EPA001 wrote:

My take on that is that it is more speculative than that is a deal maker or breaker.

If it would make a real difference Boeing would be all over the place with glossies.
But the B HiWi hordes only bring it up in rather abstract postulations.

enzo011 wrote:

I find it could well be the case, just like HA paid close to or even less than $100m per 787 for this order.

And perhaps they did. I could see Boeing offering that low a price if they also secured from HA an agreement that they will buy another two dozen 787-9 down the road as A330-200 replacements. The long term support and ancillary sales for ~30 787-9s would go a long way to boost the overall margins of such a deal and it would flip HA back to Boeing from Airbus when it comes to widebodies.

enzo011 wrote:

I am not sure if you answered, but you commented that Airbus will be in trouble if the 789 sales price is only $10m more than the cost for Airbus to produce a A350. Do you think, with what you know, it is unrealistic for Airbus to reach production costs of the 787 with the A350? Or is it a case that Airbus has a 20% premium on production costs compared to Boeing?

I do believe the A350 will cost more than the 787 to produce, but I do not expect the delta to be as large as it is rumored to be now. So maybe $10-15 million more instead of the rumored current $20-30 million.

bx737 wrote:

Here is a quick thought I’d like to put into the mix:

Is there a market for the MOM?
Airbus and Boeing appear to be having difficulty selling their smallest wide bodied aircraft. This article is about the A330-800 losing its sole customer, a poster above referred to the 787-8 as “dying” and the A350-800 was taken off the drawing board. There seems to be difficulty in selling aircraft of this size. The A330-800 has a capacity of approximately 275 in a two class configuration, similar to the 787-8. Whereas the A321LR can carry about 190 (two class) and the 737 MAX10 about the same, are airlines prepared to buy a new aircraft that is between the two of these. Personally I can’t see it.

What plane can fly how many people between two particular points and at what costs. A MOM will have to excel at enough routes to make a compelling business case. Boeing and any number of airlines see a big possibility, but not yet enough to offer the plane.

marcelh wrote:

cledaybuck wrote:

JerseyFlyer wrote:

Boeing cannot be too aggressive on price until the massive deferred costs of the early stages of the 787 programme are recovered.

No. Boeing should not be letting their accounting methods determine the sales price of their aircraft.

Those deferred costs can't be pushed into the future eternally. With the current rate (just over $ 16 Million per plane) thy need to build another 1,700-ish 787s.

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper right off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

Stitch wrote:

The A330-900 is too big and lacks the range for all the missions HA looks to be interested in. The 787-9 is too big, as well, but at least it has the range.

How much if any cargo does HA shift? I would have thought that 789 and A359 could move some cargo to make up for the oversize seating capacity.

soooooo.... one big thing I think you've all forgot about, is the A359 is a very capable aircraft and after just having my first two flights on one I'm extremely impressed. The Pax experience is FAR better than the 787 in my personal opinion though I was on SIA and they tend to outfit their aircraft well.

However here is a problem for mainland hubs and somewhat of an opportunity for Hawaiian. Typically the 777, 747 etc are close to the edge of the range on transpacific sectors. This is not an issue for HA. So what does that give HA the ability to do with the A359? Lift a huge amount of freight from places as far away as JFK to ICN, AKL and SYD. Amounts the likes of QF, DL, NZ etc just can't carry. Weight restrictions.

If they cancel their order and I was at airbus.... id just about give them away A359s to keep them onside. There's also no reason why, with some of HA's partners they can't start tag on routes. HNL-JFK-CPT/JNB... with JetBlue feeding them at JFK. this really isn't any different to Delta sending a 77L ATL-LAX-SYD. It IS an American carrier after all... it will have full traffic rights. Or HNL-LAX-EZE/GRU. HNL is known as a clean destination and safe destination. And for a lot of people that carries great appeal. Especially those with small children. If they don't take it... considering the first one's already built (I find unlikely they won't now) this plane has a future in cargo and military applications. hell it's probably the most capable tanker/troop aircraft ever built. it won't serve in the USAF, but you can bet your bottom dollar it will end up in the RAF, the RAAF, the RANZ, the RCAF, the Singapore Air Force, a whole stack of Middle East states , the Luftwaffe, the French Air Force, probably even South Africa as well. Then one big order from Amazon or DHL... and an aircraft that had low development costs due to its stretched brother thats done well, the 339.... and you have a success. If Boeing pull this deal off.... it wasn't about commercial logic. It was they wanted to win at any price.

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Boeing is afraid of the A330neo
—> Boeing leadership are idiots
—> Boeing sells aircraft at a loss
—> This is actually good news for Airbus
—> Boeing has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

cledaybuck wrote:

marcelh wrote:

cledaybuck wrote:

No. Boeing should not be letting their accounting methods determine the sales price of their aircraft.

Those deferred costs can't be pushed into the future eternally. With the current rate (just over $ 16 Million per plane) thy need to build another 1,700-ish 787s.

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper right off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

I would say the most logical way to view it is that until sometime in 2016 Boeing wasn’t 100% sure what the ultimate stabilizes build cost of the 787 would be. The line stabilized in 2015-16. Suppliers mostly saw contracts renegotiated in 2016 and 2017. Now Boeing knows its cost and will adjust their offering price accordingly as they go forward.

