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Boeing might quit producing the 747

Triton

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"Boeing might end production of the 747"
by The Associated Press and KOMO News Wednesday, July 27th 2016

Source:
http://komonews.com/news/business/boeing-might-end-production-of-the-747

NEW YORK — As Boeing reported its first quarterly loss in nearly seven years on Wednesday, the company said it might quit producing the 747.

The iconic 747. The double-deck jet — known as the Queen of the Skies — revolutionized air travel by making it more affordable for the masses. The giant jet once stood alone, with more seats than any other jet and a range of 6,000 miles, longer than any other plane.

But its four engines and massive size are now seen as negatives — it burns too much fuel and airlines struggle to fill flights with 400 or more passengers. Slowing freight traffic has meant few orders for the cargo version of the plane.

"If we are unable to obtain sufficient orders and/or market, production and other risks cannot be mitigated, we could record additional losses that may be material, and it is reasonably possible that we could decide to end production of the 747," Boeing said in the filing Wednesday.

No timetable was set, but Boeing needs to keep the manufacturing line open for the next few years in order to fulfill orders, including for two replacement jets for Air Force One, the presidential plane.

Boeing builds the 747 at its Everett plant. That huge factory was built in 1967 to build the jumbo jet.

Boeing reported on Wednesday that revenue rose 1 percent to $24.8 billion, and company shares rose steadily before the opening bell Wednesday.

Charges totaling $3 billion before taxes, led to Boeing's first down quarter since the third quarter of 2009, when it lost $1.6 billion.

On Wednesday, Boeing also lowered its full-year earnings to the range of $6.10 and $6.30 per share, from $8.15 and $8.35. The revenue outlook remains the same at $93 billion to $95 billion.

Despite the rough quarter, analysts believe that Boeing showed underlying strength and shares gained $1.11 to close at $135.96.

The report of a quarterly loss comes days after one of Boeing's key suppliers, Rockwell Collins, publicly called out the company for being behind on $30 million to $40 million in bills for various electronic and cockpit equipment.

"Boeing is delinquent and Boeing has contributed to some of our underperformance here this quarter in cash flow, which is disappointing, but we're working that with them," Rockwell Collins CEO Kelly Ortberg said Monday when the company posted earnings.

Boeing executives said Wednesday during a conference call that they were trying to meet industry standards and moving to a more orderly cycle.

The Boeing Co. reported losses of $234 million. The adjusted per-share loss was 44 cents. Analysts surveyed by Zacks Investment Research had projected an adjusted loss of 88 cents per share. Boeing had already warned analysts of the heavy charges for the quarter, giving them time to adjust their estimates.

The charges this quarter include a $1.2 billion write-down, before taxes, on its 747-8. Boeing attributed the loss to weakness in the air cargo market, saying that the overall number of freighter jets produced will be lower than originally estimated. The company will continue to manufacture one of the giant jets every two months but no longer has plans to double the production rate to one per month in 2019.

Boeing also decided against spending money to refurbish and sell its two remaining 787 Dreamliner test aircraft. The jets were built in 2009 and both have spent more than 6,700 hours in flight and ground testing. That charge reached $1.2 billion before taxes.

Finally, Boeing took another write-off on the Air Force's KC-46 Pegasus Tanker, a midair refueling plane Boeing is building off its commercial 767 jet frame. Problems were found during recent test flights and Boeing is working to fix them. The Air Force was supposed to take delivery of 18 tankers by August 2017 but the new schedule now targets January 2018. The delay and changes will cost Boeing $354 million before taxes, on top of more than $1 billion in charges already taken on the tanker.

The increased revenue mostly came from faster production of Boeing's commercial planes. The commercial division accounts for about two thirds of the company's revenue, with its defense and space divisions making up the rest.

Boeing takes a deposit when a jet order is made but doesn't collect the bulk of the cash until a jet is delivered. The company delivered 199 commercial jets during the quarter, up from 197 during the same period last year and 181 two years ago.

Boeing shares have fallen almost 7 percent since the beginning of the year, while the Standard & Poor's 500 index has increased 6 percent.
 

lastdingo

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No such story must ignore Airbus.

