Boeing, 787, economics and subsidies

I came across a rather interesting article the other day, although its a year old, it is still 100% relevant in todays world.

An investigation by the Industrial Geographer discovered that the 787s development costs are likely to exceed $13billion USD by the time it comes to market. To put this into context, the new Airbus A380 cost roughly the same, Boeing has spent as much on a 230 seat twin with an ETOPS 180 rating as Airbus has on a 800 passenger quad that isnt restricted by ETOPS.

This is mainly because the aircraft is being developed out of new materials, new techniques and also it is because the three different launch models, the 787, 787SR and the 787STR are not the same aircraft. The base 787 model will have a maximum take-off weight of 205,400kg. The aircraft typically accommodates 200 passengers in a three-class cabin configuration. The length is 56m. The wingspan is 58.8m and the height is 17.4m. The range is 14,445km.

The 787-SR short range version is the same length and height as the 787 but has a 5.5m shorter wingspan (51.5m). The maximum take-off weight is 136,075kg and the range is reduced to 6,480km.

The stretched version, 787-STR, has the same wingspan and height as the standard 787 but the length is increased by 6m to 62m. The aircraft carries typically 250 passengers in a two-class cabin layout. The range is increased to 15,370km and the maximum take-off weight is 223,000kg.

Normally, different models of the same aircraft, at launch, are based on the same basic components with simply the fuselage being extended or shortened, but Boeing has required its partners to develop different wings for the SR version, and the STR model is likely to require different engines. All of these modifications will raise development costs for these parts dramatically.

Essentially what Boeing are doing with the three 787 models is bring their product line back into the current market. Out of the 6 models currently being presented by Boeing to the market, 5 of them are based on 1970s or earlier technology, with only the 777 being based on 1980s tech. This is in comparison with Airbus which has the majority of its range being based on 1980s or later technology through use of all new designs.

The 787 will be the first LCA to tout a first-of-a-kind composite fuselage and wing, and will consist of 50 percent composite materials, 20 percent aluminum, 15 percent titanium and 15 percent steel, and this will give it an edge over the competition because it allows the aircraft to burn as much as 20% less fuel than existing jets on both long and short haul routes. The only problems that face airlines is the lack of commonality between the shorthaul models and the longhaul models - make no mistake, while these aircraft are related, they are as different as any other aircraft, with as much as a 45% weight difference and different avionics, landing gear and wings.

When Boeing launched the 777 in the 1990s, the project cost them as much as $7billion. As I said before, the 787 project is looking likely to top $13billion, and much of that comes from aid, loans or subsidies.

Much is heard of Airbus getting state aid under the 1992 Trans Atlantic agreement, but Boeing also is allowed, within the same limits given to Airbus. A breakdown of the aid given to Boeing for the 787 is thus:

1. The State of Washington House Bill 2294 includes tax incentives for siting of the 787 production factories in the state. This package comes to roughly $3billion to $3.7billion in total, and expire on July 1 2024.

2. State of Kansa providing a $200million loan over 20 years for production of the nosecone and a $500million bond.

3. Japan is providing $1.58billion to the Japanese companies responsable for the wing, fuselage and center wing box.

4. Italy is providing $590million in loans for location of 787 parts.

5. Oklahoma is providing $350million in interest free loans for location of production facilities but it is unlikely that Boeing will meet targets for these factilities and thus wont be elegible for the loans.

6. Boeing is also asking the various states and countries to fund the 747 freighter conversions that will be required for shipping the various parts around. This is estimated to cost between $300million and $500million.

Boeing board statements have put the Boeing funded portion of the 787 program to only '60% of the total cost of the 777 program', which when using the publically available figure of $7billion, gives us an idea that Boeings contribution will be roughly $4.2billion, which is $1billion less than Airbus contributions to the A380 by currently available figures.

All in all, nearly 50% of the launch cost of the 787 will be met using aid, loans, subsidies and grants from sources. This is vastly in breach of the level of subsidies allowed under the 1992 agreement, and will certainly give the EU some ammunition if the current trade dispute ever makes it to the WTO.

The article is very interesting, and what I have paraphrased here is essentially only scratching the surface.

www.findarticles.com...

Fred will be along shortly.......