I think the majority of the price change is in the maturity of the line and aggressive pressing on suppliers to keep their prices in check. Looking at the numbers it was middle of 2016 before they could really be sure they had a handle on exactly how much it would cost to build the rest of them.

By looking at it Q3 2016 is the first with a substantial reduction of the deferred balances which means that is the first time that price less cost to build exceeded cost to build plus planned profit. It was about $4 million a plane then and the average in 2016 was about $1.7 million per plane when you account for the reduction made writing off the R&D planes. In 2017 the number was about $17.6 million per plane so it is accelerating rapidly.

I agree you can’t let accounting influence your pricing, but the movement of the accounting numbers show where Boeing is in regards to cost of production. Until they weren’t below projections as they were until mid 2016 they weren’t in a position to apply pricing pressure and maintain margins. Now they appear to have a choice of either expanding their margins or increasing their market share and volume. The A330neo is particularly vulnerable to a reduced price 787. Pushing it out has strong strategic implications.

Well a couple things we have learned in this thread.
1. Boeing is now selling a/c at a loss in the hopes of gaining market share, this is the same crap that Airbus was accused of so we know it is just that, crap.
2. The Boeing Program Accounting experts have not weighed in on the obvious, Boeing is almost at the end of its current block and they either have to increase it or take a write off, the only way to increase is by showing to the SEC that the prospects of future sales exist.

Now if Airbus through a news vendor puts out that Boeing is selling it Dreamliner's at a loss with a low ball price, other airlines will mandate the same price, which will result in Boeing gaining more orders for the 787 but at lower yields which will allow them to raise the accounting block - kicking the can down the road - while writing off a lesser amount of the cost against sales. It may also allow another increase in the production rate which will create more slots to allow more purchases to allow lower cost to defer the cost even further etc etc etc.

All I can say is Oh what a tangle web we weave when first we practice to deceive.

um, Boeing has already increased the 787 block size recently, and quite conservatively on top of that. They can increase it at any time so long as they can justify the new number in some form. Which is quite easy when you have as narrow of a gap between current orders and current block size and a 14/month production rate.

bigjku wrote:

cledaybuck wrote:

marcelh wrote:

Those deferred costs can't be pushed into the future eternally. With the current rate (just over $ 16 Million per plane) thy need to build another 1,700-ish 787s.

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper right off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

I would say the most logical way to view it is that until sometime in 2016 Boeing wasn’t 100% sure what the ultimate stabilizes build cost of the 787 would be. The line stabilized in 2015-16. Suppliers mostly saw contracts renegotiated in 2016 and 2017. Now Boeing knows its cost and will adjust their offering price accordingly as they go forward.

I think the majority of the price change is in the maturity of the line and aggressive pressing on suppliers to keep their prices in check. Looking at the numbers it was middle of 2016 before they could really be sure they had a handle on exactly how much it would cost to build the rest of them.

By looking at it Q3 2016 is the first with a substantial reduction of the deferred balances which means that is the first time that price less cost to build exceeded cost to build plus planned profit. It was about $4 million a plane then and the average in 2016 was about $1.7 million per plane when you account for the reduction made writing off the R&D planes. In 2017 the number was about $17.6 million per plane so it is accelerating rapidly.

I agree you can’t let accounting influence your pricing, but the movement of the accounting numbers show where Boeing is in regards to cost of production. Until they weren’t below projections as they were until mid 2016 they weren’t in a position to apply pricing pressure and maintain margins. Now they appear to have a choice of either expanding their margins or increasing their market share and volume. The A330neo is particularly vulnerable to a reduced price 787. Pushing it out has strong strategic implications.

I agree with most of this. The only thing is I am not sure we know if the decline in the deferred balance is due to decreased build costs or increases sales prices. Probably a little bit of both.

Stitch wrote:

I do believe the A350 will cost more than the 787 to produce, but I do not expect the delta to be as large as it is rumored to be now. So maybe $10-15 million more instead of the rumored current $20-30 million.

Which makes sense as it is a bigger aircraft. I would assume more material costs more and thus production will be more. The 787 is also at a later stage of its production cycle so you would expect its costs to be less. If we assume that Airbus can approach the same level of efficiency regarding production of aircraft as Boeing and seeing that they will be break even on a per delivery basis in maybe a years time this will mean Airbus will have a cash cow with the A350 in a few years time.

PlanesNTrains wrote:

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Boeing is afraid of the A330neo
—> Boeing leadership are idiots
—> Boeing sells aircraft at a loss
—> This is actually good news for Airbus
—> Boeing has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

Ah yes, some extreme exaggeration to prove your point. A very reliable fall back.

bigjku wrote:

cledaybuck wrote:

marcelh wrote:

Those deferred costs can't be pushed into the future eternally. With the current rate (just over $ 16 Million per plane) thy need to build another 1,700-ish 787s.

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper right off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

I would say the most logical way to view it is that until sometime in 2016 Boeing wasn’t 100% sure what the ultimate stabilizes build cost of the 787 would be. The line stabilized in 2015-16. Suppliers mostly saw contracts renegotiated in 2016 and 2017. Now Boeing knows its cost and will adjust their offering price accordingly as they go forward.

