Leeham News and Analysis
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Leeham News and Analysis
- How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer December 6, 2024
- Start-up hybrid plane OEM MAEVE teams with MHIRJ for sales, more December 5, 2024
- Production increase delays hurt Airbus costs December 2, 2024
- Books to consider for Christmas November 29, 2024
- Slow, methodical process to restore Boeing’s trust, efficiencies November 28, 2024
Pontifications: A330neo, still struggling, nears 300 sales
By Scott Hamilton
June 27, 2023, © Leeham News: Airbus inked a memorandum of understanding with lessor Avolon for 20 A330-900s at last week’s Paris Air Show. When converted to a firm contract, this will bring the -900 order book to 299. Another 12 of the short, longer-range A330-800 make the total 309.
This compares with 664 A330-200s, 784 A330-300s and 38 A330-200Fs. The A330ceo is one of Airbus’ best-setting widebody airliners. The entire A330ceo and neo families are Airbus’ best-selling widebody, followed by the A350 family. The original A300/A310 family is third.
However, the A330neo has struggled in the market. First offered in 2014, it was the last of the new generation twin aisle airplanes up to that point. Boeing’s 787 and the A350 preceded it. Through May, 2,096 gross orders were placed for the 787. Nearly 600 remain in the backlog.
Why hasn’t the A330neo done better? In an interview with LNA at the air show, Christian Scherer, Airbus’ chief commercial officer, said there were two factors.
Young installed fleet of ceos
He said one reason is that when the neo was launched in 2014, the ceo fleet was still relatively young. The last ceo, an A330-300, was delivered in 2020. This means the installed base is still relatively young.
“The bulk of the replacement of those airplanes is not upon us yet,” Scherer said. More than 1,350 remain in operation. “The replacement of that embedded fleet is only just starting. So that’s, that’s one phenomenon. The other is that I think it took the community a while to realize the seed cost potential of the 330.” Conversions of the older A330s into freighters is now well underway.
“And If you’re not necessarily wanting to fly your 14, 15, 16-hour sectors [flown by the larger, longer-range A350], then the 330 is kind of hard to beat from a seat cost perspective.”
Scherer rejected a view from former sales executive Kiran Rao, now a consultant for airlines. In an interview with me for my book Air Wars, The Global Combat Between Airbus and Boeing, Rao said that the sales team neglected the A330neo, favoring instead the larger A350. “I don’t think that’s the case,” Scherer said.
Rao added that the prime reason Airbus launched the A330neo was to put price pressure on the new, much more expensive-to-buy Boeing 787. The A330 was fully amortized except for the new engine, wing and other upgrades. Boeing infamously went billions of dollars over budget and had yet to break even on the program.
When Airbus launched the A330neo, then-top salesman John Leahy and one of the industry’s leading buyers, Steve Udvar-Hazy, predicted sales of 1,000 aircraft. Former officials of Rolls-Royce, which supplies the engines, scoffed at the prediction even then. Total sales would likely be closer to 400, they said.
Cost-competitive
Despite all the new technology in the 787 and the neo being a combination of old and new, using virtually the same RR engine as on the 787, the operating costs proved to be similar to the 787. The capital cost, however, was much lower.
Still, demand for the 787 is brisk while the A330neo picks up orders at a slow if increasingly improved pace.
A220 Stretch
Before the air show, speculation was rife that Airbus would launch the long-discussed stretch of the A220-300. The unofficial name is the A220-500. This model would compete directly with the Boeing 737-8 MAX and Airbus’ own A320neo. Yet Scherer thinks the “Stretch,” as he calls it, will complement the A320 rather than cannibalize sales.
As LNA previously pointed out, A320 sales are already shifting to the larger A321neo as the so-called heart of the single aisle market moves upward. Pressed for production slots, the A220-500 would free A320 slots for the more profitable A321.
But LNA’s analysis concludes that Airbus will need production capacity for the Stretch alone of 25 a month to cover the commitments for the A320. The 220’s production rate is just 6/mo and Airbus struggles to meet this consistently due to continued sluggish recovery from the COVID pandemic. It has a goal to boost this rate to 14/mo by 2025, at which point Airbus thinks the program will finally be profitable. Officials want rate 14 and profits before committing to the Stretch.
There is also no uniformity on whether to proceed with the Stretch. Scherer wants to add the CFM LEAP engine as an option to Pratt & Whitney’s exclusivity with the Geared Turbofan engine. The LEAP is more than 500kg heavier, however. Scherer wants to maintain the A220-300’s 3,300nm advertised range. A stretch may trade range for seats. To avoid this, Airbus must consider revising the wing—perhaps to the point of a new one—or the engines must reduce fuel burn by 1.5%-2%. Scherer would like to add an engine option for the A220-300 if a choice is offered on the Stretch.
Some within Airbus favor a simple stretch, one engine and few other changes. Another faction doesn’t want any a stretch.
A330 neo: $2B development costs, 300 sales = $6.66M per unit
A350 : $12B development costs, 1000 sales = $12M per unit
787 : $32B development costs, 2000 sales = $16M per unit
777X : $8B development costs, 363 sales = $22M per unit.
Some programs have a severe uphill climb to break even…
Who said the 787 will stop at 2000 orders?
Who said that any of them will stop at the order numbers quoted above?
I do.
It’s in the financials I quoted to you;
Boeing expects the current order book of ~600 to cover ~$10 billion in the Deferred Production Balance. They estimate that they will receive X amount of future orders that will cover the remaining ~$4 billion, right?
Well, if you recall, BA wrote off some $3.5 billion a couple of years ago, in a one time charge. Pulled it right out of the DPB in Inventory and took the hit.
Question:
If Boeing was expecting to sell something like 2,500 Dreamliners, why would you take the loss on the program? Why not just keep the $3.5 billion in there and say “We expect it to be covered by future orders”?
You wouldn’t take the charge if you could reasonably expect to make it up with orders, would you?
Frank:
A better question is, what do you have to replace a 787 with?
And there is a high likely of a NEO 10-15 years from now.
And while the Trent 10 is dying a slow death, there is at least a choice of engines and negotiation on the subject. Offset a bit by the exclusive on the A330NEO with derivative Trent 10 so not a complete loss.
While I am not a financial guru, I was on the sidelines of what I though was an inspired decision by the Credit Union I worked for.
We had a local version of the Prime Mortgage debacle and the month, quarterly and yearly results just kept lingering (house loans are 15 and 30 year) that was a black eye until the far future.
So they wrote off ALL the loans in one move. Took a huge hit, and then after that? The results were positive.
A number of the loans did come through, they got part return on some and those numbers just added to the Plus side.
So yes there can be reasons past 2000 x 787 (orders are still coming in are they not?) to write off parts or even all though not being in that field I am not going to begin to say what works and why.
My first take on the Credit Union was they were nuts but the reasoning behind it resonated and it was, CEO is right, this place is all doom and gloom and that stopped it.
@Transworld
That is not how program accounting works. It’s not about clearing the decks.
“The primary difference between contract accounting and program accounting is that program accounting estimates the number of units of a given model that will be sold over its lifetime and estimates the total costs the company will incur to build that number of units in the program, whereas contract accounting bases its estimated costs on the cost to complete a specific contract (ASC 912-20-25-5A). A secondary difference is that program accounting recognizes revenues when the customer takes delivery of the product, while contract accounting recognizes revenues based on estimates of the percentage of the costs that have been incurred to complete the contract (ASC 912-20-25-5A).”
https://www.cpajournal.com/2016/11/23/case-study-effects-program-accounting/
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Emphasis on:
‘program accounting estimates the number of units of a given model that will be sold over its lifetime’
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That is what the rules say. I’m not sure that the auditors or SEC would allow BA to just ‘write things off’ to make everyone feel good and lift the doom and gloom.
And remember, they wrote off $3.5 billion, which is consistent with what a revised estimate would be. There still is some $14 billion to go. They did not write off $17.5 billion, did they?
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‘But with deferred costs peaking in 2016 at $33 billion, Leeham analyst Bjorn Fehrm believes Boeing cannot make an overall profit on the program. Ted Piepenbrock, an academic affiliated with MIT and the University of Oxford, projects losses decreasing through the first 700 airliners and forecasts the cumulative deferred costs to peak beyond $34 billion. The model most favorable to Boeing projects a program loss of $5 billion after delivering 2,000 Dreamliners. Boeing’s original development investment, estimated at least at a further $20 billion, is not included in these costs’
https://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overall-profit-analysts-grow-more-skeptical/
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A program loss of $5 billion, after 2000 deliveries.
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On sales:
Boeing crossed the 1,000 units sold in 2013.
A decade ago. They are at ~1,600 now, an average of 60 new orders a year. Use that number and tell me how long it takes for them to get to your 2,500 or 3,000 unit sales mark.
By history there will be 787neo’s. In the old days new dash numbers like 747-100,-200,-300-400 most of them with engine options, together with Block updates. By now Boeing could simplify the 787 systems with reduced mass and cost that will eventually come in new versions. So depending on how long they will keep the 787 name it will sell a few thousand more as long as it evolves.
@Claes
I don’t doubt.
For accounting purposes, this changes all the numbers involved. It’s a new formula.
Frank:
I won’t disagree with your accounting details, I suspect there are reasons why Boeing did what they have in that regard and accounting is a weird world of its own (I took a course in it, well started a course and quite mid term as my head hurt each night).
To be clear, I did not say Boeing was going to make money on the 787. Maybe come close to breaking even and you can probably fill in details if that includes interest rates based on borrowing 34 billion (that is a moving picture as debt is paid down of course and not a clue how you calculate that as its not even like car payments)
Frankly (bad pun and while I could not resist I do applogize) I would appreciate some kind of best financial guess on what Boeing would have made with that varying 34 billion percentage wise (with a best guess of a payoff schedule).
That said, Boeing is working up to 10 a month. And that means around 120 a year produced.
Yes they have some backlog but also orders clearly are going to keep coming in.
10 years? Very conservative, I think much longer but lets use that as a metric.
So at a conservative 60 orders a year, 600. As of may 1,067 have been built.
2500 seems very doable and no one has answered what is in the wings (another bad pun I am afraid) to replace it?
That is why the 737 lingers on, Boeing has kept it equally competitive with the newer A320 and while I think they should have had a replacement going during the NG era, its still on equal footing with the A320.
An interesting example has popped up with Alaska Airlines planning on flying a MAX-9 to Nassau from Seattle. I would have to do some checks but dropping say 6 passengers Puerto Rico might be reachable. Probably is with a full -8.
“program accounting estimates the number of units of a given model that will be sold over its lifetime…”
thats NOT how Boeing uses its program accounting.
The accounting block method is used where the block number can and does increase ‘over the life of the program’
The block number is number on order plus likely orders based on its customers possible near future orders…. passenger growth plus renewals coming up that havent been formally ordered yet. Of course some of those dont eventuate and theres others that come in that are captures from say Airbus
In 10 years the accounting block will certainly have grown over 2500
@TW
‘I suspect there are reasons why Boeing did what they have in that regard ‘
…and? What are those reasons? (beyond that they had to report it due to regulations)
@Duke
Don’t shoot the messenger, Duke. Write the CPA Journal and take it up with them. And the regs that they quote
Well you are wrong Frank about the $3.5 bill 787 writedown. Its not related to the production block accounting at all
Boeing was clear it was only for compensation to 787 airlines for late delivery. Its a 787 cost , but not a 787 *production cost.*, and thus couldnt be added to the accounting block. Boeing had to take on the chin now ( although likely amortised over the likely late delivery years-)
Your whole house of cards has collapsed because of a fundamental misunderstanding of the difference in production cost and late delivery cost
Jeez Duke,
You know – it’s really getting tiring correcting you all the time, but I only do so because I don’t want others in here mistakenly thinking you are correct, when you are wrong.
You admittedly don’t understand Accounting 101, yet here you are trying to argue an advanced accounting topic.
From the financials (sigh):
‘During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceed estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs.’
https://s2.q4cdn.com/661678649/files/doc_financials/2021/q4/0c5ce0eb-2517-45fe-afc8-b1a9bb9ab4b7.pdf
The facts dont agree with you
“Reach-forward loss to compensate for delayed deliveries
Analysts had expected a reach-forward loss on the 787 to happen already last year, but Boeing was able to account for the losses on the program elsewhere in its results. The $3.460 billion pre-tax charge will largely be for compensating customers for delayed deliveries.
https://airinsight.com/boeing-takes-3-5-billion-787-charge-and-offers-777x-freighter/
Its added to overall 787 total costs
‘Its added to overall 787 total costs’
No Duke, that is not a fact. That is your opinion:
What is does say in the article is this:
‘On December 31, deferred production costs for the 787 stood at $11.693 billion, down from $15.153 billion in Q3 and $14.976 billion in Q4 2020.’
Why is it down from $15 billion to $11 billion?
Because as the facts state in the BOEING FINANCIALS, it came out of the DPB.
Hey – helpful hint for you:
Apply for a job at Mar A Lago. The facts there don’t seem to matter much, either
Frank:
You seem to like to beat a dead horse.
Clearly I have no idea what drives Boeing and how it uses its financials and what the end goal is, I have stated that. Let me know what I can say that convinces you I fully accept that (I also do not understand string theory though I can accept why there is a theory).
We have seen Boeing adjust the blocks on the 787 a number of times.
I see no reason they can’t adjust them again.
And you have not come up with anything other than opinion based on a false equivalence of finances vs reality.
The reality is Boeing will continue to produce 787 until they no longer can as a viable commercial operation regardless of an outside view of finances.
You seem to think Boeing has to stop at some arbitrary number.
But you don’t put any proof that there is a viable product by Airbus or Boeing to replace it.
All the evidences says at least 15 years more production and I strong case can be made for 20-30.
Or do you contend aircraft quit wearing out and the end of the world dictates Boeing stop?
We can agree I do not understand the in depth of financials, but its clear you do not understand equipment production.
Now in 30 years maybe global warming has stopped all flights and we are back to sailing ships but I don’t see that.
What in your view other than picking a number out of financials is a convincing case that Boeing just stops at 2000 made if there are orders for more?
Maybe give me the same degree of respect you are asking for. I have seen a lot of equipment made and I have seen it continue to be made until something changes.
So yes 2500 and 3000 is not a stretch (well there is the -10 but you know what I mean I hope)
@TW
‘What in your view other than picking a number out of financials is a convincing case that Boeing just stops at 2000 made if there are orders for more?’
Where did I ever say that Boeing will stop producing anything, if there are orders for more?
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‘Maybe give me the same degree of respect you are asking for.’
Respect is EARNED. You want respect than stop putting out things that I have not said. I haven’t asked for anything. I’ve just presented FACTS. All you’ve done is run down financial people and give us your feelings, no facts. No proof. No back up.
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Who is the best placed to estimate how many orders there will be for the 787?
You? Or the people who do these projections at Boeing? Who by the rules, must report their findings.
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OK fine. I’ll throw out everything that is written in the financials and go with your gut feelings because you’ve seen a lot of equipment made.
It’s got to GET to 2,000 orders, first.
It’s around 1,600 now.
Boeing doesn’t expect that it will get much beyond that
The 2000 number is floating around a lot of late — probably due to people being very generous with options (e.g. United and Riyadh) and “rumor orders” (e.g. Turkish)…
Sorry guys, you are missing the plane here.
Sales have not stopped have they? Are they going to stop next month, next year or 2030? I don’t think so.
Now, rightly or wrongly Boeing is looking to work up to 10 a month delivery.
Significant sales keep coming in monthly or quarterly however you want to slice it.
As I recall Boeing cross the 1000 line a few years back.
2500 is not beyond reason and sans a revolution in aerodynamics and or engines, 3000 is possible. Sure you may do an NEO to get there, but what else is in place or even pondered?
Maybe I am not looking hard enough but I don’t see anything.
@Transworld
‘Sure you may do an NEO to get there, but what else is in place or even pondered?’
And what will a NEO on a 787 need?
Development capital.
What will an addition of Capex to the 787 do to program accounting?
It will result in an increase in the DPB as well as revised estimates for sales, expenses and margin. All the numbers will change.
What does that change for the reality of what are today’s numbers?
Nothing.
As it stands, it’s looking like 2,000 is the goal, which is still a loss making position unless they can pull off another $3.5 billion in margin to offset the write off. Mind you, there also have been a number of ‘abnormal production costs’ taken in the past couple of years totaling over $2 billion.
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A 787Neo is the same aircraft that the A220-500, the 797, the NMA, NBA, FSA, TBW are. Concepts.
It is quite possible that Boeing have looked at the business case for a 787Neo and decided it isn’t there.
Perhaps they are also looking at the A330Neo and wondering if a 787Neo would sell in the same manner, given that the 787 is fairly new and replacement would not begin for quite awhile.
Frank:
I don’t get your take on this.
Firstly there is no answer by any of the doubters, let alone the Boeing haters, about a replacement for either the 787 or the A330NEO.
So, like the 767, Boeing will keep making it because no one has anything else and it beats the A330NEO in sales.
Will they NEO it in the next 5 years? No. 10 years, maybe.
15 years, I would call that a certainty. Your choice of RISE or a GTF! RR and PW or RR and GE could collaborate even.
So, yes for financial planning its prudent to plan on 2000, but, I easily see 2500 and per the 737, when there is no replacement, it can go on for a seriously long time.
Its advanced as it gets, Boeing does miner improvements all the time and they can make the -8 fully common and get some more benefits there as the -8 continues to sell. Not huge but it fits a slot.
@TW
‘So, like the 767, Boeing will keep making it because no one has anything else and it beats the A330NEO in sales.’
Don’t know if you are aware, but the 767 will go away in 2027.
It beats the A330Neo in sales, but as I’ve already explained, it is under-priced.
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I’m going to try again;
Program accounting relies heavily on estimates, right?
Any change to the 787 program means capex and a new formula.
Boeing has clearly stated in their financials that they had to write off $3.5 billion because they did not expect to be able to get sales to cover that amount.
They have sales to cover $10 billion.
They ESTIMATE they will GET sales to cover ~another $4 billion. They don’t have them yet. They estimated they wouldn’t get enough to cover the $3.5 billion they wrote off. Your suspicions aside…
Period.
