Moderators: jsumali2, richierich, ua900, PanAm_DC10, hOMSaR

  • 1
  • 2
  • 3
  • 4
  • 5
  • 7
 
StTim
Topic Author
Posts: 3733
Joined: Thu Aug 08, 2013 7:39 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 9:17 am

I looked but have not seen this being discussed.


http://www.seattletimes.com/business...ospace/job-cuts-planned-at-boeing/


It looks to me like the 330neo is having an major impact on Boeing in reducing the price they can sell 787's at.
 
alfablue
Posts: 54
Joined: Tue Jan 22, 2013 1:16 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 10:31 am

The article doesn't paint a rosy picture for Boeing if true. Basically they have only the 737 left as cash cow and on that front they can't compete on price with Airbus (nor on performance in case of 739 vs A321). The 777 production rate will be reduced and profits probably pay for the R&D of the 777-8/9. The 787 still 50 million dollar too expensive to produce per frame, and let's not even talk about the 747.

Many unnamed sources in the article, but if true that many customers lean heavily towards Airbus then I would say Boeing needs to re-think a few things. Looks like Airbus is enjoying a more modern/consistent product line with better pricing/financing options.

Rgds,

alfablue
 
mat66
Posts: 307
Joined: Fri Jan 22, 2010 1:12 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 10:40 am

Quoting StTim (Thread starter):
It looks to me like the 330neo is having an major impact on Boeing in reducing the price they can sell 787's at.

That is one point, but I think the price Boeing sold the 787 for in the order rush 2005-2007 might even be more of a problem.
 
User avatar
enzo011
Posts: 1906
Joined: Tue Jun 21, 2011 8:12 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 11:00 am

If what is being reported is true, whats up with the Boeing executives? Do they not know what happens in their company or do they not care to massage the truth with such abandon?

Quote:
His open discussion of Airbus undercutting Boeing pricing surprised Wall Street analysts.

Two weeks ago, when Boeing Chief Financial Officer Greg Smith was asked during an earnings teleconference whether the company was facing pricing pressure in 2016 and 2017, his unequivocal response was, “No, nothing material.”

Maybe they haven't learned the lessons from the 787 debacle and the left hand has no idea it there is a right hand?
 
RickNRoll
Posts: 1869
Joined: Fri Jan 06, 2012 9:30 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 11:21 am

Quoting StTim (Thread starter):
It looks to me like the 330neo is having an major impact on Boeing in reducing the price they can sell 787's at.

I doubt it. The A330neo is just a gap filler. The article spells out quite clearly where Boeing's problems lie.
 
chiad
Posts: 1330
Joined: Tue May 16, 2006 4:24 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 11:21 am

Quoting StTim (Thread starter):
It looks to me like the 330neo is having an major impact on Boeing in reducing the price they can sell 787's at.

Could also be a reminder how things could go if Boeing launched MoM to compete against the A321NEO/A321NEOv2/A322.
 
User avatar
N14AZ
Posts: 4152
Joined: Sat Feb 24, 2007 10:19 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 11:22 am

Quoting alfablue (Reply 1):
Looks like Airbus is enjoying a more modern/consistent product line with better pricing/financing options.

I see this rather like the graphs of sine and cosine. During some phases one is doing better than the other - depending on when / what aircraft programme has been introduced - and vice versa.

Quoting alfablue (Reply 1):
Looks like Airbus is enjoying a more modern/consistent product line with better pricing/financing options.

I know at least one Australian member who doesn't share this point of view.  
 
AWACSooner
Posts: 2545
Joined: Tue Jan 22, 2008 12:35 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 11:45 am

Quoting StTim (Thread starter):
It looks to me like the 330neo is having an major impact on Boeing in reducing the price they can sell 787's at.

And the fact they never came up with a true 757 replacement until it now (maybe)...long after longtime 757 operators opted for the 321 to replace their fleets.
 
Chaostheory
Posts: 1156
Joined: Wed Mar 06, 2013 2:09 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 12:37 pm

I've mentioned before how Airbus is undercutting the 787 on price. Airbus will happily sell you an A330 for $120m, a neo slightly more whilst Boeing will struggle to get below $135m. That price delta easily covers the efficiency advantages of the 787.

The job losses themselves aren't surprising regardless of 787 woes. I have two nephew who work(ed) for Boeing. One recently left for Esterline down the road and the other has been given the option of relocating to Alabama or California. He'll probably leave as he is eyeing up a CFD research position elsewhere.
 
