With the development of space travel / tourism technologies, and the holy grail of Sydney->London in 2 hours continuing to be sought (directly or indirectly) by Virgin Galactica, Space X etc, there's a good chance Boeing and Airbus will go the way of so many car manufacturers.
If they struggle this long to warrant the 787 investment, how hard will it be (and what impact will it have on share prices, noting they currently view most of the 787 investment as sunk cost) to make the next step-change in the industry? Especially if by then there may not be a 30 year window to pay for it.
They're not going anywhere soon, so maybe it won't happen until the back end of my life. But I imagine people thinking with nostalgia about companies like Boeing and watching movies on 12 hour flights that were only intermediate legs, in the same way we talk about car brands and childhood experiences - bucket seats, no air-conditioning, driving down the highway towards the beach for summer.
Except that Boeing is also heavily (and increasingly) involved with commercial space as well, e.g. satellite building, launch vehicles and human spaceflight vehicles.
The struggle to recoup the investment in comparatively minor innovations in the 787 is a pretty good indication of why 2 hour commercial flights to Sydney are likely to remain a pipe dream.
Yeah, the thing limiting supersonic/hypersonic/etc. passenger travel is not the technology, it's the economics. There just aren't enough passengers willing to pay the extremely high fares to make fast inter-continental service work.
Also the precedent of Concorde is not particularly encouraging: building a supersonic airliner required sacrifices of cabin space and comfort which didn't align well with the preferences of the passengers wealthy enough to afford the fare, so given the choice between paying 5x the subsonic fare for quick but cramped, or 2x-3x for subsonic but luxurious, those passengers chose subsonic.
The amount of discomfort that seems inevitable for the sub-orbital trajectories (i.e., you get to know what it feels like to be an astronaut during launch, shaking, g-forces and all) that seem unavoidable for fast halfway-around-the-world-in-a-couple-hours service probably would sink it economically as anything but an occasional jaunt for rich tourists who want to say they rode it.
An additional issue with supersonic is it doesn't save you time waiting in line at the airport or driving to and from. So the net comparison isn't 3.5 hours vs 7 hours of flight time (Concorde vs 747, New York to London); it's more like 6.5 hours vs 10 hours of total cab + airport + flight time. Either way, you're probably tired from the trip and won't be particularly productive, so why not pay less money for a more comfortable seat in a bigger, slower jet?
(While I never flew Concorde, I did babysit one in a museum. There isn't a single seat that isn't cramped -- even in the cockpit.)
>wikipedia: The airliner's maiden flight took place on December 15, 2009, and completed flight testing in mid-2011.
>this article: Almost a dozen years after the jet was launched, however, the prospect of the 787 ever making an overall profit for Boeing remains doubtful
it actually entered service almost exactly four years ago, i'm not sure where they get 12 years from. It seems a little early to be saying it never will reach a profit.
In the commercial airplane world 'launching' an airplane just means it can be sold to customers, not that the airplane is done. Boeing adheres to a 'gated' design process, where one of the earlier gates is the 'launch' of the aircraft and the last is entry into service. The airplane is designed far enough to close the business case and then can be 'launched'.
"Launch" of an airliner program does not refer to the first airframe going into service; it refers to the point where the manufacturer officially announces the program to airlines and begins taking orders. Typically the actual aircraft is years from being assembled and flying when that occurs (for example, Boeing launched the 777X program in 2013, and currently plans for the first actual 777X aircraft to enter service in 2020).
Aircraft sales is a really weird industry. It's gone the way of the AAA video game in the sense that its so expensive to build one now that there are only a select few companies that can do so.
And going forward companies will go for iteration rather than new designs as each new design is almost a literal bet the company proposition. Just look at the 32 billion the article asserts that Boeing has already spent on the dream liner!!
There was a great article that gets posted here every now and then called something like why can't we fly any faster and it turns out the answer is that consumer's don't want to pay for it. I think something similar is happening with air craft design in the sense that we're seeing less improvement because no one, in terms of passengers, wants to pay for the cost involved to really inovate.
As to a comment about space travel/tourism eating Boeing's lunch, I think that's a pretty uniformed comment. How many private company has more space flight knowledge, patents, or design experience than Boeing?
There aren't many and I don't think there will be that many due to the costs involved. I mean Boeing has spent 32 Billion on the dream liner, what is Space X's valuation?