To keep 747 in production means to squeeze Airbus in its 330/340/380 market segments. Without the 747 the only competitor from Boeing would be the 777, and this would allow Airbus to charge monopoly premiums.
This in turn would give Airbus the extra profits and cash to squeeze Boeing harder in other segments, depressing Boeing's profitability there.

747 or not isn't only about profits from the 747 program; it's about competition strategy.

I suppose it would be sensible to add another aircraft type into the production line at Everett, so 747 production can be maintained.
Alternatively, the 777 may get an enlarged 4-engine sibling variant to replace the 747.
 

Sundog

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The B777 will be just fine for the large market. Boeing knew this was coming, that's why the 787 is the size it is; Boeing knew the large market was going to dry up, which is why they didn't think the A380 was a good idea. Boeing will be getting rid of the 747 and Airbus will be getting rid of the A380. MOM is the future.
 

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lastdingo said:
No such story must ignore Airbus.

To keep 747 in production means to squeeze Airbus in its 330/340/380 market segments. Without the 747 the only competitor from Boeing would be the 777, and this would allow Airbus to charge monopoly premiums.
This in turn would give Airbus the extra profits and cash to squeeze Boeing harder in other segments, depressing Boeing's profitability there.

747 or not isn't only about profits from the 747 program; it's about competition strategy.

I suppose it would be sensible to add another aircraft type into the production line at Everett, so 747 production can be maintained.
Alternatively, the 777 may get an enlarged 4-engine sibling variant to replace the 747.
Both Boeing and Airbus already have huge profit margins on their planes, indicating that they both already have "monopoly" power. The 747-8 was never going to be much of a competitor, and is mainly selling in the freighter version. Not enough of a market for passenger planes. 777-8/9 are taking most of the orders for that sort of need.
 

Triton

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Seems like the superjumbos are a flop. Perhaps unintended victims of the global recession and decreased demand.

"Fears over UK taxpayers' £530m investment in Airbus as A380 production slashed"
by Alan Tovey, Industry Editor
18 July 2016 • 5:00am

Source:
http://www.telegraph.co.uk/business/2016/07/18/fears-over-uk-taxpayers-530m-investment-in-airbus-as-a380-produc/

Airbus’s decision to slash production of its A380 “superjumbo” raises questions over when UK taxpayers will get back the £530m they handed to the plane-maker to help launch the jet.

Britain gave the money to Airbus in 2000 to help develop the giant jet under a scheme known as repayable launch investment (RLI).

The Business Department confirmed the loan but said its terms were commercially sensitive, though Airbus is understood to pay a royalty each time it delivers one of the giant jets.

But waning demand for the A380 led Airbus to announce at last week’s Farnborough airshow that it was cutting production of the jet from the current rate of 27 a year to just 12 in three years’ time. Some believe that the slowdown could be the first step to killing the project after poor sales.

Fabrice Bregier, boss of Airbus, admitted the lower production rate could mean that A380 will go into the red, though the company says the programme is breaking even at the current rate.

Critics claim that unless the jet is profitable, Airbus is not obliged to pay back RLI, and the lower production rate means the jet will never recoup its costs. The terms of the deal are shrouded in secrecy, they were based on the business case for A380 when it was being developed.

When the A380 first flew in 2005 at the Paris airshow, an Airbus presentation predicted sales of 751 of the aircraft by 2021. So far just 319 of the double-deck jets have been sold, with 193 delivered.

A spokesman for Airbus said: “Repayment of RLI does not depend on the success of a project. It is repayable regardless of how successful the programme is.”

Despite the disappointing sales of the A380, Airbus has held early stage talks about winning further RLI to develop a upgraded version of the jet in the hope it will attract more buyers. Upgrades include more efficient engines and the possibility of “stretching” the fuselage to increase capacity has also been floated.

Although the terms of RLI deals vary between different programmes, taxpayers have lost out before with hundreds of millions pumped into developing the A340 airliner written off after failed to win the sales that were hoped for. However, the huge success of the single-aisle A320 jet means Britain has received back more than it invested in jet.

