By Karl Sinclair
Feb. 04, 2025, © Leeham News: The Boeing Company (BA) released its 2024 FY Annual Report this week and as expected, it was awash with red ink.
On the Jan. 28, 2025, earnings call, CFO Brian West had this to say, in reference to a question regarding the inventory build-up:
“In terms of the inventory, we’ve got $87.5bn worth of inventory in the company right now…. So that is the big cash flow benefit that we’re going to see over the next couple of years-ish and it’s all because we’ve been sitting on this big investment that we look forward to having unwind with deliveries, and that’s what we’re focused the team on out in Seattle.”
Indeed, the balance sheet does indicate a figure of $87.55bn sitting in the Inventory account, but what is the detailed break-down of what is contained therein?
The recent five-month certification stoppage on the 777X program, due to the thrust-link breaks, forced Boeing to take a charge on the program in 2024 of $3.499bn This is in addition to the $6.493bn reach-forward loss taken on the 777X in 2020.
Along the way, Boeing has also recorded “abnormal production costs”. In 2023 and 2022 the program wrote off $513m and $325m, respectively.
For those keeping track, this is $10.83bn in losses for the variant, without having delivered a single aircraft to an airline or lessor.
It is a recurring problem for Boeing and one that traces all the way back to when it started using program accounting to report earnings.
Each quarter, in the Boeing financial reports section titled Inventories, are the details of what makes up that account.
For Boeing Commercial Aircraft (BCA) it is broken down by program; 737 MAX, 787 and 777X.
It can get a little wordy, but if you can understand the code, you can make sense of it:
At December 31, 2024, and 2023, commercial aircraft programs inventory included the following amounts related to the 737 program: deferred production costs of $9,679 and $6,011 and unamortized tooling and other non-recurring costs of $909 and $792. (in millions)
Deferred production costs (DPC) are simply expenses that have been accumulated and will be pulled out at a later date.
Typically, expenses are recorded onto the Income Statement during the period for which they are incurred, matching revenues and costs.
Program Accounting allows Boeing to put those amounts into Inventory and keep them there, until it decides to pull them out.
Normally these accrued amounts are expensed with a delivery. Other times, they are written off.
In the case of the 737 MAX, DPCs went up in 2024, from $6.011bn to $9.679bn.
Tooling also increased over the same period, from $792m to $909m.
Typically, tooling gets sold for scrap value prices, after a production run is finished, like the 757 program, for pennies on the dollar.
The final piece to the puzzle is Customer Compensation, which is also retained in Inventory.
Commercial aircraft programs inventory included amounts credited in cash or other consideration (early issue sales consideration) to airline customers totaling $5,837 and $4,126 at December 31, 2024, and 2023. (in millions)
In 2024, amounts relating to DPCs, tooling and customer compensation squirreled away in Inventory rose $4.447bn to $35.095bn. Expenses, not aircraft that can be sold.
Inventory is an asset account on the balance sheet. Assets are one of the things that are considered, when evaluating a corporation, and is used in various financial ratios, especially when the company CFO publicly declares an amount in an earnings call.
Source: Boeing 2024 10-K
A $35bn reduction, due to them being DPCs, would devalue Inventories to $52.55bn for 2024, a not insignificant amount.
Many investors would look at the balance sheet and assume that Boeing has over $87bn in product that it is able to sell to customers.
Another $10.43bn of inventory is spare parts, used aircraft and general stock materials. Removing that along with the DPCs leaves ~$42bn in Inventory, 48% of the number indicated on the balance sheet.
Periodically, Boeing has announced write-offs against a particular program. This can come in the form of a reach-forward loss, an abnormal production charge or an adjustment, when funds are judged to be non-recoverable with aircraft sales.
Boeing commercial has written off a total of $42.972bn on its three main programs, the 737 MAX, the 777X and the 787, as of December 31, 2024.
It is worth noting that an eye-watering $38.9bn of those write-offs, charges and abnormal production costs have come since the grounding of the 737 MAX in 2019.
As stated in the financials, Boeing relies heavily on the use of estimates, when using program accounting.
How many aircraft will be sold over the life of the program? How much revenue will be generated? What will the costs be to produce those airframes? How much profit will be generated?
All of these projections are updated on a quarterly basis and as parameters change. So do the estimates.
Boeing also reports in the financials, when it expects to zero the DPC balance on a program.
Here are the details for the 787 program, at the end of 2024:
At December 31, 2024, $11,224 [in millions] 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 $3,324 are expected to be recovered from units included in the program accounting quantity that represent expected future orders.