I think the majority of the price change is in the maturity of the line and aggressive pressing on suppliers to keep their prices in check. Looking at the numbers it was middle of 2016 before they could really be sure they had a handle on exactly how much it would cost to build the rest of them.

By looking at it Q3 2016 is the first with a substantial reduction of the deferred balances which means that is the first time that price less cost to build exceeded cost to build plus planned profit. It was about $4 million a plane then and the average in 2016 was about $1.7 million per plane when you account for the reduction made writing off the R&D planes. In 2017 the number was about $17.6 million per plane so it is accelerating rapidly.

I agree you can’t let accounting influence your pricing, but the movement of the accounting numbers show where Boeing is in regards to cost of production. Until they weren’t below projections as they were until mid 2016 they weren’t in a position to apply pricing pressure and maintain margins. Now they appear to have a choice of either expanding their margins or increasing their market share and volume. The A330neo is particularly vulnerable to a reduced price 787. Pushing it out has strong strategic implications.

I agree with most of this. The only thing is I am not sure we know if the decline in the deferred balance is due to decreased build costs or increases sales prices. Probably a little bit of both.

par13del wrote:

Well a couple things we have learned in this thread.
1. Boeing is now selling a/c at a loss in the hopes of gaining market share, this is the same crap that Airbus was accused of so we know it is just that, crap.
2. The Boeing Program Accounting experts have not weighed in on the obvious, Boeing is almost at the end of its current block and they either have to increase it or take a write off, the only way to increase is by showing to the SEC that the prospects of future sales exist.

Now if Airbus through a news vendor puts out that Boeing is selling it Dreamliner's at a loss with a low ball price, other airlines will mandate the same price, which will result in Boeing gaining more orders for the 787 but at lower yields which will allow them to raise the accounting block - kicking the can down the road - while writing off a lesser amount of the cost against sales. It may also allow another increase in the production rate which will create more slots to allow more purchases to allow lower cost to defer the cost even further etc etc etc.

All I can say is Oh what a tangle web we weave when first we practice to deceive.

2018 will be a key to determine if Boeing can make it within the accounting block. They need to post strong gains on the reductions on a per plane basis. They ended at about $20 million and this year need to push towards $29 million in per frame reductions. If they do that and then have the production increase it will be really close to reducing that block to zero without a write off.

The next 650-700 orders were mostly higher priced variants such as the 9 and 10 which helps a bunch.

Boeing should come very close to closing out all deferred cost on the program within the present block. I could see an expansion to 1,500 units which sales would likely support but it doesn’t really matter. Unless reductions per frame stagnate in a way that would be unexpected given what we know it’s getting very close to handled.

cledaybuck wrote:

bigjku wrote:

cledaybuck wrote:

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper right off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

I would say the most logical way to view it is that until sometime in 2016 Boeing wasn’t 100% sure what the ultimate stabilizes build cost of the 787 would be. The line stabilized in 2015-16. Suppliers mostly saw contracts renegotiated in 2016 and 2017. Now Boeing knows its cost and will adjust their offering price accordingly as they go forward.

I think the majority of the price change is in the maturity of the line and aggressive pressing on suppliers to keep their prices in check. Looking at the numbers it was middle of 2016 before they could really be sure they had a handle on exactly how much it would cost to build the rest of them.

By looking at it Q3 2016 is the first with a substantial reduction of the deferred balances which means that is the first time that price less cost to build exceeded cost to build plus planned profit. It was about $4 million a plane then and the average in 2016 was about $1.7 million per plane when you account for the reduction made writing off the R&D planes. In 2017 the number was about $17.6 million per plane so it is accelerating rapidly.

I agree you can’t let accounting influence your pricing, but the movement of the accounting numbers show where Boeing is in regards to cost of production. Until they weren’t below projections as they were until mid 2016 they weren’t in a position to apply pricing pressure and maintain margins. Now they appear to have a choice of either expanding their margins or increasing their market share and volume. The A330neo is particularly vulnerable to a reduced price 787. Pushing it out has strong strategic implications.

I agree with most of this. The only thing is I am not sure we know if the decline in the deferred balance is due to decreased build costs or increases sales prices. Probably a little bit of both.

I would agree it’s both. A lot of the first half of orders were likely launch orders at launch pricing. We are moving away from those to larger and more profitable variants.

I would expect Boeing to be very aggressive going forward simply because they can.

enzo011 wrote:

Planesmart wrote:

Seems counter-intuitive for Boeing to offer any airline a deep discount on a mature model, unless there is a strong, secondary motive. Boeing is so risk averse, strategic thinking that sees deep discounts offered to protect a yet to be launched model is way too far fetched.

The Boeing board approves discounts outside the respective airline Tier rating. HA would not be Tier 1.

More likely, is Airbus are playing some cards here.

Boeing 787 customers who do not have firm price options, looking for top-up orders, are unhappy with the unit prices now being quoted, as are top-up customers with no options. The suggestion a small player is being offered deeply discounted 787's, will lower price expectations from those repeat customers.

If the average sales price of the 789 is $125m this is about 55% off list price. We are not talking about launch prices for the 789 any longer as well, would this be considered normal pricing discounts on average? Seeing that Boeing made a deal with UA on the 737-7 to keep the C-series out and then the whole price dumping saga with DL, surely it is time to re-think the notion that Boeing is being risk averse and they have actually switched to a very aggressive model to win and maintain market share?