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New engine, new wing, new whatever….is a different calculus. How many airlines would migrate off of the current order book, into a new 787Neo, if it was launched? It changes everything, including increasing the amount of capital BA would have to recover to make the darn thing
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There is also this tidbit in the financials from Q1 of this year, in the details on the 787 program:
“We are currently producing at 3 per month and expect to return to 5 per month in 2023. In the third quarter of 2021, we determined that production rates below 5 per month represented abnormally low production rates and result in abnormal production costs that are required to be expensed as incurred. We also determined that the inspections and rework costs on inventoried aircraft are excessive and should also be accounted for as abnormal production costs. Cumulative abnormal costs recorded through March 31, 2023 totaled $2.1 billion, and we continue to expect to incur up to $2.8 billion with most being incurred by the end of 2023.”
So they wrote off $3.5 billion, plus another $2.1 billion with an additional $700 million coming.
Production costing of $6.3 billion MORE than they have received in revenues for those ~1,050 they have delivered.
Now, please explain to me how selling aircraft at a loss, is better than selling them at break even (or even a small profit).
You sold all these aircraft. Great! It only cost you $6.3 billion to do it.
It’s like going to the casino and saying:
“Hey everyone, look – I won $80 playing the slot machines! I only had to put $100 in to do it, but I walked out with $80!”
You make more by staying home and not playing.
Frank:
You are wrong, the 767 is not “going away” in 2027.
First there is the obvious KC-46A.
Within the ICAO rules, orders in place before 2027 can be made. Sp FedEx and UPS etc all put in advance orders with a wink wink nod nod that only those you need you have to pay in advance for.
Or Boeing stating it will ask for a waiver?
You seem to have missed that this does not just apply to the 767, it applies to Embraer as well and if you think Embraer will not support Boeing, guess again.
You also seem to think Boeing will not be able to borrow the money if needed for a 787 NEO. Boeing has a lot of stuff it can put up as collateral but I doubt they would even have to.
I do not see an NEO for the 787 for at least 10 years and maybe just maybe Boeing is out of hock as it has a huge backlog of sales on MAX, 787 and the 777X.
Ford went all in some years back so don’t try to tell me that a more viable company than a failing Ford back then can’t get money. Its a big company and its more than BCA.
Don’t tell me that Boeing can’t write off more losses either.
As long as there are sales and Boeing is selling an aircraft for more than it cost to produce it, they will keep making it.
Airbus made a mistake in insisting Boeing had to make the profit on an aircraft that Airbus had arbitrarily decided they had to and it flopped on them.
@TW
‘Within the ICAO rules, orders in place before 2027 can be made. Sp FedEx and UPS etc all put in advance orders with a wink wink nod nod that only those you need you have to pay in advance for.’
I guess facts don’t matter to you, huh?
Maybe you can take up your ‘wink winks’ with him:
“The US Federal Aviation Administration yesterday announced it will adopt the emissions and noise rules proposed in 2017 to reduce emissions and noise in commercial jets and turboprops by 2027. Failure to comply means the offending airplanes can’t be produced from 2028.”
https://leehamnews.com/2022/06/16/faa-adopts-icao-2027-emissions-noise-rules-death-knell-for-new-production-767f-777f/
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You know what? I can’t be bothered anymore. You post things you can’t even be bothered to check are factual and then run me down for posting stuff.
I’m done.
@ Frank
Don’t get disheartened — just think of all those other readers who benefit from what you post 🙂
We all know that certain commenters here prescribe to an alternate reality — nothing will change that. It’s fascinating to ask oneself *why* they do that — and there are many possible answers — but that’s a matter for a different forum 😉
“However, the A330neo has struggled in the market. First offered in 2014, it was the last of the new generation twin aisle airplanes up to that point.” 299 orders
what about this:
However, the 777x has struggled in the market. First offered in 2013, it was the last of the new generation twin aisle airplanes up to that point. 363 0rders
Plus: the 777X isn’t even certified…
USG is going to lend a helping hand, TBTF.
I’ll do you one better:
‘However, the 777x has struggled in the market. First offered in 2013, it was the last of the new generation twin aisle airplanes up to that point. 363 orders AND the program had to take a $6.5 billion write off because of cost overruns and lack of sales. ‘
Cost overruns and lack of delivery.
Sales for that size aircraft are pretty good.
And then they came up with an F model which is outselling the A350F by a lot, hmmm, not even in production vs an in production mod? Yea, that is a failure all right.
@Transworld
Remind me to never let you near anything business related.
If you are looking at the 777X program, with it’s $6.5 billion declared loss, before deliveries and entry into service have even happened – and are calling it successful…
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Let me get you to understand something;
Boeing has 363 orders. They wrote off $6.5 billion. That comes down to about a loss of $18 million per plane – which means that across the board, they underpriced each aircraft sold by that amount.
Every purchaser got a per aircraft $18 million discount under what it costs to make that plane. They’d have to bump the price by that much, to break even.
Whether they underestimated their costs or tried to do it on the cheap and it fell apart, it doesn’t matter. The bottom line is they are not getting enough money to cover their expenses.
Now ask yourself how many orders they would have if the aircraft was priced accurately.
Then compare and contrast it to what the results have been for ‘the other guys’ and their recent programs:
A330Neo – covered dev costs
A350 – costs also covered and in the black
A320Neo family – blasted gravy train the size of Niagara Falls
A220 – still the black sheep of the family
How can you look at the 777X program and say ‘pretty good’?
Frank:
You got a deal, I will handle the tech end and you run the financial. I think we would have a wining combo. Its good to have a conservative financial view and I can be wildly speculative (keeping in mind I always was financially conservative but play penny anti poker I run wild and win!) . I won a $200 pot in what was supposed to be a friendly game they kept changing the rules on. I won one killer hand and the others decided to back another player and tried to run me into the ground. I had more than enough money by then to play conservative until I got another good hand and took the whole pot.
So someplace in all this is a middle ground of risk and prudence. Boeing certainly nailed the 787 market area though they also clearly messed up hugely on production and then the shim gap debacle.
Every plane in development is losing money , serious money before its certified and long after.
Thats why Airbus uses program accounting for its new development planes and the often large launch order pricing to get the customers to sign right away.
With the A400M they wanted to use asset stripper accounting where the IP was to be ‘sold’ to the captive buyers to make their books look good but it was seen as a step to far even for the Dutch accounting ( which is why the Group HQ is in Leiden). No doubt various dodgy deals through Maltese banks continue like Lufthansa does.
n addressing the 777X, shades of John Travolta and Saturday Night fever, Uh uh uh staying alive!!!!!
The A380 was not a successful program and neither is the A400 by your definitions (and I do not disagree with it)
But, they are still in the game and the F model is very revealing on who wants and likes what. The A350F should be winning hands down and is not.
Like the 747, Boeing is parleying what was supposed to be a PAX plane into a nice selling combo (Airbus as well on the A350F but its not nearly as successful doing it as the 777X-F and they have a well proven and flying design, that tells you something very definitive.
Like my Credit Union, huge write off and then they made money and they are not only going strong, they keep expanding (look up Global Credit Union)
What we do know is that the A350-1000 and the 777-9 are the only game in town for large wide body (sorry Bryce (well not really) but we need to leave room at the top for true VLA)
The A350 clearly is a successful program. But are you factoring in all the free lunch aid they were given? What is the pay back point for that free money (how many does Airbus have to build?).
700, 900, 1500? So yea, there is an Airbus incentive to make it a bigger number just like the 1500 number for the A380.
So, the A350 is a bit smaller than the 777X and its a given they get more orders just like you get more orders for the 787 (and the 767 easily sold 1000 and still going)
Is there anything contemplated in the wings to replace the 777X?
Until there is, you have to run the production out 20 years and extend that year by year as no replacement in sight.
Airbus contemplated an A350-1200 but there looks to have been no interest. So the 777-9 is it (yes we know the -8 is barely competitive but the F sales are really nice)
There is not replacement in sight for the A350 either.
Please address what replaces either one of those two aircraft?
The financial parts I am not going to disagree with and less important if they can pay off their debt or even break even on the aircraft as they have put themselves in multiple holes.
Sometimes you get yourself in a corner and just surviving is a win.
Click to Edit – 8 minutes and 55 seconds
@TW
So much to unpack:
‘Boeing certainly nailed the 787 market ‘
One of the 4 P’s of marketing is Pricing. Not nailed.
——————————————-
‘Airbus as well on the A350F but its not nearly as successful doing it as the 777X-F and they have a well proven and flying design, that tells you something very definitive.’
Could it be that Airbus is pricing it properly and determined not to lose $6.5 billion like BA did on the 777X, before it even starts in service?
———————————————-
‘Like my Credit Union, huge write off and then they made money and they are not only going strong, they keep expanding ‘
Yes. BA wrote off $6.5 billion on the 777X program in 2020 and $3.5 billion on the 787 in 2021.
How are the Q1 results doing in 2023? Going strong? Expanding? You expecting BA to have profitable margins this year?
———————————————
‘The A350 clearly is a successful program. But are you factoring in all the free lunch aid they were given? ‘
Here we go again. BOTH OEM’s are the beneficiary of help from governments. But it still seems that only one is well run and profitable.
——————————————-
‘Please address what replaces either one of those two aircraft?’
The 777X isn’t even flying yet. Will be in service in 2026 and you want to know what is replacing it? Don’t you want to know what’s going to replace the A321XLR? it due out next year!
The A350 will probably get NEO’ed in the future. Why mess with a good thing?
———————————-
You know what I do know about future aircraft development?
With Boeing having over $40 billion in net debt and Airbus amassing a 10 billion euro rainy day fund, I do know who will be better placed to develop another jet, whenever that will be.
—————————————–
‘Is there anything contemplated in the wings to replace the 777X?
Until there is, you have to run the production out 20 years and extend that year by year as no replacement in sight.’
Well, that’s one school of thought. The other is that the 777X is going to be Boeing’s A380.
—————————————————
‘The financial parts I am not going to disagree with and less important if they can pay off their debt or even break even on the aircraft as they have put themselves in multiple holes.’
Break even? Less important?
It’s everything.
Where do you think Boeing got all the money to spend to cover their losses? Two places.
Deposits from customers and banks.
Both have to be paid back.
Airlines want their aircraft. In return for an aircraft, Boeing gets money. More money then they spent to make it and the margin is positive. A positive margin means they can take the overage and pay back the banks.
Break even doesn’t cut it. (which they’re not even doing)
It means that they have gotten in the same amount of money they spent to make it.
They may take in all kinds of deposits on future orders, which bumps up cash. That’s great. But when the time comes to deliver the aircraft and the margin on the aircraft is negative, they have sold the aircraft for a loss.
Boeing has had 4 years and one quarter of selling aircraft for less then it costs to produce them. They have had to borrow money to pay for this.
In 2019 they delivered 380 aircraft.
They lost ($6,657) to do that.
In 2020 they delivered 157 aircraft.
They lost ($13,847) to do that.
In 2021 they delivered 340 aircraft.
They lost ($6,475) to do that.
In 2022 they delivered 480 aircraft.
They lost ($2,370) to do that.
In 2023 (so far) they delivered 130 aircraft.
They lost ($615) to do that.
All those losses were covered by money they didn’t earn. Money that is costing them.
@ Frank
From your list, 2022 is an interesting year:
480 aircraft delivered, $2370M operational loss.
If we attribute all BA debt to the BCA division (ignoring the fact that BDS has also incurred debt), and add on $2.5B in debt interest, we get a small positive “EBIT” of $130M.
$130M divided by 480 aircraft is $270k per plane.
BCA turnover in 2022 was $25.867B. Dividing that by 480 yields an average selling price of $53.89M per plane.
$270k “EBIT” on a sales price of $53.89M represents 0.5% profit — nominally corresponding to average discounts of about 64.5%.
That tiny profit was then bulldozed by the huge annual loan interest bill, leading to a huge loss for the year.
Same is already happening this year.
Yet the 787 still outsells the A330 neo handily.
Well seeing as Boeing is giving them away it makes sense for people to keep taking them.
And of course 5 years from now Boeing goes belly up and no support.
What are those airlines thinking?
Frank:
I do not begin to disagree Boeing has messed up and badly.
But, the MAX production is straightened out and getting stronger.
The 787 shim debacle is in the rear view mirror.
The 777X is moving to production.
As long as Boeing sells aircraft for more than the cost to build then they will continue to build them.
The losses are due to their screw ups. I am assuming those mess ups are at an end and clearly they are for the MAX and 787.
I believe they will be for the 777X and only if and when that goes into certification will we know but all indicators are it will.
And Airbus never made an A380F despite that being part of the justification for the program.
Between a 777X-F and the pax, it will be successful and it will not sell in the numbers the 787 will, more like the A330NEO.
Airbus have already said that the A350 broke even at…..350 aircraft.
Nice! Too bad about the other guys..
A350 development cost is more like $15 bill than 12
You are forgetting the later A350K cost and the $15 bill doesn’t include A350F.
Time to redo the calcs
And the Free Lunch money added into it
yes . Its $4 bill of launch aid
2009
‘Britain two weeks ago pledged 340 million pounds (about $550 million) in loans to help Airbus develop the A350, which is intended to compete with Boeing’s much-delayed 787 Dreamliner.
Germany would provide 1.1 billion euros (about $1.57 billion) and France 1.4 billion (about $2.0 billion), German and French officials have said.”
https://jp.reuters.com/article/us-usa-eu-aircraft-sb-idUSTRE57Q4P320090827
There maybe some quibbles over whether all the funding was drawn down
Oh look!
The state/federal subsidy tracker for BA currently has a tally of $74.99B…
https://subsidytracker.goodjobsfirst.org/parent/boeing
😉
Oh look!
The state/federal subsidy tracker for Airbus currently has a tally of $$160,144,431…
Keep in mind that this is amount is for subsidies in the United States only. It doesn’t include the ‘launch aid’ Airbus gets in Europe. Money that doesn’t have to be repaid if the program fails, like the A380.
@ muckamuck
Intriguing logic…
Why would the total amount of Boeing subsidies include ‘launch aid’ received by Airbus?
And: any sign of those BA subsidies being repaid?
The reality is apples and oranges.
Each of the partitioning Airbus countries (UK, German, France and Spain) are like the US in that they have their own infrastructure support that is free.
Then collectively and separately they have free lunch aid.
The US has never had a national program of free lunch aid, does not exist and claimed false equivalences are made.
And the Airbus countries nor Airbus EVER publish what numbers are required to be built that then determines the free lunch gets paid back (and it does not get paid back in the case of the A380)
So, give me the number for each program Airbus has going.
@ Transworld.
I know the A320 aid was repayable after 750 sales. In 2005 the UK government were saying they had received double their initial investment of £250 million and, I believe to this day, we’re still getting royalties on every aircraft sold.
The A350 was a bit different from a UK point of view as our contribution was a direct loan so I presume we’ve been getting money back from day one but we’re not going to get the royalties after the loan is repayed.
Others I don’t know and can’t find out after a quick peruse of Hansard. All I can find that our esteemed(?) parliamentarians have said is that these are confidential commercial agreements so I doubt me doing an FOI request will come up with the answer.
One more thing I found earlier but forgot to post.
In 2002 the following question was put to the UK government:-
“To ask the Secretary of State for Trade and Industry how much levy was received by the Government in financial years (a) 1998–99; (b) 1999–00 and (c) 2000–01 in respect of (i) the Airbus A320 Launch Aid, (ii) the Airbus A330/340 Launch Aid, (iii) RB211–535 aeroengine, (iv) V2500 aeroengine, (v) EH101 helicopter and (vi) Lear 45 executive jet; and if she will make a statement.”
The answer:-
“Unfortunately the Government cannot disclose the levies received by programme, as the information is commercially confidential and market sensitive under Exemption 13 of the Code of Practice on Access to Public Information. However, I can provide the total levies received for those programmes for the financial years requested. These are as follows:
Total levies received for A320, A330, RB211–535, V2500, EH101
1998-99 – £152.4 million
1999-00 – £187.2 million
2000-01 – £130.9 million”
And that’s just the UK never mind Spain, Germany and France. Whilst we don’t know the share that came from Airbus it shows that, unlike Boeing, they do actually pay their aid back (and more via royalties) in most cases.
Yes, they may not have done on the A380 but that’s the one outlier in the commercial sector. I’m sure the A350 programme is doing well enough to repay their launch aid as well.
Any investor will be lucky to get a profit from everything they invest in but, as a UK tax-payer, I’m happy with the money we pumped into Airbus. I think it’s a shame we got rid of our 20% holding in the company but hey ho.
I didn’t quite understand how the a330neo can put pricing pressure on the 787 without putting pricing pressure on the a350.
Might a better explanation of the strategy be that it was meant to pick up more budget-oriented, high-volume short-distance operators? But Airbus may have misjudged the size of that market (that market may prefer at the moment to pick up used A330ceos).
A350 is a bit bigger than A330neo, so perhaps there’s just enough room between them to protect one from the other. 787’s problem perhaps is that it’s somewhere in between, and the A330neo is competitive against it.
I don’t think that Airbus can be judged to have estimated the market size wrong (or if they have, it’s of little consequence). The A330neo cost very little to put together, so there’s no massive burning need to recoup a vast development program. If it sells at all, it’s probably going to be profitable (and it has been selling).
As a tool for undercutting 787 it’s perfect. As another reason for A330ceo operators to stay with Airbus it’s ticking a lot of boxes, and so is A350. Airbus have a lot of good options to tempt customers with, and all of them pay good margin. Boeing has fewer options (just 787), and reputedly struggles to make much margin on it, because A330neo undercuts it.
And let us not forget that Boeing couldn’t deliver 787’s for a while, and for pretty bad reasons. There was no money coming in for more than a year (and it’s largely why the backlog looks so big).
At the end of the day, sales numbers count for nothing; profit (or loss) overall counts for everything. Boeing seem to have no confidence in their finances recovering before the next decade; they’re taking a development holiday until at least then.
Except its underselling and not under selling the 787, the numbers don’t lie.
You can take it as a one to one A330NEO to 787CEO for the same time period and who has the orders and deliveries that are tops for both in that peirod.
The 787 is almost outselling the A330NEO and the A350 combined.
Thanks for this perceptive comment, Matthew.
> And let us not forget that Boeing couldn’t deliver 787’s for a while, and for pretty bad reasons. There was no money coming in for more than a year (and it’s >>largely why the backlog looks so big<<). <
bingo..
Planes were built but not delivered.
Are you referring to production or deliveries
Boeing has not gone belly up and they are still making 787 (more per month all the time) and they will continue to do so.
Making an argument on financials ? Meh. The A380 was a huge total loss something like 25 billion and Airbus is still in business.
@TW
“Boeing has not gone belly up and they are still making 787 (more per month all the time)”
I heard BA is building 787 at a rate no faster than Airbus’s A350.