The current 787 firm orders are not enough to cover all of the amounts in the balance of DPCs sitting in Inventory on the Dreamliner program. The Boeing backlog for the 787 is 719 firm orders, after ASC606 accounting adjustments. They represent a shortfall of ~30% to zero out the balance.
Boeing expects that orders it has yet to receive will cover expenses made in the past.
It is going to be a long road to recovery for Boeing Commercial. Those amounts accrued in the deferred production costs will be on the balance sheet for a long time to come.
Impressive analysis! I hope you will do the same for Airbus.
“Socialism” is boring.
Workers get paid and have a health insurance even they get sick. Several countries still receive money from reimbursable launch aid for A320 and A330 they gave Airbus decades ago (how much does Airbus pays per aircraft?). Billions of profit in 2024. Just boring.
Airbus does not use program accounting. So there is not much to analyze.
Program accounting is an (unfortunately legal) way to artificially inflate current profits at the expense of the future. For years before 2018, Airbus was harshly criticized by the financial markets for how much they (supposedly) lagged behind Boeing’s financial performance. For many years to come, Boeing will continue to pay the price for this phase, in which it was only about maximizing shareholder value – through program accounting, compromising on safety, lack of investment, …
Does Airbus use the same accounting tricks like Boeing? IYKYK
WTO and US trade officials have been asking for that for decades.LOL
Re: WTO
“The World Trade Organization (WTO) formally authorised the EU on 26 October to take such countermeasures against illegal U.S. subsidies to aircraft maker Boeing.”
From 2023
https://www.airbus.com/sites/g/files/jlcbta136/files/2024-03/Airbus-Annual-Report-2023.pdf
Capitalised Development Costs
The Company has capitalised development costs in the amount of
€1,706 million as of 31 December 2023 (€1,482 million as of
31 December 2022), for Airbus programmes (€880 million), Airbus Defence and Space (€517 million) and Airbus Helicopters
(€309 million).
Inventory
Inventories of €33,741 million (2022: €32,202 million) increased by
€+1,539 million. This is mostly driven by work in progress, raw
materials and manufacturing supplies resulting in inventory build
up to support the ramp‑up, partially offset by less finished goods
reflecting higher deliveries. Advance payments made to suppliers
increased by €+956 million to €6,001 million (2022: 5,045 million)
largely due to payments made to suppliers to support Airbus’
ramp‑up and de‑risk the supply chain.
In 2023, write‑downs of inventories in the amount of €-782 million
(2022: €-394 million) are recognised in cost of sales, whereas
reversal of write‑downs amounts to €149 million (2022:
€243 million). At 31 December 2023, €18,973 million of work in
progress and €3,883 million of finished goods and parts for resale
were carried at net realisable value.
Inventories recognised as an expense during the period amount to
€41,644 million (2022: €35,710 million).
—————————————————-
Comparison:
Boeing Inventory: $87.5bn
Airbus: of €40.698bn (Q3 -2024)
Good analysis. If 719 ordered 787 shall be recovered with existing orders, this means that the profit and loss account will be debited with 15,6 million dollars per plane sold (11.224:719).
The same calculation can be made with the DPC for the 737 programme.
It is always the same in accounting: What you put on the assets side of the balance sheet, can only be charged to P/L.
BA has frequent “one-time” charges over the years, and analysts follow the corp’s PR line: treating those as “exceptional” items and focusing on result from operation only.
https://leehamnews.com/2016/01/21/boeing-cuts-747-8-production-rate-takes-charge/
Also of those 719 planes on order how many are compensation for delivery delays ?
I would not be surprised that about say a third of the backlog does not bring in fresh cash, but is just there to prevent even more cash from bleeding out now to compensate airlines for delays
So some of those orders are more losses to come as their construction costs have not yet been incurred and they will hardly bring in any revenue
I am not defending Boeing, but I don’t think complete aircraft are involved in compensation. I know some 767s were done that way in regards to the severely delayed 787 deliveries – a lessor aircraft as it were.
I think those deals tend to extended warranty, parts, services.
FedEx cancelled the A380F before the contract allowed (obvious it was not going to ever be delivered). No plans for further Airbus, 777 at the time and then shifted to t he 767F. They did and do have a large fleet of A300/310s. Maybe Airbus happy to break even on parts.
UPS was in the same boat with the same setup. Their decisions was to wait till the failure to deliver met contract terms and got their money back. They too have a significant Airbus A300 (not sure on 310) fleet. UPS went 747 vs 777 and kept buying 767s (and decided FedEx was right and the MD-11 was very valid.