UA is a Tier 1 customer, HA isn't.

cledaybuck wrote:

marcelh wrote:

cledaybuck wrote:

No. Boeing should not be letting their accounting methods determine the sales price of their aircraft.

Those deferred costs can't be pushed into the future eternally. With the current rate (just over $ 16 Million per plane) thy need to build another 1,700-ish 787s.

You kind of can keep pushing those deferred costs into the future eternally as long as you keep selling more planes, but that is not my point. You shouldn't let sunk costs determine your future actions. Those costs already happened and the money is already spent. Are you saying that if Boeing took a giant paper write off today on 787 expenses, they could sell the planes for substantially less tomorrow despite it still costing the same amount to actually build? That makes no sense.

Nice job at finding an example that might make people understand that program accounting does not change how Boeing does business much if at all.

It doesn't create money or destroy money, it just spreads out the production cost over time.

If Airbus was allowed to do it, they would be doing it right now, given how A320neo, A330neo and A350 are in ramp up mode.

par13del wrote:

Well a couple things we have learned in this thread.
1. Boeing is now selling a/c at a loss in the hopes of gaining market share, this is the same crap that Airbus was accused of so we know it is just that, crap.

No, we do not know this!

All we know is that Hamilton's article suggests Boeing is selling 789s at a price lower than Airbus's cost to make A359s.

And it's pretty logical:
A350 is not too far down its learning curve, 789 is.
A350 is bigger and heavier than 789.
789 has suffered up front so that manufacturing cost would be low over time.

The info in Hamilton's article even shows how Boeing could easily be making 10% - 20% above its cost to manufacture 789 on this deal.

Ref: viewtopic.php?f=3&t=1387017&start=250#p20193987
Ref: viewtopic.php?f=3&t=1387017&start=200#p20191703

PlanesNTrains wrote:

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Boeing is afraid of the A330neo
—> Boeing leadership are idiots
—> Boeing sells aircraft at a loss
—> This is actually good news for Airbus
—> Boeing has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

I think this change says more about the management of the airline than about the manufacturers or aircrafts.

Lufthansa wrote:

So what does that give HA the ability to do with the A359? Lift a huge amount of freight from places as far away as JFK to ICN, AKL and SYD. Amounts the likes of QF, DL, NZ etc just can't carry. Weight restrictions.

On HA's expected stage lengths, they can carry whatever they want on either the 359 or 789. The two aircraft have near-identical cargo capacity by volume. This may be a strategic advantage for HA but it doesn't give either the 359 or 789 a leg up.

This whole differed cost thing is simply a way for Boeing detractors to cast shade but it is nothing more than a paper exercise at this point. Some are even talking nonsense about "debt", as if Boeing borrowed the money to develope the 787. They didn't, they owe nothing to anybody except shareholders. The only thing it did was allow Boeing to show profit for 2-3 or 4 years that could have paid those costs. So what. This does not affect the cost of future production in any way. Boeing could probably have even taken those costs up front without a huge stock hit, as long as stockholders are convinced the R&D will work out in the future, look no farther than Tesla, for example.

PlanesNTrains wrote:

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Airbus is apparently desperate
—> Boeing is afraid of the A330neo
—> Airbus is Afraif of the 789
—> Boeing leadership are idiots
—> Airbus leadership are idiots
—> Boeing sells aircraft at a loss
—> Airbus give away airplanes
—> This is actually good news for Airbus
—> This is actually good news for Boeing
—> Boeing has woken the sleeping giant
—> Airbus has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

Hence my popcorn, the way I see it is yep maybe the 338 is dead (as some here have pointed out) and yes Boeing is trying to win back an important customer, because they can and are willing to do...if its stupid or reckless to do so, only time will tell, in the mean time Il wait to see a 789 in HA colors.... and how this pans out..

Best Regards
TRB

george77300 wrote:

Now we might have a aircraft BUILT with no customers or orders. When was the last time that happened?

The Bristol Brabazon?

DrPaul wrote:

george77300 wrote:

Now we might have a aircraft BUILT with no customers or orders. When was the last time that happened?

The Bristol Brabazon?

Again the Brabazon was paid for.
The last whitetails were Boeing: 748

JerseyFlyer wrote:

lightsaber wrote:

I think that reduced production price of the 789 is a huge issue for Airbus. From my own observation, it appears Boeing has reduced 789 production costs by 20 to 25 million per airframe over the last 4 or so years. Boeing has been more agressive cutting costs than Airbus...

To others:
Boeing is increasing production to go on volume. That means aggressive pricing to win market share.

Boeing is very cost driven. If it does produce a 789 for $10 million less than HA paid, that is $60 million in out the door profit and then ancillary sales.

The industry is going to a service model. A service model requires volume. Google used to do everything possible to be the only vendor of a service (this year has been different). Why shouldn't Boeing go for the market share?

Lightsaber

Boeing cannot be too aggressive on price until the massive deferred costs of the early stages of the 787 programme are recovered.

Airbus will reduce A350 production costs as the production ramp-up of that frame matures - it is lagging the 787 due to its later EIS. I would think there is less potential cost for Airbus to squeeze out of A330 production, given the maturity of that process, although an increase from the current 6 per month to rates that they achieved a few years ago would surely help.