Very interesting reading Richard. Not just the subsidies bit (which I don't think Fred will like very much) but also the bit about the 787 really being three different aircraft

I wonder how much of the aid Boeing will recieve for this is repayable by comparison with how much of the A380 aid is repayable (which is all of it I believe).

And Boeing has stumped up a cool $1billion less of its own money than Airbus did for a project costing the same? Doesn't sound fair, does it.

It's an outrage I tells ye's!

I just hope someone is going to go complain to the WTO about it all!

You're right;

will someone bring out the Airbus subsidies figures ??

and what's the LCA in

The 787 will be the first LCA to tout a first-of-a-kind composite fuselage and wing, and will consist of 50 percent composite materials, 20 percent aluminum, 15 percent titanium......

??

Originally posted by sminkeypinkey
Fred will be along shortly.......

Im already here. I will respond to some of this as soon as I can. My wife is putting "tarrifs" on my net time

I did find the part about 3 differnet planes interesting. Perhaps because they larger versions are more or less in developemnt at the same time as the base, they went with a different method to speed production and lock in orders before any potential for competition in the line.

Also I admit my knowledge deficit about all composite structures, but perhaps it is not possible to put in a fuselage plug to make the plane bigger down the road??

Originally posted by Stealth Spy
and what's the LCA in

The 787 will be the first LCA to tout a first-of-a-kind composite fuselage and wing, and will consist of 50 percent composite materials, 20 percent aluminum, 15 percent titanium......

??

Large Civil Airliner.

Also I admit my knowledge deficit about all composite structures, but perhaps it is not possible to put in a fuselage plug to make the plane bigger down the road??

The 787 fuselage is made up of 5 pieces:

1. Nose and cockpit
2. Forward fuselage
3. Central box
4. Rear fuselage
5. Tail

It isnt a single one piece fuselage. As with all airliners, its easy to add a bit between the center wing box and the forward fuselage to lengthen that part of the aircraft, since the parts just bolt together like standard aluminium parts.

Before you all get your panties in a twist, I do not intend on this thread descending into farce through subsidies. My reason for including the information is that a lot is said in these forums and others about Airbus subsidies, and while it is claimed that Boeing also receives subsidies, not many can pin down the amount. The article is very informative on this subject, and puts both sides of the arguement into perspective - that being neither side has clean hands.

To head off some claims, the Washington State tax cuts could not have been had by Airbus if they had based a factory there, the bill to give Boeing the tax cuts was heavily customised solely for Boeing, and directed at Boeing and the 787 - Boeing wouldnt have gotten them if they had opened a factory for another type of aircraft.

Also, Airbus is to open a factory for the A330 in Mobile, Alabama, if the KC330 project is given the go ahead. THis plant will produce civilian A330s, A320s and the KC330 using parts mainly procured from US manufacturers, except for the engines which will be customer choice.

I am starting to doubt the efficieny of the A380. It may have a better engine efficiency and carrying capacity and junk but I think its gonna be another 747 kind of thing. Only some airports will be able to handle something of that size right off the bat, and the ones that want to handle it might have to do a whole lot of expensive renovations and runway extenstions/widenings. A lot of people have become skeptical that the new additions like the aircraft bars will stay, instead replaced by..... MORE SEATS! I admit that I think they are correct. Its all about income and efficiency.

I also dunno bout the new 787 Dreamliner. I'm a little hazy on the EXACT specs of this aircraft, but I know its been called the next-gen 737. I have seen some of the comparisons. It looks better, and the airframe looks so much hotter =P.

All in all I have more faith in the 787 than the A380. It just seems more efficient for the time being. One thing I do want to see is the Boeing plan. It looks a lot like a really big wing with three engines mounted on the top of the back end. Absolutely huge, very impressive. I bet you guys have seen it... Its in Popular Science books and can be downloaded for MS Flight Simulator '02 and '04

All in all I have more faith in the 787 than the A380. It just seems more efficient for the time being.

I think you are falling into a common misconception - the A380 and the 787 are not competitors.

The 787 is relatively shorthaul compared to the A380, it doesnt have the range to match and is also hampered by the ETOPS 180 rating. The 787 is a 767 replacement, and it will fulfill pretty much the same market. The 747ADV and the 777-200LR are the A380 competitors, but the 747ADV hasnt even been launched yet.

