Re: Airbus on a roll

Date:         01 Dec 96 04:08:56 
From:         kls@ohare.Chicago.COM (Karl Swartz)
Organization: Chicago Software Works, Menlo Park, California
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>Isn't a major portion of the cost of a plane made up of components
>bought in, not produced by the airframe monger?  By the time that
>you've paid for engines and electronics ...

The *biggest* cost of most planes is all the research and development
plus flight testing that goes on before anything beyond some up-front
payments are received for the first plane, plus the finance charges
(interest or opportunity costs) on that investment.  For example, the
latest estimate I've seen for the 747-500X/600X development cost is
around $7 billion.  A substantial amount of that will have been spent
well before the planned first delivery in December 2000.  Now, think
of the annual interest on $7 billion ... and how many planes Boeing
has to sell at $200 million per copy (never mind discounts) just to
pay the interest on those development costs!

This is why I've heard people suggest that the 767 will turn a profit
while the 757 may not -- Boeing has sold more 757s, but the 757 got
off to a very slow start, with some of the biggest orders not coming
until half a decade after it entered service.  The 767, in contrast,
generated brisk sales from the very beginning, quickly paying off the
development costs.

--
Karl Swartz	|Home	kls@chicago.com
		|Work	kls@netapp.com
		|WWW	http://www.chicago.com/~kls/
Moderator of sci.aeronautics.airliners -- Unix/network work pays the bills