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
Team Assignments – Team 2
• Break-even analysis
– How many planes/year will Airbus have to sell to breakeven?
– 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?
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)
How many planes/year will Airbus have to sell to breakeven?
• 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
Data Combinations
Four data combination sets to analyze
High R&D and Low Operating Margin
High R&D and High Operating Margin
Low R&D and Low Operating Margin
Low R&D and High Operating Margin
Number of planes needed for break-even:
465 planes
349 planes
406 planes
305 planes
Years to break-even after 2007 (48 planes per year):
8.9 years (2016)
6.5 years (2014)
7.7 years (2015)
5.6 years (2013)
Low R&D and High Operating Margin
High R&D and Low Operating Margin
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.
How sensitive is the B/E point to R&D
and Operating Margin changes?
High R&D and Low Operating Margin:
465 planes
High R&D and High Operating Margin:
349 planes
Low R&D and Low Operating Margin (406
planes)
Low R&D and High Operating Margin (305
planes)
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!
Sensitivity Analysis
(one R&D, 2 margins)
20000
15000
10000
5000
20%
15%
0
-5000
-10000
-15000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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.