User avatar
Polot
Posts: 8422
Joined: Thu Jul 28, 2011 3:01 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:25 pm

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.
Last edited by Polot on Mon May 14, 2018 4:33 pm, edited 1 time in total.
 
User avatar
Finn350
Posts: 1279
Joined: Tue Jul 09, 2013 4:57 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:30 pm

XT6Wagon wrote:
YIMBY wrote:
seahawk wrote:
The production line at Boeing is more mature and more streamlined. The production process is also more efficient.


This is irrelevant. The agreed price depends on the market conditions, and as long as there is more demand than supply the prices grow.

The unit price may be above or below the production costs. In the latter case the profit is taken from maintenance contracts and spare parts.


Below production costs is a short term thing only. Even then you'd best be able to justify said sale as losing you less money than not selling.


It depends how you define "short term". B787 production cost exceeded sales price from the beginning of the production up until 2016. That was quite many years. Now Boeing is making a modest profit from each frame to offset the earlier losses (to the tune of $30 billion).
 
User avatar
zeke
Posts: 12447
Joined: Thu Dec 14, 2006 1:42 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:39 pm

Polot wrote:
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.


Please see what the CPA Journal says about that https://www.cpajournal.com/2016/11/23/c ... ccounting/

They clearly also say over the life of the program, Airbus use IFRS, not program accounting. IFRS requires inventories to be measured at the lower of cost or net realizable value.

“Current and potential investors should consider that program accounting involves deferring the recognition of actual expenses via the capitalization through inventory of manufacturing costs related to the initial plans of a new program that exceed the estimated average manufacturing cost per unit over the life of the program. Investors should evaluate the cost per unit that must be amortized to cost of goods sold over the remaining units to be produced. In Boeing’s case, on March 31, 2015, it had $26.9 billion in construction costs that had been deferred on the production and delivery of its first 258 model 787 aircraft. This equates to approximately $25.9 million per plane, which will be amortized over the remaining 1,042 aircraft that the company anticipates to be built over the life of the 787 program. Investors should evaluate whether they believe Boeing can sufficiently reduce its manufacturing costs related to the 787 program to profitably recover these deferred costs. It is also relevant to note that Boeing’s shareholders’ equity as of March 31, 2015—minus the deferred production costs—leaves the company with a significant deficit in net worth. On that date, Boeing’s Form 10-Q reflected consolidated shareholders’ equity of $7.9 billion. Had Boeing not deferred construction costs on planes already built, it would have had a deficit in net worth of $10.9 billion, net of estimated income tax benefits of $8.1 billion.”
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
User avatar
Polot
Posts: 8422
Joined: Thu Jul 28, 2011 3:01 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:46 pm

zeke wrote:
Polot wrote:
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.


Please see what the CPA Journal says about that https://www.cpajournal.com/2016/11/23/c ... ccounting/

They clearly also say over the life of the program, Airbus use IFRS, not program accounting. IFRS requires inventories to be measured at the lower of cost or net realizable value.

“Current and potential investors should consider that program accounting involves deferring the recognition of actual expenses via the capitalization through inventory of manufacturing costs related to the initial plans of a new program that exceed the estimated average manufacturing cost per unit over the life of the program. Investors should evaluate the cost per unit that must be amortized to cost of goods sold over the remaining units to be produced. In Boeing’s case, on March 31, 2015, it had $26.9 billion in construction costs that had been deferred on the production and delivery of its first 258 model 787 aircraft. This equates to approximately $25.9 million per plane, which will be amortized over the remaining 1,042 aircraft that the company anticipates to be built over the life of the 787 program. Investors should evaluate whether they believe Boeing can sufficiently reduce its manufacturing costs related to the 787 program to profitably recover these deferred costs. It is also relevant to note that Boeing’s shareholders’ equity as of March 31, 2015—minus the deferred production costs—leaves the company with a significant deficit in net worth. On that date, Boeing’s Form 10-Q reflected consolidated shareholders’ equity of $7.9 billion. Had Boeing not deferred construction costs on planes already built, it would have had a deficit in net worth of $10.9 billion, net of estimated income tax benefits of $8.1 billion.”

Again, you are too focused on the accounting and not on actual raw production costs.

Boeing doesn’t have to recoup all deferred costs in the current block. They can raise the block again lowering profit per a plane needed to recoup costs, or they can just write off whatever is left at the end of the block (a few billion might be easier to stomach and present than ~$30 billion). But Boeing, when trying to win sales for the 787, is not going to automatically and arbitrary add X% to the cost to build a plane when it comes time for pricing- they are going to look at the cost to build and try to get a specific profit margin in the pricing (how much dependent on how competive the order). If it is lower than the average profit margin needed to recoup deferred costs who cares if it wins over an important client. It would still be net positive cash for the company.
 
JayinKitsap
Posts: 775
Joined: Sat Nov 26, 2005 9:55 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 4:57 pm

Being 2nd to market, Airbus chose to optimize the 350 for a payload range curve higher that the 787, more akin to the 777E curve. Airbus's intent was to spot the 350 between the 787 and the 777. That was done to allow the 350 to not infringe on the 330 missions. Looking at current sales both the 350 and 777 are OK but not on fire. Meanwhile, the 787 profile fits a lot of airlines needs without having excess capabilities.

The 787-10 right now, being a simple stretch has traded a lot of range for capacity. For the right missions it has excellent economics, but it can only do about 3/4 of the widebody mission requirements. Those it cannot do well the 789, the 350, and the 777 all are better for.

In airlines, the ability to do ultra long haul is pretty well satisfied now. But the prior champion of long haul, the 772LR, sold far fewer than the 773ER.
 
User avatar
globetrotter94
Posts: 382
Joined: Mon Oct 31, 2016 5:05 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 5:17 pm

LewisNEO wrote:
StTim wrote:
mham001 wrote:

No idea but the 787 has had a lower list price than the A330 for years.



You cannot compare list prices for so many reasons. A key one is that Airbus include a lot more of the fit out in the price whereas it is not in the Boeing list price.

It is a bit like the old days in the UK where a BMW list price didn't even include a radio as standard. It made its list price much closer to say a Ford.