Why is everyone talking as if $20 tp $30 million in profit per 789 is agressive/desperate?

That is $3 to $5 billion a year erasing the differed costs Boeing owes itself. Right now Boeing is generating more profit than they can spend!

Everyone does realize how little external debt Boeing has? It is less than gross profit per year.

Everyone is so wrapped up in tax schenanigans that the HUGE cash surplus Boeing has is ignored. Differed program costs is charged against taxes as paper profits are made. Boeing paid off most of the actual debt years ago.

Since Boeing is on a service model and apparently service profits are not program profits... the only issue is Boeing isn't using tax credits timely.

Boeing can drop 787 prices tremendously.

And yes, Airbus is printing money now too.

Lightsaber

This supposed order seems quite odd to me. Hawaiian must have gotten an absolutely incredible deal for Boeing. They will lose their long haul fleet commonality. There current long haul fleet consists of a few 767s which are to be retired in the next few years, a few a321neo's with more to come and the majority of their fleet is operated by a330-200's. Boeing must have offered Hawaiian crew training, maintenance as well as the termination of some 767 leases early. So it is likely that Boeing is selling these planes and service at a loss in order to stop the A330-800neo from gaining any kind of foothold.

It's well documented that an all new aircraft is much harder and more time consuming to put into service for an airline rather than an almost identical aircraft. This is all because of the alleged 797 which is empirically a smaller plane. This move from Boeing will make Airbus much more likely to develop either a stretched a321lr - a322, a shortened a330neo - a30-700neo or an all new a360. So this is either pie in the sky, a sly smart move from Boeing or a huge Boeing mistake.

I still think the -800neo is better

lightsaber wrote:

JerseyFlyer wrote:

lightsaber wrote:

I think that reduced production price of the 789 is a huge issue for Airbus. From my own observation, it appears Boeing has reduced 789 production costs by 20 to 25 million per airframe over the last 4 or so years. Boeing has been more agressive cutting costs than Airbus...

To others:
Boeing is increasing production to go on volume. That means aggressive pricing to win market share.

Boeing is very cost driven. If it does produce a 789 for $10 million less than HA paid, that is $60 million in out the door profit and then ancillary sales.

The industry is going to a service model. A service model requires volume. Google used to do everything possible to be the only vendor of a service (this year has been different). Why shouldn't Boeing go for the market share?

Lightsaber

Boeing cannot be too aggressive on price until the massive deferred costs of the early stages of the 787 programme are recovered.

Airbus will reduce A350 production costs as the production ramp-up of that frame matures - it is lagging the 787 due to its later EIS. I would think there is less potential cost for Airbus to squeeze out of A330 production, given the maturity of that process, although an increase from the current 6 per month to rates that they achieved a few years ago would surely help.

Why is everyone talking as if $20 tp $30 million in profit per 789 is agressive/desperate?

That is $3 to $5 billion a year erasing the differed costs Boeing owes itself. Right now Boeing is generating more profit than they can spend!

Everyone does realize how little external debt Boeing has? It is less than gross profit per year.

Everyone is so wrapped up in tax schenanigans that the HUGE cash surplus Boeing has is ignored. Differed program costs is charged against taxes as paper profits are made. Boeing paid off most of the actual debt years ago.

Since Boeing is on a service model and apparently service profits are not program profits... the only issue is Boeing isn't using tax credits timely.

Boeing can drop 787 prices tremendously.

And yes, Airbus is printing money now too.

Lightsaber

Thank God, a voice of reason. The media reports suggests it now costs Boeing somewhere between 80-95 million to produce a 789. The rumored selling price to HA was 110-115 million per plane. So Boeing is making 25-30 million per frame in the HA deal.

So please can someone explain how making 25-30 million profit per aircraft is bad?

ElroyJetson wrote:

lightsaber wrote:

JerseyFlyer wrote:

Boeing cannot be too aggressive on price until the massive deferred costs of the early stages of the 787 programme are recovered.

Airbus will reduce A350 production costs as the production ramp-up of that frame matures - it is lagging the 787 due to its later EIS. I would think there is less potential cost for Airbus to squeeze out of A330 production, given the maturity of that process, although an increase from the current 6 per month to rates that they achieved a few years ago would surely help.

Why is everyone talking as if $20 tp $30 million in profit per 789 is agressive/desperate?

That is $3 to $5 billion a year erasing the differed costs Boeing owes itself. Right now Boeing is generating more profit than they can spend!

Everyone does realize how little external debt Boeing has? It is less than gross profit per year.

Everyone is so wrapped up in tax schenanigans that the HUGE cash surplus Boeing has is ignored. Differed program costs is charged against taxes as paper profits are made. Boeing paid off most of the actual debt years ago.

Since Boeing is on a service model and apparently service profits are not program profits... the only issue is Boeing isn't using tax credits timely.

Boeing can drop 787 prices tremendously.

And yes, Airbus is printing money now too.

Lightsaber

Thank God, a voice of reason. The media reports suggests it now costs Boeing somewhere between 80-95 million to produce a 789. The rumored selling price to HA was 110-115 million per plane. So Boeing is making 25-30 million per frame in the HA deal.

So please can someone explain how making 25-30 million profit per aircraft is bad?