If I had to guess, the future of air craft design is increased partnership, not more companies.
Perhaps not in commercial space, but given liability structures in private and small aircraft, the situation for quite some decades has been that innovative design has largely emerged in kit aircraft. I recall discussion of this when John Denver died in the crash of his experimental airplane in 1997.
You still need to pass quite a bit of regulation for private aircraft because you know if they fall they can kill more than just their pilot.
Kit aircraft can only be licensed as "experimental" under FAA rules AFAIK which quite limits the potential customer base which is quite small to begin with.
Understood. Point being that manufacturer liability means that there's been exceptionally little innovation in basic private aircraft (e.g., Cessna, Piper) for decades. Your basic designs date from the 1950s/1960s.
Private jets, somewhat less so, but still pretty conservative.
There's also very little profits in the market, most aerospace companies that sold aircraft to individuals have died, all business jet makers have also died.
Learjet wen't bankrupt, it's now owned by Bombardier, Gulfstream is owned by General Dynamics and even before that it had to shed much of it's design and manufacturing capabilities and had to license the designs for their most popular jets like the G100 and 200 series from Israel Aerospace Industries.
There can be quite a large amount of innovation even in iterating on existing designs.
Boeing is using new materials, and the new high-bypass engines for the 787 and 747-8 are quite a technological achievement.
People also forget that Boeing like many other aerospace companies rely on government funding and military contracts.
Many of Boeing's commercial aircraft either started as military designs for long range bombers and cargo aircraft or were a sister project of one.
Airbus was pretty much a hail mary effort by Europe to revive their aerospace industry, the UK, France, Italy and Germany have dumped billions of tax payer money to get Airbus off the ground.
Airbus got preferential treatment in the EU market, and even it relies quite heavily on it's military wing for a large part of their profits.
As far as individual programs go the 787 like the 777 doesn't have military variants at this point, the "newest" Boeing aircraft with military versions is the 767 (there are plenty of 737 tankers and CIC/AW aircraft out there, and even 707's) and it does't look like they will ever receive one.
But it's also very hard to estimate the worth of a program, the 787 might not break even in the books, but the technology, experience, patents and intellectual property that came out of that program may very well be highly profitable.
+1 for pointing out that Boeing has significant revenue from military contracts. The Seattle Times analysis seems not to take that into account, but rather focuses on purely commercial aspects.
New passenger planes are extraordinarily expensive to develop, and only 2-3 corporations in the entire world are capable of it.
Boeing traditionally has introduced new models with advantageous features, then continued selling them for decades, gradually rolling out slightly modernized versions that the airlines can purchase to refresh their fleets without completely retooling to support a newer model (retraining mechanics, purchasing new parts, etc.).
The article argues that Boeing will take ~5 years to break even. That actually sounds pretty good. I would give them 10-15 years.
The fact that only one Boeing person seems to have been consulted for this article suggests that it's mostly speculation by outsiders and former insiders, and not a realistic analysis based on comprehensive data. If Boeing's betting on military contracts to keep it afloat while the more profitable 787-9 and -10 models come online, so what? Sounds like a reasonable thing for this kind of manufacturer.
Those tankers however will use new technologies from other projects like the cockpit displays and avionics from the 787.
And these ones will slowly replace the USAF current tankers the KC-135 which are based on the Boeing 367 (which turned into the 707 for it's commercial release) which has been flying since the mid 50's.
People underestimate the life span of most aircraft designs, at least of the good ones if the design is superior it's practically timeless.
The US is still building new U-2's because there's nothing comparable to it still.
The U2 carries pretty much every airborne sensor we've built so far, when it comes to ISR roles the U2 can fly much higher and further than any drone, and give both line of sight and over the horizon coverage which most drones cant.
The Global Hawk can almost match the U2 in altitude 60,000 feet vs 70,000 but it can carry only a fraction of the sensors that the U2 can, and it also is currently more expensive than the U2.
If it retires I hope that the US will preserve some for private sale, I would rather fly in a U2 at this point than than on the spaceship one, there's just something about a minimalistic design from the dawn of the "atomic age" which is still relevant today that can bring you to 1/8th of the way to low earth orbit that is inspiring.
The last air-frame was built in 98, and they are still rebuilding older ones to the new U2-S specs, and now in 2016 it will again get upgraded with new tech.
