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  • UBS on 787 break-even
    Posted by Guy Norris 12:17 AM on Oct 21, 2011

    As Boeing prepares to repatriate its first 787, ZA001, from the Seoul International Aerospace and Defense Exhibition (ADEX) on Oct 21, program planners will no doubt be scrutinizing the estimates in a recent analysts’ report that predicts the program will not break even until around the 1,000th delivery.

    UBS Investment Research updated its outlook for the program and says Boeing “will have to learn much faster on 787 than it did on 777 to hits target for break-even 787 cash-flow by 2014.” Although Boeing CEO Jim McNerney expects the 787 to breakeven on a recurring basis before 2020, UBS indicates the point at which the program will move into clear profit may not occur until around 2021, or after 1,000 deliveries. This assumes a 16% ‘learning curve’ similar to that achieved with the 777, which will see average 787 unit cost reduce from around $250 million to $150 million to $160 million by 2014.

    blog post photo
    Source: UBS

    Bit of an eye-chart I'm afraid, but for those of you without a handy magnifying glass this UBS chart shows cumulative production across the X-axis and average unit cost on the Y-axis. The upper curve, which intersects the $111 million cost in 2021 is based on a 15% learning curve, while the middle line, which achieves the same cost in 2014 is a 20% curve. The most dramatic curve, which dips below the target by 2014, represents a very stiff 25% learning curve.

    UBS says Boeing is believed to have targeted a per unit cost of around $111 million by 2014. “Our analysis indicates that in order for Boeing to achieve this, it will need to bring its 787 manufacturing cost down 50-60% faster than it did on 777,” says the UBS report. Although sobering, even UBS is more positive for the profit outlook than leasing magnet Steven Udvar Hazy who recently suggested 1,500 was a more likely break-even.

    Never mind. Perhaps the headline in the Korea Times report on the arrival of the 787 at ADEX will cheer Boeing up.

    Boeing 747 Dreamliner debuts at Seoul air show

    Tags: tw99, Boeing, UBS, 787, ADEX, ZA001

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