Re: ATR-72's and Airbuses

Date:         17 Dec 96 03:09:19 
From:         Chuanga@cris.com (H Andrew Chuang)
Organization: Concentric Internet Services
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In article <airliners.1996.2767@ohare.Chicago.COM> I wrote:
>
> In addition, because of Airbus's structure, Airbus divides
> all the workload amongst its partners and doesn't look for the most
  ^^^
> cost-effective subcontractors.

As I have admitted in an earlier post, I should not have said "all;"
"most of" is what I really meant.  I do apologize for the exaggeration
which wasn't my intent.  Nevertheless, I do stand by my overall
statement.

There are many things that the participating Airbus partners don't make
(such as seatings, inflight entertainment systems, etc.).  That's why my
guess is around 20%-25% of the revenue (engines not included) Airbus
generated are spent for sub-contracting.  Since I can't find the exact
number, you are more than welcome to correct my number.

Boeing's number is on their webpage, check

<http://www.boeing.com/news.release.960610.html>

In 1995, Boeing spent US$12b with 34,000 US companies; i.e., nearly
50% of Boeing's total sales (engines not included), and that does not
include foreign subcontractors.

Yes, Boeing does have many foreign subcontracts which are tied to
foreign sales.  Nevertheless, Airbus does, too.  Most of those
subcontracts have small monetary values, with the exception of Japan,
which I believe is a risk-sharing partner on the B777 program.  It's
probably not a coincidence the three biggest Japanese carriers all
have ordered the B777, and only one has ordered the A340.  You may
want to argue that Boeing's products are subsidized by the involvement
of Japanese government.  However, do keep in mind the order of
magnitude that we are talking about.

My rough estimate is about 30% of the work that Boeing would have
sub-contracted out, Airbus is doing it inhouse.  Assuming Airbus's
revenue to be around US$11b, and aircraft delivered to be around
150, a 15% saving on 30% of US$11b amounts to US$3.3 million per
aircraft (0.3 * 11,000 * 0.15 / 150 = 3.3) which Airbus can pass to
their customers.  Of course, if you believe Airbus has the world's most
efficient workforce, then my example is meaningless to you. :-(