The 787 wins on efficiency - it will burn 20% less fuel than a standard twin engine in its class, but the A380 wins on passenger economics for a number of reasons:

1. after break even point (323 seats filled out of 555 with a full standard cargo load, thats 227 pure profit seats - vastly more if an airline opts for a 600, 700 or even 800 seat configuration) a A380 has 85% more profit seating than a 747-400 with 415 seats which breaks even at 290 pax.

2. the A380 is more fuel efficient after its break even point than a fully loaded 747.

3. this is the big one - landing and take off slots. The worlds airports are getting busier and busier, and with routes becoming used more that means more passengers. To fly 600 people across the Atlantic, that requires 2 767s, 777s or 787s, and that means two landing fees, two gate fees and two fuel bills, two maintenance bills etc. By putting those 600 people on one aircraft, you cut all of that in half essentially, and with airports becoming more crowded, landing slots will be hotly contested and become more expensive as the airports up prices to make more money.

4. not a lot of people are aware, but the A380 is designed so that you can remove the two outer engines at construction time and use it as a huge shorthaul coach - imagine shipping 700 holiday makers 2000 miles from anywhere in Europe to the Med, you would make a killing, especially as that aircraft could make 4 trips a day, thats 2800 passengers carried by one aircraft in a day, using the above figures thats 1508 pure profit passengers, and at a random current rate from LHR to Cyprus airfair at £258 single, thats £390,000 profit on that days flying for that aircraft.

The A380 has a lower weight footprint than a 777-300, so weight is not an issue at any major airport. The thing that airports have been upgrading is the width of the taxiways - the outer engines are further out than on any quad before, and they have to be over concrete to lower the likely hood of FOD through ingestion.

Dont worry about emergancy diversions, the A380 requires less runway to takeoff or land on than a 747 or 777, so any major airport in the world can take it in an emergancy, evne if it has to sit at the side of the runway because it cant get off the taxiway.

The A380 as a 'mega-twin'? Now thats a new one on me as well Richard

I tried to put those same economic and logistical arguments in favour of the A380 in another thread the other day but you word it so much better than I do.

Originally posted by waynos
The A380 as a 'mega-twin'? Now thats a new one on me as well Richard

Thanks! The 'megatwin' info I have posted here before, it came straight from the mouth of an Airbus spokesman on BBC west when he was being interviewed during the opening of an Airbus-BAe technology research facility outside Filton. I have only found snippits on it since then, but it looks like the first one is possibly planned for 2012 rollout for testing.

Another thing to wonder at is the max takeoff weight for the A380-900 is roughly 590,000kg while the wing loading limits are specced for 800,000kg - thats some expansion available in the wing loading, you have to wonder whats in store there!

Originally posted by waynos
I tried to put those same economic and logistical arguments in favour of the A380 in another thread the other day but you word it so much better than I do.

At Richards request, I will not spend alot of time dwelling on the subsadies issue except to address the Washington State tax issue. The bill that allows this is not Boeing specific. Should Airbus chose to build planes in the area, it would recieve the same breaks and benifits. No doubt (I hae to do some digging) its proposed plant for its KC-330 will get something from Alabama. I doubt Boeing would get the same in say Toulsane.

In regards to the economic benifits of the A380 those have never been a serious issue. If its seat/mile cost were worse than the 747-400 why would anybody have ever purchased it. The issue with the A380 is that of hub to hub versus point to point.

Yeah the 787 and the A380 are two totally different aircraft. Both have some great aspects though. An 800 passenger jet has some awsome potential for cheap flight (maybe I can afford that trip to stonehenge). The 787 meanwhile uses so much less fuel than it's competitors that it should make it a real winner for companies that buy it.

The only way to put an end to the subsidiaries debate is for the two giants to cooperate on projects. Something along the lines of the proposed tanker deal with Airbus and Northrop. It is utterly stupid for these two industry leaders to not share some projects. It is all because of the fight to keep jobs at home in the EU and the US, instead of the infighting while China walks away with the whole industial complex some collaboration should start to occur. I myself get rapped up in the silliness but truthfully I think keeping the high tech and high wage jobs is important for us all and what better way then thru some renewed cooperation on a whole new generation of advanced passenger aircraft.