One industry source said: “Overall, RLI has been a very good deal for the UK Exchequer, which has received twice as much from Airbus as has invested.”

RLI is the centre of a complex and long-running World Trade Organisation legal battle between the Airbus and Boeing. The US plane-maker claims that RLI is illegal under global rules, and that the Airbus unlawfully been handed $18bn through the loans, allegations which Airbus refutes.

Boeing faces similar claims from Airbus, which says the US company gets unlawful tax credits to build aircraft in the US, effectively subsidising its jets.
 

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There was an article a month or two in AvWeek sounding the death knell of the 4-engine commercial airliner. 2-engine, long-range, point-to-point service is seen as replacing hub-and-spoke.
 

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lastdingo said:
To keep 747 in production means to squeeze Airbus in its 330/340/380 market segments. Without the 747 the only competitor from Boeing would be the 777, and this would allow Airbus to charge monopoly premiums.
This in turn would give Airbus the extra profits and cash to squeeze Boeing harder in other segments, depressing Boeing's profitability there.
First of all, the Airbus A340 has been out of production since 2011, another victim of the shift from quadjets to big twins.

As for the A330, the 777-8 has a higher passenger capacity than even the 900neo, and the 777-9 will carry still more (and to greater ranges, too). So, Boeing has the A330 well-bracketed between the 777X and the larger 787 variants.

Regarding Airbus being able to charge monopoly premiums on the A380, that would be true if there were substantial demand for the aircraft, but there isn't. One can safely assume that nobody is paying close to sticker on the A380 at this point. Theoretically, the loss of the 747-8 as a competitor might exert a slight upward pressure on A380 prices, but the effect will be minimal. That's because the passenger model (the only one that competes with the A380) is a dismal seller. Not counting an order for Arik Air that appears to be dead in the water, and an order from Transaero (which went bankrupt), there have been 36 orders for the -8I from just three airlines (Lufthansa, Korean Air, and Air China). All but three of the 36 have been delivered. Two of those airlines operate A380s anyway. So, the 747-8 isn't stealing enough business to affect A380 pricing much.

It might be a slightly different matter for private customers (twelve -8s were sold to individuals or governments, ten delivered, with the VC-25Bs remaining), versus one for the A380, but that market is so small as to not matter.

lastdingo said:
I suppose it would be sensible to add another aircraft type into the production line at Everett, so 747 production can be maintained.
Alternatively, the 777 may get an enlarged 4-engine sibling variant to replace the 747.
Quadjets are dead. Efficiency, range, and dispatch rates are better for twins. In another 15-20 years, a growing population may produce enough demand for a larger jet, but it's likely to be a big twin (Boeing submitted patent drawings for a VLA double-decker twin a year or two ago). If it needs more thrust than that, perhaps they'd consider a trijet, particularly if it's a BWB configuration, but I really think we're done with four-holers for anything subsonic.
 

kaiserd

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carsinamerica said:
lastdingo said:
To keep 747 in production means to squeeze Airbus in its 330/340/380 market segments. Without the 747 the only competitor from Boeing would be the 777, and this would allow Airbus to charge monopoly premiums.
This in turn would give Airbus the extra profits and cash to squeeze Boeing harder in other segments, depressing Boeing's profitability there.
First of all, the Airbus A340 has been out of production since 2011, another victim of the shift from quadjets to big twins.

As for the A330, the 777-8 has a higher passenger capacity than even the 900neo, and the 777-9 will carry still more (and to greater ranges, too). So, Boeing has the A330 well-bracketed between the 777X and the larger 787 variants.

Regarding Airbus being able to charge monopoly premiums on the A380, that would be true if there were substantial demand for the aircraft, but there isn't. One can safely assume that nobody is paying close to sticker on the A380 at this point. Theoretically, the loss of the 747-8 as a competitor might exert a slight upward pressure on A380 prices, but the effect will be minimal. That's because the passenger model (the only one that competes with the A380) is a dismal seller. Not counting an order for Arik Air that appears to be dead in the water, and an order from Transaero (which went bankrupt), there have been 36 orders for the -8I from just three airlines (Lufthansa, Korean Air, and Air China). All but three of the 36 have been delivered. Two of those airlines operate A380s anyway. So, the 747-8 isn't stealing enough business to affect A380 pricing much.