Pretty complex decisions and approaches. I don’t even know the 767s Boeing gave out were given vs at cost or reduced cost.
Huh, what is compensation credit? How the hell Boeing’s customers are able to use it? On “incomplete” non-deliverable planes?? 😭
Thanks for your comment.
As of 12/31/2024….yes.
Boeing is currently producing the 787 at 5/month. Let’s say they could instantly start producing and delivering 10/month; 120 year. ~6 years production for 719 aircraft.
Program accounting is based heavily on the use of estimates. BA says so, right in their financials. Estimates are also updated every quarter.
There is an awful lot that can happen between now and six years out.
My understanding is BCA bakes in cost efficiency improvement (say by increasing volume, they demand concessions from contractors & suppliers, & unit cost further benefits from fixed overhead) over the years in their assumptions for program accounting.
Although I have been working in corporate finance for a good portion of my career, this kind of accounting is very close to fraud in my opinion. It doesn’t have much to do with “True and fair view”. But probably I’m just old school.
Yeah, IYKYK! Wonder why so many (on TV and elsewhere) tout about BA’s huuuuge backlog… 😂 Shouldn’t they know better?
@Matth:
Its always struck me as such as well.
Strong article from Karl. Split out on programs. Luckely not behind paywall.
777x had a niche replacing VLA’s but the delays reduced it with nearly all 777x launching customers now ‘also’ ordering the A350-1000 and Airbus/RR completing the building blocks for a mid life upgrade of that program.
@Keesje
The market for the 777X passed it by. If you look at the backlog it looks eerily like the A380, and that did not end well.
I don;t think that is true but obviously looking forward is a guess.
777X seems to have 747 like support and add in the Cargo version.
I fully agree its not going to be built in the 777-200/300 numbers.
I have no clue if they can retire the losses with production ever.
@TW
When you dissect the backlog the first thing that pops out is that nearly half is Emirates/Qatar…sound familiar? There is a real risk in taking delivery of aircraft that has no secondary market.
And a lot of the other backlog is oollllddd…to the point where you wonder whether some of it is real. 10+ years is a long time to wait for a plane. At a certain point, business conditions change and airlines move on. 777C are not being replaced with 777X they are being replaced with 787.
I put it in an xls once; 777 classics , W’s are being replaced by A350s by nearly all legacy carriers. Only a shrinking small number still doubting.
The 777X is very heavy & expensive for its capability, and that became cleat already >10 years ago.
But the 777X passed the point of no return.
Then came the engine problems, re-certification by a re- empowered FAA, unexpected test fuselage rupture and its root cause investigation, etc.
Program Accounting = ” We lose money on every plane- but make it up by Volume “
Harumpf!
the issue with program accounting is that you mix real outlay with expected future income.
This is massively aggravated when today’s outlay breaks all assumed limits or the expected future income is volatile ( customer compensation and ASC606 stuff…. ( 1st tier example : 787 )
i.e. your project goes pear shaped, cost escalates and all that is well hidden in the Deferred Cost Basket ( IMU: booked as asset! )
The Beauty of program accounting is you never have to pay for a success (granted its been a while for Boeing). That is what has allowed Calhoun and his like to gut the company. You are allowed to cook the books and still do share buy back and issue dividends.
For a Robber Baron its a get out of finances free card.
It does doom Boeing to a slow liquidation. But then like Musical chairs, when the Music stops, there is one less chair than people. Someone goes down.
As a company Boeing is ill served, read that as disasterious, by Program Accounting.
But as happy people who walk away with 10s of millions, Calhoun and his like, happy campers.
I often wondered what it would be like to not have a conscious. Pretty sure the current me would detest being like that.
its really time to call end to this “voo-doo” program accounting. the 787 has been around for over 20 years.
Agree with TW, the Boeing executives who partied out free cash flow in the previous decade, based on
– unrealistic forecasts,
– limiting investment,
– squeezing suppliers,
– embedding politics
– advanced perception management
– sidelining FAA
– deferred costs iso debts
– artificially boosting stock value by buy backs
– pushing out new product development
are now travelling between their nice houses having quality time with their grand children.
While we are young enough to see the chickens come home to roost and people suffer. A system error IMO. Nothing socialist about that.
That MBA school of management was commandeered by Boeing CEOs only after watching Rodney Dangerfield in the movie Easy Money. Great “men.” At least they’ve benefitted themselves, not so much the stockholders. We cannot blame McDonnell Douglas and GE for everything.
Over time the numbers are the same .