User avatar
moo
Posts: 4980
Joined: Sun May 13, 2007 2:27 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 1:54 pm

Quote:

According to two people who listened to the internal webcast, Conner said the job cuts are needed “because Boeing cannot compete with Airbus right now on prices.”

Thats interesting considering most people thought the strength of the dollar would be benefiting Boeing and hampering Airbus - if Boeing are struggling despite that, then somethings afoot....
 
racercoup
Posts: 408
Joined: Sun Jan 28, 2007 10:48 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 1:55 pm

Let's see.... Boeing has increased the cash dividend it pays to it's stockholders and has set aside billions for it's stock buy-back program. I wouldn't get the shovel out too quickly.

An adjustment in the labor force was imminent given increased automation and a reduced need for support staff hired for the 787 program.

Unlike Airbus, Boeing exists to make a profit for it's shareholders and as a result employs thousands. Boeing does not exist to sustain jobs.
 
sxf24
Posts: 1007
Joined: Wed Aug 15, 2007 12:22 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:05 pm

Quoting Chaostheory (Reply 8):
've mentioned before how Airbus is undercutting the 787 on price. Airbus will happily sell you an A330 for $120m, a neo slightly more whilst Boeing will struggle to get below $135m. That price delta easily covers the efficiency advantages of the 787.

Actually, Airbus will be happy sell you an A330 or A330neo for $80-85m. Boeing can't compete with that.
 
User avatar
sassiciai
Posts: 1118
Joined: Mon Jan 07, 2013 8:26 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:11 pm

Quite predictable to see the usual rose-tinted spec brigade C-in-C offering up his usual tosh, oblivious to the real world that most of us recognise, and even unable to digest the comments from Boeing itself!  

If Boeing does exist to make a profit for its shareholders, why are so many execs tainted with the 787 saga still in position? Why, for that matter, are they still selling the thing, if the company looses $50M a copy on each one delivered?

Language Police warning: "it's" is an abbreviation for "it is", the word I think you want is "its"!
 
User avatar
zeke
Posts: 15158
Joined: Thu Dec 14, 2006 1:42 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:18 pm

Quoting racercoup (Reply 10):
An adjustment in the labor force was imminent given increased automation and a reduced need for support staff hired for the 787 program.

Also rate reductions in the C-17, 747-8, and 777.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
User avatar
seahawk
Posts: 9681
Joined: Fri May 27, 2005 1:29 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:20 pm

Quoting sassiciai (Reply 12):
If Boeing does exist to make a profit for its shareholders, why are so many execs tainted with the 787 saga still in position? Why, for that matter, are they still selling the thing, if the company looses $50M a copy on each one delivered?

Sunk costs. When looking at an economic question you must forget the past. At the moment it would be obviously more expensive to cancel the 787 production, than to built them even at a slight loss. Especially as the 787 will start to make money soon.

This however does not sound to good for a MoM project. Because if you think the A330NEO was bad, a A322 will be way worse.
 
User avatar
moo
Posts: 4980
Joined: Sun May 13, 2007 2:27 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:32 pm

Quoting sassiciai (Reply 12):
If Boeing does exist to make a profit for its shareholders, why are so many execs tainted with the 787 saga still in position? Why, for that matter, are they still selling the thing, if the company looses $50M a copy on each one delivered?

When it comes to recouping investments, unless you simply want to forever eat your development costs, you do one of two things:

1. Initial production runs are sold at higher prices and you recoup your development and ramp up costs within a (relatively) few sales. Intel does this with their CPU's, where you see newer CPUs using newer technologies enter the market at the top end of the pricing range and eventually ending up in the bargain buckets after a few years.

2. You keep your pricing relatively flat across the entire production life, acknowledging that the first so many aircraft off the production run will go to customers at a loss to you, but no individual customer will have to bear the cost of development and ramp up.

The reason both approaches exist is because they work in different circumstances - for Intel, immediate performance gains are a very good thing for a good proportion of their customer base, and that $800 in the initial price hike can lead to immediate large savings for purchasers.

For aircraft manufacture, if you load the development and ramp up costs onto the first few frames, you would never sell them. If an airline had to pay an additional $50Million cost loading per airframe for the first 3 years, and after that could buy aircraft at a $50Million discount, then that airframe will have to have savings to the company of more than $50Million during those three years. Does a 787 save an airline $18million or so a year in fuel and maintenance costs? Probably not.