Are those 80-95 Milion manufacturing costs?

At this point we know not only how much HA are paying for the frames, how much they will cost to produce - BUT as far as I know there is still no official announcement that an order has been signed. Throw in we know how much the A350 costs to produce.

Pretty good detective work.

william wrote:

texl1649 wrote:

william wrote:

I don't know why this is so funny to me......

To be fair, it is closer if it is from a “red” state like right to work South Carolina. Resist!

If this was meant to be funny or sarcastic it went right over my head,.......And I state this as a news junkie. Please explain.

A RED state usually means a state that has republican politicians controlling its political status and usually favors corporations instead of the working individual. "Right to work" means employees do not have to belong to a union or pay union dues. This usually means employees have lower salaries, benefits and job protection. The statement "Right to work for less" has been used to described Right to work states. I am NOT making these statements because of any feelings I have, only to answer your questions.

LongHaul101 wrote:

Boeing must have offered Hawaiian crew training, maintenance as well as the termination of some 767 leases early.

As above, what is likely is that Boeing is bringing in tens of millions of dollars selling these planes to HA. Also, it is known that HA's 767s will be terminated early but they will go to UA so Boeing is going to have steady revenue from them and in turn is helping keep UA happy too since they've been looking for used 767s for a while now. They are said to be forgiving the HA termination penalties, but in the great scheme of things, that's minor. It wouldn't surprise me if some transition training is thrown in too, but that's not unusual to see.

LongHaul101 wrote:

So it is likely that Boeing is selling these planes and service at a loss in order to stop the A330-800neo from gaining any kind of foothold.

That's the spin that Leeham/Hamilton is trying to apply, along with the "Boeing must be afraid of the A330neo to do this" spin too. I don't think that's any more likely than the notion that HA prefers the 789 and had a contractual path that allowed them to transfer the A338 deposits to A321s because Airbus shut down the A358, and Airbus is using Leeham/Hamilton to spin the story their way.

par13del wrote:

Well a couple things we have learned in this thread.
1. Boeing is now selling a/c at a loss in the hopes of gaining market share, this is the same crap that Airbus was accused of so we know it is just that, crap.
2. The Boeing Program Accounting experts have not weighed in on the obvious, Boeing is almost at the end of its current block and they either have to increase it or take a write off, the only way to increase is by showing to the SEC that the prospects of future sales exist.

Now if Airbus through a news vendor puts out that Boeing is selling it Dreamliner's at a loss with a low ball price, other airlines will mandate the same price, which will result in Boeing gaining more orders for the 787 but at lower yields which will allow them to raise the accounting block - kicking the can down the road - while writing off a lesser amount of the cost against sales. It may also allow another increase in the production rate which will create more slots to allow more purchases to allow lower cost to defer the cost even further etc etc etc.

All I can say is Oh what a tangle web we weave when first we practice to deceive.

BOEING IS NOT SELLING AT A LOSS.

Boeing is selling below the prior sales price of the 789 ($125 million).

Boeing is selling below the production cost of the A359, estimated $125 million

Boeing produces a 789 for $35 to $40 million less than an A359.

If Boeing is selling at $101 to $106 million, they make about $2 billion in profit per year! Now Boeing required ROI probably has a floor today of $105 million.

Airbus will reduce A359 costs with time. In two years, if their cost isn't below $105 million per A359, they have a problem.

Boeing is using first movers advantage to gain market share. Because of when production costs dropped and A330NEO delays, it puts Airbus in a bad position.

Because Boeing was so agressive with cost cutting, a 789 in a few years will cost $5 million to $10 million less to produce than the A339 and probably $20 million less than an A359.

Or Boeing can price a 789 at the A359 build price and make 25% profit or $20 million+.

Until Airbus becomes more agressive in cost control, there is an issue. The A330NEO build cost must be brought below $70 million. The A359 build cost must get down to $90 million or less.

I think the A359 is an incredible aircraft and will sell well.

This is just USA economics of scale mindset. Ford did this in the 1920s where the model T was sold below the production cost of any other automobile at 30%+ profit. When you sell more, cut your price. The first thing taught in engineering economics. Airbus, school is in session.

Lightsaber

Has this order been confirmed or is it pure speculation? I have yet to see a press release from any of the principals in the deal.

enzo011 wrote:

Stitch wrote:

I do believe the A350 will cost more than the 787 to produce, but I do not expect the delta to be as large as it is rumored to be now. So maybe $10-15 million more instead of the rumored current $20-30 million.

Which makes sense as it is a bigger aircraft. I would assume more material costs more and thus production will be more. The 787 is also at a later stage of its production cycle so you would expect its costs to be less. If we assume that Airbus can approach the same level of efficiency regarding production of aircraft as Boeing and seeing that they will be break even on a per delivery basis in maybe a years time this will mean Airbus will have a cash cow with the A350 in a few years time.

PlanesNTrains wrote:

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Boeing is afraid of the A330neo
—> Boeing leadership are idiots
—> Boeing sells aircraft at a loss
—> This is actually good news for Airbus
—> Boeing has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

Ah yes, some extreme exaggeration to prove your point. A very reliable fall back.

