Cost of 787 fix: It will cost nearly $500,000 per aircraft to install the battery fix in the Boeing 787, documents released by the Federal Aviation Administration indicate. The actual math is $466,666. Analysts believe the 787 grounding cost Boeing about $600m, which the CEO said yesterday was absorbed in the R&D budget. Jim McNerney also said there are no contractual obligations to compensate customers for the grounding, but something will likely be worked out.
LOT will resume flying the 787 June 5, it was reported today.
China’s Airbus Order: It appears China is satisfied with the European Union’s about face on carbon taxes. Readers may recall China opposed the EU’s attempt to levy taxes on foreign airlines over carbon emissions. China vowed not to buy any Airbus aircraft–particularly the A330–in retaliation. Several other countries opposed the tax, though these didn’t go so far as to boycott Airbus. Today an $8bn order for Airbuses, including the A330, was announced by China.
So Boeing is to pay the $25M to replace the batteries on all 50 airplanes currently in the fleet? That is relatively cheap. For airplanes yet to be delivered and also need the replacement battery system I assume that cost is added to the delivery price?
It adds to Boeing’s production cost.( like the myriads of manhours purportedly spent on developing the fix. )
As it fixes a design defect and increases (over)weight I seen no reason why customers should pay a premium. More like the reverse.
Why would it be added to the delivery price? It is an FAA required design change, not some sort of extra option or upgrade.
I don’t think the cost to each aircraft on the delivery line will be as high. The earlier in the production the aircraft is, the cheaper it will be to implement the new battery installation.
It seems Boeing has already replaced the batteries in 10 airline owned airplanes and 9 production airplanes.
BTW Scoot, I could not read the WSJ story on China buying the Airbus airplanes. I don’t have a subscription with them.
Copy the title and paste it in Google.
The cost for yet undelivered airframes will surely be absorbed by Boeing (unless the purchase contracts specifically specify that the airframes need not be certified… which I seriously doubt).
$500k is not very cheap I think, you can have a lot of stuff for that amount… must sure be cheaper for production a/c though? Or is the $500k number for production a/c and it costs more for already produced ones?
$500k is just the fix installation. Analysts estimate Boeing has spent $600m, researching and designing the fix. McNerney said the figure (whatever it is) has been absorbed in R&D.
Compensation, if any, to customers is on top of all of this. United said on its earnings call the grounding cost it $11m for Q1 alone.
.6 B is a phenominal amount of money if the entire 747-8 program was 2 B.
I was commenting primarily on KC’s comment above that Boeing would add to the delivery price of a/c’s not yet delivered to cover some costs for the upgraded battery system. I think they cannot do that (unless their customers are dumber than a ton of bricks…).
Understand that the $500k is for the installation, but was pondering whether it was for a/c’s in production or already produced; the latter surely being more expensive to upgrade than frames not yet completed.
This is not super important, so we need not dig too deep or spend hours debating it, was just thinking about what it all meant. Tha’s all.
Yes, $2B is a lot of money, but I believe that is closer to the cost overrun on the 747-8 program, not the cost itself.
I tend to agree, I remember seeing somewhere the total cost was around $4-5B for the 748I.
Referring to the KC’s comment, I have no idea what will allow Boeing to insert this cost into the price of an already sold frame… no chance.
Don’t airplane sales contracts usually include a statement covering unusual and unexpected cost increases to be passed onto the customer?
Just in case the customer is US Air Force.
I doubt that the cost associated with the airworthiness or certification of the aircraft will be readily picked up by the customers. Funny, you hadn’t made similar comments with regards to the repairs to be performed on the cracked rib feet of the A380s. Airbus said they will be picking up that cost and rightly so.
I didn’t make the comment about the same thing on the A-380 because I remember Airbus saying they would pick up the tab.
And Boeing said their cost will be absorbed by the R&D budget. So what’s the difference?
Isn’t the extra weight a performace penalty of about half a million per frame?
Then there is the extra serving costs this bodge wil bring.
Boeing’s bill is going to be more like 2 Billion, plus finacing costs, say 200 More aircraft before break even.
I think the succes of the 747-8 depends on the recovery of the cargo market/ world economy and oil staing high. If oil prices decline, a lot of cheap 744s will be converted. If the market recovers & oil stays high, the 747-8F has little competition so probably good margins too.
It was written that 200k hours of engineering went into the fix. Don’t know the hourly rate, but lets assume 100USD per hour with a 1.5 overhead ratio (for all the managers, lean experts and forward looking statement experts, who are not directly involved in design but surely add a very valuable contribution), that makes:
200k hrs * 100USD/hr * 1.5 = 30 Million USD.
Where are the remaining 570 Million USD?
They didn’t procure much hardware, flights tests were actually two or three.
It appears to me that the budget is exaggerated on purpose. Maybe to save some taxes.