I struggle to realize how these would make sense for Hawaiian. I feel like sticking with the 338 is the way to go and if needed upgauge a few frames to the 339.

Now nearly 400 posts in this thread which is no more than speculation by an aviation publication. The only definitive word has been from HA which has said no decision has been made in regards to their A338 order. Nothing from Boeing, Nothing from Airbus. The thread has turned into is Boeing selling below production costs, to Boeing is making money IF Boeing can produce the 789 for between $85,000,000.00 to $95,000,000.00 U.S. dollars. This to is nothing more than pure speculation unless you work in Boeing's accounting department.
With that being said HA will do what is best for HA and it's share holders. Should(being the keyword) HA determine it's cost effective to add 789 to their fleet and thus maintaining a mixed fleet as they have with the 763 at moment and not to mention HA will have to factor in cancellation costs for the A338, HA could possibly swap the A338'S for more A321'S NEO'S and thus resolving cancellation penalties they may order the 789. It has been mentioned Airbus has not canceled the A338 and have a test aircraft getting prepped in Toulouse.

Revelation wrote:

StTim wrote:

Shows hypocrisy though

"Let he who has not sinned throw the first stone"...

Thank you.

Polot wrote:

People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

If you were a Boeing shareholder, you would be very worried if less attention was paid to making profits. So it is important that the 787 programme did actually make some money - otherwise there is little justification for the programme.

As for sunk costs - these have not yet been reported in the profit statements yet. They are just a balance shown in the balance sheet. Shareholders will not worry so much about sunk costs if they had been charged to the profit and loss account. In order to call them sunk costs, Boeing needs to take the charge. Then we can forget it.

Coming back on topic - whatever HA orders and takes, it is for the good of the business. Maybe Leeham got its wires crossed. Maybe HA does indeed need both the A338 as well as the B789. Time will tell. Lets wait and see what happens....

Polot wrote:

At some point the question becomes who cares? What is done is done, Boeing already spent the $28B+ years ago. Boeing may have already accepted that the 787 program as a whole will never be some huge net profit maker when you take into account all the production costs. But that doesn’t mean you should just roll over and stop aggressively selling planes. As long as the sales price is greater than the price to build it is netting Boeing more cash than if they had not done the deal, and puts another frame in service to get additional revenue from in the future from sales and support.

If they have to write it (787’s production costs) off they write it off and the world moves on, just like with Airbus and the A380 and A400M. It doesn’t actually change anything. People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

Correct. It is EXACTLY the same argument by the way that defenders of the A380 program make. The only difference is that Airbus wrote the costs off in real time where Boeing capitalized them. Do they make money on the current production is the only thing the OEM cares about. I remember not so long ago when some Airbus fanboys (some of whom have posted in this thread as it happens) were positively giddy over the A380 being break even on a per frame basis. It takes a lot of hypocrisy on their part not to apply that metric to the 787. Chances are that neither program will make back all its costs. Poop happens, and I am sure there are (albeit expensive) lessons learned and already benefited from. But a.net myths are hard to slay.

Meanwhile back at the ranch, the A338 order doesn't seem to have been cancelled. I am still not ruling out the A359 at HA.

Ziyulu wrote:

2-4-2 seating to 3-3-3 seating. I feel sorry for those in economy.

Private jet passenger: I feel sorry for those in commercial flights.

flee wrote:

I am sorry to say that this will be the case as long as deferred costs remain in the Boeing balance sheet. These are not development costs - they are production costs and have nothing to do with development. Boeing has stated that the costs will not be written off as they are incurred. Instead they will be capitalised as an asset and be amortised over the production block. As such, these costs have not been accounted for through the profit and loss account. Every 787 frame that is now made has to bear these production costs that were incurred earlier. This will go until the last unit of the accounting block that Boeing has predetermined.

These deferred production costs is what is preventing Boeing from selling the 787 too cheap - they are part of cost of production. If Boeing sold the 787 too cheap, they would not be making profits and may even incur losses.

It's pretty obvious Boeing can sell 787s cheap enough -- they've got years of backlog and are increasing the production rate.

If it suited the Boeing Company it could just chose to take a write off tomorrow for the deferred costs, it'd be a paper loss that would presumably effect valuation and stock price, but would not impact what price they'd sell 787s for.

If it suits the Boeing Company they can keep increasing the accounting block every time they get a new bunch of orders ( as they've already been doing on 787, 777, 737, etc ) till the end of the program. If at any point it becomes clear they can't cover the deferred cost ( like it did on 747-8 ) then they'll take a loss, but that just is not likely for any of the successful programs, so it will not impact what price they'd sell 787s for.

Overpricing the 787 to cover deferred cost makes no sense. What makes sense is to sell airplanes at as strong a price as the market will bear to bring in cash, and let the accounting work itself out if/when the accounting block can no longer cover the deferred cost. Guess what? That's what they do on all the other programs, too!

flee wrote:

If you were a Boeing shareholder, you would be very worried of less attention was paid to making profits. So it is important that the 787 did actually made some money.

As for sunk costs - these have not yet been reported in the profit statements yet. They are just a balance shown in the balance sheet. Shareholders will not worry so much about sunk costs if they had been charged to the profit and loss account. In order to call them sunk costs, Boeing needs to take the charge. Then we can forget it.

Coming back on topic - whatever HA orders and takes, it is for the good of the business. Maybe Leeham got its wires crossed. Maybe HA does indeed need both the A338 as well as the B789. Time will tell. Lets wait and see what happens....

You are right on many levels, but remember that there are no secrets here. It's all in black and white, and investors have made their decisions with the benefit of full disclosure. Those that do care about this issue should have already bailed (at a lower share price than currently as it happens). Sometimes I feel like calling up Dennis Muilenburg and telling him to write it off already FFS, so I don't have to read any more tedious posts about it on a.net.