It might be a slightly different matter for private customers (twelve -8s were sold to individuals or governments, ten delivered, with the VC-25Bs remaining), versus one for the A380, but that market is so small as to not matter.

lastdingo said:
I suppose it would be sensible to add another aircraft type into the production line at Everett, so 747 production can be maintained.
Alternatively, the 777 may get an enlarged 4-engine sibling variant to replace the 747.
Quadjets are dead. Efficiency, range, and dispatch rates are better for twins. In another 15-20 years, a growing population may produce enough demand for a larger jet, but it's likely to be a big twin (Boeing submitted patent drawings for a VLA double-decker twin a year or two ago). If it needs more thrust than that, perhaps they'd consider a trijet, particularly if it's a BWB configuration, but I really think we're done with four-holers for anything subsonic.
Agreed. Doesn't look good medium-long term for the 747-8 family or the A380.
Reduced by the success of the big twins and point to point routes into small unprofitable and unsustainable niches. Short of a major techical development changing the rules of the game looks like the future is twin engined, just like twin jets ended 3-4 engined short haul aircraft the same has occurred for long haul.

It does beg one question; if the very large aircraft (A380 size plus) can't sustain one aircraft facing no-real direct competitor then what is likely to drive demand for a new aircraft significantly larger than the biggest of the current twinjets? (The sort of pressure to force radical new designs like a BWB type solution). And even if there was such demand would it likely support more than one type (leading to possible Airbus/ Boeing and US/Euro cooperation on one design).
 

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The tiny order volumes for the 747-8 (thats why it would be taken out of production) would have little positive impact on Airbus, and if that company attempted to raise margins on the A380 they would sell even less of them than they are now.

Basically big-twins are the future; Boeing was right all along and probably shouldn't have bothered with the 747-8.
 

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JFC Fuller said:
The tiny order volumes for the 747-8 (thats why it would be taken out of production) would have little positive impact on Airbus, and if that company attempted to raise margins on the A380 they would sell even less of them than they are now.

Basically big-twins are the future; Boeing was right all along and probably shouldn't have bothered with the 747-8.
About one half of the 747s built are still flying! Perhaps the market is only stagnant until more planes start wearing out and need to be retired. In which case it would be good to keep the line going at some minimum rate.
 

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No, they'll be replaced with 777-8/9. Almost identical capacity and much better operating economics.
 

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BDF said:
No, they'll be replaced with 777-8/9. Almost identical capacity and much better operating economics.
Basically I just quoted this out of agreement.
 

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JFC Fuller said:
BDF said:
No, they'll be replaced with 777-8/9. Almost identical capacity and much better operating economics.
Basically I just quoted this out of agreement.
To be boring I also agree :)
However it is interesting that while these super efficient approx. B747-400 sized or smaller wide body twin jets are ubiquitous the larger jets with equivalent operating economics per passenger (747-800, A380) are struggling badly. So it's clearly not just efficienciey driving this trend, the market isn't supporting the ultra high capacity market, which does make one wonder what could/would in anything but the very long term drive the development of anything significantly larger than a B777 or A350.
 

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Airplane said:
About one half of the 747s built are still flying! Perhaps the market is only stagnant until more planes start wearing out and need to be retired. In which case it would be good to keep the line going at some minimum rate.
I'm going to parse those numbers a bit. So far, 1,513 747s of all types have been built. Of those:
  • 559 are in active service, by my count (that should be fairly close)
  • 534 are in storage (again, approximately: some may be back in service, others may have been scrapped)
  • 14 are preserved or on display
  • 59 have been written off due to incidents
  • Finally, 335 have been scrapped

