|Quoting JoeCanuck (Reply 27):|
There is absolutely nothing that can be done about money that is already spent, and nothing that will change production or deferred costs...except selling more planes...which Boeing is doing.
I think this is a good point.
From memory the 787 is going to 144 unit deliveries per year from the current 120 at the end of the year.
Boeing have already stated by the end of the decade they will substantially increase production again.
I know the $32 billion development costs are eye watering, but we have to put this into perspective.
The 777, at a maximum production rate hit 100 units per year. In a couple of years time the 787 production rates should be 60% higher than this. With the 777 program costing (at a guess) $15 billion in today's money, $24 billion for the 787 probably isn't too bad. $32 billion is probably a tad too much.
I think where the real issues lie, are the actual costs to manufacture the aeroplane. I suspect the 787 is taking 2-3 times longer to build than first envisaged.
For instance using 1350 units as the accounting block for writing off production costs, the 787 needs to generate surplus incomes of approximately $24 million per unit to hit this target or $32 million if we consider the 787 is not at break even yet with 350 units produced.
If we consider the costs to manufacture each aeroplane could be $5-10 million higher than first envisaged, Boeing has another and probably more pressing issue to deal with. Boeing, regardless of the sunk costs really need this aeroplane to start producing substantial free cash flows.
I suspect the 787 is going to find it very difficult to recoup its costs. I'd suggest a write-off in the region of $10 billion is required. This would substantially change the psychology for the program and mean Boeing's sales staff will be more agile in being able to put together deals when selling these aircraft.