kitplane01 wrote:I'm not asking of the program as a whole is profitable (it's not, and there were write-offs to prove it).
LAX772LR wrote:Would be shocked if the pax version broke even, considering how clearly rejected it was by the market.
But who knows with the freighter. Sorta surprised that the opportunity cost on even the -F isn't so high that Boeing sees it as unjustifiable (i.e. use that space for MOM/NSA production), but apparently that's not currently the case.
RJMAZ wrote:Copied from another thread.
"These numbers are made up but are approximate to keep the math simple.
On each $200+ million 747-8 aircraft Boeing might make $40 million profit. $20 million of that profit will be allocated to pay off the development cost. The other $20 million goes to the end of year company profit. The remaining money from the sale covers the cost of construction.
That $20 million allocated for development is calculated by taking the development cost of $4 billion and dividing it by 200 aircraft. 200 aircraft is what boeing initially thought they would sell. If Boeing after a few years worked out that it will sell only 150 aircraft then it must take a one off hit of $1 billion. This is what Boeing has done.
Some members think that one off hit means the program has made a loss. That is not the case. Boeing has still been making $40 million profit per frame, they simple did not allocate enough of that profit towards paying off develooment. With 150 frames sold that would be $6 billion of profit which is well over the $4 billion development cost. As Boeing is still making profit on every frame it will or already has broken even and will continue to slowly make a profit."
travelhound wrote:For instance, in hindsight, a 747-8i would have probably been a better choice for QF over the A380. On long distance flights it would of had 20% lower trip costs. A smaller version would if had 25% lower trip costs and be in a size bracket that better suited QF's market and route network.
2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Strato2 wrote:The 747 has been a financial disaster for Boeing.
RJMAZ wrote:2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Spot on.
Also the write-off was most likely for tax reduction purposes.
As Boeing has had two years of massive company profits they can write-off the 747-8 development costs to reduce the tax bill.
The 797 will most likely have massive costs during ramp up which will keep the tax bill low for quite some years. So with the 787 bringing in massive profits it was the perfect opportunity to write-off the 747-8 development costs.
This also means any future 747-8 sale now has a larger profit in that financial year.Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
The 747-8 program will most likely just break even for Boeing as the freighters keep coming down the line at a profit.
The 747-8 successfully prevented Airbus from charging high prices for the A380. That low profit then caused the A380 to be a financial disaster for Airbus.
One could say the 747-8 helped kill the A380. That in my mind makes the 747-8 a raging success.
compensateme wrote:
Boeing’s required to present accurate financial statements, which means its estimates have to be accurate. The write off is resulting from a change in estimate, it has nothing to do with tax write offs nor does it by itself say anything about the profitability of the program.
rrlopes wrote:While that's technically true, there is a lot of room for companies to maneuver when filing their results. You can rest assured that the timing of the write off, whenever that happens, is carefully chosen by the company in order to best fit their interests. They "realize" they need to revise the estimates when it's convenient to do so.
rrlopes wrote:compensateme wrote:
Boeing’s required to present accurate financial statements, which means its estimates have to be accurate. The write off is resulting from a change in estimate, it has nothing to do with tax write offs nor does it by itself say anything about the profitability of the program.
While that's technically true, there is a lot of room for companies to maneuver when filing their results. You can rest assured that the timing of the write off, whenever that happens, is carefully chosen by the company in order to best fit their interests. They "realize" they need to revise the estimates when it's convenient to do so.
2175301 wrote:Once it became obvious that the 748 sales projections and the accounting block were wrong; Boeing had to adjust the accounting block at that time; and take whatever write-off would be required. The 748 is a rare case where Boeing has had to reduce an accounting block in their history. The accounting blocks on the other commercial aircraft has done nothing but keep going up as realistic projections of future sales indicates a need for a larger accounting block for the next "y" years.
NameOmitted wrote:2175301 wrote:Once it became obvious that the 748 sales projections and the accounting block were wrong; Boeing had to adjust the accounting block at that time; and take whatever write-off would be required. The 748 is a rare case where Boeing has had to reduce an accounting block in their history. The accounting blocks on the other commercial aircraft has done nothing but keep going up as realistic projections of future sales indicates a need for a larger accounting block for the next "y" years.
Does it also then free the company to offer signficant discounts to future buyers, or is this not a part of that decision?