Although BA repeatedly claimed to clear its 787 inventory within two years, with discovery of more manufacturing issues it looks more and more remote.
Pedro:
The fun part is that we get to see don’t we?
You won’t have to speculate, you will know.
787’s problem perhaps is that it’s somewhere in between, and the A330neo is competitive against it.
That’s a good problem to have. The 787 hit the sweet spot. The sales numbers prove it.
The sweet spot resulted in $3.5 billion charge off in addition to almost $3 billion abnormal production cost for the 787 program. Bingo!
nope, management proved once again you can mess up a very good product.
The 787 financial issues are nothing more than management failures to execute.
Same for the MAX and the 777X.
You guys keep raising that false equivalency and the A380 is the example you are looking to use.
Technically the A380 was a success, it works and it works well (and you could say the same for Concorde)
But, neither one was a commercial success because they were failures to sell. No because there was anything technically wrong with them, there was no market (or the market was so tiny) they failed.
The 787 is both a tech and sales success. And it maybe enough of a success that it pays back all the management screw ups that undercut it.
Interesting to see a discussion point from years ago, “the point of the A330NEO is to put price pressure on the 787”, sort of confirmed.
Also, does anyone know how long (or for how many frames) P&W and other suppliers have exclusivity on the A220?
…and can their less than impressive durability and maintenance performance be factored into a exit (clause or law suit) to end such exclusivity.
Julian:
The laugh is that Airbus determined that Boeing as forbidden (by Airbus) from offering discounts below the A330CEO discounts Airbus had decided were international law.
The in a dash of pure in your face take that Airbus, Boeing offered focused discounts (Hawaiian) that still made money but undercut what Airbus has Ruled is the world law on the subject. I still remember the screams of, you can’t do that, take it back.
Almost as funny as when the A380 did its first passenger flights and the Execs of the Airlines started screaming, we have to get the 900, we can’t carry any fright with this thing, its not fair.
So much for what Airbus thinks on that subject. Boeing will do what it wants as can Airbus but to think you decide what Boeing can do, chorph.
“Boeing offered focused discounts (Hawaiian) that still made money.”
What proof do you have?? 😳 Nothing.
At least, according to BA C -suite guys the 787 program performed much worse than their forecast – that’s why they were forced to charge off reach forward loss of the program of $3.5 billion on top of $2 billion abnormal production cost (and counting).
And what proof do you have that the Hawaiian 787 sale didn’t make money? 😳 Nothing.
Welcome aboard another chatbot. Read Boeing’s financial statements. Thanks. We are in a Red Queen’s world: reach forward losses = making money! 😂
The statements about the sales campaign Boeing waged with Airbus are what back it up.
Just like the people who have decided that the A380 screams did not exist. They do and did. The A380 did not have excess capacity and could not carry freight and the passenger luggage.
So, it had to make its money on passengers and it had to be full to do so. With freight capacity aircraft like the 777/787/A330/A350 do not have to be full to make money.
That is reality.
I love the 330. Some airlines will go up to the 350, some will stick, some will move to the 787… But it is true… The established fleet is young an pretty robust, and the older examples of the fleet are getting close to end-of–life. Aerlingus got the last -300 and it’s oldest -200s are over 20years (-200s) due for replacement soon. For Aerlingus, a GE/CFM airline. The swap to RR (after a decade of poor press) is likely a delaying factor. This may well be a consideration for others whose experience is with GE, and who read, like us, the less-than advertised durability of all new engines. That may be playing into decision making, of all types, and which type.
Regarding the stretch, it’s not essential right now as they’re are aircraft that meet the remit, so as much s I’d like to see it, I’d be happy to see the best version of it at a later time than a quick version sooner.
I also love the A330 — nice to have a plane with a 2-X-2 seating configuration.
The 767 has it also, but they’re on the way out.
The RR engines on the A350 / A330 neo were never a source of any major problems.
With the A350/A330neo, Aer Lingus might finally start to offer longhaul Asian routes — at the moment, they cede that entire segment to the Gulf carriers, BA and KLM.
Durability issues, but a fix has been developed… Can’t find the RR link quickly but scroll down a bit on he SF link.
EI are doing well with their LRs and will do better with heir future XLRs but the need to get cracking on 330 decisions, whatever they choose. I think neos but maybe a mix of 330/350s. Not sure they’ve much interest in East… Maybe India from Manchester if they expand there with a larger fleet (with some buffer for tech).
https://simpleflying.com/how-rolls-royce-increases-trent-7000-time-on-wing/
And 2-2:2-2 is great.
EI certainly won’t be competing with BA for routes as they’re both part of IAG.
Orders for new aircraft are now done directly by IAG who allocate them to their various airlines. They also require shareholder approval.
(No-one outside IAG/Boeing is 100% certain which airline the MAXs IAG have on order will go to, some have said Vueling, some have said at least some will go to British Airways and others have said Aer Lingus. It could be a mixture of all of those).
IAG’s latest annual report shows they have no A330s on order, nor any options so none will be going to Aer Lingus for a while at least.
It’s all A350, B787 and B777X for the immediate long-range future although I have to say a new order for A330s isn’t out of the question as both EI and IB currently use them (and BA are leasing one for a few months).
The A330 has always been a slow starter but with constant developments got better and better. The A330neo might follow this if it has enough skilled engineering allocated to cost and weight reductions in addition to performance improvements. Most likely is Boeing doing the same on the 787 but Boeing has more projects needing engineers to fix things so there is a window for Airbus to roll out Block updates maybe in combination with an A330neoF freighter maybe together with ST Engineering that do the A330ceo freighter conversions or in Mobile together with Lockheed Martin if USAF select it as a new tanker.
Well that is an interesting contention but most aircraft are slow starters and the huge flush of orders is a Boeing 787 thing.
Why would an A330-300NEO F sell when you have all those perfectly fine and engine choice A330CEO to choose from?
The A330MRT in fact continues A330CEO production as the cost to certify a A330NEO in that role does not pencil out.
Sure the A330NEO will sell in low numbers and maybe for a long time but it is a low rate and its a split from the CEO which does nothing for common production.
Airbus is planning a Multirole Tanker version of the A330-800 in 2026 ( https://airinsight.com/airbus-has-no-appetite-to-further-stretch-the-a350/ )
Interesting…though I can’t see much of a market for that, unless the USAF flips.
The fleet is young and robust but the 330CEOs biggest customers have ditched it and gone for the 787 or 350. It is what it is. All the explaining it’s not necessary the reality is, there are other options that do what it does but way better. Like what is its USP other than being cheap.
350-900 gives you that extra payload capability at that sweet spot
350-1000 big payload to almost anywhere on the planet. If you can fill it up. Cash machine
787-9 is complete sweet spot with extensive range
787-10 is lowest cost per seat, regional monster as exhibited in the Asian market and Asian carriers (CI just added it to their book last week)
787-8 is the go to for opening up new long haul routes or for smaller nimble carriers. Has picked up some orders recently
777-9 is just maximum passengers and maximum cargo at a very low operating cost. So if you want the biggest you come here. Emirates says they’re coming back this year for a top up, I suspect they’ll add the 35K. Too Why? Because if you can fill them up, they’ll print you more cash than anything else
So my question to you all is place yourself as an airline owner, what makes you buy a 330NEO, economically speaking. Commonality is a good answer but it’s come too late, the 787 has infiltrated into the market so for many carriers they already have 787s it’s now about choosing which kind of commonality you want. The 330NEO will lose in most cases
All correct, but the A330neo really isn’t doing too badly considering the development costs were covered at 200 units (my estimate at the time it was launched), the line is fully depreciated and they are increasing production from 2 per month to 4 per month. So if we assume the 787 ramps to 12, the A330 will get ~25% of that market (vs zero if they hadn’t done it)
It won’t sell as well at the (brilliantly positioned) 787 but the critical point is that it keeps the pricing honest at the bottom end of the 787. Reducing your competitors profits at no cost (or even a small profit) to yourself – what’s not to like?
Reducing your competitors profits should never, ever, ever be a goal in business. Maximizing your own companies profits should always be your primary goal. I don’t care how much my competitors make as long as I reach my own profitability goals. The fact that a former Airbus executive actually admitted that they spent billions to minimize their competitors profits shows Airbus is not actually a normal capitalist company. This shows the Airbus leadership team has the zero sum/fixed sized pie philosophy, not a growth/abundance philosophy which is not a good sign for long term success.
Budget longhaul carriers may find the A330neo’s price tag more attractive than the alternatives: BA can’t continue selling its planes at a loss for ever, and the mega-discounting will have to stop at some point.
Also, the A330neo has earlier slots available than the alternatives.
It cost a pittance to develop, so what’s the risk?
I agree development cost is low and also risk. I’m not against airbus developing the jet I think I mean hey, what do they have to lose? Also it was on time and on schedule so doubt there were any overruns. I’m just giving my own thoughts on why it always just gets lost in the middle of everything.
You know if we look at the AI order 350/787 is the main theme
We have Turkish coming up soon from what we’ve been told 350/787 again the main theme and they’re a big 330 customer.
So it’s just something to think about.
IMHO I don’t think airbus really minds if you ask me. I think they take a “if you want we have it, if you don’t that’s cool here’s a 350” approach
Yes, I agree.
Take Delta, for example: whether the airline orders more A350s, or more A330neos, or a mix, it’s all revenue for Airbus, one way or another. The A350s have a higher sale price, but the A330neos probably have a proportionately higher margin, and help to keep the A330MRTT line running. The most important thing is that the customer gets the plane that it wants for a particular usage case.
From what has been published in the press, Delta received insanely great pricing for all of their A330NEO’s, so I doubt there is much margin to be had from any of the Delta orders.
True, when the A330 CEO ruled the market its only competitor was the 767. Many carriers settling on the A330/777 product mix. We see the same today with many carriers settling for an A350/787 product mix. Now add in the A321XRL and its easy to see where the market is headed.
Airbus and Boeing are stating the same thing about the A330 and 777 markets and replacement cycles. But even they know the market has fragmented.
williams:
I would argue the heyday for the A330CEO was the 787 early years when Boeing messed up the produion so badly and there was a bubble in Aircraft buying and the A330CEO was the only thing roughly in the category so it sold in great numbers.
I always was curious how it would have done if the 787 program had been done right? Not as well certainly and I don’t disagree the A330 is a good aircraft.
Its just the 787 has hit the sweet spot.
“Its just the 787 has hit the sweet spot.”
Not for BA’s balance sheet…
Yet it outsells the A330 neo handily. Your notion that the the 787’s position between the A330 and the A350 is a problem, is laughable.
@ muckamuck (rather appropriate name, it seems)
Do take the trouble to read, will you?
(1) It’s not *my* “notion that the the 787’s position between the A330 and the A350 is a problem” — find somebody else to pin that on.
(2) Handily outselling at a handy loss per unit. Hence the remark about BA’s balance sheet.
(2) Handily outselling at a handy loss per unit. Hence the remark about BA’s balance sheet.
Too bad Boeing can’t get “reimbursable” launch aid, that’s not really reimbursable when things go south. Or just write off development costs and then declare the program profitable, like Airbus does.
@ muckamuck
BA does, however, get state and federal subsidies — currently totaling $80B (see above) 😉
“787-10 is lowest cost per seat, regional monster as exhibited in the Asian market and Asian carriers (CI just added it to their book last week).”
🤣🤣
CI is a state-owned airline, when politics trumps economic sense.
https://www.taipeitimes.com/News/taiwan/archives/2022/04/29/2003777419
https://mentourpilot.com/cathay-pacific-order-shows-boeing-weakness/
There’s still Eva Air, Korean, Singapore, Vietnam, BA, KLM, United, Etihad, Saudia (who have also recently ordered more) who use it because of its below 11hr cost benefit compared to other frames.
I’m not really trying to get into any nuances here, I’m just telling you the strength of the frame. That is what the airlines that operate it say.
Yep
One of the things that is being missed was customers wanted the 787 and badly.
Its management failure in production lead to an opening just when major orders (aka the bubble) blew the lid off wide body market for a time.
That gave Airbus a huge bonus (and kudo to them with the right product).
But since the 787 started getting the numbers up?
My take is the 787 hit the sweet spot in the market and will hold it for another 30 years.
Now A330 Customers? Some are very loyal to Airbus (and that is fine). But you will remember when we went through A330 Rev 1-4 and then wound up with the A350, those customers jumped to the A350 despite it not being an A330.
So the like of the Airbus product meant more than economics.
Then like a boom a rang, the A330 Ver 2.0 came by again. Except it had two distinct groups it was competing with. Those who had bought A350 for their future and those who bought 787.
Its not that its a bad aircraft at all, its just in the wrong position and history can be hard.
I agree with your analysis of situation too.
I think it’s come a bit too late for commonality to help it.
For example, I love the 777X and I can’t wait to be on it but it also suffers from this a little bit, where the commonality argument has already faded with some of the 300Er customers
Take Air France, you can argue commonality with the legacy fleet of 300ERs but they’ve also got a big fleet of 359s so just go the 35K and cut out the 777 entirely that saves you big money.
Same thing we see with Philippines’s recently and probably we will see with some other customers down the line.
I still think the X will sell reasonably well, nothing extraordinary like it’s predecessor but we will see a nice number of them around.
Halliday:
Agreed fully. Nice to see some even reasoning for a change
Comparing “upgrade” programs:
A330neo: $2B development costs, 300 orders
B747-8: $4B development costs, 157 orders.
With the B747-8 as a benchmark, the A330neo is doing very well 😉
The Airbus A330neo-800 is an outstanding aircraft. More orders will pick up later. As more aging aircrafts are getting replaced
I don’t think so but hopefully we all live to ripe old ages and get to see!
“The other is that I think it took the community a while to realize the seed cost potential of the 330.”
I presume this should be “seat cost” (after factoring in cost of capital, particularly at today’s higher rates).
Airlines in general are not stupid and they have departments that run the calculations all the time.
It does not mean the board is not biased, Delta was never going to buy a 787 despite the so called competition.
And it does not really matter if the A330CEO/NEO is the perfect aircraft for Delta, what matters is how they manage their operations and fleet and as long as the A330 is close enough it works and works well.
The best view is the 50,000 foot perspective and what numbers are sold.
The Airbus fans are all in on how the A320 series is beating the MAX but the 787 which clearly is outselling two Airbus product lines these days is not the same. Sure makes for a hypocritical view.
Hi Bryce,
Your approach is very interesting.
Do you have the same analysis considering the development cost per unit divided by the cost of the plane, or the development cost per unit divided by the seats of the plane?
This might provide another view, but the big picture you showed may not change.
Sincerely
Interesting points, but messy in practice because of the different seat numbers that airlines use and the different discounts that are offered.
Ultimately, instead of price, what really matters is the margin — which is a combination of list price, discount and production costs. The margin per unit is what ultimately allows the development costs to be paid back.
Here’s an interesting point.
– I have various sources which indicate that the nominal production costs of an aircraft are 35% of list price; in fact, this yardstick may be what OEMs use to set list price in the first place, i.e. at three times estimated unit production costs.
– Industry standard discounts are 45-55%, depending on the circumstances. Lets just say that the discount is X%.
– The margin in this case is then M = 100-35-X % = 65-X%.
– You can see now that,
* If AB gives a 55% discount on an A330-900, M will be 10% of $296.4M, which is $29.4M.
* If BA gives a 60% discount on a 787-10, M will be 5% of $338.4M, which is $16.9M.
So, in this case, BA has a much smaller unit margin, and has to use it to pay off much higher development costs.
Plenty here just can’t believe that BA is over-discounting, but there’s lots of (indirect) evidence that this is the case…and it’s reflected in the quarterly results every 3 months.
Hey Scott, we know more stories about Mr. Leahy and his “deals”. He was was one heck of a salesman.
What happened to break even discussions? I remember it used to be the rage back during the A380/787 development days with, now it seems to have disappeared.
I am curious about what the (realistic) break even numbers are for the newer planes- A220, A320neo, A330neo, A350, 737MAX, 777X
Two in your list are easy in terms of breakeven:
– 737MAX : never
– 777X : never
Additionally:
– 787 : well over 1600…probably much more, in view of recent/current unit margins.
@ Frank posted some detailed data on this just last week.
I would add 787 to your list.
your list of *never*.
@ Pedro
Agreed — but one has to offer a glimmer of hope to BA investors 😏
How Boeing 787 won sales??
FG:
-> The steadily lowered price for the Dreamliner was supported by the barebones production costs forecast by programme planners who saw a global supply chain with its contractual prices locked in, as well as design and manufacturing responsibility and cost weighted toward Boeing’s suppliers.
Boeing’s supply chain model as formulated, say company insiders, allowed the estimate of its “snap together planes” to be built for an unprecedented contractually locked-in low recurring cost that would be recognised early in the programme as the production rate was set to reach 10 aircraft a month in 2010.
This cost assumption, built upon a $5 billion investment for the 787, say industry sources, compared with the $11.5 billion initially budgeted for the 777, allowed Boeing to compete aggressively to establish the Dreamliner in the marketplace, ultimately obliterating the earliest incarnations of the A350.
Thankfully, we all know these are nothing more than horseshxt that were far from reality.
@Bee
By definition, the Boeing programs are all in the red;
The 777X wrote off $6.5 billion
The 787 wrote off $3.5 billion
The Max cost BA some $20 billion
Because BA uses program accounting, they have to reliably estimate the expected revenues, expenses and profits for the life of the program.
Once you have a write off, you are saying that these amounts will not be covered in the program.
If you peruse the BA financials, you’ll see things like this:
‘At March 31, 2023, $10,211 of 787 deferred production costs, unamortized tooling and other non-recurring costs are expected to be recovered from units included in the program accounting quantity that have firm orders and $3,916 is expected to be recovered from units included in the program accounting quantity that represent expected future orders’
So they are estimating that the current firm orders they have will cover some $10 billion in expenses, but need another bunch of orders to cover another ~$4 billion.
It would have been $7.5 billion, but Boeing does not expect that they would get orders to cover that much – so they wrote it off.
Same thing for the 777X, except that amount was $6.5 billion.
I’m a bit confused regarding the 777X numbers, I’m bad at accounting so bear with me.
You say Boeing does not expect they’ll garner enough orders to cover the $7.5bn that was written off? But with the 777x costing around $400m at list prices, even if we assume around a 60-70% discount, a 30 plane order would cover that easily, and Boeing has way more orders than that for the 777, so surely that shouldn’t be an issue?
