mjoelnir wrote:Polot wrote:zeke wrote:The price aircraft are sold at reflects the demand and capabilities of that aircraft.
Fact of the matter is that the production cost on the 787 line is many times higher that the A350, they have built more of them. And the first 100+ basically had double or more time put in them. As a way to hide the true production cost Boeing also moved some of the early built aircraft into the R&D budget.
Because of the way Boeing chooses to account for aircraft production costs you need to look at the costs over the total accounting block.
That is not how you determine production costs. Nobody looks at the total money spent to build every plane in existence on that line when determining the production costs. They look at the cost to build a single plane. Boeing/Airbus try to sell planes for more than they cost to build them, they don’t expect a sale to cover costs across the entire program’s lifetime. The production costs on the 787 line is lower than the A350 because Boeing have built so much more and the line is more mature.
Deferred production costs is just accounting, it is not money owed. If Boeing writes off the entire deferred production costs today then the 787 rolling off the line tomorrow doesn’t suddenly become cheaper to produce than the 787 that rolled off the line yesterday. Also moving early builds to R&D budget is not “hiding” true production costs. Moving to R&D requires writing them off (which Boeing did)- giving us an exact figure on how much it cost Boeing to build those planes. Hardly hiding anything.
Deferred cost is profits moved from the future to the present. It shows in the early years a profit in regards to production while there is in reality a loss. As Boeing starts always new production runs, it can replace old deferred cost with new deferred cost.
If deferred cost would be only about accounting, nobody would bother. It is about showing a profit when there is no profit.
I know that everybody here talks about cash flow, a measurement that does not distinguish between cash earned and cash loaned. Free cash flow is not a measurement of the success of a company, that you would find in earnings or profit, but how much money it is possible to extract from a company at that time.
And “profits” (past, current, or future) have nothing to do with actual current production costs. The cost to Boeing to produce a 787 now is not dependent on how much money Boeing made or lost on a 787 produced 5 years ago.
Also your whole discussion about shifting future profits should tell you that profit is not necessarily an indication of the success of a company. There are many metrics you have to consider at once to get a true indication of company success.