RJMAZ wrote:kitplane01 wrote:I'm not asking of the program as a whole is profitable (it's not, and there were write-offs to prove it).
First mistake. A write-off does not mean the program as a whole is not profitable.
Copied from another thread.
"These numbers are made up but are approximate to keep the math simple.
On each $200+ million 747-8 aircraft Boeing might make $40 million profit. $20 million of that profit will be allocated to pay off the development cost. The other $20 million goes to the end of year company profit. The remaining money from the sale covers the cost of construction.
That $20 million allocated for development is calculated by taking the development cost of $4 billion and dividing it by 200 aircraft. 200 aircraft is what boeing initially thought they would sell. If Boeing after a few years worked out that it will sell only 150 aircraft then it must take a one off hit of $1 billion. This is what Boeing has done.
Some members think that one off hit means the program has made a loss. That is not the case. Boeing has still been making $40 million profit per frame, they simple did not allocate enough of that profit towards paying off develooment. With 150 frames sold that would be $6 billion of profit which is well over the $4 billion development cost. As Boeing is still making profit on every frame it will or already has broken even and will continue to slowly make a profit."
RJMAZ wrote:2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Spot on.
Also the write-off was most likely for tax reduction purposes.
As Boeing has had two years of massive company profits they can write-off the 747-8 development costs to reduce the tax bill.
The 797 will most likely have massive costs during ramp up which will keep the tax bill low for quite some years. So with the 787 bringing in massive profits it was the perfect opportunity to write-off the 747-8 development costs.
This also means any future 747-8 sale now has a larger profit in that financial year.Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
The 747-8 program will most likely just break even for Boeing as the freighters keep coming down the line at a profit.
The 747-8 successfully prevented Airbus from charging high prices for the A380. That low profit then caused the A380 to be a financial disaster for Airbus.
One could say the 747-8 helped kill the A380. That in my mind makes the 747-8 a raging success.
sargester wrote:The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
2175301 wrote:The topic of this thread relates the 748 being currently cash positive. All indications is that it is. By exactly how much per aircraft is unknown.
Please research the issue before you say anything more about it. Lots of information out there - and discussed on many previous A-net threads.
We need to keep this thread on topic - and that is the 748 and its financial performance.
Have a great day,
RJMAZ wrote:kitplane01 wrote:I'm not asking of the program as a whole is profitable (it's not, and there were write-offs to prove it).
First mistake. A write-off does not mean the program as a whole is not profitable.
RJMAZ wrote:Copied from another thread.
"These numbers are made up but are approximate to keep the math simple.
On each $200+ million 747-8 aircraft Boeing might make $40 million profit. $20 million of that profit will be allocated to pay off the development cost. The other $20 million goes to the end of year company profit. The remaining money from the sale covers the cost of construction.
RJMAZ wrote:Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
sargester wrote:The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
kitplane01 wrote:2175301 wrote:The topic of this thread relates the 748 being currently cash positive. All indications is that it is. By exactly how much per aircraft is unknown.
Please research the issue before you say anything more about it. Lots of information out there - and discussed on many previous A-net threads.
We need to keep this thread on topic - and that is the 748 and its financial performance.
Have a great day,
What indications?
I did research and cannot find anything clear. I'm hoping to be educated.
2175301 wrote:The topic of this thread relates the 748 being currently cash positive. All indications is that it is. By exactly how much per aircraft is unknown.
Two related topics would be would all the initial deferred production cost be paid off; and was the 748 overall profitable for Boeing.
We need to keep this thread on topic - and that is the 748 and its financial performance.
kitplane01 wrote:This is begging the question.
If Boeing is really making a $40 million profit per plane produced, that's my answer. But you wrote that is a made up number. Does anyone know the right number?
kitplane01 wrote:2175301 wrote:The topic of this thread relates the 748 being currently cash positive. All indications is that it is. By exactly how much per aircraft is unknown.
Please research the issue before you say anything more about it. Lots of information out there - and discussed on many previous A-net threads.
We need to keep this thread on topic - and that is the 748 and its financial performance.
Have a great day,
What indications?
I did research and cannot find anything clear. I'm hoping to be educated.
sargester wrote:RJMAZ wrote:2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Spot on.
Also the write-off was most likely for tax reduction purposes.
As Boeing has had two years of massive company profits they can write-off the 747-8 development costs to reduce the tax bill.