I’m still trying to figger out the significance of a “list price” for these aircraft, since huge discounts are the norm and no one at all pays “list”.
weird
I suspect — but can’t (yet) prove — that list price is chosen to be three times nominal unit production costs.
My first job was with a bearing company that had list prices but everyone got a discount. We bought the items at c. 98% discount and sold them on at various discounts. Top customers got 90% or more, occasional account customers got 65-75%.
Even a person walking in off the street to our trade counter would get 40% discount. One person once asked me why he got a discount and I had to say I didn’t know – it’s just the way the trade works.
And that was in the 1980s.
@Bee
It’ll be my pleasure.
Imagine a simple accounting model;
You sell a product. You have costs associated with making it. After delivery and payment, you subtract Expenses from your Revenues and you a left with a number.
A positive number and you’ve made money. A negative number and you’ve lost money. They call that a margin. Or an Operating Margin:
https://www.investopedia.com/terms/o/operatingmargin.asp
—————————————————-
Because aircraft design requires huge amounts of capital, Boeing uses something called ‘Program Accounting’. What this does is allow Boeing to put monies spent on a particular program (in this case the 777X or the 787) which would normally be an Expense, into an account called a Deferred Production Balance (DPB).
The DPB is located in Inventory, which is an asset account on the balance sheet.
Boeing will then, using it’s experience and know how in the aviation industry ESTIMATE certain numbers.
1) How many aircraft they will sell for this program
2) What the per unit costs will average out to be
3) What margin will be left over
Then they take the DPB (consider it like expenses pooled together) and allocate a portion of each aircraft sold an amount that they pull out of the DPB to expense along with what they spent to actually make the aircraft.
All accounting happens at the time of handover, when final payment is exchanged.
Good so far?
——————————————————–
Boeing has to rely heavily on the use of estimates and as you can imagine, sometimes reality doesn’t match with the estimates.
For whatever reason, Boeing had determined that in the DPB for the 777X program, they would not be able to re-coup $6.5 billion of the money they spent, over the life of the program.
Here is the wording from their release:
‘As discussed above, Commercial Airplanes now expects first delivery of the 777X to occur in late 2023 and has recorded a $6.5 billion reach-forward loss on the 777X program. Among the factors contributing to the revised first delivery schedule and reach-forward loss are an updated assessment of certification requirements based on
ongoing communication with civil aviation authorities, an updated assessment of market demand based on continued dialogue with customers, resulting adjustments to production rates and the program accounting quantity, increased change incorporation costs, and associated customer and supply chain impacts.’
https://s2.q4cdn.com/661678649/files/doc_financials/2020/q4/4Q20-Press-Release.pdf
———————————————-
So that money has been spent and will not be recovered in the production run. This is not the first time it has happened. They also had to write off around $1 billion on the 747-8 program.
They have also done the same thing with the 787 program, writing off $3.5 billion.
‘The company continues to perform rework on 787 airplanes in inventory and is engaged in detailed discussions with the FAA regarding required actions to resume deliveries. In the fourth quarter, the company determined that these activities will take longer than previously expected, resulting in further delays in customer
delivery dates and associated customer considerations. Accordingly, Commercial Airplanes recorded a $3.5 billion pre-tax non-cash charge on the 787 program. The program is producing at a very low rate and will continue to do so until deliveries resume, with an expected gradual return to five per month over time. The company now anticipates 787 abnormal costs will increase to approximately $2 billion, with most being incurred by the end of 2023, including $285 million recorded in the quarter.’
They also had another $2 billion in abnormal production costs.
———————————————————
So by definition, the expenses that you have accumulated and ‘held’ in the DPB (if they are not expensed during normal delivery of aircraft) and are ‘written off’ means the program is in a loss position.
I hope this helps
Thank you. I keep relearning and then forgetting program accounting. One small clarification, which I think you got right, but want to make clear: the DPB is not the loss in the program, but difference between the expected profit and the actual profit/loss so far – so if Boeing were expecting (say) $10bn profit on the block, the 787’s $33bn DPB indicates $23bn loss so far.
On the other hand, a $3.5bn forward loss recognition means they expect to lose exactly that (so the DPB would end up at $13.5bn at the end of the block in the above example).
The other complication is varying the block size, which makes it even more fun…
@Charles
The DPB is held in an Asset Account on the balance sheet, in Inventory. It doesn’t become a part of the profit/loss equation, until it get’s transferred to the Income Statement. It’s just held there.
Imagine it was another asset, like a building or machinery;
Over time, as the asset is used, it is depreciated. Usually depreciation happens once a year, but in this case it’s depreciated every time there is a delivery.
When the production run is done and there are no more deliveries to be made, if there is still a balance there, it is a loss.
If during the course of the program, you take a chunk of it and expense it to the I/S without any associated deliveries, you are saying we aren’t going to be able to re-coup those funds.
The program is in a loss position.
Bee:
One aspect missed is say Boeing sells a 777 (current) for 200 million.
That is not all profit, you have all the assemblies and labor to pay.
So just for sake of an example, those costs are 180 million and Boeing makes 20 million on the 777 they sold.
And Boeing can and has adjusted its program accounting estimates for the 787.
I am not a finance guy but I did see the Credit Union wrote off loans that were not in default and they just adjusted the accounting as a profit if they did make money on them (our great local housing loan debacle)
So no I do not buy Boeing is obligated to not make a profit on the 787 if they can produce them in enough numbers to overcome the debt the program incurred due to screwed up management.
I have seen too much fluidity in accounting to believe you can’t adjust estimates and add a profit in if that occurs when you did not think it would.
Program accounting is just a way to make sure you never have any profits so you don’t have to pay taxes as (in theory) you always have a new program to absorb your profits.
And the fact that Boeing bought back shares as well as paid dividends on profits before the 2018 melt down proves it.
Program accounting should be illegal.
Bee:
Boeing has kind of upended the break even part as they messed up all 3 of their current programs (767 aside) and are in huge arrears on the 787, MAX and the 777X.
So, we get into when do they make money on the production but still loosing money due to the losses?
And while its depressing, Boeing is still surviving and as long as you are still doing that its an accomplishment and can they continue to make aircraft?
No one has ever explained how the exclusive engine supplier arraignment really works. Obviously the airframe supplier could get a higher without it, or the engine manufacturer wouldn’t have an exclusive deal.
Smaller airlines and those who run their planes for more than 10 years must be getting annoyed by now
I think your a little generous with your 330n orders ..Scott…
We all know the longstanding Iran Air is going nowhere, throw in Garuda ,who stated many times , they’re completely overhauling their fleet requirements.., including the 330-800.. That’s another 30 questionable orders ,which more than likely,will never come to fruition !!
On the other hand, a large number of 787s can be canceled without penalty, due to the accumulated delivery delay of more than 2 years — in fact, several already have been cancelled in the last 6 months.
And basically the entire 777X order book is in ASC606.
Nice attempt at deflection,; when someone has a valid point, just blame it all on Boeing …We get it Byrce.. We know your fallout Boy response.,to anything negative about your cherished company.. Again with the 777x never seeing the light of day ..We get it..
So how many orders have officially been cancelled ??
Curious too , about how many 787 orders have been cancelled, due to accumulated delivery delays ??
Pot calling the kettle black??
Where does this 2096 gross order for 787 come from?
Total delivery: 1,062
Unfilled order: 594
ASC 606 adj.: 55
Backlog: 539
787 inventory: almost 100
@ Robert L
Looks like someone is (still) very frustrated about something…🙈
***
“So how many orders have officially been cancelled ??”
Same question applies to the A330neo, doesn’t it?
***
Cancelled 787s: don’t you check BA’s monthly lists of orders, cancellations and deliveries…?
@ Pedro
I have the same question regarding the 2096 order figure for the 787: Wikipedia is showing 1693 (including all recent big orders).
Maybe options are being optimistically added in?
Robert L:
Spot on. And of course Asia X is going to take all those A330NEO orders that used to be CEO, then were NEO and then were A350 and now are (ahem) 15 NEO. LOL
Grubbie:
Engine mfg pays the Aircraft mfg an upfront bribe (err fee) to not put someone else’s engine on their aircraft.
The A330neo might be said to be “struggling” if it were a brand-new aircraft- but it’s not. I think it
was a fine, low-cost strategic move by Airbus.
Time will tell.
Spot on
Boeing breaking even right now is a victory, Airbus breaking even for the A330NEO? Hmmm
Simple math.
$2B divided by 300 aircraft is $6.66M per frame.
A 55% discount on an A330-900 generates $29M in earnings…more than enough to cover the $6.66M and still make a nice profit.
So, it actually broke even after 70 aircraft (70 x $29M = $2.03B).
Since we were talking Fedex and their fleet, comes this:
Fedex Sued: ‘Largest Odometer Fraud Scheme’ in US History
https://www.youtube.com/watch?v=6Cvz4qwjl9Q
Steve @ Lehto’s Law does a nice job
@Frank
With a slump in demand, is there any good reason for FAA to issue emission exemption for 767F??
Because Boeing wants/needs it?
Hey, look at it this way: if Boing can eventually come up with 2000 orders for the 787, they might finally learn how to build ’em right!
Too bad about that huge 787 Program writeoff, but what’s 3.5 billion dollars among friends?
😉
You believe BA would learn its lesson??
As usual ..Byrce.
All talk .no substance…..
Still waiting for your valid response to my question??? How many 777x have been cancelled ??
Since you already stated a few 787’s have been cancelled because of delivery delays, how hard is it for you to tell me those that did, because of that…Dig a little deeper Bryce ,and go back to your ” Link” vault to verify your claims !!
Also
Did I say anything about a330 neo cancellations???
Bogus orders still on the books, is reason enough to call Airbus out on maintaining inflated orders to seem all is well in a program in dire need of help !!
While your at it..
You may want to ask Afriqiyah Airways, Libya Airlines, and Yemenia Airways when they plan on taking their A350’s…
I think approaching 20 years would be more than enough ,for an airline to make a decision about purchasing an aircraft…
We know United won’t be taking their’s either.
Nice ploy on AB’s part not to cancel that after the mega 787 order as well.!!
Too enraged to be able to reply within the thread? Or to be able to find publicly-available information?
(1) 777X cancellations: Emirates cancelled 24 of them in 2019 — forgotten that?
(2) 787 cancellations: I’ll give you a hint, to help you along — check March 2023 and December 2022.
(3) “Bogus orders still on the books” and “maintaining inflated orders to seem all is well in a program in dire need of help”:
“Exclusive: Boeing shifts 118 777 orders to “iffy” under accounting rule; 191 firm orders remain”
https://leehamnews.com/2021/02/01/exclusive-boeing-shifts-118-777-orders-to-iffy-under-accounting-rule-191-firm-orders-remain/#:~:text=Boeing%20last%20week%20reclassified%20118%20777X%20orders%20from,orders%20for%20the%20X%2C%20down%20from%20309%20previously.
(4) “We know United won’t be taking their’s either.”
No, we don’t: “suspecting” is not the same as “knowing”.
Another screw-up with the 787 is all it takes.
Some Diazepam, perhaps?
Do get with the times Byrce .
Bringing up a nearly 3 year old link from Scott on 777X orders , ..So ,the 70 plus orders since then mean nothing to you..
We all know , you’d love nothing more than to see the 777x fail, like it’s a personal vendetta against you
Get over it …!!
New orders don’t change the ASC606 status of the rest of the order book.
https://onemileatatime.com/boeing-lost-777x-orders/#:~:text=The%20aircraft%20manufacturer%20has%20also%20revealed%20a%20massive,Boeing%20had%20309%20confirmed%20orders%20for%20the%20777X
And, if I had the “personal vendetta” to which you allude, then I’d actually be cheering on the 777X, because it’s another net-loss program for BA…
Do tell us more about Airbus’ version of ASC606 Bryce…
We’d all love to hear about 20 year old stagnant orders still counted as legit, never to leave the books, or collapsed airlines, (Kingfisher) still showing as actual firm orders 6 years after their demise..
Or orders that took the demise of the program (A380) to finally be removed from the books..
You listening Amedeo and HongKong Airlines ..
Please tell us more Bryce about their AB’s lame accounting standards !!
@ Robert L
Why don’t you just look it up for yourself?
It’s called IFRS15.
I took your advice Bryce !!
Thank you for the suggestion!!!
Learned a great deal!!
Very interesting accounting standards in IFRS15 !!!
Here’s my summary in a nutshell !!!
You’ll Scratch My Back ,..and I’ll Scratch Yours !!!
Thanks again for the suggestion !!
“or collapsed airlines, (Kingfisher) still showing as actual firm orders 6 years after their demise..”
Kingfisher have no outstanding orders on the Airbus books.
13 ordered, 13 delivered, none currently operating.
Thanks for clarification 😄@Russell
Well, Charleston is still making 787 and Everett has a growth industry in fixing them, so what is not to like?
All those people pay taxes Boeing does not and it keeps the economy going, you just can’t hate on that.
Do some math. Boeing sells 100 x 787 a year. They do so for a reasonable 10 more years. They are willing to go toe to toe with the A330NEO on price.
That is 1000 more x 787s. The 767 has been in production for 32 years and is still being sold. And while it was state of the art (still not FBW) and still viable (it would be competaive with a new engine).
So rather than rattle on and on about numbers, give me an Airbus proposal that replaces the 787? Its not the A330, if Boeing had done the 787 correctly production wise the A330 would have gone to 25% or the market.
I have nothing against the A330CEO/NEO. But if the 787 is its direct competitor its been upstaged just like the 767 was by the A330.
Combine 767 air frame production exceeds all A330 production these days (have to pick a point where the transition should take place so that is a discusable item but full cert date for the A330NEO would work for me)
A $$$ losing program is the only way to create good paying jobs in today’s Murica?
Thats only an issue for the shareholders .
Same happened for Amazon , who had 14 years straight of losses…the early shareholders must be still crying into their pillows …or not !
How much AMZN is losing each year?? Can you show us in a list?
P. S. To those stock market watcher wannabe, there’s a BIG difference between AMZN and BA. Can you find out and tell us?
before they made money Amazon lost money for 14 years in a row and from the beginning , look it up.
Its a well known fact.
Boeing made money for a very long period – except for a few short periods- until the grounding of the Max. of course the grounding was their fault
Question for you my friend but of course you wont answer directly
How much money has Comac made since they started the A320-919 development 14 years ago ?
answer :
https://asia.nikkei.com/Business/Aerospace-Defense-Industries/China-s-COMAC-soars-helped-by-state-backed-funding
Duke. I think many of the commenters were not around during the time you speak of. It’s new history to them
@ Dukie
On the subject of state funding:
The state/federal subsidy tracker for BA currently has a tally of $74.99B…
https://subsidytracker.goodjobsfirst.org/parent/boeing
@duke
How much AMZN had lost in total in 14 years? How many years during that period AMZN had positive FCF? Did AMZN ever dip into shareholders deficit (i.e. liabilities exceed assets)?
How much money BA has lost last four years? Approaching $22 billion. How much cash was bleeded during those years?
Remind me one event close to the twin crashes self-harm by AMZN. 🤣
Do you know why Instant brand has filed for bankruptcy? In good years, the management borrowed loan to return capital to shareholders. Does it sound like BA?
Tesla,anyone?
“Boeing sells 100 x 787 a year.”
Lol. Can you re-do your maths with real numbers?
Yep, rate 10, that is 120 mfg a year.
That is a fact.
‘Do some math. Boeing sells 100 x 787 a year. They do so for a reasonable 10 more years. They are willing to go toe to toe with the A330NEO on price.’
No. They. Aren’t.
BA had to write off $5,5 billion in losses on the program, which means they did NOT price the 787 high enough to cover the costs incurred. The A330Neo has (by all accounts) made back it’s money spent, i.e. it was priced appropriately.
Nor the 777X.
All the should be and would be, the 787 continues to sell in numbers and you can make a strong case for 2500, 3000 is not impossible.
So, we have 1096 in operation, call it an even 100 sitting on the ramp getting fixed so that is 1196 and we have production ramping up to 10 a year.
So, doing some basic math, 120 a year x 20 years, phew.
Now maybe the 787 is not going to sell 120 a year for 20 years, but we have blown through 2000 and 2500 easily.
Nothing on the horizon to even begin to replace it.
If it’s that easy then, TW – why doesn’t BA, who makes the darn thing, share the same opinion as you?
Why did they write off $3.5 billion if PHEW….we’re on the way to 2,500…even 3,000?
Frank:
You keep dancing around this and I keep telling you I don’t know what goes through the mind of an accountant (that is why someone does our simple taxes for us)
You know as well as I do they can write another chunk off in the future.
As for numbers, unless as I said over and over again, unless you see something in the future I do not, what is there to replace a 787?
TransWorld
You’re joking, right?
‘You know as well as I do they can write another chunk off in the future.’
So it’s as simple as that, doesn’t matter if we make money on the program, sell ’em at a loss, we’ll just write off another chunk in the future, right?
I’m not dancing around anything. I’ve told you that a 787Neo is a different calculus with numbers that change, especially a deferred production balance.
But if your reasoning is that it doesn’t matter, we’ll just write it off…
Really?
——————————————————-
Unwittingly, Duke provided the answer for why BA wrote off $3.46 billion on the 787 program, in the article:
‘it implies the company doesn’t expect to recover those costs in future deliveries, then lower expected profits for 787 in the future. ‘
If the company does not expect to recover the costs, it means it will not have the SALES to cover those costs.
Boeing is telling you, right to your face, that the sales will not be there.
It isn’t me telling you this, it is Boeing.
Do you understand?
“*Why* did they write off $3.5 billion if PHEW….”
Surely this sort of financials background should be at your fingertips
…..I guess not , as Ive always suspected
But to help you out
“The $3.460 billion pre-tax charge will largely be for compensating customers for delayed deliveries”
https://airinsight.com/boeing-takes-3-5-billion-787-charge-and-offers-777x-freighter/
Its not a loss on* production* to be offset against the production block is it
…Your welcome
Oh Duke
Thank you so much for your unsolicited input. If you do plan to join again in the future, please read the question carefully.
I asked why, not what, or how, or where.
The what is the write off for customer compensation.
The how is how much, as in $3.46 billion.
Where, is from the Deferred Production Balance.
Here is the Why (straight from the article you posted):
‘it implies the company doesn’t expect to recover those costs in future deliveries, then lower expected profits for 787 in the future.’
That is the Why, in my question.
You’re welcome
BTW – A loss, is a loss, is a loss. That money is gone, see ya – bye bye. The banks will still want their $3.46 billion back from Boeing (plus interest) and they do not get a pass, just because they call it one thing or another. Boeing spent that money and it isn’t coming back.