So option 1 is out for aircraft manufacturers. Customers won't buy the first few airframes off hte production line, so there would be no one to pay for the development and ramp up costs. So they have to spread those costs across a much larger run of aircraft.

The real question is why do aircraft manufacturers feel the need to discount heavily at launch...
 
mham001
Posts: 5745
Joined: Thu Feb 03, 2005 4:52 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:32 pm

Quoting racercoup (Reply 10):

Let's see.... Boeing has increased the cash dividend it pays to it's stockholders and has set aside billions for it's stock buy-back program. I wouldn't get the shovel out too quickly.

And also announced a 3% bonus for machinists.

I don't think our European contributors should get too gleeful yet.
 
ec99
Posts: 262
Joined: Mon Mar 16, 2015 2:18 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:32 pm

Quoting moo (Reply 9):
Thats interesting considering most people thought the strength of the dollar would be benefiting Boeing and hampering Airbus - if Boeing are struggling despite that, then somethings afoot....

This does not make sense to me. If you are exporting a product you want your currency to be weak and the currency of the buyer to be strong. A strong dollar makes Boeing aircraft more expensive for people paying in other weaker currencies. I would assume the strong dollar is a drag on profits.

The benefit of a weaker currency is why the Chinese kept their currency artificially undervalued for much of their big growth years. Similarly, look what happened to Swiss exports when they stopped defending the peg to the Euro and let the Franc appreciate 15% overnight.
 
mjoelnir
Posts: 9393
Joined: Sun Feb 03, 2013 11:06 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:36 pm

Quoting racercoup (Reply 10):
Let's see.... Boeing has increased the cash dividend it pays to it's stockholders and has set aside billions for it's stock buy-back program. I wouldn't get the shovel out too quickly.


While keeping up to defer cost

Quoting racercoup (Reply 10):
An adjustment in the labor force was imminent given increased automation and a reduced need for support staff hired for the 787 program.

It was planned to increase output for the 737 and the increased automation first comes with the move from 777 to 777X.

Quoting racercoup (Reply 10):
Unlike Airbus, Boeing exists to make a profit for it's shareholders and as a result employs thousands. Boeing does not exist to sustain jobs

Unlike Boeing, Airbus does not pretend to make a record profit while deferring huge amounts of cost.
 
DfwRevolution
Posts: 9305
Joined: Sat Jan 09, 2010 7:31 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:36 pm

Quoting moo (Reply 9):
Thats interesting considering most people thought the strength of the dollar would be benefiting Boeing and hampering Airbus - if Boeing are struggling despite that, then somethings afoot....

No, it's the exact opposite. A strong U.S. dollar makes it more difficult for U.S. firms to sell export goods. A weak U.S. dollar makes it easier for U.S. firms to sell export goods. Ditto for the Euro.

Quoting seahawk (Reply 14):
Sunk costs. When looking at an economic question you must forget the past. At the moment it would be obviously more expensive to cancel the 787 production, than to built them even at a slight loss. Especially as the 787 will start to make money soon.

Perfectly said.   
I have a three post per topic limit. You're welcome to have the last word.
 
User avatar
moo
Posts: 4980
Joined: Sun May 13, 2007 2:27 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:38 pm

Quoting ec99 (Reply 17):
This does not make sense to me. If you are exporting a product you want your currency to be weak and the currency of the buyer to be strong. A strong dollar makes Boeing aircraft more expensive for people paying in other weaker currencies. I would assume the strong dollar is a drag on profits.

The term "strength of the dollar" doesn't necessarily mean that its stronger or weaker, it's just a way to refer to the situation. I wasn't referring to the fact that the dollar is stronger than the euro, just the current strength of the dollar.

Consistently over the past decade or so, the aircraft market has been more expensive for Airbus as it sells its aircraft in dollars but pays its workforce and suppliers in euros - the value of the euro against the dollar means Airbus has lower spending power per dollar than Boeing would, as Boeing does not lose any money in currency exchange.
 
User avatar
william
Posts: 3334
Joined: Thu Jun 10, 1999 1:31 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:46 pm

The stretched 737 MAX looks better and better now..............From Boeing point of view.
 