So, 39% are still in service. Of those:
  • 8 are 747-100s, all freighter conversions (all but 2 operated by Iranian AF)
  • 10 are 747-200Bs (5 freighter conversions, 2 VC-25s, and 3 for Kabo Air
  • 2 are 747-200Cs (one for Iran Air, other for Aerospace One)
  • 10 are 747-200Fs (years 1978-1991)
  • 4 are E-4Bs with the US Air Force
  • 5 are 747-200M Combis (3 for Iran Air, 2 for Uni-Top)
  • 8 are 747-300s (2 regulars, 3 Combis, 2 SRs, and half of them are from Nigeria's Max Air)
  • 10 are 747SPs, mostly used as VIP transports
  • 2 are 747SRs
  • 239 are 747-400s (2 Japan AFOs, 3 are freighter OR LCF conversions, leaving 207 in passenger service)
  • 149 are 747-400F freighters
  • 36 are 747-400M Combis, of which 12 have been converted to freighters (of the 36, 15 are KLM's and 6 are Asiana's)
  • 66 are 747-8F freighters
  • 40 are 747-8I models (only 33 carry passengers)

Now, let's consider the 747-400 passenger fleet (the 207 -400s and -400ERs) in more detail. First of all, note that the -400s are already mostly gone. 446 were built (plus 19 -400Ds for Japan), so more than half are already stored or scrapped. So, look at the major remaining operators:

  • British Airways has 38 -400s (or will by autumn); they once had 57. BA plans to retain some, but has been retiring 3-4 per year. They aren't buying 747s to replace them; they have a handful of A380s, but now want A350s and 787-10s.
  • China Airlines has 8 -400s. They're replacing them with 777s.
  • Delta Air Lines has 9 -400s. They're replacing them with A350-900s, & they'll all be gone by next year.
  • El Al Israel Airlines has 6 -400s. They're replacing them with 787s by 2020.
  • EVA Air has 3 -400s. They'll be retired by March.
  • KLM has 5 -400s, along with 15 -400M Combis. Four will retire by the end of the year and be scrapped. The rest will be gone by 2021 or so.
  • Korean Air has 7 -400s. They're selling them off to cheaper operators like Max Air. They're replacing them with 747-8Is, yes, but also with 777-300ERs.
  • Lufthansa has 13 -400s. They've replaced some with their 19 -8I models, but don't seem eager to ditch the rest.
  • Qantas has 5 -400s (plus 6 -400ERs). They're slowly replacing them with 787-9s. Notably, Qantas operates the A380, but has postponed the last 8 of 20 they ordered.
  • Saudia has a mix of -400s they own and lease. They're keeping them for now.
  • Thai International has 10 -400s. They're replacing them with 787s and A350s.
  • United Airlines has 21 -400s. They're replacing the with 777-300ERs and A350-1000s.
  • Virgin Atlantic has 8 -400s. They're being retired and stored. Virgin has A380s on order, but has deferred them. Meanwhile, they're buying A350-1000s.

So, there are easily 50-60 more -400 passenger models that will be retired in the next 2-3 years. Note that only two of the airlines listed above are replacing their retiring 747s with new 747-8Is. Some of the retired -400s will go to secondary operators. Others could be converted into freighters, which is still loads cheaper than buying a brand-new 747-8F, and remember that Boeing says cargo demand is not growing much. The market is stagnant, but that's not the only problem. Quadjets just aren't in demand, or another 35% of the fleet wouldn't be in storage. And remember, these phase-outs are occurring as fuel prices are abnormally low. When they start to rise again, the retirement schedules may well accelerate.

Edit: And now, on 5 August, Qantas announced they will cancel their order for the 8 remaining A380s.
 

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Obama canceled the VH-71/VXX (AW101) when he came to office to set an example. Looks like President-elect Trump is willing to take things a bit futher (Well, and/or set up a better negotiating position with respect to Boeing and the prospects for a 747-8-derived Air Force One replacement). This was just "Tweeted." Quite the wake-up call for the Boeing execs in Chicago and Seattle this morning...

https://twitter.com/realDonaldTrump/status/806134244384899072
Donald J. TrumpVerified account
‏@realDonaldTrump

Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!