Your misunderstanding is obvious
from your own comment asking the obvious if you knew what you were talking about
‘Why did they write off $3.5 billion if PHEW….we’re on the way to 2,500…even 3,000?’
See you are linking the contract impairment cost of $3.5 bill – Taken right now as it should- to the production cost accounting block which is spread of …wait for it… over current and future production
If you dont understand the difference – and your feedback- indicates that you dont , its your credibility which has taken an *immediate impairment*. But as usual you will pretend that your words quoted dont exist
Duke,
I knew what I was talking about. I was asking Transworld to see if he could find the answer.
Did you bother to read the post from the Boeing financial statements, which said that the $3.46 billion was taken out of the DPB? Do I need to post it again for you, a third time?
Jeez Duke, you really need to read things before commenting:
Here we go….one final time:
‘During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceed estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs.’
You want the link. The page number. Anything else? Do try to keep up please and engage in some reading before attacking and commenting on something you have shown you have zero knowledge in.
That said – thanks once again for jumping with your unsolicited and incorrect advice.
Frank:
I neither want to find the answer nor will look for it.
The powers that be know I was not cut out to be an accountant. I got dirty for a living and loved it the dirtier I got.
Accountant don’t even get ink on their fingers these days (representative finger injury from hitting the fake it key so much (grin).
Reality is (all kidding aside) is that Boeing will keep making and selling 787s as long as there are sales for it (and if they quit I guess they can write Charleston off!)
@TW
‘Reality is (all kidding aside) is that Boeing will keep making and selling 787s as long as there are sales for it (and if they quit I guess they can write Charleston off!)’
Through all the posts, I don not understand where you get this idea that I have postulated the BA quit making the 787. It is a figment of your imagination.
What I have said is that BA is selling those aircraft below what they are costing them to make. As simple as that.
——————————————-
Losses.
You may pooh-pooh losses and write offs, but they are as real and hurtful to a company as can be.
You call it a paper transaction. But there is REAL MONEY that has been spent, to generate those numbers in the financials.
Real cheques were sent to suppliers. Real wages were paid to employees. Real discounts were given to customers. Money was spent.
Now.
If you have a business where other segments are profitable, generating a positive margin – those segments can cover those losses. But Boeing doesn’t have that. Only services is in the black and it had earnings of $2.7 billion in 2022. Interest expense alone eats that up.
So you borrow money.
Even you, a self proclaimed teckie guy, can understand the perils of over-borrowing, yes? What happens when you get a bunch of credit cards, run them all up, make the minimum payments and don’t have money to pay off principle?
Boeing can keep making and selling 787’s.
What happens if it costs more to produce then revenues received? You going to make that up by selling MORE?
—————————————-
This has been my whole point to you;
The 787’s are selling in great numbers, but are costing BA to do so. You are trumpeting how great the sales figures are (strange for a teckie guy who says he abhors accountants), but ignores the consequences.
BTW Duke
I answered your incorrect statement above. I just didn’t want people to get the wrong impression that you were correct, since you seem so authoritative on the subject:
‘Its not a loss on* production* to be offset against the production block is it’
From the financials (once again)
‘During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceed estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs.’
https://s2.q4cdn.com/661678649/files/doc_financials/2021/q4/0c5ce0eb-2517-45fe-afc8-b1a9bb9ab4b7.pdf
Thanks for those quotes from Boeing’s own financial statements, along with the links.
Someone is working very hard to Not Understand.
Here’s that link again:
https://www.seattletimes.com/business/boeing-aerospace/will-787-program-ever-show-an-overall-profit-analysts-grow-more-skeptical/
Thanks for it, Frank, and for your typically thorough and well-researched comment just above. The evidence-based community
appreciates it.
Vincent:
Agree Frank presents great accounting, but I am a tech guy, not an accountant. I know some perfectly nice people who are accountants, I just don’t get how they think.
While I am interested overall in Boeing status that way, its not my main interest and none of what Frank has brought up relates to slower A330 sales nor what the future is for the 787.
The A330NEO may well continue to be made in small numbers like the 767 (no matter what the ICAO nonsense its going to get another 150-250 made as KC-46A.
Equally I see no replacement for the A350 nor the 777X. Airbus clearly has decided there is room for only one top dog pax carrier and why loose money when you have a good product and good sales in a slot below it?
This is supposed to be a discussion about A330NEO production, not what is a credit, debit and crossing I and dotting Ts.
While Frank is not off base it also has a degree of what about ism to it in that he keeps bringing it back to accounting and that is not the subject though not as off topic as some about isms we see.
@Transworld
It’s not about an ism, or being a tech guy – it’s about reality.
Currently, there is no 787Neo/Max. There are no 2,500-3,000 sales of the 787. The program has lost money on the first 1,050. It has written off over $6 billion in the past few years. Boeing wrote off $3.5 billion because they didn’t expect to cover that amount in the 787 program.
You are talking about wishful things that don’t exist. For Pete’s sake, you’re going on about a 777X replacement and the thing hasn’t even gotten to the certification stage.
The conversation about the A330Neo includes the 787 as it is it’s direct competitor.
What I find fascinating is the amount of hoopla and exuberance that is exhibited for an aircraft program that has cost it’s company billions of dollars. It is continually mentioned how the 787 is outselling the A330Neo.
It cost Boeing over $6 billion to do that.
By all accounts – the 787 may be a great plane. You say you’re not an accounting guy, yet you seem to go over the sales figures and point out how the 787 is outselling the A330Neo.
So you’re a sales guy. A tech guy. But not an accounting guy. Got it.
Side note:
Funny, but down below, you say you’re not an accounting guy, but you make the (incorrect) assertion that tooling is paid for.
Now you can see why many/most commenters on this forum simply don’t/won’t/can’t grasp the dire straits that BA is in.
They can’t get their heads around the most basic financial concepts, like earnings, costs and debt.
More losses coming in Q2 and Q3; cash-on-hand is melting away, and soon won’t even be enough to cover accounts payable; gross debt is still at $57B,…, but, no need to worry because the (loss-making) orders keep pouring in… 😉
Frank:
I am going to have to disagree. You have hung your hat on a false equivalency.
Right now Boeing sells and makes 787 for the foreseeable future.
You have looked into your weejie board and decided that Boeing will not when all evidence (50 years of 737 production) Boeing cannot and will not do so.
With write-off Boeing can make a paper profit on the 787 as well as 737 and 777X.
The reality is that the more money Boeing makes going forward the more they can pay the debt down.
Or in your world they just quit now and they still have that debt.
Its what I call the illogical chip in action.
‘Or in your world they just quit now and they still have that debt.’
Where did I say that?
—————————————————-
‘With write-off Boeing can make a paper profit on the 787 as well as 737 and 777X.’
So write-offs are the answer, huh?
I’m going to try to explain this to you:
The amounts they write off are monies they have PREVIOUSLY spent. It is a dollar, just like a dollar that comes out of your pocket. It just happened in a period before. It’s isn’t just a paper thing.
As well – that amount is alive and well, sitting right there on their balance sheet. Except now it is called ‘Long Term Debt” because Boeing had to borrow to cover those expenses. $57 billion worth.
Lenders will also want their money back. And their interest payments.
Frankly I’m kind of shocked that you would take this kind of approach – given that I see you as an older individual, with years of experience in the world.
You cannot simply walk away from losses and say “It’s simple, we’ll just write it off” especially when you don’t have the margins through operations generating the cash to pay for it.
——————————————
‘The reality is that the more money Boeing makes going forward the more they can pay the debt down.’
And what happens when Boeing doesn’t make money – producing goods that it sells for less than it receives? What do you do?
Use borrowed cash? Use other customer deposits?
—————————————-
‘Its what I call the illogical chip in action.’
That there, is projection at it’s finest.
Airbus A221
https://theaircurrent.com/aircraft-development/the-airbus-a221-begins-to-come-into-focus/
“..for Airbus and its propulsion and industrial partners, how it achieves that mission for an airplane with roughly 170 seats has yielded few answers, though a widening scope of options — including >>revisions to the jet’s carbon fiber composite wing<< — are now on the table.."
thanks for that link!
https://www.airbus.com/en/newsroom/press-releases/2022-07-airbus-completes-assembly-of-first-future-wing-prototype
Airbus already has a new way to produce CFRP wings.
The new way is cheaper & faster than the actual way.
It has to be faster for the successor of the A320.
It has to be cheaper to increase the margins on the A220.
And starting on the A220 you go:
– with a factory already producing CRF wings (less learning curve)
– lower risk on the value of your production (lower production rates and NOT your cash cow).
I can’t see Airbus sitting idle on this treasure.
As for Spirit Aero Belfast building faster and cheaper the A220 wing, its still needs an autoclave process The next generation single aisle will probably use thermoplastic process or some type of non autoclave process (e.g. MC21) to reduce capital expenditures, floor space and speed up process time.
video on A220 wing production (factory tour)
https://www.youtube.com/watch?v=tDDrgGSiW3A
David, Spirit Aero Belfast is not using the technology of WoT for the production of the 220 wing.
But Spirit is already developing (together with other suppliers involved in the WoT program) all the needed OOA processes.
https://www.compositesworld.com/articles/update-lower-wing-skin-wing-of-tomorrow
Hey guys:
So the title is that A221 comes into focus and all I see are speculations and possibility which is the opposite of focus, its like the Oklahoma stampede of ideas (for those not familiar with US that was a mark on the ground and no one could go claim land in Oklahoma territory until the gun sounded, quite a mad rush and yes the Native Americans (not Indians) got trampled).
Read that as we don’t know what we want nor do we have a patch to how to get it.
So this does get into Franks area though its techy as all get out.
If Airbus is going to do an all new wing on the A321 (yes the bigger one) then it makes sense that they use their new whiz bang tech of tomorrow for the wing.
As for the A220, there you have to actually decide what you want and then see what an all new wing costs not to mention the investment on that (3-4 billion) and if you can modify the wing made in Belfast or an all new wing.
There is a cost benefit study to be made as well as putting off the break even for the A220 as its another big investment.
And does anyone really think CFM is going to come out with an all new LEAP variation for at best 7 aircraft a month?
Pull on the other one. So, 5 years before we see the A220-500 (and yes I can call it what I want) and before CFM would get any return on the investment and who is going to buy a LEAP when the P&W has finally been matured and doing all they say it will as well as another 3-5% better SFC?
Or P&W responds by a new GTF that uses all the lessons they know from having made the GTF that can’t be inserted but makes a jim dandy base for an A220-500. LEAP does not match the SFC of the GTF now.
No, its not coming into focus, its gotten more confused and maybe an excuse not to do anything.
While we are at it lets re-do the computer setup so its exactly like the rest of Airbus!
I agree with all those points. WoT is just waiting for the right moment.
Its a wonder -paper- plane project.
trouble is Airbus Canada is having trouble building the existing models ( mainly -300) at its 14 pm current rate .
The be an A221 ( I like the name) and met its demand it would likely need to be 30 pm build rate
A likely minimum change A221 would have a payload range very similar to the A320 ceo but not enough for the neo.
The other problem is the airlines like their cheap A320 max for the short ranges most fly , a carbon fibre wing A221 isnt such an advantage for the extra cost implied.
Could you translate that into English, DoU? Thanks!
I will give it a go.
It ain’t happening !
“..While Boeing asserts this 787 hole [in 2015] can be filled in just over six years by churning out hundreds of Dreamliners at a profit, even bullish Wall Street analysts have grown nervous over the staggering size of the accumulated losses, already $10 billion higher than Boeing projected just two years ago.
Less optimistic observers see no prospect of Boeing ever making an overall profit on this jet.
“No way,” said Bjorn Fehrm, an aviation and business analyst with Leeham.net who has run detailed models on 787 costs and revenue. “They need to recover far too much money per airplane. They will never do that.”..”
That was said in 2015 … nearly 10 years back
Do try to keep up
Indeed it was. Has Björn Fehrm’s prediction (and others in article, equally pessimistic about Boing ever making a profit on the 787) in that article from 2015 proved to be untrue? Not even;
and that was *before* the MAX and 777-X debacles, when Boing was said to be flying high..
Reading *thoroughly* from the past is a good way of learning about the present, and the future, too. You might try it!
> “No way,” said Bjorn Fehrm, an aviation and business analyst with Leeham.net who has run detailed models on 787 costs and revenue. “They need to recover far too much money per airplane. They will never do that.”..” <
If our erudite friend has evidence to the contrary of what Leeham's Mr. Fehrm stated here, I hope he will provide it, so
we can all be the wiser.
For my good friend Duke, one year after he said this article about the Boing 737MAX’s ongoing safety issues would be imminently retracted:
https://www.abc.net.au/news/2022-06-27/boeing-737-max-in-mid-air-emergencies-as-us-set-to-launch-probe/101175214
“Stay tuned!”
Hey Duke
How spot on Bjorn was. As was the other analysis. After a production run of 2,000, it would still be down $5 billion, they said.
But it only took 1,000 to get to a $5.5 billion loss.
ROLF:
I have no issue at all with Bjorn and his prediction, its not the subject though.
What y0u guys are saying is Boeing should just quit making the 787, now that truly is a hoot.
Or they can make as many as possible and at least retire as much of the program losses as possible!
When you are drowning getting your head above water is a victory and you don’t really care about gaining altitude if you can make it ashore alive.
But no, Boeing should just quit making aircraft to make the Airbus enthusiasts happy.
You guys really need to get real here.
No Trans,
This is not directed at Boeing. This is directed at YOU and the comments you have made.
Yu have continually gone on about how the 787 is outselling the A330Neo. But you seem to neglect a really important part. From Duke’s article he posted:
“The $3.460 billion pre-tax charge will largely be for compensating customers for delayed deliveries”
They are PAYING customers to take their airplanes. Airplanes they are selling at a loss.
You think maybe, just maybe – this could be a reason for the great sales figures?
Frank:
I hope you can see the logic bust you just put out.
So, they failed to make aircraft (well more accurately failed to deliver, they did make them) and they paid their customers for that failure.
That then translates into losses on all 787 to be made in the future.
Or, just quit making 787s, write Charleston off and tuck their tail between their legs and go home?
Or you can correct your failures, straighten up your programs and make money on your product? No, it just make sense to quit now while they are behind.
Pheweee.
And please note, it is Scott who presented the topic of the slow A330NEO sales.
I have just pointed out that the 787 is and has sold well and therefore its not the market.
What I am hearing is, that is great that the A330NEO is not selling for X reasons but a much better selling aircraft is bad !
Conflicted logic for sure.
If the 787 was selling in low numbers would that make it good then?
” ..The most conservative of IISL’s models, the one most favorable to Boeing, projects that after delivering 2,000 Dreamliners, the jet-maker will still have “a total program loss of approximately $5 billion.”
>>Worse, the above IISL, Wall Street and Leeham analyses of 787 costs don’t include Boeing’s original investment to develop the jet, estimated by most analysts at a further $20 billion or more.<<
Piepenbrock’s team, which includes a former strategic analyst at Boeing, concludes the company will never recoup that, either.."
Maybe they'll make it up in valium.
You just keep harping on that and not on how long the 787 will be built, how many and how much more the debt gets retired the more they build and how there is no alternative in the next 15 years and more likely 30.
You guys do realize that the reason Airbus quit making the A380 was they had no more sales for it?
I think that Airbus would be very smart to launch a proper replacement for the A330 CEO in the next few years. Such an aircraft would have a similar capacity but 5500-6000nm range. Carbon composite wings and body. Essentially a shrunken A350. Such aircraft could be ready in the early 2030’s. Performance wise, such an aircraft would be superior to the 787 and A330 NEO. This would give Airbus a very strong product line.
No Airbus would do best by turning its humungous back log into cash. To keep the natives (stockholders ) from being restless.
https://www.theregister.com/2023/02/21/airbus_investor_evidian_stake/
No- that’s the Boing / USA approach, and how did that work out for them?
Airbus is instead building a ten billion Euro rainy-day fund, which is the *prudent, non-MBA* approach. If you wanna learn how to destroy a company and feed on the carcass, ask an MBA..
Tell that to the Airbus shareholders.
PC:
Neither Airbus nor Boeing has any current alternatives that would have any real advantage in coming out with a new aircraft.
Boeing has the option toe NEO the 787 as a response even if Airbus was silly enough to try to do so.
The reality is we are looking at 30 years of A330NEO, A350, 787 and 777X (and not to forget the MAX and A320/200)
Think is PC,
IF Airbus were to sink some $20 billion into an A330 replacement, Boeing could counter and do a simple and cheap 787 Max re-engine and do to Airbus what Airbus is doing to Boeing with the A330Neo.
Remember – Boeing has written off over $5.5 billion on the 787 program, through the first ~1,000 deliveries, meaning they needed to charge an extra $5.5-$6 million per aircraft to reach a break even point on them.
Why can’t they charge more?
Because the A330Neo is sitting there blocking them from doing that.
A few years back I took a look at a big NB to replace the A330’s on short/ medium flights.
Interpolations, comparisons show it could be 30-40% lighter than a A330/787. High volume, leisure and long thin routes would be the target markets.
https://lh3.googleusercontent.com/-54a7gfJxrBY/WVt-gM3kSAI/AAAAAAAABKo/xa3p1KUx90Iq-3uFkEwWTPyCJwH19zpQQCLcBGAs/s1600/A370-900%2BAirbus%2BMoM%2BNMA%2Bkeesje.jpg
You would loose the LD3 capability and have to do with the smaller AKH series, but I assume that would be acceptable.
I thought that was your Boeing NMA concept. Did you just change the nose?
If I remember correctly, you gave up cargo capability for aero.
Frank,
Just hilarious!
The A330neo is sitting nowhere. Launched in 2014 (nearly 10 years ago) Sales are disappointing. The 787 ( Dreamliner eclipsed any Airbus Widebody.
The pink glasses are to be removed please…
Thks!
The A330 will never sell again at the rate it once did and that’s a no-brainer for clear-headed people. The culprit is:
Thé Boeing 787 Dreamliner.
Let the criminal enter…
Lol !!!
I think you are really missing the point. The A330neo is fully depreciated, R&D paid back and so it does 2 things:
1) makes $10-20m per plane for Airbus – at 2.8 per month, that is an extra $300-600m per year that Airbus wouldn’t otherwise have
2) it keeps the pricing on the 787 honest – maybe $10m lower than it would otherwise have been, so at rate 10-12, it reduces Boeing’s (Airbus’ only competitor) profits by $1.2-1.4bn per year (plus the 30 or so 787s that would have been sold but for the 30 A330neo delivered – that is a further $900m pa or so that Boeing misses out on)
Agree the 787 is selling far better than the A330,
I hate to use the expression ‘zero sum game’ but this is a two horse race and is as close as it gets. Where else are airlines going to go if they want a new WB that fits the A330/787 niche?