>New passenger planes are extraordinarily expensive to develop, and only 2-3 corporations in the entire world are capable of it.
There would probably be more if it weren't for the vast subsidies thrown at both boeing and airbus. That pretty much locks out all potential from competition from anywhere except maybe China.
Europe tried that and it killed their aerospace industry which resulted in them having to pay tenfold to revive it.
Aerospace companies just like space programs are force multipliers their value is several orders of magnitude greater than what they make because they propel all industries within a nation forward.
While for-profit companies should not be funded on the same level as government organizations I would not advocate more for removing subsidizing from the likes of Boeing than I would for the stop to NASA funding because they are one and the same.
The US government partially funded the development of the Falcon 9 launch system and the department of energy grant was critical from keeping Tesla from going under. Government funding of key technology sectors is something we should all strive to increase because it's one of the few government spending programs that later pays for its self 10 times over.
> Boeing is using new materials, and the new high-bypass engines for the 787 and 747-8 are quite a technological achievement.
There are no "new" materials in the 787, and the engines were developed by GE and RR under their own financial risk. They fit on the A330Neo and A350 just fine, too.
The now mostly-forgotten Raytheon Premier light business jet was the most relevant pioneer of all-composite commercial aviation structures[0] and the 787 is basically a scale-up of those principles, with a wound-barrel fuselage.
It's really the engines and the high-aspect ratio wing that make the 787 more efficient than the previous generation of airliners. All the other fluff is just marketing.
[0] and even that was decades later than all-composite home-builts, and the Learfan, Beech Starship, Avtek-400 and whole buch of others... plus of course Airbus have been using composite structural components since the late 1970s.
To avoid the "bet the company" issue, maybe the future of new aircraft designs will be to create a company specifically to design and build one new aircraft. That company will have a management and marketing agreement with the aircraft company that created it, and will issue equity and debt to finance the design and build. Most of its staff will be on secondment from the "parent" company, and it collects royalties on the eventual aircraft sales/leases.
You pretty much have to give equity for that kind of risk, because the interest on bonds you could sell would not be commensurate with the projected cashflow.
But "betting the company" doesn't mean in this case that the company would disappear. It would just go bankrupt. That is a scary word, but in a case of Boeing, (some) equity would just be transferred from shareholders to creditors; operations would not be affected.
>we're seeing less improvement because no one, in terms of passengers, wants to pay for the cost involved to really inovate.
We tried this with the Concorde. The pricing was terrible and it was a turkey in the sky that even rich people didn't care enough to use frequently. Saving x amount of time for y dollars didn't work. As a side note, I saw a Concorde at the Air and Space museum recently. Its huge. About the length of a 787 and with less than half the seating capacity. From a cost perspective, there's no way something like would ever be financially sound. How many people are in such a hurry and willing to pay such a premium?
Just because speed has reached a status quo of speed vs fuel, doesn't mean you can't innovate in other ways. The interior and driving experience of a 2015 Honda Civic is far, far better than the 1979 Civic. Yet they both do the same 65 mph on the expressway and both are cheap.
Blaming consumers is short-sighted and unfair here. The industry competes largely on fuel efficiency anyway. The 787 is 20% more efficient than the 767, for example. Nicer entertainment systems and creature comforts are an added bonus.
They didn't give an overall picture as to how this happens. Airliner programmes run at a loss initially, because there were the development costs, the costs for equipment and methods to build the plane, and that it takes way longer to build the plane since that one hasn't been built before. However as more and more are built, the whole process gets more and more efficient making each one cheaper (aka the learning curve). It is generally measured by comparing the costs on unit N with those of 2N, and for airliners is around 75-85% (eg unit 200 should cost 75-85% of unit 100). Javier has two excellents posts - a more detailed explanation and how it happens in aerospace, and then deriving the 787 curve based on public information:
The manufacturers also give steep discounts on the first few planes off the assembly line, as they are less likely to meet the promised specs, probably overweight, and more prone to teething issues. Consequently the most expensive ones to make get lower revenues too. But then the manufacturer expects to make it up in volume over time.