8:52 AM (EST) - 6 Dec 2017
 

Grey Havoc

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Further to that development: http://www.reuters.com/article/us-usa-trump-airplane-idUSKBN13V1S5
 

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Boeing (NYSE: BA) today issued the following statement regarding the Air Force One program:

"We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serve the unique requirements of the President of the United States. We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer."
----------------------------------

Anodyne (an·o·dyne): adjective
not likely to provoke dissent or offense; inoffensive, often deliberately so
 

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His 4 billion figure is not true as far as i know (3 or so is the correct number i believe?) and it is important to consider the tweet and statement made by him was not random or unprompted. Just before the tweet, this was up...

http://www.chicagotribune.com/business/columnists/ct-boeing-china-trump-robert-reed-1206-biz-20161205-column.html
 

marauder2048

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flanker said:
His 4 billion figure is not true as far as i know (3 or so is the correct number i believe?) and it is important to consider the tweet and statement made by him was not random or unprompted. Just before the tweet, this was up...

http://www.chicagotribune.com/business/columnists/ct-boeing-china-trump-robert-reed-1206-biz-20161205-column.html
There's a long tradition of "Negotiating through the press." Reminds me a bit of Akbar Al Baker of Qatar Airways.


"“Well I think the planes are too expensive. I spoke to a very good man yesterday, the head of Boeing, a terrific guy,
and we're going to work it out,” Trump told NBC’s “Today” on Wednesday morning. “You know, that’s what I’m here for.
I’m going to negotiate prices. Planes are too expensive and we’re going to get the prices down and if
we don’t get the prices down, we’re not going to order them. We’re going to stay with what we have.”

http://www.politico.com/story/2016/12/trump-boeing-ceo-dennis-muilenburg-232305
 

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Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.
 

marauder2048

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lastdingo said:
Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.

Meh. Given Trump's vastly superior visibilty into the program, I'm inclined to give him the benefit of the doubt.
 

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marauder2048 said:
lastdingo said:
Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.

Meh. Given Trump's vastly superior visibilty into the program, I'm inclined to give him the benefit of the doubt.
Don't think he really cares about the exact number or the exactly where it is in the acquisition process. PETrump is reacting like the 'everyman' hearing a news story about US$3+ billion being spent on the replacement AF1 program.

His first reaction is get pissed. "This is bull$&^t! Cancel it!"

He knows it's as much about perceived power in dealing with Congress as it is in dealing with authoritarian governments. He has a lot to get done w/Congress. Perceived power in Congress starts with approval ratings.

No fool this one.
 

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All evidence to the contrary notwithstanding.
 

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lastdingo said:
Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.
Actually, very little of the Presidential Aircraft Replacement budget has been spent, since they only awarded the initial development contract earlier this year. But there's also not much room to cut, without eliminating fundamental capabilities like nuclear command and control. Maybe he'll cut the leather seats?
 

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TomS said:
lastdingo said:
Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.
Actually, very little of the Presidential Aircraft Replacement budget has been spent, since they only awarded the initial development contract earlier this year. But there's also not much room to cut, without eliminating fundamental capabilities like nuclear command and control. Maybe he'll cut the leather seats?
Or, like his change of heart on waterboarding and such after speaking to Gen. Mattis, he'll tone it down once the experts explain why it costs what it does. Maybe he could have a, "beer summit" with Muilenberg. ;)
 

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TomS said:
lastdingo said:
Wow, he's really dumb enough to believe that there wasn't much of that money spent already, impossible to be recovered.
A competent businessman understands sunk costs, but businessmen who go bankrupt and stiff contractors as a business model don't necessarily so.
Actually, very little of the Presidential Aircraft Replacement budget has been spent, since they only awarded the initial development contract earlier this year. But there's also not much room to cut, without eliminating fundamental capabilities like nuclear command and control. Maybe he'll cut the leather seats?

Boeing has stated that they "don't make any money" on the AF1 program (-200 jets). Don't know if I believe that. At the very least I'm sure they meticulously 'ensure' that they lose no money on the program.