Just that it boosts reported profit earlier when cash flow positive
the other side it increases looses earlier too when cash flow is negative and this is what is happening
Airbus mixes unit and program accounting in its airliner deliveries, as so called launch orders used program accounting . But no one is told how many are ‘launch’
Airbus doesnt even break down its airliner revenue/costs numbers by type that Boeing does
“Over time the numbers are the same .”
Only when that program runs as expected/planned.
Did Boeing ever manage to work a program as planned?
Even poster child programs like the 747 never achieved that.
I think that the management’s (not the current one since the circumstances were bad for BA since early 2019) intention was to maximize short-term profits as much as possible: in better times, they increased accounting quantity of the 787 when orders were flooding in as a result of offering the planes at insanely low prices, therefore it takes longer to zero out the deferred production costs accumulated, inflating profits.
Scenario when BA/BCA can successfully zero out deferred production costs without write-offs exists in fantasy (as posted here), not in reality.
It allows to show profits even under duress.
like: “ohh, wow, look at the problems they have but still showing profits. Profits must go through the roof after problems are solved.
It is from the toolbox “How to manage share value”.
( only thing that has counted for a long time.)
Direct comparisons of Airbus and Boeing numbers ( based different accounting metrics ) shows that public analysis
ignored / never understood the differences.
Years back I seem to remember a bunch of posters here and on other sites “crowing till bankruptcy” over Boeing’s “superior” financial data.
Agree with Matth: Boeing’s accounting shenanigans come very close to fraud, and at minimum are very deceptive.
Thanks for this very clarifying article.
Backlog of the 777X:
2024 358
2023 416
A decrease of ~60, what happened?
More compensation to dole out to customers to maintain the backlog?
@Pedro
Don’t worry…the program accounting block is only 500 units.
Emirates reduced its order but it swapped them for 30 787. Just means they wont pay another deposit for its 787 s
The predicted program is 500 but will increase over time as more of the expected orders come in.
Just as the 787 program numbers increase each year
“Emirates reduced its order but it swapped them for 30 787.”
In 2024??? OMG! Didn’t it happen in 2019, involved like 24 777X, not close to 60?
In 2024, Boeing increased the ASC-606 for the 777/777X program by 86 units (46 in October, after the suspension of 777-9 certification flights). Considering that Boeing received 30 new orders for the 777X last year, the numbers seem to add up.
This breakdown demonstrates BCA is still an engineering company. No, not aerospace, but financial engineering.
Good job everyone!
Not the case. Boeing its in annual report ( yet to come) puts unit and program accounting numbers side by side Has done so for a decade
Airbus mixes program and unit accounting in its airliner types as it says it used for launch orders only.
How much A321XLR orders are run as program accounting ?
How much A350-1000 production are still launch orders
Never in their annual reports! Have you a single one? Jesus Christ!
read* a single one
Textbook Whataboutism… but what is new?
https://s2.q4cdn.com/661678649/files/doc_financials/2024/q4/Commercial-Airplanes-Unit-Cost-vs-Program.pdf
Sorry, there is nothing like program accounting in Airbus.
There is capital expenditure as in any business, that is depreciated every year (rather quickly in Europe).
So yearly profits are real profits…
There is the issue of “avances remboursables”, help coming from governments to finance new models.
“Remboursables” means this is repaid, fix amount for each model delivered.
Problem is that it never stops, and the 320 family has repaid several times the initial amount, and it is going on and on…
same for the 330/340 program
and probably for the 350 program in the near future.
Only the 380 did not repay fully its initial amount.
According to my knowledge Airbus did avoid reimbursable launch aid for the A350 program due to the reason that it’ll more expensive in the long run.
Not clear
ChatGPt says 3,5€BN
True that nowadays, Airbus can easily borrow from banks at cheaper conditions (if runaway success)
Airbus did get some RLI for the A350. I don’t remember the amount, but what I do remember it was in the annual financial filings footnotes the first year. I reported it and it was removed from subsequent filings as a result.
Airbus got RLI from France and Spain for the A350. The UK helped fund it via a loan as it was deemed less financially risky. The loan had been fully repaid by 2020.
I think the German portion was done as a loan as well based on what I remember of the WTO dispute.
Boeing was forced to publish those numbers by (foreign) shareholders.
And they invariably accompany those bits with
the caveat that these are not true bookkeeping numbers
like GAAP is.
IMU:
with the early A350 frames Airbus announced that they would
book cost per customer distributed evenly over frames delivered in that order. i.e. early on cost per frame is decreasing from first to last frame in a fixed size order but booked as constant over frames delivered …
BCA
737 program:
At December 31, 2024, $10,542m of 737 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 *$46m are expected to be recovered from units included in the program accounting quantity that represent expected future orders*.