True and of course, the list price is not the actual selling price. Besides that, it is possible both companies use different minimal margins they want to see on their products. But then we might get into the long discussed matter about accounting methods that differ between the US and the EU and also something like deferred (production) costs... :angel:


Seems like the answer to my question of how aircraft pricing is determined is simply "black magic" then.
6E, 9W, AF, AI, B6, BA, BI, CA, DN, IC, JL, KL, KU, NH, QR, SQ, TG, TK*, UA, VS
 
a19901213
Posts: 44
Joined: Sat Feb 23, 2013 10:38 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 5:24 pm

Marginal revenue = Marginal cost
 
User avatar
kanban
Posts: 3853
Joined: Sun Jan 06, 2008 1:00 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 5:27 pm

If one looks at the manufacturing processes of both companies, Boeing has streamlined with a single FAL line from section assembly to roll out. Airbus utilizes multiple buildings and multiple towing of sections and airplanes.. that factor alone defeats reducing costs. the full fuselage vs panel strap ons further limits the possibility of manufacturing cost improvements.. I'd say that even if the two manufacturers were running side by side at the same rate, Airbus has too many obstacles built into their process to ever reap the kind if cost reductions Boeing does.. Said so 4 years ago and nothing has changed ... And you can see this by the slowness of teh Airbus ramp up... it's not the suppliers, it's the bloody FAL non process.
 
User avatar
Devilfish
Posts: 5998
Joined: Tue Jan 24, 2006 7:52 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 5:30 pm

And ostensibly, the (yet to be built?) A358 is some $16M cheaper than the A339...while costing $20M more than its similarly non-selling A338 stablemate..... :? .....

Image
http://www.airbus.com/content/dam/corpo ... .1280.jpeg
"Everyone is entitled to my opinion." - Garfield
 
User avatar
LAX772LR
Posts: 10706
Joined: Sun Nov 09, 2014 11:06 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 6:27 pm

Trystar wrote:
RB211trent wrote:
LAX772LR wrote:
You're going to pay more for a higher weight option on a given model, versus the exact same plane at a lower weight.

Very very loosely, your referring to the take off weight not aircraft weight

Come on, now. LAX772LR doesn't let questionable - or, indeed, completely incorrect - statements get in the way of being contrarian for the sake of it.

I'd love to see the likes of you point out anything "completely incorrect" said by me thus far.

Look, I'm sorry this person doesn't like it, but actually:
yes, weight (in several factors, just not the one he chooses to focus on) directly influences cost of both aircraft acquisition and operation. That's simply a fact.


BOAC1966 wrote:
That varies from each starting point and base currencies. Basic hull cost is but one component therefoe the thread title question is unanswerable and can seriously mislead.

:checkmark:
I myself, suspect a more prosaic motive... ~Thranduil
 
kevin5345179
Posts: 80
Joined: Sat Feb 10, 2018 4:08 am

Re: Why is the A350 so expensive?

Mon May 14, 2018 7:52 pm

zeke wrote:
lightsaber wrote:

I've read A359 estimated production costs are $125M.
B789 production costs are believed to be much lower. As in $35 M lower. ($90 million).


No idea where you are getting those numbers from, the cost for the each OEM to produce the 787/A350 is less than 50 million. Put things in perspective at the peak of demand, you could buy an A330 ready to fly for 60 million and a 777W for 100 million.

On top of the OEMs airframe costs you have the other big ticket items such as engines, apu, interior, avionics, these are not manufactured by the OEMs, and may involve buyer furnished equipment clauses.


80-90 M production cost is pointed out by Hamilton and he claimed the source is from WS analysts
https://leehamnews.com/2018/02/20/boein ... 800-order/
 
User avatar
zeke
Posts: 12447
Joined: Thu Dec 14, 2006 1:42 pm

Re: Why is the A350 so expensive?

Mon May 14, 2018 11:59 pm

That would include engines, apu, avionics, and interior non of which are produced by the OEM, they are not OEM production costs. The OEM can do nothing about those items to improve their manufacturing productivity.

People above are making the assertion that the learning curve on the 787 has improved to reduce Boeing’s production costs below Airbus.

There has been zero evidence on this thread on how much each OEM spends on their airframes, they throw in the ancillary items like engines and APU which the OEM has no control over.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
kevin5345179
Posts: 80
Joined: Sat Feb 10, 2018 4:08 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 12:53 am

zeke wrote:
That would include engines, apu, avionics, and interior non of which are produced by the OEM, they are not OEM production costs. The OEM can do nothing about those items to improve their manufacturing productivity.

People above are making the assertion that the learning curve on the 787 has improved to reduce Boeing’s production costs below Airbus.

There has been zero evidence on this thread on how much each OEM spends on their airframes, they throw in the ancillary items like engines and APU which the OEM has no control over.


I agree that the learning curve on 787 is not there at this point...... In fact, I don't believe 787 is being produce at 80-90M per frame as the last quarter per plane only burns off 23.5M on deferred production cost. If 789 is being sold around 125M, I think we are still looking 100M per plane for production cost. I tend to believe the 80-90M assumption comes from they "project" by the time Boeing is about to deliver HA's 787 (2021) is the time that gets Boeing to 80-90M range.

I guess they may be able to squeeze suppliers + buying supplier + own learning curve for another 10% cost reduction by 2021.
 
kevin5345179
Posts: 80
Joined: Sat Feb 10, 2018 4:08 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 1:31 am

kanban wrote:
If one looks at the manufacturing processes of both companies, Boeing has streamlined with a single FAL line from section assembly to roll out. Airbus utilizes multiple buildings and multiple towing of sections and airplanes.. that factor alone defeats reducing costs. the full fuselage vs panel strap ons further limits the possibility of manufacturing cost improvements.. I'd say that even if the two manufacturers were running side by side at the same rate, Airbus has too many obstacles built into their process to ever reap the kind if cost reductions Boeing does.. Said so 4 years ago and nothing has changed ... And you can see this by the slowness of teh Airbus ramp up... it's not the suppliers, it's the bloody FAL non process.


apparently you are pretty bias toward Boeing to start with and all the words you wrote was based on your pure speculation without evidence
if towing cost that much why don't you mention flying parts from Japan, I'm sure a TPAC flight cost a lot more than tugs ......
not suppliers ? what happened to all the gliders ....... I'm pretty sure we don't live in the same world ......
 
Newbiepilot
Posts: 3013
Joined: Tue Aug 30, 2016 10:18 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 1:43 am

RB211trent wrote:
B777LRF wrote:
A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.


Aircraft aren’t sold by weight....ridiculous


They kind of are sold my MTOW. The higher the Payload, the more revenue that can be generated, so airplanes actually do actually have pricing that correlates with weight. Most airplanes have a variety of MTOW options and higher weights cost more. That is why airlines that don’t actually need to fly over 3000nm aren’t ordering the A321LR for example. Lower weight versions are cheaper despite costing virtually the same for the manufacturer to build.
 