The 787 programme has all the above applying, but also was done differently. In the late 90s McDonnell Douglas was bought by Boeing. The inside joke is that McDonnell actually bought Boeing, using Boeing's own money. Some of the senior management at Boeing for commercial aircraft was also taken over by McDonnell people. McDonnell was well known for financial engineering, somewhat as a side effect of not having much money,
They decided that the 787 would be revolutionary on many fronts at the same time. That includes extensive use of composites, all electric architecture (current planes use a lot of hydraulics and bleed air), new engines, and advanced systems. They also farmed out much of the design and manufacturing work (far more than normal for previous airliner programmes).
In theory that meant spreading of the risk, and that Boeing would slap the planes together, collect the money and get rich. The optimism meant pricing them really cheap which led to a huge number of orders, as airlines couldn't say no to such a bargain and specs.
In practise Boeing hadn't discovered new magic, risks hurt everyone, individual manufacturers had problems, different partners had different priorities, things didn't run as cohesively as expected, Boeing had to spend lots of money rectifying issues including buying some suppliers, assembly was problematic and the list goes on.
The consequence is that the overall expenditures and initial far too low pricing, combined with the actual learning curve means they are unlikely to ever make an overall profit.
The same question is being asked about the Airbus A380, and the A350 is also way over budget and behind schedule. I suspect it's a matter of time until a Chinese manufacturer ramps up and stomps all over the current airplane market with cheap yet perfectly serviceable planes.
Anecdote: A few years back, I flew on a Xian MA60, a perfectly serviceable commuter turboprop that's technically a descendant of the venerable Soviet Antonov An-24 but in practice competes agains the ATR-42. A small detail that weirded me out is how the garish livery on the seats inside looks exactly like the one used in Chinese buses... which have also essentially obliterated Western companies' bus sales in large swathes of Asia.
To be fair, most of those accidents seem to be pilot error of one sort or another, perhaps more a critique of airline competency in that part of the world, rather than the aircraft itself.
I'm not sure that Airbus and Boeing have much to fear from the C919, though I'm sure it'll sell well enough in China.
Aircraft purchasers are conservative, and they're much more concerned about operating costs, reliability, availability of third party maintenance and type-rated pilots and residual values than they are about acquisition costs, with the 737 and A320 enjoying massive brand and network effects. You only have to look at the struggles of the Sukhoi Superjet to find buyers outside Russia for what is reportedly a very decent modern aircraft. It's also a racing certainty that COMAC will suffer similar if not worse problems with delays and complications to the programme. Launching all-new aircraft is hard even when you have substantial expertise in doing it.
The A380 is failing for a different reason: there just isn't the level of demand for an aircraft of that size to make the programme viable.
Another important point is how many airlines have standardized their narrow-body fleets. Maintaining a single type/family is simpler and often cheaper than having trained crew, mechanics and parts available for multiple types of aircraft.
In the US, for example, Southwest and (mainline) Alaska are both pure-737 fleets. Virgin America, Frontier and Spirit are all A320-family, with JetBlue operating only A320 family and the E190. US Airways, prior to its merger with American, was moving toward an all-A320-family narrow-body fleet and was nearly there (only a few 757s were left, and US Airways was looking to replace them with a long-range variant of the A321 once it became available).
So a new narrow-body type -- whether it's COMAC's C919 or Bombardier's C-Series -- probably will never make it into those carriers' fleets, which in turn makes it that much harder to break into the market.
Added to that, the existing manufacturers (Airbus and Boeing) are established enough and have the resources to be able to offer significant discounts to an airline which commits to a large fleet overhaul. New entrants likely are not financially able to do that, putting them at more of a disadvantage in trying to place their first aircraft with the airlines.
A big unknown is how long it will be before they have to design a replacement for the 787. What are the error bars on that? It's not something analysts (or anyone) can easily predict.
Given the enormous design costs and how close a 787 is to optimal efficiency, perhaps they will be selling them as long as the 737?
So what? Boeing isn't going anywhere. Why are these business people trying to figure out when and how Boeing is going to make a profit. At this point Boeing is basically a government institution. It doesn't need to run like a business so applying business principles to it makes no sense.
I've heard a theory that commercial aviation as a whole has always been unprofitable. Look at how many airlines have gone bankrupt since deregulation in the US and the removal of flag-carrier subsidies in Europe. Boeing and Airbus are both indirectly subsidized by their respective governments, with each claiming the other's subsidies are somehow unfair.
The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.
— Warren Buffett, annual letter to Berkshire Hathaway shareholders, February 2008.
I figure it as more of an investment in technology to benefit future designs. So while that one model may not show a profit lessons learned can be applied going forward.
