Thanks for your detailed response. I might have misunderstood your statement when you said 200 to 300 units were good enough and you probably misunderstood my question by your reply. In other words, my main question was a financial question whereas you are speaking in qualitative terms. Commercial companies and commercial products are in the business to be profitable. The size of the market and the probable market share it can secure are key business consideration. This then in turn is related to the product development cost that must be recouped and the ongoing cost structure necessary to produce a quality product. In the aviation industry, a key performance indicator is its breakeven point and which I thought that was what you were referring to.
As an example as of 2015, Boeing's B787 is still net cash negative for every plane it sells. The latest 2016 quarterly report seems to suggest that it has reached breakeven on a cash flow basis but industry analysts are questioning its accuracy given that its deferment cost is still growing. Boeing initially estimated it will need to sell 1100 units to breakeven but this has grown to 1300 units. As of 2016, there are $32 Billion in development and deferment cost that are yet to be offset. Take another example, it is estimated that the Airbus A380 will need to sell 420 units to breakeven. Presently, Airbus has sold only 317 units.
I am not sure what are you trying to say? AVIC won't make a profit or China can never recoup their investment in ARJ21?
It is ironic that you use Airbus as an example because In the early year Airbus is heavily subsidized by the European government that it become bone of contention and subject to lawsuit by Boeing as unfair trade practice I think the litigation is still pending.
Airbus has one of the lowest operating profit margin and both A 350 and A380 will not make profit for years to come . So the whole airbus operation is carried by A 320 model
AS I say before the process of learning to build passenger aircraft alone is worth the investment. As now they have firm order of 300 But with exploding air travel in China now who knows what the production rate in the future?. Plan is on hand to optimize the ARJ21 even with stretched model and better fuel efficiency.
Not to count the intangible benefit of building ecosystem of component supplier such as engine, avionic, etc which bode well for future expansion civilian aerospace industry in china. Enticing the private sector to enter aerospace industry.
Without flourishing civilian aerospace industry there will be no robust military aerospace That is the predicament that china is in right now. China can built building and machinery fast but training skill technician take a long time
It remind me of the early year of HSR in China with every analyst in the west predict China will never recoup the cost of the infrastructure Guess what it is now profitable and keep expanding at faster and faster rate. Not counting the intangible benefit better inter connectivity, higher value of real estate along the line, relieving the old line for bulk carrier. etc .
So having 300 firm order is icing on the cake and order can keep coming in the future for improved model depending how reliable is ARJ 21