INFINITI329 wrote:

I struggle to realize how these would make sense for Hawaiian. I feel like sticking with the 338 is the way to go and if needed upgauge a few frames to the 339.

Most likely the 787 has lower CASM (cost per available seat mile) excluding ownership costs than the A330neo. While not a huge difference, the 787 probably has lower fuel burn per seat than the A338. If anyone has a comparison, i would love to see it. Boeing and Hawaiian do have a long term relationship and Hawaiian is likely savvy enough to negotiate some support items for their 717 fleet by ordering 787s.

There is lots of debate on purchase price, but one thing i am confident in is that the financing terms on a high production popular plane are better than an orphan fleet. Unless Airbus self finances the deals, Hawaiian will likely be paying for the risk that the financers have due to a low residual value of the plane. Hawaiian is doing well now, but with no other operators, it would be hard to place an A338 if Hawaiian offloads them at some point before they are fully paid off. Hawaiian is a smaller airline that was in bankruptcy a decade ago, so banks are probably willing to offer better terms with 787s that will have a more robust used airplane market if Hawaiian does run into trouble (tsunami?, volcano?, North Korea? Lots could happen in 20 years). Think about Frontier A318s that got scapped that were less than 5 years old. Financing companies and lessors avoid low production rate orphan fleets. They charge higher rates to accomodate that risk

So in the end it may be a good business decision to switch. Hawaiian has been through enough delays and iterations of this order caused by Airbus that cancellation penalties are likely low or non existent.

An announcement on the 787 will not take place until agreements are signed. Until then, HA cannot make specific comments, nor will it cancel the A330-800s. I think Leeham’s intel about HA’s intent, likely fed from Airbus, is correct. The rumors about pricing are almost certainly not. Boeing is very concerned about residual value and won’t sell much below current market values. What’s more likely is that the value of the full package delivered to HA would require Airbus to price at or below $100M.

Polot wrote:

mjoelnir wrote:

Newbiepilot wrote:

Boeing is still a profit maximizing company in economic terms regardless of what deferred costs are. They want to earn the most money possible. They can lower prices, increase rate and try to steal market share or they can maintain higher prices but sell fewer airplanes. Sales price should be based on current production cost. If profit is maximized, deferred costs naturally will decline faster.

Indications are showing that Boeing is increasing rate and willing to get aggressive on price to capture market share versus the competition. Building 168 airplanes with 23 Million in profit will earn more than 144 airplanes at 25 Million profit. Add to that the higher rate should lower costs even more. Going up in rate should allow Boeing to drop price a little. 2-3 Million may or may not have been enough to win over Hawaiian. The significant drop in production cost as is shown by the current $16 Million drop in deferred production cost per plane could also explain why Boeing can now get more aggressive on price. Two years ago deferred costs were still increasing.

Up to now all Boeing has to show for the 787 is a loss. Here are thrown around numbers like 23 or 25 million profit on a 787 delivered. End of Q2 2017 the deferred cost on the 787 were 25.348 billion USD. End of Q4 it was 25.358. That makes 590 million reduction of deferred cost. In Q4 36 787 were delivered, that comes out to 16.4 million USD profit per frame. At 636 frames delivered Boeing should be quite near to the point were it gets difficult to cut out a lot of the production cost. There are 764 frames left in the block of 1400 frames. To finish the block and clear out the deferred cost Boeing needs on average 34 million USD profit per frame to break even on the whole production. Let us go to a 2000 frame block, that still would mean 19 million USD profit per frame needed, more than Boeing managed last quarter, and it would still mean that Boeing would have managed just to get back what it had cost to produce those 2000 frames.
If Boeing wants a return on the 25 billion development cost of the 787 in the 1400 block we look at over 60 million USD per frame needed and if we look at 2000 frames there will be nearly 40 million USD per frame needed. All that just to get the money back, without showing a profit overall.

At some point the question becomes who cares? What is done is done, Boeing already spent the $28B+ years ago. Boeing may have already accepted that the 787 program as a whole will never be some huge net profit maker when you take into account all the production costs. But that doesn’t mean you should just roll over and stop aggressively selling planes. As long as the sales price is greater than the price to build it is netting Boeing more cash than if they had not done the deal, and puts another frame in service to get additional revenue from in the future from sales and support.

If they have to write it (787’s production costs) off they write it off and the world moves on, just like with Airbus and the A380 and A400M. It doesn’t actually change anything. People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

It would have been done if Boeing would have booked the cost and taken the hit in profits, Boeing still has to take the hit in profits. If Boeing would write of the production cost now and declare a multi billion USD loss, the stock value would implode. It is nothing like Airbus, they took the hit and had lower profits.

mjoelnir wrote:

It would have been done if Boeing would have booked the cost and taken the hit in profits, Boeing still has to take the hit in profits. If Boeing would write of the production cost now and declare a multi billion USD loss, the stock value would implode. It is nothing like Airbus, they took the hit and had lower profits.

I don't think so. It is already disclosed and baked into the stock price. The price may even go UP if they take the write-off, with any potential uncertainties being removed.

mjoelnir wrote:

Post #384:

But the profits that will be expected have already been declared and spend. If Boeing would declare the hit today, they would declare a 25.4 billion USD loss, 25.4 billion USD less inventory and 25.4 billion USD negative equity, that means some 25 billion less assets than liabilities. If you add the Unamortized Tooling and Other Non-Recurring Cost, you get to about 28.5 billion USD.
That would about wipe out the profits for the last five or six years.

I think Mjoelnir has hit the nail on the head.