767 program:
BCA is going to end production in late 2026 or early 2027 => a reduction in accounting quantity of 7 units, plus new IAM agreement resulted in an additional reach-forward losses of $182m.
777X program:
“we determined that estimated costs to complete the 777X program plus the costs already included in 777X inventory exceed estimated revenues from the program. The resulting reach-forward loss of $3,499 [balance of the deferred production costs of the 777X program as of Dec 31, 2024 is $0] was recorded as a reduction of deferred production costs and other non-recurring costs.”
From a financial accounting point of view, it’s shocking that SEC has allowed BA to include the full amount of deferred production costs as current asset. I’d say, it’s quite likely that ~95% of the DPC balance carried as of Dec 31, 2024 will remain there twelve months later.
Thats because the ‘loss’ say of the 777X is for 500 units in the production quantity and thats over 10-15 years.
Its boosts the ‘announced profit’ later on if the loss is taken before 2025 FY
Anyway its the GAAP standards they are using.
You should look into Airbus much lower financial credibility by so called international standards where they mix unit and program accounting but dont explain by how much. and dont break down their commercial programs by type at all.
What are you talking about??? I referred to classification of assets on BA’s financial statements.
Deferred production costs as of Dec 31, 2024:
737 $9.7b
787 13.2b
777X Full amount is written off at y.e.
I would say that it will go up, as it did from 2023, to 2024.
Boeing has said 2025 will be a cash burn year. Negative margins at both BCA and BDS.
When you Credit Cash out of the Bank account, there has to be a corresponding Debit.
Either to Expenses or in BA’s case, Inventory.
Depends how they want to classify it…
I have no problem saying that while fascinating, I don’t understand most of it.
Kind of like the Sun rising in the East. Yes I know that is where it comes up. All the physics behind it?
So I will watch the comments but I worked with my hands and body for a living (well I used my brain a lot). Hard physical work. Point me at a potential ditch and I was your guy.
Point me at a financial result, well lets just say I kept it simple. How much do I earn, how much can I afford to spend and save as much as I can!
On a side note, Spirit is increasing fuselage production from 21 to 31 a month (plus a substantial backlog).
This is going to be interesting through this month and the next month though better data will be at the end of the 2nd quarter.
CNBC: Boeing’s Starliner losses top $2 billion after program reports worst year yet
Since 2014 when NASA awarded Boeing a fixed-price contract to develop Starliner, the company has recorded losses on the program almost every year.
I wonder, as the “merger” with Spirit goes ahead in mid-2025, what happens if the auditors compare Boeing’s working assumptions of the 787 program under program accounting and contrast that of Spirit, find out future profits of Boeing is (at least partly) built on continued losses by Spirit?
I too wonder. Not all who wonder are lost.
737 program accounting also includes the 737NG, which has likely been quite profitable for Boeing. If the 737MAX were considered separately from the 737NG, deferred costs would likely be higher.
@Enrigh
Was a curious decision to lump NG with Max. What that also does is obfiscate the what the accounting block for Max should have been been. Put another way…the NG may have well exceeded its final accounting block and thus made the outstanding Max orders appear less than what they would have been if that variant had stood on its own.
“How close is DC’s helicopter corridor to the DCA landing approach for Runway 33? Suuuuuuuuuper close.”
https://bsky.app/profile/meghanhoyer.bsky.social/post/3lhfhvygwlc2g
https://pbs.twimg.com/media/Gi_wzhFa4AE9mmV?format=jpg&name=large
@Pedro
Kinda shocked this was ever approved. Then add that a helicopter can be told to stay behind a CRJ and then to have another CRJ coming right behind (and coceivably confuse the pilot) it all points to too much traffic for one tight intersection.
I don’t think the army crew had enough acquaintance in the domain
to distinguish types in the dark.
Their reflexive answers seem to indicate a “don’t bother us uber professionals”.
What do we know about night vision goggle use?
~~40° vision field, prone to blooming in that in places brilliantly lit environment.
@Uwe
Sounds like these close calls happened a lot. This was not an isolated incident. It is a terrible traffic pattern.
Casey is being kind.
its insanely stupid. Any pilot can tell you that visual separation at night is a joke.
Classic case of “normalizing deviation”. Those kind of flight conflict should never be allowed, period.
And Reagon should be shut down.
Bloomberg Economics say “the one certainty with US tariffs is uncertainty.” Their new model finds ongoing unease could knock almost 1% off US industrial production by May 2026.