Historically, in the 20th century, Boeing's only profitable planes were the 727 and the 747. See "21st Century Jet", which is about the 777. (The book, not the PBS special.)
59 comments
[ 3.4 ms ] story [ 129 ms ] threadIf they struggle this long to warrant the 787 investment, how hard will it be (and what impact will it have on share prices, noting they currently view most of the 787 investment as sunk cost) to make the next step-change in the industry? Especially if by then there may not be a 30 year window to pay for it.
They're not going anywhere soon, so maybe it won't happen until the back end of my life. But I imagine people thinking with nostalgia about companies like Boeing and watching movies on 12 hour flights that were only intermediate legs, in the same way we talk about car brands and childhood experiences - bucket seats, no air-conditioning, driving down the highway towards the beach for summer.
Also the precedent of Concorde is not particularly encouraging: building a supersonic airliner required sacrifices of cabin space and comfort which didn't align well with the preferences of the passengers wealthy enough to afford the fare, so given the choice between paying 5x the subsonic fare for quick but cramped, or 2x-3x for subsonic but luxurious, those passengers chose subsonic.
The amount of discomfort that seems inevitable for the sub-orbital trajectories (i.e., you get to know what it feels like to be an astronaut during launch, shaking, g-forces and all) that seem unavoidable for fast halfway-around-the-world-in-a-couple-hours service probably would sink it economically as anything but an occasional jaunt for rich tourists who want to say they rode it.
(While I never flew Concorde, I did babysit one in a museum. There isn't a single seat that isn't cramped -- even in the cockpit.)
>this article: Almost a dozen years after the jet was launched, however, the prospect of the 787 ever making an overall profit for Boeing remains doubtful
it actually entered service almost exactly four years ago, i'm not sure where they get 12 years from. It seems a little early to be saying it never will reach a profit.
And going forward companies will go for iteration rather than new designs as each new design is almost a literal bet the company proposition. Just look at the 32 billion the article asserts that Boeing has already spent on the dream liner!!
There was a great article that gets posted here every now and then called something like why can't we fly any faster and it turns out the answer is that consumer's don't want to pay for it. I think something similar is happening with air craft design in the sense that we're seeing less improvement because no one, in terms of passengers, wants to pay for the cost involved to really inovate.
As to a comment about space travel/tourism eating Boeing's lunch, I think that's a pretty uniformed comment. How many private company has more space flight knowledge, patents, or design experience than Boeing?
There aren't many and I don't think there will be that many due to the costs involved. I mean Boeing has spent 32 Billion on the dream liner, what is Space X's valuation?
If I had to guess, the future of air craft design is increased partnership, not more companies.
Kit aircraft can only be licensed as "experimental" under FAA rules AFAIK which quite limits the potential customer base which is quite small to begin with.
Private jets, somewhat less so, but still pretty conservative.
Learjet wen't bankrupt, it's now owned by Bombardier, Gulfstream is owned by General Dynamics and even before that it had to shed much of it's design and manufacturing capabilities and had to license the designs for their most popular jets like the G100 and 200 series from Israel Aerospace Industries.
Most of what I know about Lear is Chrystal Shanda.
Agreed, do people not realize how involved Boeing is with the commercial space landscape?
Boeing is using new materials, and the new high-bypass engines for the 787 and 747-8 are quite a technological achievement.
People also forget that Boeing like many other aerospace companies rely on government funding and military contracts.
Many of Boeing's commercial aircraft either started as military designs for long range bombers and cargo aircraft or were a sister project of one.
Airbus was pretty much a hail mary effort by Europe to revive their aerospace industry, the UK, France, Italy and Germany have dumped billions of tax payer money to get Airbus off the ground. Airbus got preferential treatment in the EU market, and even it relies quite heavily on it's military wing for a large part of their profits.
As far as individual programs go the 787 like the 777 doesn't have military variants at this point, the "newest" Boeing aircraft with military versions is the 767 (there are plenty of 737 tankers and CIC/AW aircraft out there, and even 707's) and it does't look like they will ever receive one.
But it's also very hard to estimate the worth of a program, the 787 might not break even in the books, but the technology, experience, patents and intellectual property that came out of that program may very well be highly profitable.
New passenger planes are extraordinarily expensive to develop, and only 2-3 corporations in the entire world are capable of it.
Boeing traditionally has introduced new models with advantageous features, then continued selling them for decades, gradually rolling out slightly modernized versions that the airlines can purchase to refresh their fleets without completely retooling to support a newer model (retraining mechanics, purchasing new parts, etc.).
The article argues that Boeing will take ~5 years to break even. That actually sounds pretty good. I would give them 10-15 years.
The fact that only one Boeing person seems to have been consulted for this article suggests that it's mostly speculation by outsiders and former insiders, and not a realistic analysis based on comprehensive data. If Boeing's betting on military contracts to keep it afloat while the more profitable 787-9 and -10 models come online, so what? Sounds like a reasonable thing for this kind of manufacturer.
https://en.wikipedia.org/wiki/Boeing_KC-46_Pegasus
Those tankers however will use new technologies from other projects like the cockpit displays and avionics from the 787.
And these ones will slowly replace the USAF current tankers the KC-135 which are based on the Boeing 367 (which turned into the 707 for it's commercial release) which has been flying since the mid 50's.
People underestimate the life span of most aircraft designs, at least of the good ones if the design is superior it's practically timeless.
The US is still building new U-2's because there's nothing comparable to it still.
Last built in 1989 I'm afraid, though they're still pushing off retirement because drones haven't quite taken over the game yet.
If it retires I hope that the US will preserve some for private sale, I would rather fly in a U2 at this point than than on the spaceship one, there's just something about a minimalistic design from the dawn of the "atomic age" which is still relevant today that can bring you to 1/8th of the way to low earth orbit that is inspiring.
There would probably be more if it weren't for the vast subsidies thrown at both boeing and airbus. That pretty much locks out all potential from competition from anywhere except maybe China.
Aerospace companies just like space programs are force multipliers their value is several orders of magnitude greater than what they make because they propel all industries within a nation forward.
While for-profit companies should not be funded on the same level as government organizations I would not advocate more for removing subsidizing from the likes of Boeing than I would for the stop to NASA funding because they are one and the same.
The US government partially funded the development of the Falcon 9 launch system and the department of energy grant was critical from keeping Tesla from going under. Government funding of key technology sectors is something we should all strive to increase because it's one of the few government spending programs that later pays for its self 10 times over.
There are no "new" materials in the 787, and the engines were developed by GE and RR under their own financial risk. They fit on the A330Neo and A350 just fine, too.
The now mostly-forgotten Raytheon Premier light business jet was the most relevant pioneer of all-composite commercial aviation structures[0] and the 787 is basically a scale-up of those principles, with a wound-barrel fuselage.
It's really the engines and the high-aspect ratio wing that make the 787 more efficient than the previous generation of airliners. All the other fluff is just marketing.
[0] and even that was decades later than all-composite home-builts, and the Learfan, Beech Starship, Avtek-400 and whole buch of others... plus of course Airbus have been using composite structural components since the late 1970s.
But "betting the company" doesn't mean in this case that the company would disappear. It would just go bankrupt. That is a scary word, but in a case of Boeing, (some) equity would just be transferred from shareholders to creditors; operations would not be affected.
We tried this with the Concorde. The pricing was terrible and it was a turkey in the sky that even rich people didn't care enough to use frequently. Saving x amount of time for y dollars didn't work. As a side note, I saw a Concorde at the Air and Space museum recently. Its huge. About the length of a 787 and with less than half the seating capacity. From a cost perspective, there's no way something like would ever be financially sound. How many people are in such a hurry and willing to pay such a premium?
Just because speed has reached a status quo of speed vs fuel, doesn't mean you can't innovate in other ways. The interior and driving experience of a 2015 Honda Civic is far, far better than the 1979 Civic. Yet they both do the same 65 mph on the expressway and both are cheap.
Blaming consumers is short-sighted and unfair here. The industry competes largely on fuel efficiency anyway. The 787 is 20% more efficient than the 767, for example. Nicer entertainment systems and creature comforts are an added bonus.
http://theblogbyjavier.com/2014/03/03/learning-curves/
http://theblogbyjavier.com/tag/learning-curve/
The manufacturers also give steep discounts on the first few planes off the assembly line, as they are less likely to meet the promised specs, probably overweight, and more prone to teething issues. Consequently the most expensive ones to make get lower revenues too. But then the manufacturer expects to make it up in volume over time.
The 787 programme has all the above applying, but also was done differently. In the late 90s McDonnell Douglas was bought by Boeing. The inside joke is that McDonnell actually bought Boeing, using Boeing's own money. Some of the senior management at Boeing for commercial aircraft was also taken over by McDonnell people. McDonnell was well known for financial engineering, somewhat as a side effect of not having much money,
They decided that the 787 would be revolutionary on many fronts at the same time. That includes extensive use of composites, all electric architecture (current planes use a lot of hydraulics and bleed air), new engines, and advanced systems. They also farmed out much of the design and manufacturing work (far more than normal for previous airliner programmes).
In theory that meant spreading of the risk, and that Boeing would slap the planes together, collect the money and get rich. The optimism meant pricing them really cheap which led to a huge number of orders, as airlines couldn't say no to such a bargain and specs.
In practise Boeing hadn't discovered new magic, risks hurt everyone, individual manufacturers had problems, different partners had different priorities, things didn't run as cohesively as expected, Boeing had to spend lots of money rectifying issues including buying some suppliers, assembly was problematic and the list goes on.
The consequence is that the overall expenditures and initial far too low pricing, combined with the actual learning curve means they are unlikely to ever make an overall profit.
I assume the pricing curve was based on this quick assembly and why we are 300 units in and still losing money on each unit.
https://www.youtube.com/watch?v=rvkEpstd9os
Anecdote: A few years back, I flew on a Xian MA60, a perfectly serviceable commuter turboprop that's technically a descendant of the venerable Soviet Antonov An-24 but in practice competes agains the ATR-42. A small detail that weirded me out is how the garish livery on the seats inside looks exactly like the one used in Chinese buses... which have also essentially obliterated Western companies' bus sales in large swathes of Asia.
http://www.patokallio.name/photo/travel/Laos/LaoAirlines/Lao...
http://www.patokallio.name/photo/travel/Laos/LaoAirlines/Lao...
The MA60's current customer list is a wacky but wide collection of obscure outfits (Air Burundi, Lao Airlines, Boliviana...):
https://en.wikipedia.org/wiki/Xian_MA60#Customer_summary
So what's the market going to look like when planes like the 737 clone Comac C919 start ramping up?
https://en.wikipedia.org/wiki/Comac_C919
https://en.wikipedia.org/wiki/Xian_MA60#Accidents_and_incide...
Not sure of it's current state, but it was denied UK & US certification on the basis of technical flaws last I heard.
http://www.avherald.com/h?search_term=ma60&opt=0&dosearch=1&...
Aircraft purchasers are conservative, and they're much more concerned about operating costs, reliability, availability of third party maintenance and type-rated pilots and residual values than they are about acquisition costs, with the 737 and A320 enjoying massive brand and network effects. You only have to look at the struggles of the Sukhoi Superjet to find buyers outside Russia for what is reportedly a very decent modern aircraft. It's also a racing certainty that COMAC will suffer similar if not worse problems with delays and complications to the programme. Launching all-new aircraft is hard even when you have substantial expertise in doing it.
The A380 is failing for a different reason: there just isn't the level of demand for an aircraft of that size to make the programme viable.
In the US, for example, Southwest and (mainline) Alaska are both pure-737 fleets. Virgin America, Frontier and Spirit are all A320-family, with JetBlue operating only A320 family and the E190. US Airways, prior to its merger with American, was moving toward an all-A320-family narrow-body fleet and was nearly there (only a few 757s were left, and US Airways was looking to replace them with a long-range variant of the A321 once it became available).
So a new narrow-body type -- whether it's COMAC's C919 or Bombardier's C-Series -- probably will never make it into those carriers' fleets, which in turn makes it that much harder to break into the market.
Added to that, the existing manufacturers (Airbus and Boeing) are established enough and have the resources to be able to offer significant discounts to an airline which commits to a large fleet overhaul. New entrants likely are not financially able to do that, putting them at more of a disadvantage in trying to place their first aircraft with the airlines.
The CS100 is more of a 717/E-190 competitor, but the CS300 is absolutely aimed at the types of roles 737s and A319s/A320s are currently deployed in.
Given the enormous design costs and how close a 787 is to optimal efficiency, perhaps they will be selling them as long as the 737?
— Warren Buffett, annual letter to Berkshire Hathaway shareholders, February 2008.