The 797 will most likely have massive costs during ramp up which will keep the tax bill low for quite some years. So with the 787 bringing in massive profits it was the perfect opportunity to write-off the 747-8 development costs.
This also means any future 747-8 sale now has a larger profit in that financial year.Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
The 747-8 program will most likely just break even for Boeing as the freighters keep coming down the line at a profit.
The 747-8 successfully prevented Airbus from charging high prices for the A380. That low profit then caused the A380 to be a financial disaster for Airbus.
One could say the 747-8 helped kill the A380. That in my mind makes the 747-8 a raging success.
The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
sargester wrote:The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
acjbbj wrote:sargester wrote:The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
No, the A380 was a pride thing. The 747 Dash 8 is a new generation of a tried-and-true plane that was designed for real demand, from real airlines.
RJMAZ wrote:2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Spot on.
Also the write-off was most likely for tax reduction purposes.
As Boeing has had two years of massive company profits they can write-off the 747-8 development costs to reduce the tax bill.
The 797 will most likely have massive costs during ramp up which will keep the tax bill low for quite some years. So with the 787 bringing in massive profits it was the perfect opportunity to write-off the 747-8 development costs.
This also means any future 747-8 sale now has a larger profit in that financial year.Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
The 747-8 program will most likely just break even for Boeing as the freighters keep coming down the line at a profit.
The 747-8 successfully prevented Airbus from charging high prices for the A380. That low profit then caused the A380 to be a financial disaster for Airbus.
One could say the 747-8 helped kill the A380. That in my mind makes the 747-8 a raging success.
mxaxai wrote:kitplane01 wrote:2175301 wrote:The topic of this thread relates the 748 being currently cash positive. All indications is that it is. By exactly how much per aircraft is unknown.
Please research the issue before you say anything more about it. Lots of information out there - and discussed on many previous A-net threads.
We need to keep this thread on topic - and that is the 748 and its financial performance.
Have a great day,
What indications?
I did research and cannot find anything clear. I'm hoping to be educated.
The simple indication that it is still in production and that Boeing is still accepting orders. The 747 has no future; there is no '747-8max' or '747-9x' waiting out there. Neither is there an Emirates just waiting to place an order for 100 frames. So Boeing has no interest to stretch the production at a loss until some new technology or order comes along. They can choose to only accept profitable orders or alternatively end production and use the resources on something more worthwhile.
Now, the profits are likely small. 6 per year is an incredibly slow rate. What gives Boeing some pricing power is that Airbus has no real long-haul freighter on the market. The A330-200F is a completely different market. But it's not like the narrowbody market where airlines are willing to pay a premium for faster delivery.
RJMAZ wrote:kitplane01 wrote:This is begging the question.
If Boeing is really making a $40 million profit per plane produced, that's my answer. But you wrote that is a made up number. Does anyone know the right number?
That is less than 10% profit margin based on the list price.
We can actually estimate the profit margin from the company tax bill.
Out of that $40 million profit I estimated, half of that profit goes to pay development cost. $20 million profit is what goes towards the year company profit.
Boeing made $10.5 billion profit last finacial year with 806 commercial aircraft delivered. Those included 580 737s and 145 787s. That works out to be $13 million per aircraft. If we assume the widebodies have twice the profit of the 737 due to size then the 737's have a $10 million profit margin and the widebodies a $20 million profit margin.
If the 747-8 has been maintaining this average profit the program will definitely break even with the current order book.
sargester wrote:RJMAZ wrote:2175301 wrote:I also understand that at this point that the entire 748 program is at a "loss" stage; but, if they continue to sell freighters to sustain 6 per year production rates for another 5+ years they may actually achieve break-even on the program. The write-off was because they could no longer predict enough sales to meet the "then current" production block; and had to write off the expected cost recover on "x" amount of frames that represented the difference between the older production block estimate and the new estimate. Continued sales of the freighters would push the production block size back to the original number - and perhaps higher (which would recover the written of money - assuming the average profit per aircraft produced is the same).
Spot on.
Also the write-off was most likely for tax reduction purposes.
As Boeing has had two years of massive company profits they can write-off the 747-8 development costs to reduce the tax bill.
The 797 will most likely have massive costs during ramp up which will keep the tax bill low for quite some years. So with the 787 bringing in massive profits it was the perfect opportunity to write-off the 747-8 development costs.