Newbiepilot
Posts: 3013
Joined: Tue Aug 30, 2016 10:18 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 1:48 am

]
zeke wrote:
That would include engines, apu, avionics, and interior non of which are produced by the OEM, they are not OEM production costs. The OEM can do nothing about those items to improve their manufacturing productivity.

People above are making the assertion that the learning curve on the 787 has improved to reduce Boeing’s production costs below Airbus.

There has been zero evidence on this thread on how much each OEM spends on their airframes, they throw in the ancillary items like engines and APU which the OEM has no control over.


That is not actually correct. I don’t know what Airbus calls their agreement with suppliers, but Boeing has a document called the PSAA. It has catalog list prices for all the supplier manufactured parts. It also has escalation terms that cap annual price increases to 2% or index them based on cost of manufacturing and raw material price indexies. Boeing is absolutely controlling what the suppliers charge Airlines for the original parts as well as spare part and overhaul/repair costs. They also control how much spare part inventory a manufacturer must have as well as define the amount of time a supplier is allowed to take to repair a part. There is a whole engineering team specifically dedicated to managing suppliers on behalf of airlines. The only things that Boeing doesn’t dictate price on are buyer furnished equipment like seats.

Here is a list of all the requirements that Boeing has for suppliers:

http://www.boeingsuppliers.com/tc0692/index.html
Last edited by Newbiepilot on Tue May 15, 2018 2:06 am, edited 1 time in total.
 
User avatar
zeke
Posts: 12447
Joined: Thu Dec 14, 2006 1:42 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 1:58 am

kevin5345179 wrote:
if towing cost that much why don't you mention flying parts from Japan, I'm sure a TPAC flight cost a lot more than tugs .....


The multi billion subsidy the 787 received from the Japanese Government to produce parts in Japan would in my view far exceed the additional shipping costs. The interest alone on a few billion dollars would be far in excess of the shipping costs.

Also we do not know who is paying for the shipping, the contract may well state the price is $X delivered to the production facility.

In terms of deferred production costs, there is no line item in the Boeing accounts to repay the Japanese Government the subsidy, so the deferred production costs in the Boeing accounts are not a true representation of the full production costs.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
User avatar
lightsaber
Moderator
Posts: 14906
Joined: Wed Jan 19, 2005 10:55 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 2:48 am

Newbiepilot wrote:
RB211trent wrote:
B777LRF wrote:
A good indicator of the 'right' price for an airliner, would be dollars pr. kilo.

Examples (using 2017 average list prices):
B737M9: 110M, 82.000kg = 745 USD/kg
A320neo: 108M, 79.000kg = 731 USD/kg
B787-10: 306M, 254.000kg = 830 USD/kg
A350-900 311M, 280.000kg = 900 USD/kg

So, yes, the A350-900 is more expensive pr. kg than a 787-10. But that price difference does buy you a lot more performance (range). Apart from that, there's really not that much between the various models.


Aircraft aren’t sold by weight....ridiculous


They kind of are sold my MTOW. The higher the Payload, the more revenue that can be generated, so airplanes actually do actually have pricing that correlates with weight. Most airplanes have a variety of MTOW options and higher weights cost more. That is why airlines that don’t actually need to fly over 3000nm aren’t ordering the A321LR for example. Lower weight versions are cheaper despite costing virtually the same for the manufacturer to build.

Actually, weight is a good indicator (to a point, until extreme lightening occurs) of the manufacturing costs.
But then added empty weight costs money. It reduces the sales price as it adds about $500 in costs per kg per decade.

So price per KG is a good example. However, none of those aircraft sell anywhere near those list prices. I suspect under half is very typical.

Lightsaber
You only have the first amendment with the 2nd. If you're not going to offend someone with what you say, you don't have the 1st.
 
B777LRF
Posts: 2099
Joined: Sun Nov 02, 2008 4:23 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 8:01 am

RB211trent wrote:
Aircraft aren’t sold by weight....ridiculous


It's quite often a good idea to acquaint oneself with the nature of an analogy, preferably before aiming both barrels of a shotgun at ones feet.

So whilst you're technically correct, the start of my post read 'a good indicator'. And weight is, indeed, a good indicator of cost - both to buy and to operate.
From receips and radials over straight pipes to big fans - been there, done that, got the hearing defects to prove
 
aviationaware
Posts: 2013
Joined: Mon May 19, 2014 12:02 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 9:05 am

List prices have zero bearing and comparing them between OEMs is like comparing apples and oranges. The amount of after sales services included differs and can make up a significant share of the price.
 
User avatar
par13del
Posts: 8028
Joined: Sun Dec 18, 2005 9:14 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 10:09 am

aviationaware wrote:
List prices have zero bearing and comparing them between OEMs is like comparing apples and oranges. The amount of after sales services included differs and can make up a significant share of the price.

However, this is only relevant when we are not discussing dumping and WTO claims, then everyone knows the actual prices paid to the OEM's.
 
Newbiepilot
Posts: 3013
Joined: Tue Aug 30, 2016 10:18 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 12:51 pm

zeke wrote:
kevin5345179 wrote:
if towing cost that much why don't you mention flying parts from Japan, I'm sure a TPAC flight cost a lot more than tugs .....


The multi billion subsidy the 787 received from the Japanese Government to produce parts in Japan would in my view far exceed the additional shipping costs. The interest alone on a few billion dollars would be far in excess of the shipping costs.

Also we do not know who is paying for the shipping, the contract may well state the price is $X delivered to the production facility.

In terms of deferred production costs, there is no line item in the Boeing accounts to repay the Japanese Government the subsidy, so the deferred production costs in the Boeing accounts are not a true representation of the full production costs.


We could get into an extensive launch aid discussion, but what will that tell us about the current sales prices of the 787 and A350. It doesn’t help explain why the 787 is selling much better than the A350 over the past few years. This thread speculated that is because of price.
 
mjoelnir
Posts: 7285
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 2:44 pm

Polot wrote:
mjoelnir wrote:
Polot wrote:
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.


Shifting profits is a sure sign of a company trying to hide its real profits, usually trying to show higher profits than the company has in reality. Profits or net earnings (synonym) are the only real measurement of a companies success, it is what is left when you produce something, sell it and count the cost.
All other measurements are taken into account when you do not trust a company to show its real profits. Or you talk about everything else because looking to deep at the profits paint a not to nice picture. When a company uses program for cost accounting, the aim is hiding losses or low profits in the beginning of a production run of a model or product family. When you run a new program before you have to clean out the deferred cost of the old program, you can defer to show the real net earnings for quite a while.