Perhaps they'll be willing to sell a US$1 for US$.70 for the prestige of branding. Or, maybe they'll back out or Airbus will get involved in bidding. Recall how RyanAir used Airbus to negotiate 737-800 then later 737-MAX purchases from Boeing. The point is that this is political theater to
1. keep vendors on their toes and
2. voters confident,
3. favorability polls climbing and
4. markets banking that he means business.

It's not like SECDEF Carter wasn't playing hardball with LM for the F-35 LRIP-9 contract. The only difference is that PETrump has some political aims between now and 1/20/17.

Or - Not.

We'll see, said the Zen Master.
 

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Other than the outer mold line, landing gear, and engines(?), these planes are essentially one-off nuclear, chem, biological hardened, flying command/control vehicles with classified defensive/offensive HW. It's not quite the same as his Trumpforce One buying experience. I like the Donald, but geez...
 

marauder2048

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NeilChapman said:
Boeing has stated that they "don't make any money" on the AF1 program (-200 jets). Don't know if I believe that. At the very least I'm sure they meticulously 'ensure' that they lose no money on the program.
I believe VC-25 was done (EMD + procurement) on a fixed-price basis. From what I can tell, VC-XX looks to be mostly cost-plus.
No need to rehash who bares the burden of overruns.
 

_Del_

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Can't speak for Boeing, but once upon a time we did work for the VC-25 fleet at a net loss just to be able to say we were the ones that did it. So it's possible they aren't raking in the dough.

Having said that, I'm not sure that the development cost for a fleet of 2 or 3 planes should be anywhere near the quoted figures. All the internal goodies could be scavanged from the existing fleet. Most of that stuff is still being produced in part or whole for the TACAMO (or whatever we're calling it now) and the existing VC-25's.

This reeks of the same mismanagement that led to overruns and delays on the KC-46 even though a KC-767 version already existed. This shouldn't be reinventing the wheel. You already have a 747-200 series developed and in service. How many billion do you need to adapt the -800 series for the same mission? What new cutting edge technology are we developing for this project? What am I missing?
 

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_Del_ said:
Can't speak for Boeing, but once upon a time we did work for the VC-25 fleet at a net loss just to be able to say we were the ones that did it. So it's possible they aren't raking in the dough.

Having said that, I'm not sure that the development cost for a fleet of 2 or 3 planes should be anywhere near the quoted figures. All the internal goodies could be scavanged from the existing fleet. Most of that stuff is still being produced in part or whole for the TACAMO (or whatever we're calling it now) and the existing VC-25's.

This reeks of the same mismanagement that led to overruns and delays on the KC-46 even though a KC-767 version already existed. This shouldn't be reinventing the wheel. You already have a 747-200 series developed and in service. How many billion do you need to adapt the -800 series for the same mission? What new cutting edge technology are we developing for this project? What am I missing?
What about inflation over about 30 years since the -200?
 

_Del_

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Sure, there has been inflation. But what is costing billions of dollars for development? The airframe is proven and developed. The systems are proven and developed. Why couldn't a team of old guys with slide rules figure out the basic layout and balances in a few months time? What work is going to cost billions of dollars? How many times do they have to look at weights and balances to decide a layout. I imagine it would/should be more or less similar to the -200. I know the planes won't be cheap, but a program cost in the multiple billion area seems extreme to me.
 

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Total cost of ownership? Maybe. I'm just thinking that the new AF1 is probably going to incorporate some bleeding-edge communications, IT, and hardening/defense subsystems, not to mention medical facilities. The basic airframe cost really doesn't play since it's essentially a bespoke design that, other than overall shape, will only have modest resemblances to a line 747.
 

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_Del_ said:
Sure, there has been inflation. But what is costing billions of dollars for development? The airframe is proven and developed. The systems are proven and developed.
What systems? Do we know all the systems that go into an Air Force One? I imagine there are more than a few items unique to that aircraft.
 

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I think some of us are focusing on the least important/costly part of AF1/2 - the airframe. The on-board systems are what need to be looked at to grasp costs.
 

