EK, SQ, and QR have all either retired, or are in the process of retiring, wide-body aircraft with the anticipation that they won't need them in the interim until demand recovers, at which point they'll have new 777Xs arriving to match demand. I'm not sure I've seen or read anything convincing enough to tell me that the level of supply (both for passenger and cargo) that these now retired wide-bodies provided, won't be needed until 2023+. Time will tell on this one.


I see a lot of what strike me as assumptions that the schedule is being driven by Boeing at this point. Unless and until some credible information comes out to support that premise, it is my assumption to the contrary that the schedule is now being driven by the airlines.

First flight to first delivery usually takes around 18 months. A year after first flight, without any rumors that I've caught of serious problems in flight test, the current forecast is a total 42+ months between first flight and delivery.

Airlinerdude wrote:
Jetport wrote:
It looks like Calhoun thinks the 777X will do just fine in the long run, and I am 100% sure he has far more data/information than anyone else on the planet. Even more than the basement keyboard surfers on Anet. :o

Over the longer term, “we think it’s going to be one of the real money-makers for our company,” Calhoun told CNBC.

https://www.cnbc.com/video/2021/01/27/b ... idity.html


The accountants at Boeing, and their auditors, think otherwise. If that were true, they wouldn't have concluded the 6.5bn write-off was necessary.

Be it changing market conditions or whatever excuse, this announcement says is that Boeing anticipates producing/delivering far fewer 777Xs than what was originally anticipated.


It is possible for both to be true - much lower than planned demand now that requires a write-off, but healthy profits later. They were originally anticipating seeing close to the same demand as the legacy 777. Now they've got an accounting block that if restricted to a 10 year time frame, would have been based on 1/3 the average production rate of the legacy 777. Clearly much lower than originally expected. That makes sense from the standpoint of needing to use conservative numbers to justify your decisions to investors, especially in the current environment.

Long term, however, the expectation is still that the aviation industry will experience strong growth, slowing down to a long term average of "only" 4% annual traffic growth - perhaps as many as 7500 widebody deliveries over 20 years, if Boeing's market outlook is on-target. It's 8400 widebodies if we include new-build freighters.

They could fall quite a ways short of that forecast and still see a lot of improvement in the 777X's prospects. That forecast is an average of 35 widebodies per month. Current total production plans are only 17 per month (5x787 + 2x777/777X + 3x767 + 5xA350 + 2xA330 NEO). 2019 widebody deliveries peaked at 30 per month including the freighters. We won't be returning to that rate for years, increasing the backloaded nature of the forecast.

2019 production was too high for the existing market, and certainly for the next couple of years, but eventually we'll be back to that demand and continue growth. If the 787 and A350 reached a new production rate record, it would still be only 2/3 of the delivery rate that the Boeing forecast suggests.

For what it's worth, I have a perpetually skeptical view of both Boeing's and Airbus's market forecasts, and I have been consistently wrong. I think a 20 year average of 35 widebodies per month average won't happen, and the present situation makes me more confident I will finally be right this time. However, while to do this properly I should model some market growth and fleet retirement rates in a spreadsheet, what I expect to happen based on back of the napkin math is for the 787 and A350 to continue to dominate the widebody market, yet travel growth to gradually re-open the opportunity for healthy 777X demand. If airlines are taking 5-6 of them a month 10 years from now while the 787 and A350 each deliver over twice as many, I think Boeing will be glad they sustained the program.
Last edited by iamlucky13 on Thu Jan 28, 2021 3:14 am, edited 1 time in total.
 
Airlinerdude
Posts: 255
Joined: Tue Mar 30, 2010 3:07 am

Re: Emirates first Boeing 777X pushed back to 2023

Thu Jan 28, 2021 3:14 am

jbs2886 wrote:
I'm confused are you saying Boeing should be delivering sooner than 2023? I think the shear about of retirements by airlines tells you demand won't recover and there have been significant, including IATA reports, of 2025 or so. I also don't think it is a "problem" because I think the airlines also wanted the delay.


What I'm saying is that it is possible that the aforementioned airlines have reduced/are reducing their wide-body fleets today, with the anticipation of receiving these aircraft as per their original contracts in 21/22. With the additional year (or greater) delay, this could pose issues for airlines down the road.