Fall back to what? This is the tone of the thread. We still have people saying Boeing sold at a loss, but ya, I’m the exaggerator. Lol

LongHaul101 wrote:

This supposed order seems quite odd to me. Hawaiian must have gotten an absolutely incredible deal for Boeing. They will lose their long haul fleet commonality. There current long haul fleet consists of a few 767s which are to be retired in the next few years, a few a321neo's with more to come and the majority of their fleet is operated by a330-200's. Boeing must have offered Hawaiian crew training, maintenance as well as the termination of some 767 leases early. So it is likely that Boeing is selling these planes and service at a loss in order to stop the A330-800neo from gaining any kind of foothold.

It's well documented that an all new aircraft is much harder and more time consuming to put into service for an airline rather than an almost identical aircraft. This is all because of the alleged 797 which is empirically a smaller plane. This move from Boeing will make Airbus much more likely to develop either a stretched a321lr - a322, a shortened a330neo - a30-700neo or an all new a360. So this is either pie in the sky, a sly smart move from Boeing or a huge Boeing mistake.

I still think the -800neo is better

How in the world is this different than any other such occurrence? Hawaiian went from trijets to 767 and everyone was cool. They went from 767 to A330 and the world continued to turn. Now suddenly this is odd? Airlines do this all the time, particularly generationally when models come and go.

The 800neo May be better but if nobody is biting it becomes a bit of a risk. As or DL could probably manage that risk, if not eliminate it, but not a small carrier like HA.

TheRedBaron wrote:

PlanesNTrains wrote:

Geez, you sell six frames to an airline and the world about loses its mind.

—> Boeing is apparently desperate
—> Airbus is apparently desperate
—> Boeing is afraid of the A330neo
—> Airbus is Afraif of the 789
—> Boeing leadership are idiots
—> Airbus leadership are idiots
—> Boeing sells aircraft at a loss
—> Airbus give away airplanes
—> This is actually good news for Airbus
—> This is actually good news for Boeing
—> Boeing has woken the sleeping giant
—> Airbus has woken the sleeping giant
—> Hell will now reign on their Y guests
—> etc

It’s_six_planes.

Hence my popcorn, the way I see it is yep maybe the 338 is dead (as some here have pointed out) and yes Boeing is trying to win back an important customer, because they can and are willing to do...if its stupid or reckless to do so, only time will tell, in the mean time Il wait to see a 789 in HA colors.... and how this pans out..

Best Regards
TRB

I like the A330neo. I won’t be surprised when it sells more in the future. Obviously Boeing wanted this to happen, and I’m guessing it’s to cripple the A330-800. I’m not sure how effective that’ll be since a few good sized orders put the derivative back in the game, but I’m not an insider.

I lean Boeing, but personally I think a perfect narrow body lineup is the CS100/CS300/A320neo/ A321neo. Above that, I could go A330neo or 787. HA went 787. Oh well.

I don't see why a desire on Boeing's part to kill the A330-800 needs to be seen as "Airbus spin" or as bad news for Boeing. It makes perfect strategic sense, protecting the 787-8 in the short term and (more importantly) providing more market space for the 797 in the long term. If that is why Boeing made this apparent deal, kudos to them on the aggressiveness. We would have expected no less from John Leahy, right?

Flightglobal just reported that HA has not cancelled their A330s yet

https://www.flightglobal.com/news/artic ... ow-446147/

Can we calm down for a second now?

While this does not mean that there isn't a Boeing order in the works, it does mean the A338 isn't dead quite yet

qcpilotxf wrote:

Flightglobal just reported that HA has not cancelled their A330s yet

https://www.flightglobal.com/news/artic ... ow-446147/

Can we calm down for a second now?

While this does not mean that there isn't a Boeing order in the works, it does mean the A338 isn't dead quite yet

The reports are that the deal would be announced as soon as this week, so yes, they haven't canceled the A338s "yet". If LNC reports from Toulouse that HA has switched, I think it's fairly likely that it's happened. It's been rumored for a year or more to be a possibility, the A338s have struggled to garner sales, and Boeing has ramped up their build rate. It just seems like too much momentum and coincidental reporting to not be based on fact.

But we'll see.

KFLLCFII wrote:

About the only thing Hawaii has over Florida (and probably other places in much closer reach to Florida such as the Caribbean) is natural, predictable lava views.

And year-round tropical climate. Florida is not in the tropics. It's warming up now, but tell a Floridian to go to the beach sometime last month or December when the Eastern Seaboard was experiencing a cold snap and they'll laugh in your face.

So has HA officially cancelled their A330neo order and placed a 789 order, or is this still speculation?

Why does my cynical old brain get the impression someone at Airbus might have planted this story to get Leeham to broadcast this rumour, in order to flush Boeing and Hawaiian out?

Now that Hawaiian have had to publicly comment https://www.flightglobal.com/news/artic ... ow-446147/ the story moves on and the world knows what's going on.

Typical a.net, arguing back and forth for seven pages over an item that may or may not even be based in reality.

PlanesNTrains wrote:

If LNC reports from Toulouse that HA has switched, I think it's fairly likely that it's happened.

Oh sure, the news would never get something wrong, or completely make it up to garner a few clicks.
Don't get me wrong, as a Boeing fan, I certainly hope it's true. But as a realist, I'll believe it when something official is ACTUALLY announced.
Otherwise, it's just negotiation through media, a la Tim Clark, Akbar al Baker, et al.