Put it another way: Given its situation, Boeing has decided to maximise the CONTRIBUTION towards reducing its accounting block loss by selling the 787 at market price. They are making the reasonable assumption that the resulting sales will each make some positive contribution even if it only $1. This assumes that from now on that each sale made at market price can be produced at less that market price. This seems a not un-reasonable assumption.

To optimise their position, Boeing management must give their sales teams a market share objective, not a margin objective which is technically too difficult a moving target. If they go for a market share of say 50% of wide bodies versus the combined wide bodies sales of the A330 at 6 per month and A350 at 13 per month, i.e. 19 per month, that will be well above the current short term production capacity plan of the 787 and 777-9 taken together.

So Boeing will go for a market share at which efficient 787 production can reasonably be maintained. This may also be a moving target.

Now we need to consider the Airbus response. They start with all capex having been written off against profit in the years it is incurred - I simplify. So they have the opportunity if they wish to take it, to sell at any price that makes a CONTRIBUTION to profit. This would quickly overwhelm their monthly production capacity with orders, destroy profits and financial return on shareholders funds. So they will not operate such a strategy which would also destroy Boeing.

So Airbus must adopt a market share strategy which will maintain a equilibrium price against Boeing based on PRODUCT VALUE by selling only what they can produce in an efficient manner. Essentially, this means that the prices at which Boeing can sell will be set to a substantial degree by its competitor Airbus.

Boeing Commercial business folk are therefore betting the farm on Airbus setting a market share objective which is realistic and optimal. Likewise Airbus is hoping (but not betting the farm) that Boeing has not lost the plot on its market share objective. Each OEM has to work to optimise its own position whilst looking over it shoulder to check that the other is behaving logically. This is how a duopoly might be expected to work, in a free market where there is more demand than supply.

I hope this helps and will slow if not halt the tiring debates which continue on a daily basis?

Revelation wrote:

It's pretty obvious Boeing can sell 787s cheap enough !

And they do it ( on a regular basis )

But this is counter the folk lore here that Boeing has pricing power much better than Airbus.

I'd like to question that. Afaics indications are counter.
My guess would be that a lot of pivotal sales on the Boeing side have been achieved
via exceptionaly low prices, super conditions, and lots of counterveiling ( against Airbus) PR.
Topped of with strong political leveraging.

Given the accounts of A being willing to take back A300/A320 from US first users decades ago. Why cant A guarantee residual value on the A338? At 8/12 years if you are done with the plane we guarantee we will take it in trade in for x% purchase price?

Since this thread is now about Boeing's finances (can a mod update the title, please?), I'll just chime in to note that on a Unit Cost basis, the 787 program recorded a profit every quarter in 2017 and ended up in the black by almost $4.7 billion. It was also profitable three quarters out of four in 2016 (and the Q2 loss was a third of what the Program Accounting loss was) and ended up being $2.7 billion in the black (compared to $2 billion on a Program Accounting basis). So I don't think Boeing is low-balling 787 prices across the board here.

sxf24 wrote:

An announcement on the 787 will not take place until agreements are signed. Until then, HA cannot make specific comments, nor will it cancel the A330-800s. I think Leeham’s intel about HA’s intent, likely fed from Airbus, is correct. The rumors about pricing are almost certainly not. Boeing is very concerned about residual value and won’t sell much below current market values. What’s more likely is that the value of the full package delivered to HA would require Airbus to price at or below $100M.

Which is something they should be able to do, no? The airwaysmag.com link I gave suggested they are willing to cut the price:

To counteract the potential cancellation, Airbus has offered Hawaiian to cut the price of the A330-800neo, or given options for A350-900 slots.

Ref: https://airwaysmag.com/airlines/boeing- ... -a330-800/

WIederling wrote:

My guess would be that a lot of pivotal sales on the Boeing side have been achieved
via exceptionaly low prices, super conditions, and lots of counterveiling ( against Airbus) PR.
Topped of with strong political leveraging.

And of course you can flip around each statement.

The whole point of A330neo is for Airbus to be able to offer exceptionally low prices via highly depreciated production methods.

Airbus's Leahy was the master of super conditions and countervailing PR, both sides acknowledge it.

Both sides use strong political leveraging -- how many trips have we seen made by French Presidents and German Chancellors make in China, Middle East, etc?

Both sides are competing hard.

This thread is just suggesting some ways the competition might be shifting, presuming some of the things Hamilton wrote are true.

Revelation wrote:

sxf24 wrote:

An announcement on the 787 will not take place until agreements are signed. Until then, HA cannot make specific comments, nor will it cancel the A330-800s. I think Leeham’s intel about HA’s intent, likely fed from Airbus, is correct. The rumors about pricing are almost certainly not. Boeing is very concerned about residual value and won’t sell much below current market values. What’s more likely is that the value of the full package delivered to HA would require Airbus to price at or below $100M.

Which is something they should be able to do, no? The airwaysmag.com link I gave suggested they are willing to cut the price:

To counteract the potential cancellation, Airbus has offered Hawaiian to cut the price of the A330-800neo, or given options for A350-900 slots.

Ref: https://airwaysmag.com/airlines/boeing- ... -a330-800/

WIederling wrote:

My guess would be that a lot of pivotal sales on the Boeing side have been achieved
via exceptionaly low prices, super conditions, and lots of counterveiling ( against Airbus) PR.
Topped of with strong political leveraging.

And of course you can flip around each statement.

The whole point of A330neo is for Airbus to be able to offer exceptionally low prices via highly depreciated production methods.

Airbus's Leahy was the master of super conditions and countervailing PR, both sides acknowledge it.

Both sides use strong political leveraging -- how many trips have we seen made by French Presidents and German Chancellors make in China, Middle East, etc?