This also means any future 747-8 sale now has a larger profit in that financial year.Strato2 wrote:The 747 has been a financial disaster for Boeing.
You mean the 747-8 has been a financial disaster for Airbus.
The 747-8 program will most likely just break even for Boeing as the freighters keep coming down the line at a profit.
The 747-8 successfully prevented Airbus from charging high prices for the A380. That low profit then caused the A380 to be a financial disaster for Airbus.
One could say the 747-8 helped kill the A380. That in my mind makes the 747-8 a raging success.
The 747-8 cost Boeing more money than you can imagine and at the end of the day the A380 vastly outpaced the 748I in sales... it was a pride thing for Boeing to build this plane and its costing them dearly in the long run.
RJMAZ wrote:The 747-8 successfully prevented Airbus from charging high prices for the A380.
JayinKitsap wrote:They have a backlog of 24, so 4 years at 6/yr. If no new orders are booked by mid 2020, it will likely stop. Orders placed indicate Boeing is more ahead building more than not. Possibly they are aware of a 20 unit order out there, freighters do keep selling.
seabosdca wrote:I think we have the answer on a current basis in the fact that Boeing hasn't already stopped selling and planned for program shutdown. If cash flow from sales wasn't covering the cost of producing each incremental frame, Boeing would not have bothered to go out and pound the pavement and get the UPS order, or firm up Volga-Dnepr orders.
mxaxai wrote:The simple indication that it is still in production and that Boeing is still accepting orders. The 747 has no future; there is no '747-8max' or '747-9x' waiting out there. Neither is there an Emirates just waiting to place an order for 100 frames. So Boeing has no interest to stretch the production at a loss until some new technology or order comes along. They can choose to only accept profitable orders or alternatively end production and use the resources on something more worthwhile.
flyingclrs727 wrote:
At 6 orders per year, Boeing can deter Airbus from developing a large long rang freighter based on the A350. Any order large enough to encourage Airbus to build a long range freighter based on the A350 could easily be undercut by Boeing offering 748F or 777F with short lead times. A big enough order of
748F could get Boeing to either increase 748F production rates or negotiatiate with UPS to defer some of its deliveries to free up earlier delivery slots.
kitplane01 wrote:flyingclrs727 wrote:
At 6 orders per year, Boeing can deter Airbus from developing a large long rang freighter based on the A350. Any order large enough to encourage Airbus to build a long range freighter based on the A350 could easily be undercut by Boeing offering 748F or 777F with short lead times. A big enough order of
748F could get Boeing to either increase 748F production rates or negotiatiate with UPS to defer some of its deliveries to free up earlier delivery slots.
Actually, I would assume the A350F would have much better economics than the 748F.
kitplane01 wrote:You both are assuming that Boeing would not build 748's without making a profit, but we already know Airbus is doing exactly that. Boeing's motive to produce loss making 748s cannot reasonably be to wait for a NEO, like the A380 hypothetically might get. But it could be other things ... (1) Damage Airbus's economics (2) Pride (3) Wanting to keep the line open for Air Force One (accomplished) (4) some internal Boeing reason.
kitplane01 wrote:Airbus has said out loud for all to hear that the A380 is loss making going forward.
Is it the case the Boeing just has not said? What has Boeing ever said about the profitability of the 748 going forward?
kitplane01 wrote:flyingclrs727 wrote:
At 6 orders per year, Boeing can deter Airbus from developing a large long rang freighter based on the A350. Any order large enough to encourage Airbus to build a long range freighter based on the A350 could easily be undercut by Boeing offering 748F or 777F with short lead times. A big enough order of
748F could get Boeing to either increase 748F production rates or negotiatiate with UPS to defer some of its deliveries to free up earlier delivery slots.
Actually, I would assume the A350F would have much better economics than the 748F.
boeingbus wrote:One thing we do know is that Boeing would not leave a line open if it wasn't profitable or lacked a profitable business case. The 747 is a complicated program and they would love to cancel it. So, I personally think the 747 makes money and there is interest for freighters. This makes it a worthwhile and profitable venture. That's my hunch.
boeingbus wrote:One thing we do know is that Boeing would not leave a line open if it wasn't profitable or lacked a profitable business case. The 747 is a complicated program and they would love to cancel it. So, I personally think the 747 makes money and there is interest for freighters. This makes it a worthwhile and profitable venture. That's my hunch.