If Airbus breaks even on the A330 and Boeing loses money on the 787, it’s a win for Airbus. It removes resources from BA that they could use (assuming they don’t spend it on dividends & buybacks) to strengthen their product line up to compete.
Boeing has also had trouble with the 777X. I wonder what would have happened if they had simply re-engined the aircraft with more efficient engines and left everything else the same, how badly would it have hurt the A350?
Instead they have lost $6.5 billion (so far) on the program and it is costing them.
Charles A:
Then why is not Airbus A330NEO beating Boeing in the competitions for orders?
I have news for you, the 787 tooling is also paid for.
@Transworld
Jeez – now you are just outright putting out misinformation that is flatly incorrect:
‘At March 31, 2023 and December 31, 2022, commercial aircraft programs inventory included the following amounts related to the 787 program: deferred production costs of $12,416 and $12,689, $1,821 and $1,831 of supplier advances, and $1,711 and $1,722 of unamortized tooling and other non-recurring costs.’
C’mon man
Then why is not Airbus A330NEO beating Boeing in the competitions for orders?
Because Boeing is selling the 787 at a loss?
Do you do the questions and answers now? No, it’s because the 787 is a better and more deserving product. I have already explained that your far-fetched theory was wrong. Carry on alone…
@ Checklist
You need to check the definition of the verb “explain”.
Waffling is not the same as explaining.
The 787 is selling more planes because it offers better economics to more airlines (but not all) at the price it is being sold for than the A330neo does at the price it is being sold for.
No argument from me on that.
I’m suggesting that the A330neo is a (moderately) successful program because it benefits Airbus and weakens Boeing.
The “but for” argument – but for the A330, Airbus would have lower profits and Boeing would have both higher 787 deliveries AND higher 787 margins.
Airbus is optimising profits by balancing sales and margins – if we assume Airbus makes $10m per plane at a price of $90m, then the question is whether
1) increasing the price to $100m would reduce sales by less than half or
2) reducing the price to $85m ($5m profit per plane) a) would double the number of sales and b) raise the question whether there enough capacity to produce those extra sales.
My suspicion is that both 1) and 2) would lower profits for Airbus, but 2) would sell more planes, which would make the A330 more successful in this forum’s eyes, but not in Airbus’. No straw men or other logical fallacies…
‘The 787 is selling more planes because it offers better economics to more airlines (but not all) at the price it is being sold for than the A330neo does at the price it is being sold for.’
Correct.
And what is the underlying theme on purchase pricing? Boeing does not get enough revenue to cover the costs.
Two things:
1) In 2013 the Deferred Production Balance reached some $27.5 billion.
2) In 2021, they wrote off $3.46 billion out of the DPB for ‘customer compensation’
That DPB didn’t get up there solely on spending on the actual aircraft now, did it? After all, R&D expense is a separate line item in the financials (which does encompass various programs), but one of reasons the DPB ballooned up there because Boeing had to pay customers.
They paid them to keep the orders there and to ward off any lawsuits.
———————————————————-
They also have this:
‘Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $3,290 and $2,992 at December 31, 2021 and 2020.’
This is from the 2021 financials, the same year they took the $3.46 write off from the DPB.
‘During the fourth quarter of 2021, we determined that estimated costs to complete the 787 program plus costs already included in 787 inventory exceed estimated revenues from the program. The resulting reach-forward loss of $3,460 was recorded as a reduction to deferred production costs.’
If you have a car dealership and the competition across the street sells less cars then you, but makes a profit on those sales – while you sell more cars, but eat a $5,000 loss on each car…
Which guy would you rather be? The loudmouth who says “Look how many cars I sell!” or the quiet one who just shuts his mouth and counts his money in the bank?
Keesje and others
A 787-7 “lite” can be kill a revamped A330X too.
Any CFRP will be 10% lighter at a minimum….
Maybe, if Boeing replaced the wing & heavy wingbox, gears, enegines optizid for medium long, heavy flights.
Maybe of course, even better.
An all-new circular CFRP cross section 3-3-3 would be lighter than the higher CFRP 787 fuselage.
Seats and aisles 17″ wide and eliminating the “Crew rest area” with this CFRP circular cross section
The aircraft could be very efficient. But a convincing market would have to appear for Boeing to launch such a project, a sort of smaller 787 for shorter missions, 8 hours for example.
Airbus is not going to do a A330X, it will be a replacement. Problem is how to design an aircraft that do not step on A321XRL and A350-900 toes. And sell enough of them to make it worth their while.
Oh and do it with a new cockpit architecture that the FAA and EASA will be demanding ( when they figure it out).
I don’t know about that. I am still waiting to see how much a carbon fiber wingbox will save in weight for the A320/A321
Another thing,
Any insider with a minimum of aeronautical culture knows that in the past, Airbus had never bet on the A330 but rather on the A340. It was only through a mistake and a bad analysis of the market with immeasurable luck that Airbus had seen the A330 sell. Nothing was planned before. Airbus has always had the culture of launching “20-year old aircraft”,
Shoot before aiming is not commercial…
What an amazing & un-logical observations. The launch the A330 & A340 were at the same time.
Looking back the 787 was a responds to Boeing customers switching to A330s.
https://en.wikipedia.org/wiki/List_of_Airbus_A330_operators
Specially when the longer range -200 shrink proved popular, quickly selling 600. And Airbus increased MTOW/ fuel capacity on the-300.
Boeing had to act & created the carbon, similar sized 787, after the market chocked on the the SonicCruiser.
Keesje,
Is it so important that the A330 and A340 were launched at the same time in December 1987 to refute my claims?
Airbus did not think that the A330 would sell as much, the A340 flew further and was already planning to beat the Boeing 747-400 in the early 90s before launching the A380 (ex A3XX since 1996) The 777 was a bad surprise for the A340, then from 2000 without really knowing why Airbus noticed that the A330 had been adopted by the market but it was not the initial plan just like the A380.
Then you say that Boeing customers were switching to the A330. What does that really mean?
With nearly 2000 777’s sold I can only deduce the same thing is not it for Airbus customers? So I would also say that a lot of Airbus customers ordered the 777s. Until 2008 the ME3s for example didn’t even know the 777. Yes, the ME3s ordered their first 777, 18 years after the launch of the 777-200 in 1990 Worst Lufthansa ordered its first 777(-X) 23 years after its launch.
-> It was not until DAS’ 08 that the ME3 ordered the same day a lot of Triple 7
->I rather see the 787 (Dreamliner) as an idea carefully considered at Boeing. As early as the end of the 90s Boeing wanted an aircraft that could “fly more flight, more lines” when the 777 had just entered service, and that’s how the “Point-To-Point” flight was in accordance with Boeing’s policy of confirming through the 787 a “smaller aircraft with a range of large bodies”. Historically I have never seen Boeing copy their competitors, but the opposite See how Boeing prefers to wait for something better over time, the NMA absolutely had to be a widebody but not a 757 proxy of which the A321neo is an imitation…
That’s why in 2023, Boeing still does not see the need to launch build a simple 757 replacement whose thin market has taken Airbus to grab a meager share with ~600 A321XLR…
Thanks
“That’s why in 2023, Boeing still does not see the need to launch …”
BA doesn’t have the funding to launch any new programs — regardless of whether or not it “sees the need”…
That’s why Airbus is launching a lot of new aircraft too.
Completely new like the -XLR, and the A330neo? Is it really a funding issue? A brand new program for Boeing would cost only 1.5 billion USD over 8 years which is equivalent to 12 billion in the 8th year.
It’s the time required for a development…
keejse:
I love the re-write of history and urban legend repeat.
Boeing had ideas, just like trouble shooting a system problem you have to start somewhere. The sonic cruiser was nothing more than a starting point for a conversation and assessment.
And what they got was, we love the idea but we have some to realize speed has a fuel penalty and we don’t see fuel being cheap again, so its not speed we want, its economics.
Now I believe Boeing had the 787 concept in the tool set but I can’t prove it. I always had backup or even main co ideas on things.
Boeing marketing did a brilliant job on sussing out what the Airlines wanted and it all pointed to a modern jump in all areas possible.
So, yes we love the CRFP for weight and the low maint requirements, bleed air is a pain and takes up way to much room and needs to be cooled off so yea we like the mostly electric.
So, how about a bit larger than the 767 and do all the rest of that stuff?
And so an incredibly design was born and its not been superseded, Airbus A350 is still bleed air.
The 787 was as brilliant as the Concorde was in tech and viable in its economics.
Do not make the mistake of conflating the mess up the management made of the program with production success. Sometimes (A380) it is both and sometimes its not.
But day in day out the 787 dispatch rate is as good as any non electric variant and what I can tell you, pneumatics is not the future, electric and electronics is (remember, Plastics (aka The Graduate)
I saw the same progression and I loved Pneumatics. But those are gone from my controls world and are not coming back.
Airbus made a joke of Plastic airplane only to come out with their own plastic airplane (with an Aluminum nose!)
Management execution on the 787 sucked, but its was and continues to be the most advanced and brilliant aircraft in commercial aviation.
I had read an interesting article on the Sonic Cruiser. It was a parallel development to the 7E7/787 as the latter was the result of a more conventional swept wing than 2 other versions of the Sonic Cruiser!
Yes you heard right, there were TWO types of Sonic Cruiser because there was one Sonic Cruiser which flew slower than the one presented at Mach 0.98 while the other flew faster than a conventional aircraft and the 7E7 was the fruit of the same work that had started at the end of the 90s.
The 7E7 was the extremity
slow of the Sonic Cruiser study,
the last solution
That is why the 7E7 was in December 2002 the sudden replacement and cancellation of the Sonic Cruiser.
All these studies were the same…
Bryce
…”Comparing “upgrade” programs:
A330neo: $2B development costs, 300 orders
B747-8: $4B development costs, 157 orders.
With the B747-8 as a benchmark, the A330neo is doing very well ..”
—-
Poor Bryce, he still hasn’t understood the game of competition. 2 billion for a competitor to sabotage the canceled A380-F market (June 2006) a few months after the launch of the 747-8I /-8F at the end of November 2005. You don’t see the connection? Well it doesn’t even surprise us…
Bryce still hasn’t figured out ‘the deprivation ploy’
Bryce
…”the A330neo is doing very well ..”
—-
Lol ! Couet’s method
He is one of the victims of the Boeing 787 Dreamliner. The A330neo flows like the Titanic with a few last violin notes… 🎻
With this we understand why an aircraft that cannot borrow Boeing standards (and that’s why the A350 MK1 was stillborn) no big bins , no rest area layout for flight crew and pilots, no more cabin humidity, reduced cabin pressure, should I continue?
Then they launched the A350-XWB
in disaster and a deleterious Power 8 climate copying the Boeing 777/787 standard.
I understand why the NMA has not been launched. The market is virtually non-existent. Flying without a rest area for the flight crew for ~6 hours of mission such as the A330neo is a standard annihilated by Boeing…👍
The A330neo has a modular rest area for the flight crew and cabin crew located below deck https://www.airbus.com/en/products-services/commercial-aircraft/cabin-and-comfort/welcome-to-airspace-cabin/a330-cabin
Yes below deck,…
before Boeing introduced their new standard in the 777 and very soon after the 787 saving cargo for Airlines and more $$$ revenue was Boeing’s main argument against Airbus at launch of the 787 Dreamliner! then the A350MK1 had suddenly become -XWB in 2006 …
People, some of you are repeatedly personally attacking others, in violation of Reader Comment rules. Knock it off or I will close comments. It won’t take me long on this score to close things down.
Some of the comments are also churlish and not contributing to dialog. While not specifically a Reader Comment rule issue, these demean the conversation in the eyes of the owner of this outlet–me. So I’ll give you a chance to clean up your acts, or I’ll close comments anyway.
Hamilton
https://www.macmillandictionary.com/us/dictionary/american/churlish
churlish- impolite and unfriendly, especially toward someone who does not deserve to be treated in this way
Scott has used a very stylish piece of syntax here.
It’s actually a very broad adjective — here are some of its synonyms:
https://www.merriam-webster.com/thesaurus/churlish
Note that “clownish”, “oafish”, “ungainly” and “unsophisticated” are on the list.
Of particular note, from the link:
“When might clownish be a better fit than churlish?
“In some situations, the words clownish and churlish are roughly equivalent. However, clownish suggests ill-bred awkwardness, ignorance or stupidity, ungainliness, and often a propensity for absurd antics.”
“Pretentious”, “cheeky”, “provocative”, “ignorant” and “mythomaniac”, also come to mind…
The clocks are set
alright let’s move on…
Scott:
Thank you, that was a great piece of writing and put down (I hope that does not include me but its possible)
Delta flies from profit to profit with its Airbus aircraft, especially the A330Neo. In addition, they fly reliably. Delta consistently relies almost exclusively on Airbus and shows how to make a profit. This will encourage other airlines to order more A330Neo again. If Delta is the model and profit is the yardstick, the A330Neo will get many more orders and Airbus will make a profit too.
The German Lufthansa now also has the ITA A330Neo in its inventory. This means that follow-up orders will also be placed here.
Based on an A339-XL, an F version is also to follow. Probably once the A350F is ready and delivered to the first customer.
The time of the A330Neo is only slowly beginning.
Not being sarcastic but that can be said of any aircraft. Delta was making money and lots of it with old McDonald Douglas and Boeing aircraft.
The A330NEO is a good aircraft, but like the 777W, its replacement may be three different aircraft because there are more capable aircraft now than when the A330CEO debuted.
Yep, Delta did fine with the A330CEO, as I recall they were deeper interested in the NEO but that has morphed into more interest in A350.
Others have done fine be it CEO or NEO. But aircraft are compromises of range and pax count and you slot in the best you can manage, not the perfect aircraft. Sure a few routes are ideal, but, the rest are compromised and its an average.
Airbus dummed down the A330CEO for China in what they called regional, just a paper thing that they got fewer bucks for a lower range A330. Japan does the same with a dense pack 787 (both ANA and JAL)
United flies the 787 cross US, not its best use but United has other routes that does use the range and pax count. Its flexible.
The 787 hit the more flexible slot with the right range and pax count.
What I can say from the Boeing side of a coin, FedEx management and the mechanics loved the 777F. And that was before they too advantage of the 10 ft AMJ cans.
I never heard management rave about Airbus nor the mechanics (and granted, American mechanics tend to be biased to US way of doing things)
Those same mechanics did not have anything good to say about the MD-11F.
Its not any single airline that drives the boat, its the amalgamation of all of them and clearly 787 sales are far higher than the A330NEO.
Airbus did offer a lower weight A330-300 CEO marketed as the A330R.(2700nm or 5 hours)
China never bought any . The only customer with 20 or so was Saudia- which it seems is ideal due to their position.
Seemed to be OK for China (Guangzhou to Harbin is just under 5 hours so even less between the major cities plus Hainan Is which is semi tropical holiday destination). Im guessing the cargo freight was limited too much
Duke:
Are you sure, was it just A330-200 regional s China bought?
“Lufthansa now has the 330 neo in it’s inventory”….
Expect more follow up orders by whom ?????
All other carriers in the group have finalized there future fleet requirements!!
It’s the 787 and the A350 !!!
Sorry to disappoint you !!
“All other carriers in the group have finalized there [sic] future fleet requirements”
Got any evidence for that very absolute assertion?
Until recently, we also thought that AF-KLM had finalized its widebody fleet requirements…and, yet, it’s now looking for more…
https://simpleflying.com/air-france-klm-new-widebody-order/
Memo to Byrce ;
What do you think KLM is replacing the 330 ceo’s with …🙄🙄
Obviously the 787!!!
Again ,with the Hopeful 330 n order.. which definitely is not happening anytime soon…
Enjoy your evening …
More opinions presented as certainties…
That is the funniest thing you have ever published.
Thank you, good laughs are much needed in todays world.
The A330neo may not be a bestseller, but it is still useful for Airbus to compete with Boeing in the mid-size widebody market segment (787-9/10, A330-300/900, A350-900).
These are delivery data for midsize widebodies since 2015 (the 787-9 entered service in the second half of 2014).
– Airbus: 762 (204 A330-300s, 95 A330-900s, 463 A350-900s)
– Boeing: 662 (580 787-9s , 82 787-10s).
Regarding unfilled orders:
– Airbus: 473 (182 A330-900s, 291 A350-900s)
– Boeing: 560 (452 787-9s, 108 787-10s).
Airbus delivered more midsize widebodies but Boeing has more unfilled orders (had Boeing not suspended 787 deliveries for over a year, Airbus and Boeing would likely be nearly evenly matched in both deliveries and unfilled orders).
The A330-900’s contribution is not negligible, as it has more unfilled orders than both 787-10 (108) and 787-8.(34).
The A339 has essentially taken the place that should have been taken by the A350-800, so it should perhaps be evaluated more as a smaller (and cheaper) variant of the A350 than as a successor to the A330ceo. In this respect, the A339 can be useful both to help sell more A350s and to prevent some A350 customers from buying the 787 (although it will certainly not sell as well as the A330ceo) (several A339 customers are also A350 customers: Delta, Virgin Atlantic, Starlux, Azul, ITA airways, Air Mauritius, Malaysia Airlines, … ).
The A330-800 is not selling (5 unfilled orders), but it isn’t a big issue as small widebody segment is currently shrinking to a minimum (34 unfilled orders for the 787-8).
“The A339 has essentially taken the place that should have been taken by the A350-800, so it should perhaps be evaluated more as a smaller (and cheaper) variant of the A350 than as a successor to the A330ceo”
Interesting point — apart from range, the two are quite comparable:
http://www.aviatorjoe.net/go/compare/A330-900neo/A350-800/
The A350-800 was to fly 3,000 km more and was much heavier. I see Mach 0.86 for the A330neo, which is wrong, in reality the A330 flies Mach 0.82 and Mach 0.85 for the 787 and A350.
I find that the A330neo market is lukewarm.
If Boeing observed that it would be as successful as its A330ceo predecessor, Boeing could quickly launch a 3-3-3/9-ab narrower. CFRP fuselage than the 787 with a smaller circular fuselage section and “gaining weight” not allowing to adopt rest spaces for the aircrew and pilots since it would fly less far than the 787 (Dreamliner.
