Friday, October 7, 2016

Boeing’s Unique Accounting Method Helps Improve Profit Picture

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  • $36 million profit on each of the next 800 Dreamliners
  • Each Dreamliner cost $225 million and $306 million depending on variant 
  • They will build 800 Dreamliners, including 233 planes that haven’t been sold

Boening's accounting methods have improved what seemed like a not so good outlook for the aircraft manufacture.  The long awaited 787 Dreamliner is a tech innovation in how passenger aircrafts will be built. 

  • Lithium battery issue early on during the launch of the aircraft 
  • Entire fleets grounded due to the battery issue
  • Fuselage is made out of carbon fiber allowing for extreme wait reduction, improved fuel cost, longer ranges, better performance
  • Many orders from airlines world wide
Thie research, development and production of the aircraft has cost Boeing over $30 billion; usually anything in the aviation industry is hard to turn profit. Fro example, they say to make a million dollars in aviation you should invest a billion. Losses usually run high so for Boeing to be turning a profit is impressive. 


Although not a complete solution to the looming debt, Boeing will need to make 36.1 million on each aircraft in order to clear its debt and break even; it currently makes 36 million per aircraft. 

  • This still leaves Boeing with a 1.85 Billion debt from the 787 project
  • Competitors such as Bombardier still report losses for aircraft manufactures and sales. 

As orders mature and the cost of the aircraft depreciates Boeing will need to stay a step ahead by ensuring it continues to look at other areas to save money such as production, efficiency, labor cost, tooling, and delivery schedule. 

http://www.wsj.com/articles/boeings-unique-accounting-method-helps-improve-profit-picture-1475522362

Dean Chagaris | Dr. Zhang | Marketing 3343 | October 7, 2016
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