👇👀
“Big News – Talked to the DOGE team. They are going to plug in to help upgrade our aviation system.”
https://x.com/SecDuffy/status/1887209012867047525
https://bsky.app/profile/jonostrower.com/post/3lhhd5oetuk24
WSJ: Inside the Chaotic Run-Up to Trump’s Tariff U-Turn
> “Even the threat of tariffs has the potential to be catastrophic,” said Bill Long, chief executive of MEMA, the vehicle suppliers association. Long said the car industry could become crippled in short order if even one major supplier is kneecapped by added tariffs. “If it becomes real, it will make a dent,” Long had said.
so Trump is a “German Green” clone?
“destruct the existing system and wait for transformation” ( it’s magic ).
Aviation Week would agree:
Opinion: Aerospace Would Be Exposed In Potential Trade War
Major players are starting in different positions. Boeing builds its aircraft only in the U.S., but it receives components for them from all over the world. GE Aerospace and Pratt & Whitney engines are also made up of parts sourced from around the globe. Airbus builds commercial aircraft in France, Germany, China, Canada and the U.S.—and, of course, the parts for them come from everywhere.
Many U.S. aerospace companies have moved some work to Mexico, and there are Canadian components in Airbus A220s built in Mobile, Alabama. China is importing U.S.-made engines to power the Comac C919. Aircraft parts are coming from India and Brazil, among many other countries.
But Scott was on this weeks ago:
How Trump tariffs affected, and could affect, Airbus, Boeing and Embraer
https://leehamnews.com/2024/12/06/how-trump-tariffs-affected-and-could-affect-airbus-boeing-and-embraer/
> “Sustained tariffs—or even worse, export sanctions—are introducing the very real danger of creating more disruption in an already highly stressed supply chain that—in spite of everything—seemed to be on the verge of stabilizing.
The administration’s hope that companies could react by onshoring work again appears to be far-fetched. Such actions would include very expensive multiyear projects, and a new U.S. administration could opt for completely different trade policies in four years. Plus, the main reasons for offshoring—such as high costs—continue to persist or are getting worse.
One misunderstanding about tariffs is that they are paid by the countries upon which they are imposed. In fact, in this case, U.S. airlines and their customers—so ultimately the flying public—would have to foot the bill in the form of higher air fares. In a broader sense, inflation would return. Tariffs for aerospace goods would make Boeing aircraft more expensive—even a 737-8 delivered from Renton, Washington, to Delta Air Lines or another 787 sent to United Airlines’ Chicago base from North Charleston, South Carolina. Those aircraft would become even less competitive if they were to be delivered to a foreign carrier based in a country that has put in place its own tariffs to counter the U.S. measures.
I’m lovin’ it!
Donald Trump says he could hit Japan with tariffs
Sorry, there is nothing like program accounting in Airbus.
There is capital expenditure as in any business, that is depreciated every year (rather quickly in Europe).
So yearly profits are real profits…
There is the issue of “avances remboursables”, help coming from governments to finance new models.
“Remboursables” means this is repaid, fix amount for each model delivered.
Problem is that it never stops, and the 320 family has repaid several times the initial amount, and it is going on and on…
same for the 330/340 program
and probably for the 350 program in the near future.
Only the 380 did not repay fully its initial amount.
It’s the same in Canada where the amount of money Bombardier received from the federal government (it’s different at the provincial level in Quebec) is returned as royalties on each aircraft sold. Which means the government eventually gets its money back (and possibly more) when the programme is successful. This goes all the way back to the Canadair Challenger programme in 1976 (10 years before Bombardier acquired Canadair in 1986).
The amount of money involved per aircraft is relatively small when it is applied in the form of royalties and this may explain why the measure is often overlooked in discussions about subsidies.
“The amount of money involved per aircraft is relatively small when it is applied in the form of royalties and this may explain why the measure is often overlooked in discussions about subsidies.”
The “Airbus subsidies baad” screechers intentionally misrepresent it.
you can correct their allegations and in their next post they will again postulate the same inane stuff.
@Uwe:
So you tell us.
How many A320 were built before those the so called royalty payments began?
How much were the payments per aircraft?
How Many A330 had to be built before royalty payments begin
How much are those payments.
How Many A340 had to be built before so called royalty payments began?
What were those payments
We can skip the A380 for buid, just tell us how much per A380 you would have got if it ever achieved that ridiculous number?
Now, ditto for the A350?
Inquiring minds would like to know.
sorry, but your are not an “inquiring mind” and NO.
This has been handed around on this site on a regular basis as far as available. do your own research.