Scorpio
Posts: 5043
Joined: Thu Oct 04, 2001 3:48 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:48 pm

Quoting racercoup (Reply 10):
Unlike Airbus, Boeing exists to make a profit for it's shareholders and as a result employs thousands. Boeing does not exist to sustain jobs.

Oh wow, did you actually just go there? And here's me thinking that at least here, on a major aviation board, that tired old myth would've disappeared a while ago. Guess not  
 
User avatar
moo
Posts: 4980
Joined: Sun May 13, 2007 2:27 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 2:52 pm

Quoting DfwRevolution (Reply 19):
No, it's the exact opposite. A strong U.S. dollar makes it more difficult for U.S. firms to sell export goods. A weak U.S. dollar makes it easier for U.S. firms to sell export goods. Ditto for the Euro.

Again, don't assume the term "strength of currency" automatically means its strong. Talking about the "length of string" doesnt mean the string is long or short. Strength is the thing being measured, strong and weak are the measurements.
 
scotron11
Posts: 1432
Joined: Tue Feb 10, 2004 4:54 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 3:21 pm

Interesting that the state of washington voted down a measure requiring boeing keep a certain level of employment in the state for the the tax breaks they received in 2013!

At present employment by boeing in washington state is down almost 4000 since credits were given....and now seems more cuts to come
 
Flyglobal
Posts: 540
Joined: Sat Mar 15, 2008 6:25 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 3:24 pm

Quoting racercoup (Reply 10):
Let's see.... Boeing has increased the cash dividend it pays to it's stockholders and has set aside billions for it's stock buy-back program. I wouldn't get the shovel out too quickly.

It now comes as a draw back that Boeing has to much used the program accounting to show profits on paper and make the shareholders happy.

Quoting racercoup (Reply 10):
Unlike Airbus, Boeing exists to make a profit for it's shareholders and as a result employs thousands. Boeing does not exist to sustain jobs.

You see it too much black and white. You seem to believe strongly in cowboy capitalism.

You may see that many European companies incl. Airbus are dedicated to Profit as well. The difference is they just try to keep another balance between max profit short sighted and a future oriented growth plan.
Fort hat the best profit achievable in the next quarter is not always the best solution long term.
Another difference: Even if there is a price tag, an employee In Europe is not necessarily seen as an avoidable cost account ounly, rather an asset as well (but that price tag attatched).

There is a mountain of round about 30bn$ negative cash to be ‘loaded’ to the shareholders, either by cutting profits, or by write off. The cost are sunk, but the books still have them in, unless e.g. the A380 cost.
Program accounting should have a limit in time and maximum value involved by law.

The shareholders who gained from none existing cash flow via program accounting booking money the last 5-10 years probably will not be the same then the ones who will voluntarily accept lower booking profits when Boeing finally released some of the - 30bn booking$.

Boeing should stop buying its shares back, rather write down some of the -30bn$.

Flyglobal

PS: Chapter11?

[Edited 2016-02-11 07:52:17]
 
User avatar
NWAROOSTER
Posts: 1338
Joined: Mon Feb 14, 2005 2:29 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 3:29 pm

I made the statements below earlier on the 757 replacement blog. Boeing has to come out with a better aircraft to replace the twentieth century designed 737 and 757, which are dated or out of production. Boeing can't expect the 737 to carry them in future financial heaven. It is just not going to happen.

Reading this blog on the 757 and 737 aircraft is like reading the comics or watching comedy hour. The tooling for the 757 is gone and no more757s will be built. The 757 will continue to fly until they time out, wear out or just become too expensive to maintain. It is a very good twentieth century aircraft and this is the twenty first century.
The 737 is also a twentieth century aircraft and Boeing is going to have to build a new aircraft that will be a replacement for both these aircraft . The cow only has so much milk and Airbus is perfectly happy to see Boeing remain in the twentieth century. The only people that seem to think these aircraft should continue on are Aneters.
Find something else to talk about that Anet has not talked to death like these two aircraft.…….
It will not be the end of the world when both the 737 and 757 are history and gone except in museums…...

So Boeing wake up and realize that Airbus is more than willing to build what the airlines want and eat your lunch on the way to the bank. When oil and other costs go up a more fuel efficient and better designed aircraft will be needed for the smaller amount of new aircraft that will be sold.
Boeing, again wake up before you find yourself in a financial hole in the ground because what you have to offer is left in the dust as the fewer aircraft being sold may be built elsewhere.   
Procrastination Is The Theft Of Time.......
 