But Boeing sits quietly in launching the 777-X with now 365 firm orders with prospects for another 250-300 aircraft by 2043. I don’t see the A330neo doing that much, to be honest I still see 100 A330neos sold scattered through 2043…
I would like to be wrong so that I can tell myself that Boeing was wrong but it would be a wishful thinking…
“777-X with now 365 firm orders”
Don’t forget to subtract the 118 orders that are classified in ASC606…
As I understand it they can’t list them as Firm so would need to see the link that says otherwise.
As I understand it all, Airbus does not keep their books as correct as Boeing.
@TW
Here is the link from the BA website:
https://www.boeing.com/commercial/#/orders-deliveries
324 orders are firm, which include
777-300ER 837 832 5
777F 314 246 68
73 freighters and -300ER’s from the first generation, not the 777X follow on program.
https://en.wikipedia.org/wiki/Boeing_777#Operators
————————–
BTW:
Read the first line on the BA website:
‘ASC 606 imposes additional criteria…’
Not sure BA would volunteer this info
@ TW
“As I understand it…”
That’s the central problem here, isn’t it?
Your “understanding” of various matters doesn’t intersect with what others understand.
Thanks for that fine, thorough comment on the WB situation for both companies, enrigh.
enrigh
You forgot the 777 and 777-X in the mix. Which makes your arguments unrealistic….
Thks
He explicitly referred to “mid-size widebody market segment (787-9/10, A330-300/900, A350-900).”
The 777, 777X (and A350-1000) aren’t midsize — they’re VLAs.
(Yet another 3-letter acronym for you to do some research on — in addition to OEW and TIA)
Thanks
LOL, I have yet to see that definition in Websters.
And I thought 747 and A380 were VLA.
Correct. If I recall from Boeing’s point of view the market is categorized this way in 3 class cabin;
-> 200-250 seats, small aircraft.
-> 250 to 350 seats, mid-size aircraft .
-> 350 to 400 seats, large aircraft.
-> 400+ seats= VLA…
(!) Note that the 777-X in typical 2-class configuration is 426 seats and the 777-300ER is 396 seats.
They should not be considered as VLA…
Boeing itself classifies the 777X as a VLA.
So does Leeham:
https://leehamnews.com/2019/10/28/boeings-777x-problem-shifting-market-lagging-economics-softening-order-book/
Bryce ..no offense
But if I wanted your opinion , I’d ask for it..
Since I don’t ….go bother someone else..
I have a higher tolerance of 10 year olds temper tantrums ,than I do of yours..
One simple question ???
Even you can answer this..
How many carriers operate the 787,,and A330 neo together .??
Zero…..that leaves out Austrian..
Swiss is quite happy moving forward with the 777/350 combination, why would they take a step backward in technology and order the neo…
My point stands..!!
No reason whatsoever for Lufthansa to order the 330n..
ITA ..your on your own.!
@Robet L
I can only think of one..
Virgin Atlantic….
Not sure about any others..!!
For the little story,
Do not forget that Virgin was forced (as an A380 customer, who never had delivery of the A380) to change after firm order of the A380, more than 20 years ago. It must have changed their order. Virgin had in the meantime ordered the 787-9, then rumors in 2015 appeared of interest in the 787-10 in articles at the time, The 787-10 was in line with the airline’s missions. It was forced to change its A380 orders never delivered to A350-1000 and A330neo in 2015, the story is quite similar with Emirates which was ordered the A350, then canceled in 2014, then “changed” to A350 and A330neo failing to receive any more A380ceo’s or A380neo’s never launched finaly..
(!) I’m CONVICED that Virgin and Emirates reluctantly ordered the A350 and A330neo.
I REPEAT, I am CONVICED that Virgin and Emirates reluctantly ordered the A350 and the A330neo!…
Repeating a “conviction” doesn’t turn it into reality 😉
Truer words were never spoken, its really worth repeating that it cannot be applied selectively.
This response reminds me of that Straight Talk wireless commercial. No offense..
https://www.ispot.tv/ad/1BU1/straight-talk-wireless-no-offense-free-motorola-g-power
@Robert L,
Absolutely,
the A330neo is an aircraft that airlines like Lufthansa, Air Tahiti Nui or Hawaian Airlines don’t even want to look at anymore because of the 787 (Dreamliner.
The A330neo mostly finds a few african customers such as Air Senegal, which will fly ~ 6000km to Paris CDG for exemple
Some airlines from the Gulf, or from North Africa such as Air Algerie or Tunisair…
Their typical profile are regional operations whose routes from North Africa would be to the Quebec (Canada), or New York but no more.
I don’t know if it’s such a big market. But I think that Airbus launched it so that in certain (thin) scenarios it could appeal to this kind of airline.
All the others were for A350-900s and all the more so the 787 (Dreamliner.
Thks
Robert
Just a little point to that;
You do understand that there was an overlap of production when the 787 and the A330Ceo were both being produced in large numbers and there are carriers that operate the A330 & 787.
As mentioned in the article above, there are a ton of Ceo’s in operation and the fleet is still fairly young.
But Air Canada comes to mind, as A330 & 787 operators.
Air China.
Air France.
China Eastern.
China Southern.
Egyptair.
Hainan.
Hawaiian.
KLM.
Korean.
Lufthansa.
Oman Air.
Qantas.
And on…
@ Robert L
You’re being churlish and bad-tempered, despite @Scott’s comment above.
You posted your comment after his — you should pay more attention to what the moderator says.
A330 production will increase to rate 4 per month next year.
And Boeing is working to 10 x 787 a month.
So, doing some simple math (all I am capable of) that is like 60% market share?
According to Forbes, it would be 68% in 2023 against 60% in 2019.
At any rate Boeing is number #1 in sales of widebody jets.
We had no doubt, and that for a long time 👍
Not sure that “sales” is the correct descriptor when giving something away at a loss… 😉
Prove it.
Probably too young to get the broken record part but I am sure there are U Tubes on it.
Absolutely. No evidence for that. I already canceled his fallacious argument just before PAS’23…
He claimed “we would have told him”, without giving any sources.
Just that Boeing’s 68% market share
seems irrited him
The mythomania is severe here
@TW, @Checklist
Loads of evidence presented here.
The problem is your inability to read it, understand it and/or accept it.
10 a month by 2025.
They are working on getting to 5 a month by the end of the year.
Production rate for A350 is scheduled to be 9 a month end 2025. Restricted by supply chain issues for now.
https://gulfnews.com/business/aviation/airbus-predicts-supply-crunch-with-widebodies-as-travel-rebounds-1.96210098
Everyone is being constrained by supply chain.
Stay tuned.
One shouldn’t forget China when considering potential future orders for the A330 neo / A350.
There are more than 200 A330s flying in China, and AB has completion centers for the A330/A350 in Tianjin.
In addition to fleet replacement, there’s also fleet growth to be considered.
Unlikely that BA will be getting much (if any) of that cake, in view of the continually escalating US-China trade war.
Fortunately, Airbus has “political advantages”, without that the spanking is painful…
BA has “political advantages” in the US — just look at all the contracts that BDS gets from Uncle Sugar (Buy America).
Leave the military sector aside. For Airbus it’s the same for Europe. Just look at the American airlines that are also buying Airbus. This is a very different position from the Sino-American trade war. Boeing is very disadvantaged because of this
Nice summary article for @Frank, @Pedro and any other Canadian readers/commenters (and for the rest of us, too):
Montreal Gazette: “A220 jet could rank among commercial aviation’s biggest successes: Airbus”
“Over the next 20 years, Airbus’s forecast calls for about 7,000 units to be delivered in the A220’s market segment, which includes aircrafts with 100 to 150 seats. Airbus estimates it controls up to 60 per cent of sales in the category, ahead of competitors such as Embraer’s E2 and Boeing’s 737-700.”
“Demand for the A220, which is skewed toward the jet’s largest variant, is high, Dewar said. The executive says he met with more than 15 potential customers in Paris.”
““There’s a lot of interest in the market about a stretched version of the A220. That would really be a big development,” Dewar said. “In the short term, we’re working on the three priorities we have: maturing the product, ramping up the program and making it profitable by mid-decade.””
“As designed, the plane’s wings are robust enough to support a longer, heavier airframe, Dewar said.
““There is quite a bit of capability in that platform,” he said. “It’s of strategic importance what we do with the stretch. We’re not talking specifically anymore about exactly what we’re going to do. We’re just working with customers to understand their needs. Of course, it has to fit into the product portfolio of the single aisle of Airbus. So I can confirm there is capability in the wing, but we’ll look at what makes sense for the market, and how much change we would do to best position the product.”
“Building a stretch version would possibly allow Airbus to offer airlines a choice of engines beyond Pratt & Whitney’s geared turbofan PW1500G, which recently hit a rough patch. In May, Deutsche Lufthansa’s Swiss temporarily grounded a third of its A220 fleet because of engine issues.
““For the short term, it’s a single engine,” Dewar said. “We have the Pratt PW1500, which is a very high-performance engine from the point of view of operating costs. We unfortunately have some short-term maturity issues that we’re working out with Pratt.
““If we did go for multiple engines, that would be when we do substantial change like a stretch version. That would be the time to consider that.””
https://montrealgazette.com/business/a220-could-become-one-of-most-successful-commercial-aviation-programs-airbus-exec
I have a feeling this is a plea from the Airbus Canada joint venture for Airbus to launch it.
The other gray area is the PW1500 engine which does much more damage than it performs.
Nothing short term, only long term trouble.
I’m very dubious at this stage of the project, as long as Airbus hasn’t announced anything official,
#D. CalhounIsRight won’t “have any heartburn”👍
A stretch may trade range for seats. To avoid this, Airbus must consider revising the wing—perhaps to the point of a new one—or the engines must reduce fuel burn by 1.5%-2%.
The idea of a new wing is nuts! Wouldn’t it be much easier and cost to reduce fuel burn by 1.5%-2%?
That’s the thing – Muckamuk,
It’ll either be re-do the aircraft, spending more to get a new wing and engine choice on it – or simply plug it fore and aft of the wing, get it close to 150 pax in 2 classes, but lose range.
Because of the problems with the P&W GTF, I guess Airbus is wondering if it might be wise to spend the money, to give an engine option and keep the range in the same ball park.
I dunno…. Plugs = $1 billion
Engine choice = $3 to $5 billion
I guess they’ll go to customers and ask them what they’d like to have and see if the business case makes sense.
I wonder if CFM would/could make them a lighter, de-rated Leap engine. Any engine guys in here know if that is even possible? What would that cost?
Frank:
Nothing to stop CFM from making a smaller LEAP.
But if its going to fit the A220-500, it should be shrunk down. The LEAP A is larger diameter than the LEAP B (the CFM-56 was the same size but that is the wing height issue with the MAX)
P&W can get more out of the GTF on the A220, it was designed for that size range (as well as the larger GTF on the A320/321)
The GTF was designed to be scalable. The LEAP was a stretch to get it down to the size that would fit the MAX and get the same economics as A320 series got.
I have no idea what they are really thinking, trying to hang the smaller LEAP as is on the A220 or ?????
I am not sure they do and there for sure is no clarification of Airbus thinking, more confusion as more choices past the simple stretch keep coming up and we don’t know if CFM is the least bit interested (I would not be for possible low sales, makes no sense.)
Have to revisit weight on the engines as well.
Yah – weight is a big thing.
I think Airbus is unhappy with the P&W issues and wants to bring in another option as a ‘just in case’ for airlines.
Once again, it all comes down to money. If it can be done relatively inexpensively with a good chance of sales, it’ll happen. If customers don’t order it (or at least indicate they would), it won’t.
Frank:
Weight in this case is a huge thing because Airbus is struggling with how to do the -500 that has as good or more range than the -300.
So if range is the driver then you have killed part of your engine sales market as the GTF will have more inherent range (better SFC) and its lighter.
And while Airlines might say they are interested in engine choice, P&W continues to fix the longevity issues with the GTF (reliability is either fixed or close to it and SFC is up again with some tech inserts CFM has not managed).
So lets use a wild case for 5 years for the -500 and new LEAP engine.
In the meantime PW has 100% of the market and you have sold some A220 to most of the people who are going to buy it.
Would they in turn then dump a now reliable long lived power plant for an unproven one? Not to mention one that will never even match let alone exceed the GTF for SFC?
So, still using the example, Airbus does the -500, CFM does the LEAP Minus and 50% of the A220 production is the -500.
In a real leap lets say CFM gets half of that 50%. But the monthly production of the A220 is 25 a month, CFM gets 12 of that (assume the bias/benefit to PW) and now you are talking an all new engine for 12 aircraft a month when you are selling 60 a month for 737 and 35 a month to A320 series.
And for a small market share assumed, you are going to do a new engine?
I don’t see CFM playing that game. They need to recover costs into two different versions of the LEAP when they used to only have to do a slight fit difference with a huge part of A320 series and all of the 737.
If you remember GE declined to get into the A330NEO program as Airbus wanted a new engine and GE simply did not see enough market there to do that.
Well stated TransWorld.
Spirit has got an agreement that has been voted on and agreed to:
Machinists Union approves contract with Spirit AeroSystems
https://www.ksn.com/news/local/machinists-union-approves-contract-with-spirit-aerosystems/
Light on details, but apparently it’s back to work
I recall I predicted that!
Thank you Frank, got behind today with some other stuff.
Interesting to see BA’s “Partnering for Poverty” program unraveling…
Spirit belongs to Boeing now? Sources, links?
@Bryce
Sir.
Your “Partnering for poverty” ,
Post was ,at best, moderately amusing..
Used ,10 times over.., becomes very Mundane;;;;.
Safe to say ,it ran it’s course…
Give it a rest, please.!!
The term comes from Kevin Michaels, Managing Director of Supply Chain Advisory — if you don’t like it, take it up with him.
“HOTR: Boeing slammed in absentia at conference”
“Kevin Michaels, managing director of Aerodynamic Advisory, is a supply chain expert. For many years, he criticized Boeing’s approach toward the supply chain. Tuesday wasn’t any different. He once again criticized Boeing for its treatment of the supply chain. Noting that suppliers, mainly Tiers 1 and 2, went through “Partnering for Poverty 1 and 2” cutting prices…”
https://leehamnews.com/2023/02/09/hotr-boeing-slammed-in-absentia-at-conference/
@Byrce
I’m taking it up with you ..!!
I’m familiar with his report…
I don’t condone his comments in any way, it’s your incessant way of using it in your comments ,is what I’m taking offense too…
It’s a very convincing “catchphrase”…!!! No doubt!!
But ,yes we got it !! So Is this what we’re expecting from you, from now on in your comment section???
You’ve used it like everyday for the past week !!
@ D.Andrews
Freedom of expression: we all get to choose our own syntax, provided it’s within reader comment rules.
I happen to think that Mr. Michaels hit the nail on the head, and coined a phrase that neatly describes the program.
If you don’t like it, that’s your problem.
I just thought I would do some ballpark calculations. Something a technician/engineer needed to daily.
I think its pretty conservative based on Boeing paying down the 787 debt (prior to the shim debacle).
So, Boeing makes 10 million excess per cost to mfg a 787 (I am just saying excess to avoid the term profit and getting it tangled up in total program losses to this point)
If Boeing made 1000 more 787s (seems also conservative from the current sales rate and production planned and no replacement in sight) that would be 10 billion excess no?
Production is now more efficient as its all in Charleston so that may well be conservative so it seems that a complete break even is in potential sight and that would be in lieu of (24 billion losses these days?)
If I squint I can see a small profit.
“Something a technician/engineer needed to daily.”
Maybe the mechanics should leave the calculations to the technicians/engineers 😉
I’m not even bothering anymore.
Q2 coming out soon….
We will have victory in our time.
Using theoretical explores the range of possible outcomes.
1. Scott raised the subject and while its one I have followed, clearly for what some had forecast production on A330NEO
The more astute observes have noted I did not say word one if there was an ROI in the A330NEO decision or not. I don’t know nor do I really care. Its Airbus decision on what the A330NEO does for Airbus (or does not)
Having the base for the A330MRT still being made clearly would be one cost offset. Boeing does the same with the 767 program.
I can see cannibalization of the A350 line as well. When there was no A330NEO, all the orders were moved to A350. Maintaining two lines that are competing with each other for the bulk of the sale and low rate production and low over contrition to Airbus is an interesting question. I am not jumping up and down saying its doomed Airbus, just interesting and there look to be plus and minus and its Airbus that has to decide where the line falls.
Basing 787 production on previous screw up, mistakes and stupidity and what those numbers are is simply preposterous.
If Boeing can make money on a 787 delivered they will continue to make 787s. Airbus saw they never would on the A380 and terminated it.
Boeing terminated 757 production on the same basis. There was so little demand and none foreseeable, the stopped the program. That decision made full sense.
Boeing may well never make money on the overall 787 program, they can loose a lot less or pay off the debt incurred.
None of this is decided on quarterly or even yearly basis.
Paying penalties to airlines for non delivered 787 is an interesting aspect as those airlines did not want them at the time in the first place but desperately want them now.
@ Frank
When discussing the program costs of the 787, don’t forget that the bill for inspecting/repairing the in-service fleet of 787s for manufacturing flaws has yet to come.
That fact that those inspections/repairs have been postponed to coincide with D-checks, merely delays the costs — it doesn’t make them go away.
As discussed here recently, scrapping an affected frame may be a cheaper option than repairing it — in which case BA will have to pay (steep) compensation costs.
This program just keeps on giving.
In terms of high repair costs,
we have an interesting case also on the silence of the Qatar Airways CEO. What could calm him overnight if is not a pecuniary satisfaction from Airbus?
We had a radio silence that settled Airbus today regarding the poor design of the A350 CFRP skin, which is deeply deteriorating the lower layers up to the lightning protection grid.
A problem that the Boeing 787 does not experience.
There is no “D. Gates Toulousain” to offer us some crisp stories on Airbus.
Damage, but the calmness of AAB is surprising…
What silenced AAB was a court order to produce correspondence between him and the Qatari regulator — correspondence that didn’t exist. He settled quickly to prevent further loss of face. It was well documented in the aviation press at the time.
And the 787s at multiple airlines have ongoing skin damage issues on the wings — lots of photos on the web of 787 wings covered in speedtape.
You really are very badly informed 🙈
https://simpleflying.com/qatar-airways-evidence-qcaa-grounding-airbus-a350/
https://mentourpilot.com/peeling-paint-this-time-its-boeings-787/#:~:text=This%20time%2C%20the%20problem%20appears,its%20wing%20and%20horizontal%20stabilizer.&text=But%20this%20problem%20isn%27t,just%20under%20a%20year%20ago.