Both sides are competing hard.

This thread is just suggesting some ways the competition might be shifting, presuming some of the things Hamilton wrote are true.

Most airlines’ evaluation process will consider residual value and financing. The price for the A330-800 would need to be extremely low to offset these concerns.

Stitch wrote:

Since this thread is now about Boeing's finances (can a mod update the title, please?), I'll just chime in to note that on a Unit Cost basis, the 787 program recorded a profit every quarter in 2017 and ended up in the black by almost $4.7 billion. It was also profitable three quarters out of four in 2016 (and the Q2 loss was a third of what the Program Accounting loss was) and ended up being $2.7 billion in the black (compared to $2 billion on a Program Accounting basis). So I don't think Boeing is low-balling 787 prices across the board here.

Thank you for the numbers. While the topic is... Off topic, it is unusually civil for a vs. b and good information is being exchanged. I'll let other mods decide on a title change. I'm enjoying the information presented too much to want to rock the boat.

It's been too long since an a vs. b thread was enjoyable to read.

Lightsaber

Revelation wrote:

sxf24 wrote:

An announcement on the 787 will not take place until agreements are signed. Until then, HA cannot make specific comments, nor will it cancel the A330-800s. I think Leeham’s intel about HA’s intent, likely fed from Airbus, is correct. The rumors about pricing are almost certainly not. Boeing is very concerned about residual value and won’t sell much below current market values. What’s more likely is that the value of the full package delivered to HA would require Airbus to price at or below $100M.

Which is something they should be able to do, no? The airwaysmag.com link I gave suggested they are willing to cut the price:

To counteract the potential cancellation, Airbus has offered Hawaiian to cut the price of the A330-800neo, or given options for A350-900 slots.

Ref: https://airwaysmag.com/airlines/boeing- ... -a330-800/

WIederling wrote:

My guess would be that a lot of pivotal sales on the Boeing side have been achieved
via exceptionaly low prices, super conditions, and lots of counterveiling ( against Airbus) PR.
Topped of with strong political leveraging.

And of course you can flip around each statement.

The whole point of A330neo is for Airbus to be able to offer exceptionally low prices via highly depreciated production methods.

Airbus's Leahy was the master of super conditions and countervailing PR, both sides acknowledge it.

Both sides use strong political leveraging -- how many trips have we seen made by French Presidents and German Chancellors make in China, Middle East, etc?

Both sides are competing hard.

This thread is just suggesting some ways the competition might be shifting, presuming some of the things Hamilton wrote are true.

There is one clear Victor here, HA.

If they stick with the A330NEO (either size), they have better terms. A win for them. If they go 789, it will be because they received better terms. Net results all point to lower costs for HA.

Oh... This might only be for a tiny order, but I find the negotiations facinating.

Serious question to all:. Is the engine order also in play? Could GE win on the 789? If one is to open Pandora's box, open it to negotiate on cost savings! The cost to support multi-engine fleets is far less than it used to be. Note:. The Trent has better economics on shorter missions and the GE on longer. Based on HA's routes, the advantage is RR's, all else being equal. But what is this order worth?

Lightsaber

This is indeed one of the most interesting threads in years.

The real winner here will be HA as whichever way they go, they will get a superb deal from either Airbus to retain the deal or Boeing to get its foot back in the door.

In my view, Airbus has everything to loose here, if the 789 is picked, I can see it, or other variants, replacing the A330 fleet as leases expire or the natural course of renewal takes place.

The other interesting part is RR, how much can they sharpen their pencil to either help the 338 deal or be the engine choice if HA switch to the 789?

I’m sure those involved are all swigging coffee and biting their nails......

Bricktop wrote:

mjoelnir wrote:

It would have been done if Boeing would have booked the cost and taken the hit in profits, Boeing still has to take the hit in profits. If Boeing would write of the production cost now and declare a multi billion USD loss, the stock value would implode. It is nothing like Airbus, they took the hit and had lower profits.

I don't think so. It is already disclosed and baked into the stock price. The price may even go UP if they take the write-off, with any potential uncertainties being removed.

You have your believe and I have mine. We will not be able to bet on it because Boeing will try to do everything but declare a loss.

lightsaber wrote:

A French company called Stella is trying to sell its 3D printing services and from what I've seen, they're ready

It's actually Stelia, and they're a wholly-owned subsidiary of Airbus.

flee wrote:

Polot wrote:

People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

If you were a Boeing shareholder, you would be very worried if less attention was paid to making profits. So it is important that the 787 programme did actually make some money - otherwise there is little justification for the programme.

As for sunk costs - these have not yet been reported in the profit statements yet. They are just a balance shown in the balance sheet. Shareholders will not worry so much about sunk costs if they had been charged to the profit and loss account. In order to call them sunk costs, Boeing needs to take the charge. Then we can forget it.

But, the 787 programme has, and continues to adversely influence the Boeing board in respect to future projects. The Board has no appetite to repeat the 787 financial debacle with the 737 replacement and 797.

And a conservative Board, flows down to senior management, who keen to correct past erroneous decisions, are causing waves through contractors/sub-contractors, alienating long-time suppliers.

You are correct, the 787 is here and now, and so as long as each sale yields more than the cost to build it, Boeing are ahead of the financial game. But the 787's financial position will impact the next generation of Boeing aircraft, and not for the better.

mjoelnir wrote:

Bricktop wrote:

mjoelnir wrote:

It would have been done if Boeing would have booked the cost and taken the hit in profits, Boeing still has to take the hit in profits. If Boeing would write of the production cost now and declare a multi billion USD loss, the stock value would implode. It is nothing like Airbus, they took the hit and had lower profits.

