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AeroAnalysis has performed an analysis regarding Boeing’s ability to bring the deferred costs balance to zero by the 1300th delivery of the Dreamliner, which is seen as an important milestone for the Dreamliner program.


Dreamliner deferred cost prediction: explaining the method

The method used is based on a couple of assumptions:

  • A certain ramp up in profits.
  • A certain production cost per airframe.
  • A certain revenue per airframe.
  • Ramp up of the Boeing 787-10 production.

To refine the calculations, we are taking into account that the average sales prices and production costs will increase after the launch of the Boeing 787-10, scheduled in 2018.

Boeing needed 429 airframes to reach the peak in deferred costs. For this analysis, we will assume it will need another 436 units to ramp up profits. This leaves 435 units on which the jet maker can make “full” profits. So, we are assuming that each phase (building deferred costs, ramping up profit and production on full profit) equals roughly a third of the total block size. In future analyses, we will have a look at the impact of different ramp-up patterns, but we think this pattern is a good one to start off with.

The most important findings

• AeroAnalysis model shows that there likely will be $9.7 billion left to be recovered at the 1300th delivery.

• By the 1,625th delivery, the deferred cost balance should be zero.

• Predictions of 2,700 airframes to recoup the costs seem to be overdone.

• A charge is not necessarily the next logical step.

Read the full article on SeekingAlpha