I'm not sure I'd put much weight into any predictions just yet. If anything, we've seen how wrong these so-called predictions have materialized over the last year. China's domestic air travel has recovered to pre-pandemic levels, the US airlines all underpredicted how much holiday travel would exist, both of these are pretty telling of how well predictions have materialized.

Re: the write-off, its the perfect time to do it because of the other financial reports. Frankly, with this write-off it may become a money maker. I'd also hazard to guess the delay caused timing recognition issues causing the write-off, in part.


In what way? It seems to me like a good portion of the capitalized development cost of the program suddenly had to be written-off as fewer units are now expected to be delivered. I'm not sure what timing has to do with this...
 
2175301
Posts: 2105
Joined: Wed May 16, 2007 11:19 am

Re: Emirates first Boeing 777X pushed back to 2023

Thu Jan 28, 2021 6:02 pm

Airlinerdude wrote:
jbs2886 wrote:
Re: the write-off, its the perfect time to do it because of the other financial reports. Frankly, with this write-off it may become a money maker. I'd also hazard to guess the delay caused timing recognition issues causing the write-off, in part.


In what way? It seems to me like a good portion of the capitalized development cost of the program suddenly had to be written-off as fewer units are now expected to be delivered. I'm not sure what timing has to do with this...


Program Accounting has rules... which includes a reasonable estimate of future deliveries over a reasonable amount of time (even if what exactly is "reasonable" is not specifically defined).

Boeing underwent several regulator reviews of the B787 program accounting due to the delays and program cost issues. While the regulators did not officially find anything actually wrong with what Boeing did, Boeing tightened up how they account for anticipated production changes on both the B747 and B787 lines.

I'd suggest that the current write-off of the $6+ Billion is driven specifically due to the current uncertainty of the production schedule for the "reasonable" period of time that Boeing was using for the previous B777X program. This is in fact showing both the investors and the regulators that they are following the rules related to "Program Accounting."

At the same time... This affects overall company future cash flow - and a higher future stock price - which affects future "profitability."

While in theory: Program Accounting = Overall long term production cost and profitability, with the only variation being potential tax law changes (are profits now taxed more/less than profits in the future, etc.). The addition of a better Stock Price also has effects on the company value - and future profitability (especially if Boeing sells some of its hoard of held stock).

So, its not a major increase in overall program profitability/loss; but, I can see a clear case for at least a minor increase in overall program profitability/loss.

I also believe that over the long term that Boeing will indeed make an overall profit on the B77X program, although that might take another 15-20 years longer than anticipated. There will be a market for the B777X in the future, and the B777XF as well.

Have a great day,
 
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PepeTheFrog
Posts: 406
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Re: Emirates first Boeing 777X pushed back to 2023

Wed Feb 10, 2021 2:54 pm

Further delays loom as Emirates believes first delivery won't happen before Q1 2024:

Emirates Airlines President Tim Clark said on Wednesday Boeing’s 777x jet was unlikely to be delivered before the first quarter of 2024.

Boeing has been developing the widebody jet, a new version of its 777 series, with the goal of releasing it in late 2023, already three years later than planned.

“The 777x was due to come in June of last year, Now it’s unlikely to be, I think, before the first quarter of 2024,” Clark told a virtual summit by aviation consultancy CAPA.


Complete article can be found at Boeing 777x deliveries unlikely before first quarter 2024, Emirates' Clark says
 
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scbriml
Posts: 20089
Joined: Wed Jul 02, 2003 10:37 pm

Re: Emirates first Boeing 777X pushed back to 2023

Wed Feb 10, 2021 3:14 pm

PepeTheFrog wrote:
Further delays loom as Emirates believes first delivery won't happen before Q1 2024:

Emirates Airlines President Tim Clark said on Wednesday Boeing’s 777x jet was unlikely to be delivered before the first quarter of 2024.

Boeing has been developing the widebody jet, a new version of its 777 series, with the goal of releasing it in late 2023, already three years later than planned.

“The 777x was due to come in June of last year, Now it’s unlikely to be, I think, before the first quarter of 2024,” Clark told a virtual summit by aviation consultancy CAPA.


Complete article can be found at Boeing 777x deliveries unlikely before first quarter 2024, Emirates' Clark says


It really shouldn't surprise anyone. I don't think Boeing's hit many of their predicted dates for anything in recent years. If Boeing says "late 2023" I'd say there's better than an even chance it will slip to 2024.

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