Airbus 3XX: developing the world’s Largest Commercial Jet

# Airbus 3XX: developing the world’s Largest Commercial Jet

## Airbus 3XX: developing the world’s Largest Commercial Jet

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##### Presentation Transcript

1. Airbus 3XX: developing the world’s Largest Commercial Jet Team 2 Break-even analysis Greg Roy, Eric Johnson, Shweta Hire, Karen Delton, David Mahzonni, Yusuf Akkoca, Tom Bloom

2. Team Assignments – Team 2 • Break-even analysis • How many planes/year will Airbus have to sell to break-even? • Do they have the capacity to produce that many? • How sensitive is the B/E point to R&D and Operating Margin changes? • How does the B/E compare to B747 volumes?

3. Assumptions • Prices per plane is \$225 million • Operating margin is 15% or 20% • R&D cost is \$13.7 billion or \$15.7 billion • Production capacity is 4 planes per month beginning in 2008 (48 per year) • One plane were produced each month in 2006 (12 total) • Two planes were produced each month in 2007 (24 total)

4. How many planes/year will Airbus have to sell to break-even? • There are four data sets to consider • High R&D (\$15.7 billion) • Low R&D (\$13.7 billion) • Low operating margin (15%), meaning higher operating costs (\$191.25 million) and lower profit (\$33.75 million) • High operating margin (20%), meaning lower operating costs (\$180 million) and higher profit (\$45 million) • The break-even equation is (q=number of planes): • R&D cost + operating costs * q = profit * q

5. Data Combinations Four data combination sets to analyze Number of planes needed for break-even: Years to break-even after 2007 (48 planes per year):

6. Low R&D and High Operating Margin

7. High R&D and Low Operating Margin

8. Do they have the capacity to produce that many? • Years to break even assumes they are able to produce four planes per month, beginning in 2008. Thirty-six planes total are produced in 2006 and 2007.

9. How sensitive is the B/E point to R&D and Operating Margin changes? The break-even point changes dramatically based on the R&D and Operating Margin changes. The change may be as many as 160 planes, over 50% of the lowest number!

10. Sensitivity Analysis(one R&D, 2 margins)

11. How does the B/E compare to B747 volumes? • Boeing produces only 46 planes per year • Airbus will need to produce 48 planes per year to break even by 2016 (depending on the numbers) • For other plane models, Boeing produces 25 to 107 planes per year • For other plane models, Airbus produces 15 to 66 planes per year • If the Airbus reorganization succeeds, they may produce this number of planes; but it is not guaranteed.