@TW: The A320 program business case assumed total sales of ~600. I’d say Airbus began paying royalties below this number. 355 A340s sold, no royalties. 251 A380s sold, no royalties, Germany had to eat $600m. Don’t know about France. Don’t know the BE figure on the A330.
@Noramnd:
That is not how it works.
You have to build XXXX xA220 before you stat to get the so called royalty payment (2000-3000-5000?).
The royalty payment will be peanuts, you certainly have that part right.
@TW: When BBD still had the C Series program, I was told the break even was 1,200 airplanes. I don’t know what it is under Airbus.
were RLI royalties ever directly attached to break even?
afair not?
@Uwe: I don’t know how the structure of RLI and break even (never saw the paperwork). But EU gained on A320 program (EU still gets royalties) and A330, didn’t on A340 and A380, I can’t say on A350 cuz I don’t know.
> You have to build XXXX xA220 before you stat to get the so called royalty payment (2000-3000-5000?).
OMG! Where did you pull that out from?? Thin air?
I can’t breathe! 🤣
P.S. Before the poster who admits he can’t deal with numbers strike again, AB bought 50% of the C-series for $1 only. How does this impact AB’s breakeven point?
TW – “The royalty payment will be peanuts”.
I’m a UK tax payer and I’ve always been interested in this. I’ve even done an FOI request for detailed figures but that was unsuccessful due to complexity (allegedly).
In 2002 the UK government were reporting they’d received £500 million from Airbus for the A320 following the initial £250 million investment in 1985.
Airbus had delivered fewer than 2,000 A320 family aircraft by the end of 2002 so that’s about £250,000 in repayments per aircraft.
We were also receiving ‘up to £100 million a year’ from the A330/A340 programme in 2002. Airbus were delivering less than 100 of these a year at the time so that’s around £1 million per frame.
And that was just the UK’s share.
Airbus negotiated a discount in royalty repayments for the A320 family in 2015 and promised to keep manufacturing in the UK but we’re still receiving something. I just can’t find out how much!
@flying frog:
Airbus has its own version of Program Accounting.
Its called holding out your hand for money from the UK, German, France and Spain despite being ubber profitable lo these many recent years. Or as they say in the US, once you get on the dole, you can’t get off!
Now I know what you are going to say, but that is exactly what Airbus said when the A350 came up, we don’t need their money but of course we are taking it.
As for your assessment on the return of money, the only one we agree on is the A320 and NO ONE has ever shown what the figures are? I challenge you to cite a source.
We don’t even know what the return point was. Of course they keep it behind door 7. they are so very afraid to let the public know where their money went.
Now, what was the tip numbers built for the A330? You can say anything you want, but its never been published either (rinse wash repeat)
Airbus did learn, oh don’t guess small (A320) guess big. The numbers were reported at 750. Right.
A350? Tell us what the number is?
But then you are sure based on what?
Trust us, we are the government, anything we do is good for you, really.
@Tw
A quick google search would have told you that the A350 program reached breakeven at the end of 2019. I am sure on your own you can now figure out how many A350 were delivered up to end of 2019 for the program to reach breakeven. Google is always your friend for information, it’s then up to you with how you process that information. Emotional outbursts does nothing to improve one’s ability to extract relevant facts from the information mass.
Fact is Airbus by enlarge has stayed away from accounting and financing gimmickry to become the successful business it now is, because its original governmental owners and regulators in Europe have generally not approved of the financial and accounting sleight of hand that Wall Street and “Anglo” capitalism has been happy to engage in for the past 40 plus years. This is not an attack on you but to simply say we here in the States, regulators, government, shareholders, journalists etc., allow this charade to take place because we are all focused on “unlocking shareholder value” a euphemism of “let’s make a quick buck.” I worked for a decade in New York for one such major exponent of the “shareholder value” claptrap, so I know a bit about that game. I personally witnessed at least a dozen companies gutted in my time not only here in the States but also in the UK where I first went to work in finance in the 1970s.
There is a difference between break even and when payments back begin.
Why keep asking? You can look up the info yourself. You kept talking silly without anything to backup your claims.
See my post below.
AW November 27, 2024
> Aircraft suppliers to the Boeing 737 MAX program expect to hit the key rate of monthly production of 38 shipsets by early 2026—at least half a year later than the OEM’s current target—and they will start 2025 with an average rate of 20 shipsets, roughly 14% below where they were a year earlier.
AW January 28, 2025
> Boeing is not confident enough in 737 factory stability to issue firm production or delivery guidance but positive trends following the recent strike and a generally challenging 2024 have executives optimistic that a ramp-up to 42 aircraft per month is achievable in 2025.