One of the worst things with program for cost accounting is, that it not only leads to inflated earnings over a time, but also leads to showing inventories that are not there in reality.
So not only the income statement is affected (to high accumulated profits until the deferred cost are gone), but also the Balance sheet (shows to high inventories and therefore to high assets and to high equity).
 
danj555
Posts: 164
Joined: Tue Jul 23, 2013 7:16 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:02 pm

Mrakula wrote:
I red in the past Boeing prices are without engines and interior and Airbus use some standart interior so thats why Boeing seems cheaper and giving less disccouts. But Im not completly certain about the information.


I was just on a tour of the Boeing Everett plant this weekend and the tour guide said the same thing. So Boeing aircraft could be going for even more than list prices... With engines and cabin and fitting taken into account.
 
User avatar
EPA001
Posts: 3891
Joined: Tue Sep 12, 2006 8:13 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:05 pm

zeke wrote:
In terms of deferred production costs, there is no line item in the Boeing accounts to repay the Japanese Government the subsidy, so the deferred production costs in the Boeing accounts are not a true representation of the full production costs.


Exactly. And maybe that is why Airbus never 'touched' that subsidy in it's WTO-case against Boeing/USA. They still could......

On-topic: the A350 seems to be 'perfectly priced' when the sales for such a capable airliner are reviewed. What they cost exactly, and what wins or losses are accepted in marketing campaigns of Airbus and Boeing we don't know. So we can't draw fixed conclusions out of those.
 
User avatar
Polot
Posts: 8422
Joined: Thu Jul 28, 2011 3:01 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:09 pm

EPA001 wrote:
zeke wrote:
In terms of deferred production costs, there is no line item in the Boeing accounts to repay the Japanese Government the subsidy, so the deferred production costs in the Boeing accounts are not a true representation of the full production costs.


Exactly. And maybe that is why Airbus never 'touched' that subsidy in it's WTO-case against Boeing/USA. They still could......

On-topic: the A350 seems to be 'perfectly priced' when the sales for such a capable airliner are reviewed. What they cost exactly, and what wins or losses are accepted in marketing campaigns of Airbus and Boeing we don't know. So we can't draw fixed conclusions out of those.

Airbus/EU never touched that in their dispute with Boeing/USA because Airbus would have been barking up the wrong tree. Those are subsidies by the Japanese government to Japanese companies (who happen to be risk sharing partners on the 787, and admittedly given those subsidies for that reason), not subsidies to Boeing (which is also why there is no line item on Boeing’s account to repay them...). So Airbus/EU would have to take those issues up with Japan/the Japanese companies involved, not Boeing/USA.
 
StTim
Posts: 2971
Joined: Thu Aug 08, 2013 7:39 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:21 pm

I feel we are being dragged down the programme accounting route again and feel that may be off topic. That said however I will state my biggest issue with it.

It is correctly stated that over time the profits are the same - they are just brought forward by utilising programme accounting. That is true if you look at the absolute $ value. But the profit of $x million brought forward 10 years by programme accounting is not the same as the $x million of profit foregone 10 years later as the purchasing value of that $ has reduced due to inflation. Thus in reality Programme Accounting allows higher profits to be declared (in purchasing value).

I also note mjoelnir points.
 
Flighty
Posts: 9430
Joined: Thu Apr 05, 2007 3:07 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:26 pm

Non-accountant here.
Program accounting (deferral of losses) makes sense if there is a $10B NPV project over 10 years that loses $4 billion in the first 4 years. That's valid, although hard to use correctly because it involves forecasting unknowns.

I think sometimes executives exploit program accounting in order to claim profits that either didn't occur yet and will never occur. They also exploit writedowns by approving a project that is dubious, writing down the bad stuff and then taking a share of the "profits." It all depends on what is "foreseeable" AFAIK
 
User avatar
zeke
Posts: 12447
Joined: Thu Dec 14, 2006 1:42 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:40 pm

EPA001 wrote:

Exactly. And maybe that is why Airbus never 'touched' that subsidy in it's WTO-case against Boeing/USA. They still could......


No, these trade disputes are between countries, an individual company cannot go to the WTO.

The subsidy from Japan cannot be brought to the WTO by the EU because it does not directly damage them (ie moving workers and work offshore from the US). The US would have to take Japan to the WTO which they choose not to as the arrangement helps Boeing.
Human rights lawyers are "ambulance chasers of the very worst kind.'" - Sky News
 
User avatar
kanban
Posts: 3853
Joined: Sun Jan 06, 2008 1:00 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:54 pm

kevin5345179 wrote:
kanban wrote:
If one looks at the manufacturing processes of both companies, Boeing has streamlined with a single FAL line from section assembly to roll out. Airbus utilizes multiple buildings and multiple towing of sections and airplanes.. that factor alone defeats reducing costs. the full fuselage vs panel strap ons further limits the possibility of manufacturing cost improvements.. I'd say that even if the two manufacturers were running side by side at the same rate, Airbus has too many obstacles built into their process to ever reap the kind if cost reductions Boeing does.. Said so 4 years ago and nothing has changed ... And you can see this by the slowness of teh Airbus ramp up... it's not the suppliers, it's the bloody FAL non process.


apparently you are pretty bias toward Boeing to start with and all the words you wrote was based on your pure speculation without evidence
if towing cost that much why don't you mention flying parts from Japan, I'm sure a TPAC flight cost a lot more than tugs ......
not suppliers ? what happened to all the gliders ....... I'm pretty sure we don't live in the same world ......


What most people fail to realize is that when you have a line that requires towing to advance it and move sections between buildings, you lose one full shift with every line move.. that's 70% of your factory workforce on that shift not building aircraft. flying sections that are pre-stuffed with blankets, wiring, etc at the supplier is far more cost effective since the FAL truly becomes final assembly. The Airbus model with first assembling the panels into body sections, then towing them from one building to the next is exceedingly cost inefficient. Further all the stuffing must be done in the FAL process. Note Boeing will be achieving some more process cost savings when they consolidate the 787 line in Charleston.

What is my basis? I worked in Boeing's FALs for 35 years and went on a sabbatical to study improvements to the FAL process and Just in Time manufacturing.. during that time I extensively studied the Airbus/Aerospatial processes to see what we could do better.. they were ahead of Boeing in the use of robotics, but ham strung by lack of dedicated space or room for expansion. I also studied the A380 section convoys and the wing delivery process.. again while they made it as cost effective as possible, the whole process will never be very cost effective.
 
mjoelnir
Posts: 7285
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 3:56 pm

Flighty wrote:
Non-accountant here.
Program accounting (deferral of losses) makes sense if there is a $10B NPV project over 10 years that loses $4 billion in the first 4 years. That's valid, although hard to use correctly because it involves forecasting unknowns.

