By Bjorn Fehrm

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Introduction

July 27, 2017, © Leeham Co.: Boeing held its 1H2017 call yesterday, giving further information on how the 787 deferred costs decline. The payback in 2Q2017 was $16m per aircraft.

Boeing needed to achieve a $36m per-plane reduction, based on our analysis, to not increase the payback amount per aircraft for the remaining aircraft in the current accounting block.

The $16m is still a low rate, although better than the $11m 1Q2017, given that the remaining $26.5bn deferred production costs must be amortized over the Program accounting’s remaining 735 units of a 1,300 units block.The key to amortizing the costs is the different margins of the 787 variants. We compare costs and revenue of the 787-, -9 and -10 to understand the payback margins better.

Summary:

• Program accounting means deferred production costs shall be nil at the end of the accounting block.
• Right now, there is $26.5bn to amortize and not many aircraft left that can pay the sum.
• The key to a plausible payback scenario is the payback margins of the different 787s.
• We analyze the margins through modeling of net revenue and unit costs for the 787 variants.