B777LRF
Posts: 2713
Joined: Sun Nov 02, 2008 4:23 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 3:45 pm

The 737MAX is the slightly to largely inferior offering compared to the 32xNeo; the 787 is too expensive to build and won't command the selling price Boeing hoped for due to the A330/A330neo; the 777 Classic is largely doomed because of the A350 and the 747 is, for all intents and purposes, dead and buried. Boeing's hopes now hinges on the 3rd evolution of the 777, hoping Airbus will sit still with their A350 development, and a vague plan of coming up with a A321neo 'killer'.

At the same time Boeing are raising the dividends, buying back stock and paying out bonuses - if the word on this thread are to be taken at face value.

I'm quite certain Boeing will not go even mildly down the drain, but it's not the first time the company has lost its way on the commercial side of the business. I think their biggest problems are that the 787 has failed to deliver on its dual promises of much lower production costs and angel of death to the A330, that the 737MAX has not been able to present a convincing enough argument, and that they are still embracing the MCD culture of applying ever increasing layers of lipstick to their pigs, all whilst wallowing in corporate arrogance. The 777X won't save either of that, if it'll save anything at all.
Signature. You just read one.
 
User avatar
DocLightning
Posts: 21861
Joined: Wed Nov 16, 2005 8:51 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 3:58 pm

In 2008-1010 I pointed out that with the unprecedented overruns in the 787 program, I was reasonably convinced that the program would not be able to break even to well over 1,000 frames.

I was laughed at and told I was stupid and knew nothing about airplane programs. Well, with 1,143 frames on order, Boeing is still not able to make a profit off of the 787. And now, with the information in this article, it seems as if the 787 program may never be profitable.

In general, I've seen a sense of arrogance and complacency out of Boeing since around 2002-3. Looks like those chickens are coming home to roost.
-Doc Lightning-

"The sky calls to us. If we do not destroy ourselves, we will one day venture to the stars."
-Carl Sagan
 
WIederling
Posts: 9348
Joined: Sun Sep 13, 2015 2:15 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:03 pm

Quoting seahawk (Reply 14):
Sunk costs. When looking at an economic question you must forget the past. At the moment it would be obviously more expensive to cancel the 787 production, than to built them even at a slight loss. Especially as the 787 will start to make money soon.

That would apply to Airbus. It does not apply to Boeing due to "deferred Cost".
Only if the deferred cost are written of to "loss" ...
that is a "dept iceberg" magnitudes bigger than the one that sunk the Titanic .-)
... and this context buying back shares is a measure of last recourse imho.

Does someone already know about the next financial bomb and bust thing ?
Murphy is an optimist
 
morrisond
Posts: 2786
Joined: Thu Jan 07, 2010 12:22 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:08 pm

The SEC just launched an Investigation on Boeing's accounting practises in regards to the 787 and 747 Programs...
 
User avatar
seahawk
Posts: 9681
Joined: Fri May 27, 2005 1:29 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:10 pm

Quoting WIederling (Reply 29):
That would apply to Airbus. It does not apply to Boeing due to "deferred Cost".
Only if the deferred cost are written of to "loss" ...
that is a "dept iceberg" magnitudes bigger than the one that sunk the Titanic .-)
... and this context buying back shares is a measure of last recourse imho.

Does someone already know about the next financial bomb and bust thing ?

In the end it is just accounting. The 787 money has been spent. How they would start a new program with that problem still in their books will be interesting though.
 
WIederling
Posts: 9348
Joined: Sun Sep 13, 2015 2:15 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:22 pm

Quoting NWAROOSTER (Reply 26):

The thing that makes this discussion a bit hilarious is that

the future is invariably described in solutions of the past.

What happened to innovation ?
There is always a point in product evolution when taking the
knowledge gained and starting propped up on that a new product.

endless accessorizing is not the way to go.
Murphy is an optimist
 
alfablue
Posts: 54
Joined: Tue Jan 22, 2013 1:16 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:24 pm

Quoting morrisond (Reply 30):
The SEC just launched an Investigation on Boeing's accounting practises in regards to the 787 and 747 Programs...
http://www.bloomberg.com/news/articl...into-dreamliner-and-747-accounting
 
glbltrvlr
Posts: 978
Joined: Wed Oct 10, 2007 4:28 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:25 pm

Quote:
Boeing will have to build future 787-9s at an average cost of about $91 million each — compared with an estimated cost of $140 million each in the fourth quarter of 2015.

