I think Boeing has lost it

[Spiffor]

You argue Airbus needs 11 billion to develop the superjumbo. So, if we boil down to it, the flabbergasting, shocking subsidies that only allow Airbus to exist end up being an ease of the burden of 1/4 of the development costs of one model.
Airbus invented three models this year. Admittedly, they are less revolutionary than the SuperJumbo, and probably required less than 11 billion.

But if I understand correctly, you're arguing that a company enjoying safe credit for 1/4 of a R&D project, i.e. a company that only relies on itself for all production processes and all other R&D, and which will have to end up paying the loan, is doomed to die if this 4bil loan doesn't exist?

[Adam Smith]

A Little Economics Please

We've been through this before...

If Airbus gets tax breaks or government loans (which would be at a lower rate than Airbus could get in the market, since governments have less risk), then Airbus is not paying the market price for its inputs, and is therefore being subsidized.

If the US military pays Boeing to do R&D for a technology which also turns out to have commercial application, then the military and commercial applications are said to be joint products of the R&D. Once the technology is developed either application can use it. The commercial application is NOT being subsidized because there is no economically or logically defensible way to assign the costs of R&D to either product. I.e., there is no way of determining how much of the development cost each buyer "should" pay.

[yavoon]

Originally posted by Spiffor
You argue Airbus needs 11 billion to develop the superjumbo. So, if we boil down to it, the flabbergasting, shocking subsidies that only allow Airbus to exist end up being an ease of the burden of 1/4 of the development costs of one model.
Airbus invented three models this year. Admittedly, they are less revolutionary than the SuperJumbo, and probably required less than 11 billion.

But if I understand correctly, you're arguing that a company enjoying safe credit for 1/4 of a R&D project, i.e. a company that only relies on itself for all production processes and all other R&D, and which will have to end up paying the loan, is doomed to die if this 4bil loan doesn't exist?

u act like the 4 billion is the only help airbus gets. or has ever gotten. its just not the case. 4 billion is an EXAMPLE. not an entirity.

[Spiffor]

Originally posted by yavoon
u act like the 4 billion is the only help airbus gets.

Does it get other help at the moment we are speaking?

or has ever gotten.

I don't. Airbus was a protected industry for a very long time, and it's still protected to a slight extent. I'm not trying to deny it. Heck, I even think it is a good thing, and I'd love to see Airbus as the first EU-nationalized company. I'd love to see it "entirely subsidized" as you put it, and to see all its profits going in the EU's treasury.

However, I am merely opposing the opinion that today's Airbus would have no chance to compete, and even no chance to survive, if such subsidies were stopped.

Indeed, Airbus would perform less well should the subsidies stop. But to think it would simply die completely ignores the serious industrial, scientific and commercial base the company relies on. Airbus is a viable company, subsidies or not.

[yavoon]

[QUOTE] Originally posted by Spiffor

Originally posted by yavoon
u act like the 4 billion is the only help airbus gets.[/q] Does it get other help at the moment we are speaking?

or has ever gotten.

I don't. Airbus was a protected industry for a very long time, and it's still protected to a slight extent. I'm not trying to deny it. Heck, I even think it is a good thing, and I'd love to see Airbus as the first EU-nationalized company. I'd love to see it "entirely subsidized" as you put it, and to see all its profits going in the EU's treasury.

However, I am merely opposing the opinion that today's Airbus would have no chance to compete, and even no chance to survive, if such subsidies were stopped.

Indeed, Airbus would perform less well should the subsidies stop. But to think it would simply die completely ignores the serious industrial, scientific and commercial base the company relies on. Airbus is a viable company, subsidies or not.

I think now that it has its orders for the A380 its financial status is in good. so in that u r correct. before then I would disagree.

[Spiffor]

Finally I read an answer from yavoon that doesn't make me want to smah my head on a wall

[DanS]

thats moronic. yes lets let the inefficient bloated france have complete control so instead of subsidies they can merely overprice their product to gain back the cost of their ineptness.

that'd cost the US economy more than floating boeing ever would.

Boeing would sell its assets to somebody who could make a go of it, despite Airbus subsidies. If Boeing goes out of business entirely and Airbus tries to recoup the subsidies by charging unwarranted higher prices, then I expect that it then would be worthwhile for an American company to resurect the Boeing brand.

[yavoon]

Originally posted by DanS


Boeing would sell its assets to somebody who could make a go of it, despite Airbus subsidies. If Boeing goes out of business entirely and Airbus tries to recoup the subsidies by charging unwarranted higher prices, then I expect that it then would be worthwhile for an American company to resurect the Boeing brand.

ressurect? u can't keep a company on ice. and buying the boeing "name" hardly does you any good.

and just to play out the hypothetical. what are u going to say to potential investors. "yah we could make lotsa money if airbus does absolutely nothing to counter us."