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I agree that onboard systems are the primary cost driver. But everything is or should be existing technology. What is mission critical that is not already flying on VC-25's, TACAMO, or NEACAP? Integration into a new(-ish) airframe might be a headache, but not $3B worth. That's an aneurysm, not a headache. Development costs of the Falcon 9 were ~$300M.
Is the customer asking for things driving the costs up? This happens a lot. Are they looking for an operational DEW instead of DIRCM?
Instead of looking at a couple of configurations and calling it good, is Boeing doing heavy number crunching on all 6,736 potential arrangements and billing the customer because one saved 300lbs over the other top 5 original layouts? Thank goodness for cost-plus %.
If one can develop a reusable booster essentially from scratch for $300M, surely we could cram existing technology into a larger airframe than we already did in the -200 series. If you can design and build a multifunction sports arena with kitchens, media centers, and medical facilities for 300M, surely you can interior design an aluminum tube with existing systems, galleys, press room, and an OR for less than $3B.

That's a little tongue in cheek, but I'm not seeing a cost driver on the scale of billions of dollars. It's an honest question. Maybe I'm missing something. What isn't overlapping with existing projects?
 

marauder2048

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A non-trivial portion of the $3.2 billion is MILCON in order to accommodate the 747-8I which is taller, longer, wider and heavier than the 747-200.
My guess is the same as _Del_'s guess: defensive systems. Do you provision for DEWs and KICM/MSDM?
At a minimum, it's all aspect DIRCM + towed decoys.
 

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_Del_ said:
I agree that onboard systems are the primary cost driver. But everything is or should be existing technology. What is mission critical that is not already flying on VC-25's, TACAMO, or NEACAP? Integration into a new(-ish) airframe might be a headache, but not $3B worth. That's an aneurysm, not a headache. Development costs of the Falcon 9 were ~$300M.
Is the customer asking for things driving the costs up? This happens a lot. Are they looking for an operational DEW instead of DIRCM?
Instead of looking at a couple of configurations and calling it good, is Boeing doing heavy number crunching on all 6,736 potential arrangements and billing the customer because one saved 300lbs over the other top 5 original layouts? Thank goodness for cost-plus %.
If one can develop a reusable booster essentially from scratch for $300M, surely we could cram existing technology into a larger airframe than we already did in the -200 series. If you can design and build a multifunction sports arena with kitchens, media centers, and medical facilities for 300M, surely you can interior design an aluminum tube with existing systems, galleys, press room, and an OR for less than $3B.

That's a little tongue in cheek, but I'm not seeing a cost driver on the scale of billions of dollars. It's an honest question. Maybe I'm missing something. What isn't overlapping with existing projects?
Your arena doesn't have to fly.
 

_Del_

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I can't tell if you're being deliberately obtuse or not. The flying part was developed some time ago. Nothing about integrating existing mission critical things into the -800 series should be a $3B+ expenditure plan. A Falcon 9 flies and does things nothing else did before and it cost ~$300M to develop. I understand a flying command post isn't cheap. Lots of goodies to cram in there, and they all cost money. Making a direct comparison to the cost of an airliner is naive. But there is a lot of room between "expensive" and $3B+.
 

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_Del_ said:
I can't tell if you're being deliberately obtuse or not. The flying part was developed some time ago. Nothing about integrating existing mission critical things into the -800 series should be a $3B+ expenditure plan. A Falcon 9 flies and does things nothing else did before and it cost ~$300M to develop. I understand a flying command post isn't cheap. Lots of goodies to cram in there, and they all cost money. Making a direct comparison to the cost of an airliner is naive. But there is a lot of room between "expensive" and $3B+.
We are talking about bespoke ultra small production run ultra high tech systems, the most advanced in the world of their type, generations more sophisticated (and expensive) than in the current presidential 747's (which should have been replaced a while ago but replacement postponed for political optics).
In a new aircraft whose is really very different structurally and system wise than the current airforce 747's despite the superficial similarities of being another 747.
Not going to claim every penny is necessarily justified, just that nobody can be surprised they will be extremely expensive or that a new billionaire president abandoning so many campaign promises wouldn't look to pander to a highly dubious "Everyman" image.
 
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