Channex757 wrote:

Why does my cynical old brain get the impression someone at Airbus might have planted this story to get Leeham to broadcast this rumour, in order to flush Boeing and Hawaiian out?

Now that Hawaiian have had to publicly comment https://www.flightglobal.com/news/artic ... ow-446147/ the story moves on and the world knows what's going on.

So flight global notes when the A358 order was done Hawaiian did not fly to Asia. Uh,was The Manila not part of Asia in 2008 while Hawaiian was flying there in 2008?

AA737-823 wrote:

Typical a.net, arguing back and forth for seven pages over an item that may or may not even be based in reality.

PlanesNTrains wrote:

If LNC reports from Toulouse that HA has switched, I think it's fairly likely that it's happened.

Oh sure, the news would never get something wrong, or completely make it up to garner a few clicks.
Don't get me wrong, as a Boeing fan, I certainly hope it's true. But as a realist, I'll believe it when something official is ACTUALLY announced.
Otherwise, it's just negotiation through media, a la Tim Clark, Akbar al Baker, et al.

Here, let me finish your quote of me:

PlanesNTrains wrote:

But we'll see.

If you want to argue that it's all made up, be my guest. I just think there's enough smoke for there to be a fire, BUT WE'LL SEE.

qcpilotxf wrote:

Flightglobal just reported that HA has not cancelled their A330s yet

https://www.flightglobal.com/news/artic ... ow-446147/

Can we calm down for a second now?

While this does not mean that there isn't a Boeing order in the works, it does mean the A338 isn't dead quite yet

It is good for HA to finally come forward and make a statement. I really hate Airbus and Boeing fanboys here getting so worked out for something that is not concrete or confirmed. That's the main this website is going downhill.

A bit of advice too all fanboys: You can't win all RFPs. You gain some, you lose some. There is no such thing is forever glory, ups and downs are normal for businesses.

rbavfan wrote:

Channex757 wrote:

Why does my cynical old brain get the impression someone at Airbus might have planted this story to get Leeham to broadcast this rumour, in order to flush Boeing and Hawaiian out?

Now that Hawaiian have had to publicly comment https://www.flightglobal.com/news/artic ... ow-446147/ the story moves on and the world knows what's going on.

So flight global notes when the A358 order was done Hawaiian did not fly to Asia. Uh,was The Manila not part of Asia in 2008 while Hawaiian was flying there in 2008?

They began service to Manila in April 2008, (https://newsroom.hawaiianairlines.com/r ... la-service) and they announced purchasing the A350-800 in February of 2008 (https://newsroom.hawaiianairlines.com/r ... y-aircraft)

lightsaber wrote:

Boeing produces a 789 for $35 to $40 million less than an A359.

This is quite probably one of the most ridiculous comments I've ever read on A-net, on probably quite the most ridiculous thread I've ever read on A-net.
So you think it costs Airbus 50% more to manufacture an A350-900 than it does Boeing to manufacture a 787-9?
Utterly, utterly ludicrous
And you also think Airbus don't have a clue about the economics or running an Airliner manufacturing business in a competitive environment?

I've always been a big admirer of yours my friend, but now you're buying into the kool-aid too.

Aren't you going to be in for a big shock when Airbus commercial aircraft margins finally match Boeing's over the next 2-3 years, (they're nearly there now, as of Q4 2017) whilst still selling A350-900's for presumably 50% more than Boeing have to sell a 787-9 for.
Dang! That 350 must be some plane!!
And A330NEO's will continure to roll of production lines at Airbus for years to come, MO or no MOM

It's time this thread was canned.
The A330-800 is NOT out at Hawaiian

Rgds

Hawain is a small customer ( less then 10 aircraft is involved I guess ). Why is this such a big deal ? Looking at the number of customers Airbus stole from Boeing over the past 5 years, I think this switch is not even a peanut.

ADrum23 wrote:

So has HA officially cancelled their A330neo order and placed a 789 order, or is this still speculation?

Still speculation.

https://www.flightglobal.com/news/artic ... ow-446147/

lightsaber wrote:

If Boeing is selling at $101 to $106 million, they make about $2 billion in profit per year! Now Boeing required ROI probably has a floor today of $105 million.

I hate turning this into another accounting thread by Boeing, but when we talk about profits per plane of $25m-$40m if they sell at $105-$120m, does this take into account the deferred cost that needs to be written down or is the profits beside those cost? We have had articles where Boeing will need to write down something like $30m or more per frame in profit for the 787 due to the deferred cost (in this accounting block I know. When they increase it the number will be reduced). I had it that they then had to make a $45m profit per delivery to make a $15m profit on paper if they write off $30m per delivery on the books against the deferred cost. So making a $25m profit on the HA aircraft will not reduce the deferred cost that is still there, right?

I would speculate that the news we have seen recently of Boeing trying to increase production rates is an indication that they want to, as you mention, use economy of scale to reduce costs and increase profits. But surely if people are talking about Airbus being in a precarious position with the planned rate of 70 for the A320 if there is a world crises this counts just as much for Boeing with the historically high production rates for the 787. Or will there only be a single aisle bubble and the bigger more expensive aircraft will be immune from any world rumbles?