I think sometimes executives exploit program accounting in order to claim profits that either didn't occur yet and will never occur. They also exploit writedowns by approving a project that is dubious, writing down the bad stuff and then taking a share of the "profits." It all depends on what is "foreseeable" AFAIK


The only company that still uses program for cost accounting, after it was grandfathered by the USGAAP and can be only used by companies having used it before a certain date, is Boeing. Furthermore it was only used in the aerospace industry and intended for government contracts. And if people start on program for cost accounting somewhere else, please mention the corresponding USGAAP measures that allow that. I have already several time shown the relevant USGAAP information and it gets progressively more difficult to find the relevant passages, as it is not mentioned in the newer USGAAP standards and the old leads are disappearing.

Companies doing a huge project over several years can assign profits in regards to the completion factor and real cost. But that will not help you to move profits in the same way as program for cost accounting.
 
User avatar
par13del
Posts: 8028
Joined: Sun Dec 18, 2005 9:14 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 4:27 pm

mjoelnir wrote:
When a company uses program for cost accounting, the aim is hiding losses or low profits in the beginning of a production run of a model or product family. When you run a new program before you have to clean out the deferred cost of the old program, you can defer to show the real net earnings for quite a while.

So the reason why Airbus used Program Accounting on the A350 was????????????????
 
User avatar
par13del
Posts: 8028
Joined: Sun Dec 18, 2005 9:14 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 4:31 pm

Sounds a lot like the Boeing PR line, so it cannot be accurate, I guess Contract Account bears no resemblance to Program Accounting
https://leehamnews.com/2015/10/12/analy ... -strategy/
 
User avatar
Finn350
Posts: 1279
Joined: Tue Jul 09, 2013 4:57 am

Re: Why is the A350 so expensive?

Tue May 15, 2018 5:02 pm

par13del wrote:
mjoelnir wrote:
When a company uses program for cost accounting, the aim is hiding losses or low profits in the beginning of a production run of a model or product family. When you run a new program before you have to clean out the deferred cost of the old program, you can defer to show the real net earnings for quite a while.

So the reason why Airbus used Program Accounting on the A350 was????????????????


To be precise, Airbus doesn't use and has never used Program Accounting. However, Airbus uses Contract Accounting on limited basis on the A350 program (Contract Accounting levels the profits of single contracts as opposed to the whole program):

Construction contract accounting is applied for military programmes, space projects as well as for launch customer contracts in the civil aircraft business if customers have significantly influenced the
structural design and technology of the aircraft type under the contract. As a result of certain airline customers’ increasing involvement in the development and production process of the A350 XWB programme, Airbus applies IAS 11 “Construction contracts” to a fixed number of launch customer contracts of the A350 XWB programme. When the outcome can be estimated reliably, revenues and contract costs are recognised as revenue and expensed respectively by reference to the percentage of completion of the contract activity at the end of the reporting period (“PoC method”). Contract revenues include the purchase
price agreed with the customer considering escalation formulas, contract amendments and claims and penalties when assessed as probable. The PoC method used depends on the contract.

The method is based either on inputs (i.e. costs incurred for development contracts) or outputs (i.e. contractually agreed technical milestones, delivered units).

Whenever the outcome of a construction contract cannot be estimated reliably – for example during the early stages of a contract or during the course of a contract’s completion – all related contract costs that are incurred are immediately expensed and revenues are recognised only to the extent of those costs being recoverable (the “early stage”, also called “zero profit margin” method of accounting.


Source: http://www.airbus.com/content/dam/corpo ... s-2017.pdf
 
mjoelnir
Posts: 7285
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 5:07 pm

kanban wrote:
kevin5345179 wrote:
kanban wrote:
If one looks at the manufacturing processes of both companies, Boeing has streamlined with a single FAL line from section assembly to roll out. Airbus utilizes multiple buildings and multiple towing of sections and airplanes.. that factor alone defeats reducing costs. the full fuselage vs panel strap ons further limits the possibility of manufacturing cost improvements.. I'd say that even if the two manufacturers were running side by side at the same rate, Airbus has too many obstacles built into their process to ever reap the kind if cost reductions Boeing does.. Said so 4 years ago and nothing has changed ... And you can see this by the slowness of teh Airbus ramp up... it's not the suppliers, it's the bloody FAL non process.


apparently you are pretty bias toward Boeing to start with and all the words you wrote was based on your pure speculation without evidence
if towing cost that much why don't you mention flying parts from Japan, I'm sure a TPAC flight cost a lot more than tugs ......
not suppliers ? what happened to all the gliders ....... I'm pretty sure we don't live in the same world ......


What most people fail to realize is that when you have a line that requires towing to advance it and move sections between buildings, you lose one full shift with every line move.. that's 70% of your factory workforce on that shift not building aircraft. flying sections that are pre-stuffed with blankets, wiring, etc at the supplier is far more cost effective since the FAL truly becomes final assembly. The Airbus model with first assembling the panels into body sections, then towing them from one building to the next is exceedingly cost inefficient. Further all the stuffing must be done in the FAL process. Note Boeing will be achieving some more process cost savings when they consolidate the 787 line in Charleston.

What is my basis? I worked in Boeing's FALs for 35 years and went on a sabbatical to study improvements to the FAL process and Just in Time manufacturing.. during that time I extensively studied the Airbus/Aerospatial processes to see what we could do better.. they were ahead of Boeing in the use of robotics, but ham strung by lack of dedicated space or room for expansion. I also studied the A380 section convoys and the wing delivery process.. again while they made it as cost effective as possible, the whole process will never be very cost effective.


You perhaps know something about the Boeing production process, but you are quite wrong on the Airbus process.

Perhaps you read through this. http://a380.boards.net/thread/541/a350-built

The main difference is that Airbus does not use a line concept, but a station concept. They can even use some stations for both the A350 and A330. A delay on an individual frame does not stop a line in Airbus, as there are parallel stations for most jobs done.

Because there has been some rework, single frames have been pulled out of this process and the rework has been done again parallel to the process. A lot of movements of frames that we have seen, has been in regards to rework, rather than the standard process. In the last month the rework of at least A350-900 frames has been greatly reduced and we see shorter flow times through the FAL. We see the A350-1000 frames currently still being pulled out for rework. It is also possible to pull single frames, like the frames for Qatar or China, in any position aside and speed up other frames.

We see in other industries, that many modern factories leave the line concept, and move over to a station concept. It is more flexible.

