Premium #306 – The implications of Boeing’s 787 Deferred Production Cost

How is the 787 doing in the market?  The 787 program is key to Boeing’s financial success, and needs additional sales to enable recovery of the $29 billion in development costs over the life of the program.

Boeing has a huge amount of its capital tied up in this program.   A leading analyst estimates that Boeing must recover $36 million per 787 yet to be delivered to offset the $29bn development costs, never mind production costs and profit. That number is no small hurdle.  Consider the 2016 current market value, per Collateral Verifications,  for a 787-8 at $117 million and the 787-9 at $143 million. Take the $36 million off those values (787-8 at under $81 million and 787-9 under $107 million) and Boeing must build a 787 for less than the balance to earn a profit.