42 p/m this year?
Boeing’s dreaming, as usual. Not gonna happen- they’ll
be lucky to average half that number in 2025.
I think they will get to 38 by the end of the year.
I will do a carve out and that assumes the US does not melt down under the current regime.
> The Army in the past couple years has tried to confront safety issues within its rotary-wing units, including a stand down in ’23. Last year, the service transition to a ‘stand-up’ to try to increase proficiency on more intensive, low-level flying.
> In FY24, the Army saw a mishap rate of 2.01 per 100,000 fh. Well above average.
https://x.com/beverstine/status/1884979451055771982
https://pbs.twimg.com/media/GijKtZpXQAAbZX2?format=png
Pray tell what that has to do with anything?
Seems like you have taken up nattering
Did you read the linked article from AW?
Why not??
Some news:
Boeing has informed its employees that NASA may cancel SLS contracts
It’s about freaking time.
You got my vote on that and I was a early space nut.
SLS is a huge boondoggle. Beyond that. If ever there was a waste…….
None of it has any listed end goals that get anything for anyone other than money down the hole.
Let Musk pay for a Mars mission, he has plenty of money!
@Pedro
Boeing now needs to put the Starliner out of its misery too.
Well, out of our misery!
There is a difference between a cancelled program and you pulling out of one. Depends on the contract language but you can be in hock for a lot if you quit.
Government may have to pay cancellation fees for either one as well.
But a good clean sweep would be great
@TW
This should be an easy one to kill. Starliner has no stated role except for going to the ISS…and that is a vanishing opportunity with ISS scheduled to retire. NASA can make this expensive for Boeing to certify. Yes there would be cancellation penalties.
Both sides are well served to figure out a way to just walk away.
https://ca.news.yahoo.com/future-nasa-mega-moon-rocket-050656952.html
OK, Everybody, it’s time to move on from the Airbus RLI and royalties. Beaten to death.
Hamilton
Can we change it to FLM?
There’s some scary big numbers in all that.
And the one thing one wants with such numbers is for them to be added up in clear and simple ways for easy understanding.
January was a massive month for “undisclosed” airlines, ordering 45 Airbus aircraft.
An order for 25 A320neo
An order for 10 A330-900neo
An order for 6 A350-900
An order for 3 A350F
An order for 1 A321neo
https://bsky.app/profile/airlineflyer.net/post/3lhls7m6uvs2r
> For the larger A330-A340 programme, which cost pounds 4.5bn to launch, BAe received a total of pounds 450m in support, again repayable through a levy on sales. *Repayments are due to begin later this year*.
> The A330-A340 programme was launched in 1987. Orders for the two aircraft stand at 349 from 41 customers, of which *150 have so far been delivered*.
https://www.independent.co.uk/news/business/bae-returns-on-jet-pass-launch-aid-investment-1267830.html
“OK, Everybody, it’s time to move on from the Airbus RLI and royalties. Beaten to death.
Hamilton”
Without your regularly repeated “fantastic” inputs that activity would not have been necessary.
hear, hear!
Trump promises 25% tariffs on steel and aluminum imports — including from Canada
“U.S. President Donald Trump said he will announce on Monday that the United States will impose 25 per cent tariffs on all steel and aluminum imports, including from Canada and Mexico, as well as other import duties later in the week.”
So how does this keep Boeing’s 737 and 777 costs down and keep them competitive to export?
Well its simple, if you tariff it, overnight factories spring up in the US to make that stuff.
Then because the US is a low cost producer with very low labor rates, the price drops.
That in turn leads to good paying jobs and that of course causes prices to drop.
I mean it simple logic, shoot a rock could get how simple it is. Just ask Trump
Me, I am still waiting for all the stuff he promised before that was sourced from cows.
“So how does this keep Boeing’s 737 and 777 costs down and keep them competitive to export?”
Will tariffs be refunded on export?
( here, if I export something VAT is refunded )
“Trump’s tariff on steel imports has caused the country’s remaining major nail producer to lose about 50% of its business in two weeks. Company laid off 60 temp workers. It could slash 200 more jobs by the end of July and be out of business around Labor Day”
@TW Time to wake up from your fantasy
“Mentour pilot, a longtime 737 pilot, sounds the alarm about the LRD system in the LEAP engine: This System KILLS in 39 Seconds and Nothing is Being DONE! – YouTube
https://t.co/Rz66LELa2P
https://x.com/dominicgates/status/1888425470229926283