Another thing to wonder at is the max takeoff weight for the A380-900 is roughly 590,000kg while the wing loading limits are specced for 800,000kg - thats some expansion available in the wing loading, you have to wonder whats in store there!

I always did wonder why the wings look so much bigger than you might expect in plan view (compared with a 747 the wing looks VAST, while the rest of it is merely 'bigger'
)

Originally posted by FredT

At Richards request, I will not spend alot of time dwelling on the subsadies issue except to address the Washington State tax issue. The bill that allows this is not Boeing specific. Should Airbus chose to build planes in the area, it would recieve the same breaks and benifits

Actually, no Airbus wouldnt. The exact law was dependant on a number of subtle things within the Bill, heres the section of the law applicable:

(1)(a) Chapter . . ., Laws of 2003 1st sp. sess. (this act) takes effect on the first day of the month in which the governor and a manufacturer of commercial airplanes sign a memorandum of agreement regarding an affirmative final decision to site a significant commercial airplane final assembly facility in Washington state. The department shall provide notic eof the effective date of chapter..., Laws of 2003 1st sp. sess. (this act) to affected taxpayers, the legislature, and others as deemed appropriate by the department.

(b) Chapter . . ., Laws of 2003 1st sp. sess. (this act) is contingent upon the siting of a significant commercial airplane final assembly facility in the state of Washington. If a memorandum of agreement under subsection (1) of this section is not signed by June 30, 2005, chapter . . ., Laws of 2003 1st sp. sess. (this act) is null and void.

31 (c)

(i)The department shall make a determination regarding the date final assembly of a superefficient airplane begins in Washington state. The rates in (13)(a)(ii) and (b)(ii) take effect the first day of the month such assembly begins, or July 1, 2007, whichever is later. The department shall provide notice of the effective date of such rates to affected taxpayers, the legislature, and others as deemed appropriate by the department.

(ii) If on December 31, 2007, final assembly of a superefficient airplane has not begun in Washington state, the department shall provide notice of such to affected taxpayers, the legislature, and others as deemed appropriate by the department.

(2) The definitions in this subsection apply throughout this section.

(a) "Commercial airplane" has its ordinary meaning, which is an airplane certified by the federal aviation administration for transporting persons or property, and any military derivative of such an airplane.

(b) "Component" means a part or system certified by the federal aviation administration for installation or assembly into a commercial airplane.

(c) "Final assembly of a superefficient airplane" means the activity of assembling an airplane from components parts necessary for its mechanical operation such that the finished commercial airplane is ready to deliver to the ultimate consumer.

(d)"Significantcommercialairplanefinalassemblyfacility"means a location with the capacity to produce at least thirty-six superefficient airplanes a year.

(e) "Siting" means a final decision by a manufacturer to locate a significant commercial airplane final assembly facility in Washington state.

(f) "Superefficient airplane" means a twin aisle airplane that carries between two hundred and three hundred fifty passengers, with a range of more than seven thousand two hundred nautical miles, a cruising speed of approximately mach .85, and that uses fifteen to twenty percent less fuel than other similar airplanes on the market.

So in section 1. b you have a definate final date by which the Governer must have a signed, firm agreement on his desk for a 'Aircraft Manufacturer' to build a factory in the state. This date was built into the law based solely on the ongoing discussions already happening between Boeing and the State. No other manufacturer could, during this short time period, come up with an investment plan good enough to have a final agreement by the deadline.

The use of the term 'super efficient' and its definitions apply directly to the 7E7/787 and no other aircraft on the drawing board at the time the law was drafted and enacted. Again, due to time constraints. The definition placed right there into the law fits precisely with the operating efficiencies of the 787, its actually a perfect match.

They didnt say Boeing in the law, but theres no way that, within the time frame, any other manufacturer could produce both the plans for a 'super efficient aircraft' and the financing, plans and logistics for a manufacturing plant. You are correct that the Bill didnt exclude by name any competitor, but it excludes all other competitors in other ways.

The full law is here:
www.leg.wa.gov...

The problems the Airbus A380 were due to the WingBox
The problems the Boeing B787 is experiencing now should be due to the drawing of that WingBox too.
Does anyone have the drawing of the B787 WingBox?