Airbus does the A320 family in lines, but employs a higher number of parallel lines than Boeing, I think 8 instead of 3. Here is the aim that trouble in one line will allow the other lines to keep operating at full speed. Changes to the lines can be done successive, without cutting the whole production speed to much. All lines, but the two in TLS can run every version of the A320 aircraft in any sequence, without time loss for change over.

Airbus does more of its work themselves, as there is mainly pre-FAL assembly and wings, even if it is not in house in TLS, but uses less personal, due to an overall higher degree of automation.
 
Fiend
Posts: 129
Joined: Sun Jun 19, 2016 8:53 pm

Re: Why is the A350 so expensive?

Tue May 15, 2018 8:27 pm

On a single line process if you have a breakdown on one part of the process it stops the whole line.... Using a multiple station model allows work to continue even if one station breaks down or is undergoing maintenance...

I work on engineering on a site that basically uses the single line process...... and shut-downs at various points in the line are a regular occurrence.
BAC 1-11, A300, A320, A321, A330, A340, A350, A380, B737, B747, B757, B777, B787, L1011, Fokker 100, ATR 72, MD83
 
Andre3K
Posts: 365
Joined: Tue May 30, 2017 10:11 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 12:44 am

Jayafe wrote:
rigo wrote:
...however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high.

Wrong, A350s don't compete with 787s, they'll lose where their features are not needed, not because it's expensive. It actually competes with the 777 family, and is widely overselling it as it's more capable and cheaper than them. You have one example in the forum that not even a current 787-10 can compete with A350's capabilities:
viewtopic.php?f=3&t=1393909

rigo wrote:
1. Is Airbus completely off the mark?

No.

rigo wrote:
2. Is Boeing dumping the 787 at near-loss to undercut the competition?

More than often.

rigo wrote:
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings?

It's not.

rigo wrote:
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?

The price is justified from a size, capacity, range and technology point of view. Some companies are ok getting massive discounts where dumping is allowed (hence beating the A330), and can deal with a limited plane that is a pain for passengers due to market domination/cartel.

rigo wrote:
5. Or... ?

As stated above, they are different birds. You are comparing a sedan with a SUV. More than likely the SUV will cost more from any angle you focus it, specially if the sedan is designed to be a cheap-suboptimal-unreliable people-mover.


Sounds like someone struck a nerve with you.

What I don't get is why do people not realize that the company that waits and copies the other will always be able to learn from the mistakes and make a better product. The 737 Max is hampered by its low landing gear, otherwise it would be right up there with the A32* Neo aircraft.

On that same note, Airbus's first A350 was a POS and airlines didn't want it, so they had to jump on the new plane bandwagon, and got all the benefits of being a "ME TOO" airplane where you don't have to re-invent the will or take a risk.

When will Airbus be first to deliver something original that isn't a failure (A380 first double decker sure, not a failure per say but not a success either)? Other than that Airbus is usually responding to something Boeing does, so until they decide to lead instead of follow they will always be able to "outdo" Boeing.
 
mjoelnir
Posts: 7285
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 1:05 am

Andre3K wrote:
Jayafe wrote:
rigo wrote:
...however it is also no secret that it has lost a number of campaigns to the 787 simply because airlines find its list price too high.

Wrong, A350s don't compete with 787s, they'll lose where their features are not needed, not because it's expensive. It actually competes with the 777 family, and is widely overselling it as it's more capable and cheaper than them. You have one example in the forum that not even a current 787-10 can compete with A350's capabilities:
viewtopic.php?f=3&t=1393909

rigo wrote:
1. Is Airbus completely off the mark?

No.

rigo wrote:
2. Is Boeing dumping the 787 at near-loss to undercut the competition?

More than often.

rigo wrote:
3. Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings?

It's not.

rigo wrote:
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?

The price is justified from a size, capacity, range and technology point of view. Some companies are ok getting massive discounts where dumping is allowed (hence beating the A330), and can deal with a limited plane that is a pain for passengers due to market domination/cartel.

rigo wrote:
5. Or... ?

As stated above, they are different birds. You are comparing a sedan with a SUV. More than likely the SUV will cost more from any angle you focus it, specially if the sedan is designed to be a cheap-suboptimal-unreliable people-mover.


Sounds like someone struck a nerve with you.

What I don't get is why do people not realize that the company that waits and copies the other will always be able to learn from the mistakes and make a better product. The 737 Max is hampered by its low landing gear, otherwise it would be right up there with the A32* Neo aircraft.

On that same note, Airbus's first A350 was a POS and airlines didn't want it, so they had to jump on the new plane bandwagon, and got all the benefits of being a "ME TOO" airplane where you don't have to re-invent the will or take a risk.

When will Airbus be first to deliver something original that isn't a failure (A380 first double decker sure, not a failure per say but not a success either)? Other than that Airbus is usually responding to something Boeing does, so until they decide to lead instead of follow they will always be able to "outdo" Boeing.


Who is responding to whom. The A300/310 was the original first wide body twin. The 767 was the response and so on.
 
Andre3K
Posts: 365
Joined: Tue May 30, 2017 10:11 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 1:08 am

mjoelnir wrote:
Andre3K wrote:
Jayafe wrote:

Wrong, A350s don't compete with 787s, they'll lose where their features are not needed, not because it's expensive. It actually competes with the 777 family, and is widely overselling it as it's more capable and cheaper than them. You have one example in the forum that not even a current 787-10 can compete with A350's capabilities:
viewtopic.php?f=3&t=1393909


No.


More than often.


It's not.


The price is justified from a size, capacity, range and technology point of view. Some companies are ok getting massive discounts where dumping is allowed (hence beating the A330), and can deal with a limited plane that is a pain for passengers due to market domination/cartel.


As stated above, they are different birds. You are comparing a sedan with a SUV. More than likely the SUV will cost more from any angle you focus it, specially if the sedan is designed to be a cheap-suboptimal-unreliable people-mover.


Sounds like someone struck a nerve with you.

What I don't get is why do people not realize that the company that waits and copies the other will always be able to learn from the mistakes and make a better product. The 737 Max is hampered by its low landing gear, otherwise it would be right up there with the A32* Neo aircraft.

On that same note, Airbus's first A350 was a POS and airlines didn't want it, so they had to jump on the new plane bandwagon, and got all the benefits of being a "ME TOO" airplane where you don't have to re-invent the will or take a risk.

When will Airbus be first to deliver something original that isn't a failure (A380 first double decker sure, not a failure per say but not a success either)? Other than that Airbus is usually responding to something Boeing does, so until they decide to lead instead of follow they will always be able to "outdo" Boeing.


Who is responding to whom. The A300/310 was the original first wide body twin. The 767 was the response and so on.