I don't think so. It is already disclosed and baked into the stock price. The price may even go UP if they take the write-off, with any potential uncertainties being removed.

You have your believe and I have mine. We will not be able to bet on it because Boeing will try to do everything but declare a loss.

We agree. And that means selling planes for as much as possible, which is counter to the hypothesis that they will give them away cheap.

Stitch wrote:

Since this thread is now about Boeing's finances (can a mod update the title, please?), I'll just chime in to note that on a Unit Cost basis, the 787 program recorded a profit every quarter in 2017 and ended up in the black by almost $4.7 billion. It was also profitable three quarters out of four in 2016 (and the Q2 loss was a third of what the Program Accounting loss was) and ended up being $2.7 billion in the black (compared to $2 billion on a Program Accounting basis). So I don't think Boeing is low-balling 787 prices across the board here.

There's $7.4 billion right there. Looks like a cash cow from here. Will it never make a "profit"?

This situation is a textbook example of how the financial structure of a company influences decisions. Lowest sale price will not always win just as lowest operating cost does not always win. Large companies with heavy cash balances will naturally prioritize initial cost and tend to be less concerned with residual value, especially if they tend to operate the assets for usable life. Good examples are Delta and AT&T. Conversely, highly leveraged companies, or those who run an opex based financial system instead of capex, will heavily prioritize liquidity of the asset and residual values. Outside financing drives these requirements.

A good example on a personal level is that some individuals will buy a new car and drive it for 15-20 years until the wheels fall off. Others will lease or trade vehicles every few years. Obviously both work and the “best” solution is case dependent.

...

In this case, Boeing seems to have a major advantage over Airbus in this particular size range for companies (like HA) that lease. The 330neo has struggled to sale outside of initial orders and despite excellent residual value (and great leasing terms) on ceo models, the neo is rapidly become isolated to companies running a cash-driven capex model. On the whole, outside of a few major blue chip airlines, this market is quite a bit smaller than the opex market. AirAisa excluded, most fast-growing companies are younger, highly leveraged, and as a result use an opex model.

As a fan of both A and B, I hope the 330neo doesn’t become a repeat case of the A340NG (500/600) that underperforms it’s competitive peer. Case is not yet closed but the situation appears to be becoming for difficult.

RR T-1000 TEN supposedly now equals GE in cruise meaning no more fuel burn gap at longer distances. The question becomes a matter of price, financing, availability, and reliability. RR is struggling with the last two at the moment and because the major investment in TEN, its cost is higher than GE’s. This will be an interesting space to watch over the next couple of years.

https://www.flightglobal.com/news/artic ... ow-446147/
I didn't read the full thread which it have probably been mentioned already that HA denies the report and said the order have not been cancelled yet, but then what do they mean when they say "We have not signed an agreement with either manufacturer," ?

c933103 wrote:

https://www.flightglobal.com/news/articles/hawaiians-a330-800-order-remains-in-place-for-now-446147/
I didn't read the full thread which it have probably been mentioned already that HA denies the report and said the order have not been cancelled yet, but then what do they mean when they say "We have not signed an agreement with either manufacturer," ?

The sentence right before it says "It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet.", so HA is admitting they are in the market. HA tells us they have not cancelled A338, but aren't willing to answer more questions until "the conclusion of those negotiations".

Revelation wrote:

c933103 wrote:

https://www.flightglobal.com/news/articles/hawaiians-a330-800-order-remains-in-place-for-now-446147/
I didn't read the full thread which it have probably been mentioned already that HA denies the report and said the order have not been cancelled yet, but then what do they mean when they say "We have not signed an agreement with either manufacturer," ?

The sentence right before it says "It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet.", so HA is admitting they are in the market. HA tells us they have not cancelled A338, but aren't willing to answer more questions until "the conclusion of those negotiations".

I still think the wording could easily be read as if the A338 order is not even in question here.
It could be read as this is another RFQ between the A359 and 787-9

"they've not cancelled the A338 and are negotiating the next addition to the fleet"

Rgds

Revelation wrote:

c933103 wrote:

https://www.flightglobal.com/news/articles/hawaiians-a330-800-order-remains-in-place-for-now-446147/
I didn't read the full thread which it have probably been mentioned already that HA denies the report and said the order have not been cancelled yet, but then what do they mean when they say "We have not signed an agreement with either manufacturer," ?

The sentence right before it says "It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet.", so HA is admitting they are in the market. HA tells us they have not cancelled A338, but aren't willing to answer more questions until "the conclusion of those negotiations".

That sums it up. HA is still negotiating. Is the current fleet impacted? I do not know.

Vendors should never let their orders be put in play. Airbus obviously couldn't lock HA into the A338 as tightly as they wanted. It would be silly for HA not to negotiate.

Lightsaber

lightsaber wrote:

Stitch wrote:

Since this thread is now about Boeing's finances (can a mod update the title, please?), I'll just chime in to note that on a Unit Cost basis, the 787 program recorded a profit every quarter in 2017 and ended up in the black by almost $4.7 billion. It was also profitable three quarters out of four in 2016 (and the Q2 loss was a third of what the Program Accounting loss was) and ended up being $2.7 billion in the black (compared to $2 billion on a Program Accounting basis). So I don't think Boeing is low-balling 787 prices across the board here.

Thank you for the numbers. While the topic is... Off topic, it is unusually civil for a vs. b and good information is being exchanged. I'll let other mods decide on a title change. I'm enjoying the information presented too much to want to rock the boat.

It's been too long since an a vs. b thread was enjoyable to read.

Lightsaber

I agree 787 is making profit on per delivery basis, but that still can't justify whether Boeing is low-balling 787 price
After all, you omit all the deferred production cost that Boeing is playing with their accounting book .....