That's a heck of a cost curve...
 
User avatar
DocLightning
Posts: 21861
Joined: Wed Nov 16, 2005 8:51 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:26 pm

Quoting morrisond (Reply 30):

The SEC just launched an Investigation on Boeing's accounting practises in regards to the 787 and 747 Programs...


Oh dear.
-Doc Lightning-

"The sky calls to us. If we do not destroy ourselves, we will one day venture to the stars."
-Carl Sagan
 
Flyglobal
Posts: 540
Joined: Sat Mar 15, 2008 6:25 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:38 pm

Quoting seahawk (Reply 31):
In the end it is just accounting. The 787 money has been spent. How they would start a new program with that problem still in their books will be interesting though.

Yes it will.
However it may influence the decision process negatively.

I believe a clean sheet is better. It needs higher than ever before industrialization of the manufacturing attached to the design.
And to replace the high volume 737 and to include a MOM variant in it Airplane design needs something what the automotive industry calls ‘Vehicle architecture’.

It means that you need to do your design based on a common set of parts which you can design economically in carious numbers of different vehicles for different customers/ needs.

Means: 5 door hatch, a 4 door sedan, an SUV variant and a Family wagon should share as much as possible common parts and only as few as possible variant specific.

Not exactly the same, but similar the 737 and MOM variants have to be designed also as part of a reusable component / Module parts sets.


In my opinion the 737 successor plan has to be something for the Airplane business then the Ford T model approach was for automotive.
Boeing should hire automotive experts or consultants and combine them with their Aeronautics experts to a team.

Unfortunately there is some negative attached: the development of a future Airplane Architecture style system of new highly industrialized Airplanes ala 737 (successor) and MOM comes with an initial investment which will not immediately pay off – rather it takes a decade. Boeing should do this without program accounting as much as possible, at cost of the shareholders. It will pay off when a number of variants are ready only.

Not sure if the US stock would ever buy in. But it can be done with the right approach based on a right plan and believe in the , just as seen by TESLA – they make losses, but despite that the shares rise!

Think big Boeing. Maybe Boeing should move Headquarters back to Seattle, or even better to Silicon Valley.

Flyglobal
 
User avatar
robffm2
Posts: 343
Joined: Mon Dec 18, 2006 8:47 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:38 pm

Quoting mjoelnir (Reply 18):
Unlike Boeing, Airbus does not pretend to make a record profit while deferring huge amounts of cost.

It seems, the SEC is looking exactly at this accounting:
http://www.reuters.com/article/boeing-probe-sec-idUSL3N15Q371
 
jacobin777
Posts: 12262
Joined: Sat Sep 11, 2004 6:29 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:42 pm

Quoting B777LRF (Reply 27):
I think their biggest problems are that the 787 has failed to deliver on its dual promises of much lower production costs and angel of death to the A330

Lower fuel costs haven't helped as it would've increased the fuel-savings delta that the B787 would've had over the A330.

Quoting B777LRF (Reply 27):
. The 777X won't save either of that, if it'll save anything at all.

The order book doesn't look too bad right now however I felt that Boeing should have gone with "next-generation" aluminum to save weight on the B77X.
"Up the Irons!"
 
frmrCapCadet
Posts: 4336
Joined: Thu May 29, 2008 8:24 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:50 pm

"More generally, Aboulafia expressed concern over the sustainability of the long-running airplane-industry boom and skepticism that Boeing will reach the high production rates it’s already announced.


Between now and 2019, Airbus and Boeing combined project a 13 percent growth in narrowbody-jet production and a 9.4 percent growth in widebody-jet production."
Taken from today's Seattle Times article.

And this sort of growth in a world economy that is showing almost catastrophic weakness. A number of us have worried about unwarranted optimism. While I think the world economy could recover it will require the sort of wise political leadership which simply is not there. Russia, Saud Arabia (and other oil countries) may be in extremis. China, Japan, and Europe are hurting. And in the US the center is not holding.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
nikeherc
Posts: 670
Joined: Thu Sep 13, 2012 8:40 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 4:55 pm

Quoting DocLightning (Reply 28):
Well, with 1,143 frames on order, Boeing is still not able to make a profit off of the 787. And now, with the information in this article, it seems as if the 787 program may never be profitable.