And how successful would you call the A300/310 compared to the 767? Not to mention it doesn't fit Airbus's FBW style, it barely even counts.
 
User avatar
kanban
Posts: 3853
Joined: Sun Jan 06, 2008 1:00 am

Re: Why is the A350 so expensive?

Wed May 16, 2018 1:48 am

[quote="mjoelnir"][/quote]
As usual your wanting something to be true doesn't make it so... The station concept is inherently wasteful. and the A350 process is definitely that. You will notice that all major manufacturing have abandoned station assembly except for one off items. maybe there is a reason..

But go ahead and argue about accounting systems.. when push comes to shove, no accounting system ever built an airplane.
 
User avatar
Matt6461
Posts: 2767
Joined: Wed Oct 16, 2013 9:36 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 2:17 am

mjoelnir wrote:
You perhaps know something about the Boeing production process, but you are quite wrong on the Airbus process.


This must be why Airbus generates so much more cash than Boeing and has a far higher market value.

[trigger warning for mjoel: don't check the actual market values]
 
AvObserver
Posts: 2570
Joined: Sat Apr 06, 2002 7:40 am

Re: Why is the A350 so expensive?

Wed May 16, 2018 3:23 am

Jayafe wrote:
rigo wrote:
2. Is Boeing dumping the 787 at near-loss to undercut the competition?

More than often.


If you're going to make such a bold statement, you really need to substantiate your claim with a numbers link.

Jayafe wrote:
rigo wrote:
Is Boeing's novel assembly process using barrels rather than panels generating some impressive savings?

It's not.


It might be once the costs of implementing the barrel scheme are amortized. Airbus's panel method, while surely less costly to industrialize, is inherently more labor intensive, surely incurring higher labor costs. It's not a stretch to extrapolate that in time, Boeing's technique might prove the less costly of the two.

Jayafe wrote:
rigo wrote:
4. Can this price difference be justified by the A350's extra 3% CFRP and purpotedly more advanced avionics?

The price is justified from a size, capacity, range and technology point of view. Some companies are ok getting massive discounts where dumping is allowed (hence beating the A330), and can deal with a limited plane that is a pain for passengers due to market domination/cartel.


Actually, I think Rigo's on to something here in that added CFRP and later, more advanced avionics would partly explain some of the A350's added cost in addition to your earlier point that the A350 is far more of a 777 competitor; larger and with added capabilities over a 787. However, your last point runs off the rails because you don't substantiate your overly bold (and sarcastic) claims of dumping while simultaneously trashing the 787, implying its recent success over the A330 is merely based on Boeing locking up the market with cartel tactics. Are you really so cynical as to believe every word of that?

Jayafe wrote:
rigo wrote:
Or... ?

As stated above, they are different birds. You are comparing a sedan with a SUV. More than likely the SUV will cost more from any angle you focus it, specially if the sedan is designed to be a cheap-suboptimal-unreliable people-mover.
And finally, you undermine a great, relevant point with what appears to be an obvious, cheap and unnecessary shot at 787.reliability. We're years removed from the Li-Ion battery fiasco and recent engine issues are RR's fault, not Boeing's.
 
User avatar
MrHMSH
Posts: 2223
Joined: Sat Oct 12, 2013 7:32 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 5:04 am

Andre3K wrote:
mjoelnir wrote:
Andre3K wrote:
What I don't get is why do people not realize that the company that waits and copies the other will always be able to learn from the mistakes and make a better product. The 737 Max is hampered by its low landing gear, otherwise it would be right up there with the A32* Neo aircraft.

On that same note, Airbus's first A350 was a POS and airlines didn't want it, so they had to jump on the new plane bandwagon, and got all the benefits of being a "ME TOO" airplane where you don't have to re-invent the will or take a risk.

When will Airbus be first to deliver something original that isn't a failure (A380 first double decker sure, not a failure per say but not a success either)? Other than that Airbus is usually responding to something Boeing does, so until they decide to lead instead of follow they will always be able to "outdo" Boeing.


Who is responding to whom. The A300/310 was the original first wide body twin. The 767 was the response and so on.


And how successful would you call the A300/310 compared to the 767? Not to mention it doesn't fit Airbus's FBW style, it barely even counts.


The A300/A310 were very successful, launched into an unoccupied space, had a number of innovations (2 man cockpit for widebody, first widebody twin) and forced Boeing into launching a response, a 'me too' product, they didn't have to re-invent the will or take the risk. Not sure what the relevance of not having FBW is. The A300 established Airbus as a major player, not a bad achievement considering Boeing's dominance at the time. The A330 and A340 were not launched in response to any specific Boeing product, but the 787 was definitely a response to the A330. I would debate whether the A320 was really a 'me too' product in the first place, it had more capability than the 737 of the time, and forced Boeing into launching an upgraded 737, and then when the A320neo was launched it forced Boeing into a disadvantageous position. The 737MAX is about as 'me too' a product you can get.

I don't get why it's a problem to launch something that's not 'original' anyway though. It's a duopoly and you have to be competitive. What do you think Airbus' response to the 787 should have been? Launch a Cessna 172 competitor? Why wouldn't you learn from the opponents' mistakes and target weak points?
 
mjoelnir
Posts: 7285
Joined: Sun Feb 03, 2013 11:06 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 10:00 am

kanban wrote:
mjoelnir wrote:

As usual your wanting something to be true doesn't make it so... The station concept is inherently wasteful. and the A350 process is definitely that. You will notice that all major manufacturing have abandoned station assembly except for one off items. maybe there is a reason..

But go ahead and argue about accounting systems.. when push comes to shove, no accounting system ever built an airplane.


As usually you do not know what you are talking about. Just because Boeing produces differently than Airbus, does not make the Boeing system better. Some things you have been talking negatively about regarding Airbus production in the years gone by with the A380, is done by Boeing today.
Boeing transports big parts by air, ship, rail and road, where is the difference to what Airbus does. Production of 787 parts is farther spread out in distance than parts for the A380 or A350. Fuselage parts for the 787 are transported by air to Seattle. Wings come by air from Japan. All your talk about strange transport at Airbus so much wind.