[DanS]

ressurect? u can't keep a company on ice. and buying the boeing "name" hardly does you any good.

and just to play out the hypothetical. what are u going to say to potential investors. "yah we could make lotsa money if airbus does absolutely nothing to counter us."

You can keep Boeing's assets on ice. Jumbo jet designs locked up in a vault at Lockheed-Martin, for instance.

Regarding investor response to a pitch for a new aircraft design, remember that Airbus likely would not price to its competition unless it were a significant rival. There should be ample profitable room for a new design. After all, that's what Airbus found to be the case with Boeing.

[DanS]

And regarding the point whether it makes economic sense or not to develop a superjumbo, as far as I'm concerned it's irrelevant. Boeing was told it wasn't wise to develop the 707, because there wasn't market for it and yet they did. They were told there wasn't a market for the jumbo and they developed it anyway. It's quite ironic Boeing is now telling Airbus there's no market to build the superjumbo while they themselves often completely disregarded such advice in the past.

I don't want to know about their cash flow or market projections, I want to know why they've gotten so chicken****.

Well, to be fair, they're following their own prescriptions. They canned their own superjumbo.

As for making business decisions in the absence of a market, don't you think it's rather like playing Russian Roulette? Just because you did it last time and were successful doesn't mean you should do it this time.

Anyway, they are taking risks, just in a different area. The new 7E7 doesn't have any orders yet. But the risk is assumed to be smaller, considering that it targets discount carriers, a proven and growing market.

[TCO]

Originally posted by BeBro
One could say the ridiculous prices some US companies (incl. Boeing) get for defense tech stuff are like subsidaries as well....AFAIk there was trouble ´bout it more than once in the congress.....

But Boeing still makes decisions on things like the Jumbo on the basis of that SBU earning a profit. The "subsidies" in defense (btw, anybody remember the layoffs and bankruptcies of defense companies 10 years ago) are not tied to civilian business. You have some companies which operate defense primarily. Others which operate as conglomerates. I work for one. The SBUs are very seperate.

Oh...and government contracts are not all cake either. They can be a pain in the ass. And sometimes the govt spends so much money on making sure they don't get ripped off that they do. And the minority crap...that can be a real pain in the ass. Add in the need to open your books and don't be surprised that government contracts sometimes cost more than expected. Oh...and the government does stuff like quadrupling orders during a war, requrieing you to dump other business, not allowing you to raise price (although at capacity), and when a war ends, they will cancel orders. That is all fine. Just realize that vendors who take that risk expect compensation. Some people just won't play that way...

[TCO]

Originally posted by Colon
Dan or TCO, could you tell which background the current CEO of Boeing has? Engineering? Something else?

Did you check the website? Or the SEC filings? There are usually bios.

I actually have someone I know with knowledge of corp strategy and situation at Boeing. Have not talked with him about them recently and am hesitant to do so. and even more hesitant to post stuff on this board.

[TCO]

Originally posted by Colon
And regarding the point whether it makes economic sense or not to develop a superjumbo, as far as I'm concerned it's irrelevant. Boeing was told it wasn't wise to develop the 707, because there wasn't market for it and yet they did. They were told there wasn't a market for the jumbo and they developed it anyway. It's quite ironic Boeing is now telling Airbus there's no market to build the superjumbo while they themselves often completely disregarded such advice in the past.

I don't want to know about their cash flow or market projections, I want to know why they've gotten so chicken****.

Sometimes it makes sense to make a product that does not have a market. And sometimes not. Time will tell if they were smart or chicken****. Regarding the superjumbo, the competitors have been dancing around on it for at least 10 years.

[TCO]

I don't know that the recent scandals and such had anything to do with the decision not to do the superjumbo. I think it has more to do with conservatism (perhaps smart perhaps chicken****) from the poor business in aircraft over the past few years.

[TCO]

Re: A Little Economics Please

Originally posted by Adam Smith
We've been through this before...

If Airbus gets tax breaks or government loans (which would be at a lower rate than Airbus could get in the market, since governments have less risk), then Airbus is not paying the market price for its inputs, and is therefore being subsidized.

If the US military pays Boeing to do R&D for a technology which also turns out to have commercial application, then the military and commercial applications are said to be joint products of the R&D. Once the technology is developed either application can use it. The commercial application is NOT being subsidized because there is no economically or logically defensible way to assign the costs of R&D to either product. I.e., there is no way of determining how much of the development cost each buyer "should" pay.

Also if the government contract is competetive bid, then the value of the R/D will allow a lower bid. (this is dependant on a competetive market).