Looking at the deferred production cost from Boeing website
http://www.boeing.com/investors/account ... ions.page/
we have 136 deliveries in 2017 while deferred production cost was reduced by 1950M which translate to ~ 14.3 M reduce per delivery
With this rate and 650 left in the backlog means we can reduce the deferred production cost by 9,295 M when we emptied the backlog
However, the deferred production cost on the accounting book still 25,358 M at the end of Q4 2017 and obviously Boeing need to work harder on the pricing to make up the "huge" hole
(rough estimate you need to have close to 3x of reduce per delivery as of today to zero the deferred cost on your accounting book)
After all, the program has been 7 years since the first delivery and the first decay mark is coming up

astuteman wrote:

I still think the wording could easily be read as if the A338 order is not even in question here. It could be read as this is another RFQ between the A359 and 787-9.

Well all of this speculation has been solely based on Scott Hamilton's various articles and tweets saying that HA had an RFP going between the A350-900 and 787-9 because they did not want the A330-800 anymore and that the 787-9 had won said RFP.

Scott could be talking out his bum about all of it, of course, however he does have a freedom to speak about possible facts that might not yet in evidence that HA, Airbus and Boeing cannot due to regulatory and reporting constraints.

Whatever facts there about any of this will eventually make themselves known.

Bricktop wrote:

Polot wrote:

At some point the question becomes who cares? What is done is done, Boeing already spent the $28B+ years ago. Boeing may have already accepted that the 787 program as a whole will never be some huge net profit maker when you take into account all the production costs. But that doesn’t mean you should just roll over and stop aggressively selling planes. As long as the sales price is greater than the price to build it is netting Boeing more cash than if they had not done the deal, and puts another frame in service to get additional revenue from in the future from sales and support.

If they have to write it (787’s production costs) off they write it off and the world moves on, just like with Airbus and the A380 and A400M. It doesn’t actually change anything. People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

Correct. It is EXACTLY the same argument by the way that defenders of the A380 program make. The only difference is that Airbus wrote the costs off in real time where Boeing capitalized them. Do they make money on the current production is the only thing the OEM cares about. I remember not so long ago when some Airbus fanboys (some of whom have posted in this thread as it happens) were positively giddy over the A380 being break even on a per frame basis. It takes a lot of hypocrisy on their part not to apply that metric to the 787. Chances are that neither program will make back all its costs. Poop happens, and I am sure there are (albeit expensive) lessons learned and already benefited from. But a.net myths are hard to slay.

Meanwhile back at the ranch, the A338 order doesn't seem to have been cancelled. I am still not ruling out the A359 at HA.

The A380 has made an overall production loss. The development cost will not be recovered. As this money has been spend, AND BEEN WRITTEN OFF, and the loss taken out in lowered profits, it should have no influence on what will happen in the future with the A380.

The 787 has a made a loss. It will may be that the development cost will be recovered, I find it doubtful, but wonders happen. I am prepared to stop talking about the financial situation of the 787 program, that still has over 25 billion, not booked to cost, overall production losses, if avid Boeing fans stop talking about an up to now loss making program as a cash cow.
I will stop talking about the difference between program for cost accounting and normal accounting, when giddy Boeing fanboys stop boasting about huge profits at Boeing while talking over low profits at Airbus, while forgetting to deduct the deferred cost from Boeing's profits to compare.

People here on a.net are saying the financial peculiarities of program for cost accounting is well understood. Giddy Boeing fanboys provide the proof that it is not.

Have a nice day.

Hawaiian likes the Boeing 787-900 better. It fits their plan. Simple enough.

mjoelnir wrote:

The A380 has made an overall production loss. The development cost will not be recovered. As this money has been spend, AND BEEN WRITTEN OFF, and the loss taken out in lowered profits, it should have no influence on what will happen in the future with the A380.

And I hope I have proven the same with the 787. Write off or not, it is irrelevant.

mjoelnir wrote:

The 787 has a made a loss. It will may be that the development cost will be recovered, I find it doubtful, but wonders happen. I am prepared to stop talking about the financial situation of the 787 program, that still has over 25 billion, not booked to cost, overall production losses, if avid Boeing fans stop talking about an up to now loss making program as a cash cow.

We agree on this point. I ignore those posts btw, and don't feed the flames.

mjoelnir wrote:

I will stop talking about the difference between program for cost accounting and normal accounting, when giddy Boeing fanboys stop boasting about huge profits at Boeing while talking over low profits at Airbus, while forgetting to deduct the deferred cost from Boeing's profits to compare.

Again, no disagreement. See previous response.

mjoelnir wrote:

People here on a.net are saying the financial peculiarities of program for cost accounting is well understood. Giddy Boeing fanboys provide the proof that it is not.

Sophisticated posters get it. I will say no more lest I offend someone.

mjoelnir wrote:

Have a nice day.

And to you also.

Bricktop wrote:

mjoelnir wrote:

The A380 has made an overall production loss. The development cost will not be recovered. As this money has been spend, AND BEEN WRITTEN OFF, and the loss taken out in lowered profits, it should have no influence on what will happen in the future with the A380.

And I hope I have proven the same with the 787. Write off or not, it is irrelevant.

Written off, that is exactly the point!!! You have some day to recognise your losses. The losses of the 787 have not been written off, there are more that than 25 billion USD losses accounted for as assets in inventories.

StTim wrote:

reltney wrote:

Hawaiian likes the Boeing 787-900 better. It fits their plan. Simple enough.

There is no such plane.

Semantics. We all know what the poster means. This post is not necessary. Everyone knows what is meant by 787-900. The 789, which is most definitely an airplane.