You are defending producing on a line because you were involved, fine, that does not make it the best system in the world. Even some modern car factories move at least in parts away from the line, it is just to inflexible.
The line concept, Boeing is using, is not the continues movement Ford once pioneered. It is stop and start from station to station. The work stops when the frames all move to the next position in the line.
You should please explain, what is so wasteful with moving a frame instead of in a line, from station to station? If you have looked at the material, I did give the page for, you see that all the stations reside near to each other. In both cases you stop the work. But only in the line you stop the work on all frames in the line at the same time, in the station system you only stop work on the frame you are moving.
In the station system, when a frame is ready, you move it out of the station and can store it if the next station is not ready. You do not occupy the last station waiting for everything to move.
You can have different numbers of parallel stations, for example 3 station 50 and 4 station 40, if the work in each station take a different amount of time. It makes it easier to change the process in a single station and you can adjust the number of parallel station up or down.
In the case of the A330 and A350 you can even use some of the same stations for overflow work. Now, while the A350 production is ramping up, they use A330 stations as extras. When the time at each station will go down, happening as the traveled work is decreasing and production is going smother, they can give those stations back to the A330 production or use them to increase the A350 production rate past 10 a month.
One more positive to the station system. You can move the A350-1000 slowly through the production, without influencing the speed of the A350-900, as it does not matter for the A350-900 how long the A350-1000 takes in a parallel station. The same point you have with the A330neo, change over does not influence the speed of A330ceo production.

Perhaps you start to post something more sensible, instead of clamoring only, we are the best at Boeing.
 
WIederling
Posts: 6332
Joined: Sun Sep 13, 2015 2:15 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 11:24 am

globetrotter94 wrote:
Seems like the answer to my question of how aircraft pricing is determined is simply "black magic" then.


My impression is that list prices have a relation to "product useability" value ( relative to other products .. )
i.e. pricing delta between list numbers is the summ of all relative "betterness".

How you derive at a valuation of that "betterness" could be seen as black magic. :-)
Murphy is an optimist
 
mayohoo
Posts: 46
Joined: Thu Apr 19, 2012 5:15 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 3:15 pm

Perhaps I can say that kanban is pointing out that the Boeing line system is more efficient (once the kinks are worked out and you are going for highest most cost efficient production rate), while the Airbus station system is more flexible (but may require more movement time where production is not occurring). The fact that Boeing can produce a comparable number of 737s from a 3 line FAL to Airbus with 8 lines of station system FAL might support this?

With all due respect, kanban apparently has studied the two systems in his work and I would presume he has some expertise we can learn from...
 
frmrCapCadet
Posts: 2131
Joined: Thu May 29, 2008 8:24 pm

Re: Why is the A350 so expensive?

Wed May 16, 2018 3:18 pm

In the 90s and '00s' Boeing redesigned their manufacturing in a few big swoops - and the cockups were astounding (and expensive). And ugly (ask Washington state legislature and look at what it did to Seattle area employment). The senior execs figured they needed to get out of town before they were run out. Hello Chicago.

Airbus can and will counter, but for a short time Boeing may be ahead of the game a little. It will be ephemeral - as most competitive advantages are.
Buffet: the airline business...has eaten up capital...like..no other (business)
 
User avatar
kanban
Posts: 3853
Joined: Sun Jan 06, 2008 1:00 am

Re: Why is the A350 so expensive?

Wed May 16, 2018 4:21 pm

mjoelnir
You're the one who needs to learn about processes before shooting your mouth off.. The 737 lines do not stop a stations, the position equipment moves with the plane while in use then is disconnected and moved back to the position behind, the line inches forward the whole time. Second all major car and truck manufacturers including big diesel trucks like Kenworth use a continuously moving line.. Years ago when the line was towed from station to station we lost half of one shift clearing the pathway of tool boxes, tools, test equipment; then the tractor towed out the unit closest to the door, then moved the next unit up etc until there was an opening and the start of the line and the next fuselage, wings, tail feathers were craned in. the move took a full shift, now multiply that times three lines.. that's a lot of down time. Looking at Airbus line move schematics, there is a lot of ground prep work before a move.. so it is dead time for manufacturing as is the actual move.. only in their case it's not just one building that must be idled, but every building with a station in it.. It is also noted that where Boeing uses overhead cranes to minimize shop floor disruption, the Airbus line can not move laterally in the same building and relies on transportation dollies to move sections (different dollies depending on the completeness of the section being transported).

Small companies with limited production space and need can succeed with station concepts and component inventory.. Shingo's book on singlr minute die exchange shows how to minimize change over costs and also applies to running a sub model mix on a moving line (it takes some thinking out side the box).. Schoenberger also has some valuable books on world class manufacturing..

It is always interesting when the question is what makes a plane so expensive, the same folks only want to talk about the accounting systems... not what the creates the costs in the first place. There have been some good inputs here from a cumbersome manufacturing mode, to built in complexity (panels vs barrels), contractor stuffing vs OEM stuffing.

that is the direction the originator envisioned.. not how companies manipulate the accounting.
 
User avatar
kanban
Posts: 3853
Joined: Sun Jan 06, 2008 1:00 am

Re: Why is the A350 so expensive?

Wed May 16, 2018 4:32 pm

incidentally during the moving line discussions, we looked at the docking concept and the cost trade offs.. yes it was better than the tractored line move, but it was far more expensive than the actual continuous moving line. Also note to achieve todays rates with either the old line move or the docking concept would require many more lines in operation.. The 787 would need 4 lines instead of 2 (dictated by to FALs) and ultimately only one in Charleston. Every line doubles your cost so even with parallel stations, it's double the costs no matter how efficient each station is.
 
StTim
Posts: 2971
Joined: Thu Aug 08, 2013 7:39 am

Re: Why is the A350 so expensive?

Wed May 16, 2018 5:06 pm

But Kanban frommetrics ihave seen (and they can be fiddled by outsourcing etc) Boeing and Airbus have similar workforce’s per plane produced.

Perhaps the static stations lend themselves to more Automation.

I have watched a few programs re high end car manufacturing. R8 and up. Mostly they use stations and not continuously moving lines.

Popular Searches On Airliners.net

Top Photos of Last:   24 Hours  •  48 Hours  •  7 Days  •  30 Days  •  180 Days  •  365 Days  •  All Time

Military Aircraft Every type from fighters to helicopters from air forces around the globe

Classic Airliners Props and jets from the good old days

Flight Decks Views from inside the cockpit

Aircraft Cabins Passenger cabin shots showing seat arrangements as well as cargo aircraft interior

Cargo Aircraft Pictures of great freighter aircraft

Government Aircraft Aircraft flying government officials

Helicopters Our large helicopter section. Both military and civil versions

Blimps / Airships Everything from the Goodyear blimp to the Zeppelin

Night Photos Beautiful shots taken while the sun is below the horizon

Accidents Accident, incident and crash related photos

Air to Air Photos taken by airborne photographers of airborne aircraft

Special Paint Schemes Aircraft painted in beautiful and original liveries

Airport Overviews Airport overviews from the air or ground

Tails and Winglets Tail and Winglet closeups with beautiful airline logos