False. The 787 is just a cosmetic issue unlike the A350. One is solved by a coat of black paint beforehand.
Boeing found a quick solution because it’s not a design problem unlike Airbus which made radio silence.
In other words, there’s no way this is just a cosmetic issue for the A350. The aircraft can deteriorate very quickly in very hot climates.
I rub my hands with Emirates and Air Algerie. We will hear about this story.
For AAB he doesn’t seem to be “sitting there on the side with his arms folded” anymore, as before, there is no evidence that he lost the case.
This story had dried up the image of Airbus, it had become a shame….
The A350 issue was fixed by re-painting — the problem was poor paint adhesion to (an oxide layer on) the underlying copper lightning mesh, which affected a small number of frames (depending inter alia on humidity before/during initial painting). In one particular frame, the problem was caused by an incorrect (sanding) procedure carried out by an MRO service in Shannon.
AAB settled the case because he was caught with his pants down: there never was a grounding order from the Qatari regulator — it was a pure fabrication.
In the case of the 787, the problem is UV-induced de-crosslinking of the polymer structure of the paint layer. 787s are still being flown on a regular basis to Victorville to have the affected surfaces re-painted.
You haven’t a clue what you’re talking about (as usual).
Checklist:
There is a bit more to the Boeing end than paint though that part is accurate as far as I know.
Boeing did remove some of the layers of protection on the wing tank and at the time did it without the approval of the FAA.
Pretty tech area but had to do with the electrical grid as well as fasteners and having to main tin an isolation putty on those fasteners in the tanks (possibly above them outside)
Its an area I wonder if it will not surface as well.
@Bryce
‘the bill for inspecting/repairing the in-service fleet of 787s for manufacturing flaws has yet to come.’
You know, it could turn that into a win, though – for Global Services.
“D-Check coming? Bring it into our shop, we’ll do the fixes on the shimming issue, no cost on that because it’s our fault and give you a decent price on an entire D-Check at the same time.”
At worst you price the check to cover the costs of the shim fix. Maybe it becomes a break even scenario, but perhaps you steal business away from other MRO’s and keep the lights on and bills paid.
You sell it as ‘in house expertise for the fix’ and as time goes on, the crews doing the fixes get better and better at it.
Kinda like when a car dealer has a recall, but gets the owner to come in for an oil change, tire rotation and alignment. Ask them what they are paying for the D-Check and ask to see the contract. Tell them they’ll beat that by 10% and do the shimming thing.
Price it reasonably and it just could work. Be a$$holes about it and they’ll take it elsewhere and stick BA with the bill.
———————–
Services made a 15.5% margin last year. 12.4% the year before
https://s2.q4cdn.com/661678649/files/doc_financials/2022/q4/4Q22-Press-Release.pdf
There’s room there to drop the price by 10%, make a few points and make the airlines happy.
—————————–
A quick look around has a d-check costing between $4.5 and 6 million for WB’s.
https://en.wikipedia.org/wiki/Aircraft_maintenance_checks
Lop off $500k. Sell it.
OR:
– No thanks, BA: we’ll do our own D-check.
– Send your team over to do the shim inspection before any of the critical structures are removed.
– If no issues are found: lucky you. If issues are found, you fly the plane to the US for repair, and then fly it back again afterward — all at your own expense.
– We then carry on with the D-check at our end.
Big names like Lufthansa Technik, ST, etc., will want to keep that business to themselves. They’ll probably only surrender it to BGS if they get the work done at cost — which then has no upside any more for BA.
I guess we’ll just have to see how this plays out.
Frank:
Boeing provides services but as far as I know it does not do D checks by itself.
All those Services are bundled with MRO operations.
You seem to resent Boeing doing what it can to recover costs, the market plays out and that is how it should work.
I think all signs are (and were) Airbus will launch a simple stretch of the -300, adding some MTOW, a capacity for range trade-off.
This aircraft will include an additional 20-25 seats and have a range of “just” 5+ hrs, which seems totally acceptable for Europe, China, US East coast etc.
https://groups.google.com/group/aviation_innovation/attach/9fe98471cda1d/A220-500.jpg?part=0.1&view=1
If the PW1100G matures further, that seems an ok enegine solution.
BA is screwing Uncle Sugar:
“A recent report from an American think tank has revealed that the U.S. Department of Defense (DOD) paid an astonishing $51,600 to Boeing for a trash receptacle originally priced at $300. This exorbitant payment came after the container was designated as a non-commercial item, allowing Boeing to raise its price significantly.”
“According to Responsible Statecraft, the online magazine for the Quincy Institute, the Pentagon paid over 170 times the original price for a trash receptacle used in the E-3 Sentry surveillance plane. When the civilian airliner it was based on, the 707, fell out of use, the container lost its “commercial” status, enabling Boeing to increase its price substantially.”
“The report comes after a CBS News investigation that discovered Raytheon Technologies had raised the cost of its stinger missiles from $25,000 to over $400,000 per unit. In response, a group of bipartisan senators, led by Bernie Sanders, sent a letter to Defense Secretary Lloyd Austin, demanding an update on the department’s efforts to address corporate price gouging. The senators expressed concern about the DOD’s failure to account for the significant amounts of money allocated to highly profitable private corporations.”
https://bitcoinworld.co.in/?p=44625
Someone has to pay for those share buybacks
Someone has to subsidize the MAX, 787, 777X, KC-46A, VC-25, T-7 and Starliner… 😉
LOL – maybe the services should be doing their job, this is not the first time this has come up.
I believe the last big blowup was Lockheed and toilet seats and hammers.
Thats before their time TransWorld
On another note……..Delta 717’s
https://simpleflying.com/when-will-delta-air-lines-retire-its-boeing-717s/
More A220s on the horizon…
Interesting interview with BCA’s new Randy VP Marketing, Darren Hulst
-> It confirms what I have always thought of the thin A321XLR market since 2019.
He confirms what CEO D. Calhoun that there will be no new development since he states that the 737MAX with the -10 complements the 737MAX family very well, as I strongly supported here in December 2022 , when I promised the -10 would get a waiver when no one believed in it, especially the Boeing haters here
-> It confirms as I said a few days ago on the feasibility of integrating the next generation of 777-X cabin to the 737MAX family that I have already called “Boeing Sky Interior 2”, as an evolution of the Boeing’s cabin philosophy on Day 4 of PAS’23
-> Still has no decision between a 767MAX-F or a 787-F, the weather will determine according to him, the right way to go.
(!) The 777-8F was just launched anyway.
My view is a 787-8.5F after getting the HGW gross weight done. A slightly narrowed section of the 787-9 HGW will draw the most from an increased payload in both directions. IMHO
-> I stop here
Enjoy!
Coby X-plane
https://youtu.be/tkMP7SavHRs
Over 300 comments, just because Scott said the 330 neo isn’t selling !!!!!
C’mon people, I think it’s time to move on!!!!
@D. Andrwes
Absolutely,
Maybe given the success of the A32Xneo family, Airbus thought that by taking the marketing therm “NEO” for the other products (A330neo and A380neo) that it would be successes like the popular narrowbody but the popularity of the A330 and the unpopularity of the A380 haven’t changed much.
The best strategy was the A32Xneo, because Airbus knowing that it is dominated in the widebody market by Boeing should only take advantage of new engines such as the Leap-56 from 2010.
That’s how competition is, to reinforce its play on the chessboard the “Widebody neo” were sent on the carpet by this same domination of Boeing.
slow news week after the Paris air show and before the holiday weekend
Quiz how many 7e7/787 (e.g 2003) Boeing engineers will be around in 2035 to launch the Boeing 737 replacement program…..
Checklist:
There will be no hull changes for a 787F. That is a huge investment and an F does not begin to return it.
I do think there will be a 787F but that is out past 2030 sometime when Boeing backlog for the 767F has been fulfilled and the ICAO thing can’t be worked around anymore.
There will always be engineers. Do you know that many engineers who have worked at Boeing have also been at Bombardier? It is said that the Cseries, which became A220, was designed by engineers who worked at Boieng.. It was certainly fixed-term contracts…
experience engineers with ‘tribal knowledge”?
D. Andrews:
In air to air fighter training they call it being defensive!
How dare someone make an accurate factual remark about Airbus, it has to shift to what about ism in regards to Boeing.
While I try to be polite, I am not going to let Frank make false claim co mingling financials vs what future production is. This one being on solid ground you can stop it though as you have seen it takes some doing.
Now we call it false equivalence.
Back when I was growing up it was referred to as throwing the woman into the Volcano, it quit and therefore that was what stopped the volcano.
I had hoped we had gotten past that but it seems not.
@TransWorld
Exactlyy, Scott made a valid point , about the 330 n.. being in the doldrums ,and rightly so ..
Just can’t get over the responses I’m seeing, and the finger pointing in Boeing’s direction..
Relax Airbus Backers, they make wonderful aircraft..but when a little constructive criticism comes your way…. Don’t be so darn defensive,and immediately shift blame on your competitor..!!
Who’s “shifting blame”?
A large part of the discussion is on the fact that the 787 is a loss-making program…a good benchmark for smaller programs that *do* make money.
Nothing wrong with discussing that, is there?
The “defensiveness” is more prevalent among some commenters who just can’t accept that BA has so many loss-making programs.
Regarding those losses: now that the “Partnering for Poverty” program is starting to unravel, losses will only increase further…
Bryce Bryce Bryce,
You’re too skinny to impress me…
You tell us nothing about the 787 and the A350. Everyone knows it’s a UV problem. You are asserting things that everyone knows when we didn’t need to reaffirm it to make a meager “You don’t know what you’re saying (as usual)
It’s too easy and it doesn’t work that way because not everyone is as mean as you.
Especially since you are not a reference in the matter by far, believe me…
Others like me will say this :
CEO’s AAB and G. Faury had to meet after Boeing’s lawyers would have threatened if the contract between Boeing and Qatar Airways 737MAX order is disclosed.
Boeing lawyers said it will be fire🔥, I’m not making this up.
Taken to task G. Faury would have approached AAB with a delegation at their side then told him
“This case has gone a little too far. We had said a lot of nonsense with the pressure, we had said in court without really knowing why the 787 was a good plane but I fear that we risk having problems with Boeing all the same if we go further. We will provide you with a repair and we will renegotiate the A350 contract. Yes I recognize that we do not know the root causes, and that you were sitting there too much on the side waiting, and that we had just a medium term patch for repairs. We had designed the aircraft pretty quickly because in 2006 Boeing gave us a spanking and huge pressure. Our CFRP manufacturing method is just a bad design. We recognize the thing, but please 🙏 don’t say anything more to journalists because I have to defend my brand as you must, your excellence defend yours (Qatar Airways)”
Unquote
I prefer to think to myself that you are just puffed up with pride like any other fanboy humiliated because of this affair than CEO who supposedly took off his pants just to keep his conscience
You just fell even lower…
(!) -> The A350 suffers from a chemical effect (and I know very well what I’m saying) which deteriorates any layer from the inside, including the anti-lightning grid in the first place because it starts from the inside towards the outside. ‘outside.
(Come again. tell me that I don’t know what I’m talking about!)
-> For the 787 (Dreamline, even if it is the same cause which is the UVs, the behavior is different you mix and / you confuse the two different aspects.
When you are up against the wall you insult others when you are frustrated and upset
Put down the sake bottle and let’s have some water please…
Checklist:
I would like you to refrain and you can do and still make your point.
I do not think the Airbus A350 grid issue is due to their CRFP. They are working on or have implemented a new material for the grid.
The tech issue gets really deep into grid material, cover of the same and adhesion (there was major discussion on Boeing using a lot of Titanium on the 787 due to the interaction of other metals with composites)
Personally I was amazing at what Airbus did with a frame and skin CRFP and did an outstanding job on weight vs the tech intensive spun fuselage Boeing did. I asked Bjorn about it one time and he said both work for different reasons and one is not better than the other, good enough for me.
What Airbus does about the existing A350 and the grid will be interesting.
Also interesting is how public Boeing issues become but how hidden the Airlines keep the Airbus issues. It does make one wonder what else we do not know.
Of course if Boeing keeps it in house that is bad and Airbus gets a pass but such is life!
@TransWorld
…”I do not think the Airbus A350 grid issue is due to their CRFP. They are working on or have implemented a new material for the grid…”
—
You know TransWorld, I only work with sources.
The rest is up to you to think as you wish.
Cordially
Checklist:
That is what the last sources I read were saying. No disagreement that can change.
Not sure about the tone, its a discussion item, I am interested in what you have to say and or sources.
I would suggest you shift to a discussion aspect as opposed a tone of being called out and fully understand why you react to certain parties that flip stuff stuff out.
Regards
@ Checklist
“You know TransWorld, I only work with sources.”
Do you? But you don’t post any links to these (imaginary) “sources”, do you?
TransWorld, the 787 problem was just cosmetic, the A350 problem is another problem disguised as a cosmetic problem.
Simple tape was already a fix, for ANZ and the 787 ( Dreamliner wing not for the A350.
In addition the problem was only local for the 787 (winged) while the A350 was generalized
The 787 has no problem up to the deterioration of the layers and the lightning grid.
You seem to be confusing the different facts as well
Sorry…
LOL ! You have a very short memory and a sharp tongue. Already come with sources that Boieng sells with substantial discounts before talking about Imagination.
@ Checklist
Thanks for confirming what we already knew: that your comments are full of wild imaginings that have no basis in reality.
***
I’ve posted lots of links regards BA discounts, and lots of calculations have been posted here as well. The problem is that you’re not able to read/understand them. Are there no French-language fora for you, where this impediment would be removed?
Flying Car 2023 | All About Alef Flying Car Which Got Certified by US Govt |
https://www.youtube.com/watch?v=d_o_drz7czw
David Pritchard
…”eperience engineers with ‘tribal knowledge”?
—
“Tribal knowledge”?
Lol ! I don’t understand your problem. I have a strong feeling that you are a bit pissed off by this information.
Sorry i have no cure for this is a bit beyond me
If you are associated/connected to Boeing, it must be in shareholder mentality. Otherwise you would be concerned that the Boeing talent and brain drain will make it very difficult to launch another commercial aircraft.
Last 32 years….only two new aircraft launches…777 in 1991 and 787 in 2004
Oh I forget, Calhoun strategy is the 100 years for program Which will fly first Boeing 737 replacement or Comac C929 widebody?…my bet is on China
Except that the latest development at Boeing dates back only to the 777-X which is a brand new aircraft. It dates back only 10 years while at Airbus the last A350 development dates back 18 years. The Comac 929 mdrrrrrr!!!
This copy of 787 Dreamliner, and they learn to design and produce an aircraft after having disjointed
an A320 in 2008.
You bet on that?
Lol! seriously eats me no occasion to make fun of me and become arrogant…
(!) I have nothing against China but your judgment is quite wrong from start to finish. But it’s not your fault you gobble up journalists without doing your personal analysis.
To say that Boeing’s latest development is from 2004 is a blatant error.
Sorry 777x is not a new airplane…same fuselage Just an updated wing and engines and avionics (but will take 12 years to get first revenue service)
With Boeing planning on investing in a new 737 wing riveting equipment ($100m) in Renton, my guess the 737 will be produced to 2040
I started going to China in the early 1990’s in the commercial aircraft industry. China will heavily invest in the C929 while Boeing will keep doing stock buybacks and dividends to the shareholders.
Note I said new aircraft launches, so my statement stands correct.
Remarkable that AB can do an updated A330 for just $2B and have it certified and flying in 4 years, whereas BA’s updated 777 has cost $8B (still increasing) and it still hasn’t even got a TIA after 11 years.
Just shows how much BA relied on self-cert.
Bryce,
No Bryce no evidence.
You just claimed to have heard and I laughed at you that I too would have seen the Virgin Mary. There is someone between you and me who is a mythomaniac, I believe. The Mythomane firmly believes in what he says and propagates the lie by claiming that it is true. Do you remember it was right before PAS’23…?! 🤙
The 787s (Dreamliner, MAX’s among others the “new” 737MAX-10, the 777-X are selling by themselves. If Airbus sells the A330neo’s and A350s more slowly then it is Airbus’ strategy that must be questioned and accept Boeing’s market share, among other widebody markets, at 67%.
As you also claimed that order 787 from Ryad Air and Saudia as not yet concluded. A few days later I posted a Twitter link where we could already see the 1st 787 from Ryad Air painted in a purple livery. Aren’t you tired of being so inobjective, it’s very destructive in a conversation. But we know that’s what the Boeing haters are here for, that’s why we understand your purpose stupid anti-US, anti-Boeing or whatever propaganda futile…👍
Looks like our aviation “expert” is confusing a PR frame with actual delivery frames. The purple 787 is an ex-MIAT frame that was re-painted for the PAS.
Can you tell us in which month the Riyad/Saudia order was added to BA’s order books — with link? The order was on March 14, but it wasn’t added to the books in March, April or May, and June orders/deliveries haven’t been published yet…
And have you figured out yet what OEW and TIA mean? 😉
@Byrce
Remind everyone how long it took Air India’s order to get finalized!!!!
End of Story !!!
Like it’s never happened before when large orders are announced by either manufacturer !!!!
Yes, we all know that.
I’m not attaching any particular interpretation to the lack of finalization of the Riyadh order — I merely pointed it out to the (denying/confused) French correspondent.
Looks like you’re having difficulty following the thread (yet again)…agitation tends to cause such impediments…
Robert L
It even seems that the Emirates A330neo have been canceled, the order of United Airlines A350 is in limbo, that’s why Bryce is excited…
Lol !
Lol!!! ask Airbus they are experts in the matter …
United & Saudi huge 787 orders at unclear conditions, margin and politics didn’t change the market.
Soon Airbus will be producing 13-14 WB’s a month. Without much certification, quality risks.
Anybody is free to claim / believe Boeing will have 67% market share at some point. Putting realities aside IMO.
Keesje
In psychology most of the time denial comes after frustration or anger. If fanboys do not accept that a competitor has 67% of the market, it is a problem of deep fanboyism. Nothing fishy in there…
Everybody’s free to cling on to hope, straws, quotes, promises & historical evidence.
In the last 3.5 yrs, 70 787 ‘s were delivered and 127 777s in the last 5.5 yrs. Do the production rates yourself.
Then there was the 737 debacle, huge 777x delay & COVID-19 on top. I guess someone is keeping Boeing afloat somehow, because of strategic interest. And it isn’t the market. W’ll get to know in 15 years probably.