Stitch wrote:

Sooner787 wrote:

If HA does acquire the 789, does that put western Europe within range from HNL?

Honolulu-Western Europe is around 6500nm Great Circle, which is around 1000nm lower than the design range of both the A330-800 and 787-9. So accounting for actual airline configurations and real-world conditions, both should be able to take a full load of passengers and baggage with some revenue cargo.

Austin787 wrote:

787-8 makes more sense for HA if they are going the 787 route.

FA9295 wrote:

I agree. Not sure why the 789 was more appealing to HA than the 788... Most people on this thread state that the 789 is "too much plane". The 787-8 cuts that down (although not significantly, but still nonetheless)...

c933103 wrote:

Maybe they want more range?

While the 787-8 likely has enough range to meet the requirements, it is an expensive plane for Boeing to build due to lack of commonality with the 787-9 and 787-10. So I expect Boeing is willing to deal more (as a percentage discount if not actual hard dollar amount discount) on the 787-9 than the 787-8.

marcelh wrote:

Can we see a larger order for the 789?

Perhaps farther down the road. HA has a large A330-200 fleet which is quite young. The A350-800 looks like it offered the mix of capacity and range Hawaiian was looking for to launch limited European services to test the waters and the 787-9 will give them the same. So if a European expansion does well, then I could see HA adding more 787-9s down the road.

Strato2 wrote:

Not too bad for Airbus when Boeing will end up paying them the cancellation penalties from the A330-800neo deal.

I would not be surprised if HA can walk away from the A330-800 deal with zero penalties. And any deposits they had would have been moved to their A321 orders.

parapente wrote:

So the 339's an orphan Now? Hmmmm Tricky.

I don't think the A330-900 needs to worry about being an "only child" anymore than the A330-300HGW did.

789 also has higher MTOW to facilitate longer range. Also HA 332s had 294 seats; with lie flat business class, 278. For a nominal 250 seat aircraft. 789 is nominally right at where HA has their A332s; the question is what will HA do with the extra cabin space?

jagraham wrote:

Stitch wrote:

Sooner787 wrote:

If HA does acquire the 789, does that put western Europe within range from HNL?

Honolulu-Western Europe is around 6500nm Great Circle, which is around 1000nm lower than the design range of both the A330-800 and 787-9. So accounting for actual airline configurations and real-world conditions, both should be able to take a full load of passengers and baggage with some revenue cargo.

Austin787 wrote:

787-8 makes more sense for HA if they are going the 787 route.

FA9295 wrote:

I agree. Not sure why the 789 was more appealing to HA than the 788... Most people on this thread state that the 789 is "too much plane". The 787-8 cuts that down (although not significantly, but still nonetheless)...

c933103 wrote:

Maybe they want more range?

While the 787-8 likely has enough range to meet the requirements, it is an expensive plane for Boeing to build due to lack of commonality with the 787-9 and 787-10. So I expect Boeing is willing to deal more (as a percentage discount if not actual hard dollar amount discount) on the 787-9 than the 787-8.

marcelh wrote:

Can we see a larger order for the 789?

Perhaps farther down the road. HA has a large A330-200 fleet which is quite young. The A350-800 looks like it offered the mix of capacity and range Hawaiian was looking for to launch limited European services to test the waters and the 787-9 will give them the same. So if a European expansion does well, then I could see HA adding more 787-9s down the road.

Strato2 wrote:

Not too bad for Airbus when Boeing will end up paying them the cancellation penalties from the A330-800neo deal.

I would not be surprised if HA can walk away from the A330-800 deal with zero penalties. And any deposits they had would have been moved to their A321 orders.

parapente wrote:

So the 339's an orphan Now? Hmmmm Tricky.

I don't think the A330-900 needs to worry about being an "only child" anymore than the A330-300HGW did.

789 also has higher MTOW to facilitate longer range. Also HA 332s had 294 seats; with lie flat business class, 278. For a nominal 250 seat aircraft. 789 is nominally right at where HA has their A332s; the question is what will HA do with the extra cabin space?

I would hope a 2-4-2 W section is on the table. Especially with the stage lengths we’re expecting from this airplane. Knowing the Hawaiian market Y will be 9 across. But the 2-4-2 W section would give a nice alternative to paying for lie flat business and avoiding 3-3-3.

mjoelnir wrote:

Bricktop wrote:

Polot wrote:

At some point the question becomes who cares? What is done is done, Boeing already spent the $28B+ years ago. Boeing may have already accepted that the 787 program as a whole will never be some huge net profit maker when you take into account all the production costs. But that doesn’t mean you should just roll over and stop aggressively selling planes. As long as the sales price is greater than the price to build it is netting Boeing more cash than if they had not done the deal, and puts another frame in service to get additional revenue from in the future from sales and support.

If they have to write it (787’s production costs) off they write it off and the world moves on, just like with Airbus and the A380 and A400M. It doesn’t actually change anything. People here are waaaayyy too focused on the accounting block and whether Boeing will actually be at $0 at the end of it or not. Boeing is not going to dictate their entire 787 sales strategy around it, especially since they can always extend it. We are talking about sunk costs here, not actual debt.

Correct. It is EXACTLY the same argument by the way that defenders of the A380 program make. The only difference is that Airbus wrote the costs off in real time where Boeing capitalized them. Do they make money on the current production is the only thing the OEM cares about. I remember not so long ago when some Airbus fanboys (some of whom have posted in this thread as it happens) were positively giddy over the A380 being break even on a per frame basis. It takes a lot of hypocrisy on their part not to apply that metric to the 787. Chances are that neither program will make back all its costs. Poop happens, and I am sure there are (albeit expensive) lessons learned and already benefited from. But a.net myths are hard to slay.

Meanwhile back at the ranch, the A338 order doesn't seem to have been cancelled. I am still not ruling out the A359 at HA.

The A years 380 has made an overall production loss. The development cost will not be recovered. As this money has been spend, AND BEEN WRITTEN OFF, and the loss taken out in lowered profits, it should have no influence on what will happen in the future with the A380.

The 787 has a made a loss. It will may be that the development cost will be recovered, I find it doubtful, but wonders happen. I am prepared to stop talking about the financial situation of the 787 program, that still has over 25 billion, not booked to cost, overall production losses, if avid Boeing fans stop talking about an up to now loss making program as a cash cow.
I will stop talking about the difference between program for cost accounting and normal accounting, when giddy Boeing fanboys stop boasting about huge profits at Boeing while talking over low profits at Airbus, while forgetting to deduct the deferred cost from Boeing's profits to compare.

People here on a.net are saying the financial peculiarities of program for cost accounting is well understood. Giddy Boeing fanboys provide the proof that it is not.

Have a nice day.

Ok so let Boeing take a $ 25 Billion write off this year, 787 monies going to deferred accounting can be rerouted to CASH FLOW and PROFIT. Profit margin is presently at 11%. How much more do you think that will go up years following the write off, as a Boeing shareholder I want to know. By the way at the close on Feb 23 shares of Boeing at $356.66. "Giddy" doesn't begin to describe how happy I am.

INFINITI329 wrote:

I struggle to realize how these would make sense for Hawaiian. I feel like sticking with the 338 is the way to go and if needed upgauge a few frames to the 339.

One simple reason they make sense - range. HA wants to fly further than the 332 currently allows, and the 338 range simply doesn't match what they can get from the 789 or 359, and the 339 is far too big with less range. It's all about the range.

lightsaber wrote:

Could GE win on the 789? If one is to open Pandora's box, open it to negotiate on cost savings! The cost to support multi-engine fleets is far less than it used to be. Note:. The Trent has better economics on shorter missions and the GE on longer. Based on HA's routes, the advantage is RR's, all else being equal. But what is this order worth?

Since the object for HA is to increase range compared to the current 332s, I think the GE would be better. My guess is that we'll be using the new planes to go further than we currently can go.

HAL

HAL wrote:

INFINITI329 wrote:

I struggle to realize how these would make sense for Hawaiian. I feel like sticking with the 338 is the way to go and if needed upgauge a few frames to the 339.

One simple reason they make sense - range. HA wants to fly further than the 332 currently allows, and the 338 range simply doesn't match what they can get from the 789 or 359, and the 339 is far too big with less range. It's all about the range.

lightsaber wrote:

Could GE win on the 789? If one is to open Pandora's box, open it to negotiate on cost savings! The cost to support multi-engine fleets is far less than it used to be. Note:. The Trent has better economics on shorter missions and the GE on longer. Based on HA's routes, the advantage is RR's, all else being equal. But what is this order worth?

Since the object for HA is to increase range compared to the current 332s, I think the GE would be better. My guess is that we'll be using the new planes to go further than we currently can go.

HAL

The A330-800 nearly matches the range of a 787-9. 7,500nm compared to 7,635nm, that is hardly a difference. We have also the statement that the A330-900 test frames are surpassing planed specs, so it is not unlikely for the A330-800 also to do similar.

Revelation wrote:

The sentence right before it says "It is well-known that Hawaiian Air has been negotiating with both Boeing and Airbus for the next addition to our fleet.", so HA is admitting they are in the market. HA tells us they have not cancelled A338, but aren't willing to answer more questions until "the conclusion of those negotiations".

The simple fact of the matter is the three players here, Hawaiian, Boeing, and Airbus are all public companies. If any material change to an existing or new order had actually transpired they each have fiduciary duty to make such material changes public.

Fact that we do not have any public statement means at this time there is no material change, the OEMs continue to pitch to airlines all the time.

zeke wrote:

Fact that we do not have any public statement means at this time there is no material change, the OEMs continue to pitch to airlines all the time.

do negotiations fall in the "reportable" category?
( I always though this to be limited to some signed papers.)

Well according the the worlds most reputable source (@AlexInAir) 2 hours ago Hawaiian is taking all six A338.
2x 2019
2x 2020
2x 2021

WIederling wrote:

do negotiations fall in the "reportable" category?
( I always though this to be limited to some signed papers.)

Not unless they have a material change

mjoelnir wrote:

Bricktop wrote:

mjoelnir wrote:

The A380 has made an overall production loss. The development cost will not be recovered. As this money has been spend, AND BEEN WRITTEN OFF, and the loss taken out in lowered profits, it should have no influence on what will happen in the future with the A380.

And I hope I have proven the same with the 787. Write off or not, it is irrelevant.

Written off, that is exactly the point!!! You have some day to recognise your losses. The losses of the 787 have not been written off, there are more that than 25 billion USD losses accounted for as assets in inventories.

And again, so what? Will a writeoff change the price they sell their planes for? No, as I have demonstrated. It seems like you just want them to do some kind of perp walk, where all the Airbus fanboys can yell, "Shame! Shame!" at them, but apart from that you cannot point to any real world impact.

zeke wrote:

The simple fact of the matter is the three players here, Hawaiian, Boeing, and Airbus are all public companies. If any material change to an existing or new order had actually transpired they each have fiduciary duty to make such material changes public. Fact that we do not have any public statement means at this time there is no material change, the OEMs continue to pitch to airlines all the time.

Changes which have a material financial impact a company's operations need to be publicy disclosed.
Changes which have a material financial impact an "order" do not need to be publicly disclosed.
Changes which may occur from ongoing, non-finalized negotiations would never be publicly disclosed.