Of course they haven't made a profit yet. You don't make money off of orders, but off of delivered product. They have only delivered about 370 planes. Since the 787 could well sell 2000 aircraft, time will tell.

Since I have not had any direct dealings with Boeing, I can't comment on their attitude. However, my sense is that they make a complex product and sell it in a difficult market.
DC6 to 777 and most things in between
 
User avatar
moo
Posts: 4980
Joined: Sun May 13, 2007 2:27 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:00 pm

Quoting nikeherc (Reply 40):
Of course they haven't made a profit yet. You don't make money off of orders, but off of delivered product. They have only delivered about 370 planes.

370 delivered aircraft and still making a loss per airframe - thats not a good position to be in :/
 
Sooner787
Posts: 2721
Joined: Thu Jul 18, 2013 1:44 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:04 pm

If Boeing is serious about cost cutting, they need to swallow their pride
and announce a termination of the 747 program.

I suspect the recent rate reduction is positioning the 747 line so that
the 2 new AF1 frames wil be the final jets off the 747 line.

IF they decide to proceed with the MOM program, they'll need the space
at Everett that the 747 line currently occupies.
  
 
 
User avatar
BobMUC
Posts: 1087
Joined: Tue Nov 15, 2011 9:59 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:12 pm

Not a good story for Boeing at all!
Stock price down -9.5%!
 
StTim
Topic Author
Posts: 3733
Joined: Thu Aug 08, 2013 7:39 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:13 pm

Quoting racercoup (Reply 10):
Unlike Airbus, Boeing exists to make a profit for it's shareholders and as a result employs thousands. Boeing does not exist to sustain jobs.

Oh please - Such a stupid remark.
 
User avatar
PW100
Posts: 4123
Joined: Mon Jan 28, 2002 9:17 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:15 pm

Quoting seahawk (Reply 14):
Especially as the 787 will start to make money soon.

Most of that "profit" will be required to offset the deferred cost tag of 28B.
Accounting block: 1200
Delivered to date: 370
Deferred Cost: 28B

1200-370 = 830
28B / 830 = 34M

Average "profit" required per frame just to offset deferred cost = 34M.
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
 
BravoOne
Posts: 4094
Joined: Fri Apr 12, 2013 2:27 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:19 pm

Boeing said yesterday that they think the market for the 747-8F will return in 2019 as the current airframes run out of time. May be right, could be wrong but those were the words that were used. So if they can hold their own for another couple of years maybe there will be some life left in the program? I'm not smart enough to say either way buy I doubt that Ray Conner takes much of the free advice given on the website 
 
PGNCS
Posts: 2261
Joined: Sun Apr 15, 2007 5:07 am

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:19 pm

Quoting B777LRF (Reply 27):
and that they are still embracing the MCD culture of applying ever increasing layers of lipstick to their pigs, all whilst wallowing in corporate arrogance.
Quoting DocLightning (Reply 28):
In general, I've seen a sense of arrogance and complacency out of Boeing since around 2002-3. Looks like those chickens are coming home to roost.

Interesting you both mentioned arrogance, and quite eloquently. I think you are both insightful into what is in my opinion perhaps Boeing's biggest corporate weakness.

Quoting nikeherc (Reply 40):
Since the 787 could well sell 2000 aircraft, time will tell.

That's also an excellent and balanced point. It's certainly true the 787 program has not proceeded as profitably as Boeing had hoped, but it has a long time to run.

Quoting nikeherc (Reply 40):
Since I have not had any direct dealings with Boeing, I can't comment on their attitude. However, my sense is that they make a complex product and sell it in a difficult market.

They do make a complex product, but I think B777LRF and Doc are on to something.
 
User avatar
sassiciai
Posts: 1118
Joined: Mon Jan 07, 2013 8:26 pm

Major Boeing Cost Cutting Programme - Part 1

Thu Feb 11, 2016 5:22 pm

Quoting PW100 (Reply 46):
Average "profit" required per frame just to offset deferred cost = 34M.

.....and with the A330ceo/neo currently available quicker, what's the likelihood that Boeing is making margins that even cover the $34M needed to break even?
  • 1
  • 2
  • 3
  • 4
  • 5
  • 7

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos