Saturday, June 28, 2014

Things That Are More Than A Whimsical $100.

The Wall Street Journal has an Excellent feature on the Cost of Boeing Airplane product. The Blog would like to use this space for cross linking the articles for your reference and reading pleasure. Next time look out an 777-300 ER window, its like riding on an expensive space shot. Enjoy every second of your ride as it could be arching over the Ocean or the North Pole! What goes into your Walter Mitty like slumber is a great quantity of Airline Dollars. Below will be a series of links transferring you, what goes on behind the scenes when an airline plinks down several hundred million dollars for purchasing one unit of 777 aircraft for your very own transition from here to there.

All cost are list prices for any Airline bold enough to buy just one. A $300 million dollar investment would build a 60 story high rise in most cities that would keep standing for 100 years, as a city Icon. An Airplane only has about 25 years to earn its keep in the ever changing market, and airlines must negotiate through those years in order to survive.


Below Wall Street Journal links: for your reading experience:

Why a Boeing 777-300ER Costs $320 Million







All Airlines don't necessarily pay those list prices, as discounts are taken from quantity, preferred status, or configuration considerations.  Some may pay considerably less as other contractual issues are added to a signed bottom line. However the capitalisation of just a single airplane order is immense. Its way more than a Holly-Wood mansion. When ANA ordered its 787, it represented the whole company had put its future behind that one untested Airplane. When Ryan Air ordered the 737NG  for a 176 units,  it "bet-the-farm", on its strategic plan. Now we are talking billions. One Boeing Airline Customer, Emirates comes to mind, is willing to pay 100 Billion on 777X and 777-300 ER's aircraft. This is more than what General Motors hopes to profit in 25 years by selling  millions and millions of cars. The numbers are astounding when considering what it represents in Blue collar terms. However, executives lose all fear of the number billion, when considering purchasing more aircraft. The emotional attachment for money is lost on purchases. The Board of Director's plot out a scheme with a monetary impact. The hand goes up in room asking, "Do we have access to capital resources to do this deal?" 

"Ah hummm, yes we do, let me show you", is coming from the end of the boardroom table. These 100 billions worth of aircraft will be delivered during the next generation in years. Let's commit to Boeing in 12 months where we can draw out of cash. Maybe, 10 or so billion to sign for the order. During the next ten years, after its first successful delivery, UAE, could manage multiple lump sums in advances for each block of 777X's,  in order for fleet absorption of 10 or more Aircraft a year until the order is filled. That is about 6 billion minimum and 10 Billion maximum, yearly, pacing from the balance sheet, from its liquid assets. That is not what you call Blue collar speak, but is just a number with very little emotion behind it. It does have the Emotional Intelligence (EQ) of self awareness, leadership, and inclusion of other board members. Ticket sales will drive the Boeing product as the 787 continues flying, next the Max, and then the 777X. Its where the billions come from except from a few oil wells pumping the cash flow out for an airline with a plan.