Program cost and unit cost There are two cost to look at when new program are launched. Program cost and unit cost. Both cost have to be recovered form each unit sold. Amount of Money recovered varies as the program matures.
Program cost is the cost of R&D (engineering and design), certification, cost of marketing etc. and unit cost is the actual cost of making the actual plane (parts, labour, tooling, facilities, ramp up, etc).
First batch of airplanes sold (unit cost) cost more to assembly then they are sold for. Unit cost comes down as more units are build to offset the fixed cost such as tooling, facilities cost, and ramp up cost. Unit cost also comes down due to assemblers gaining experience and efficiency introduced thru continuous improvements and lessons learned.
So the total cost of a unit has portion of the program cost plus unit cost plus profit. Following is an example and it doesn’t reflect the actual numbers as I don’t have all the information. So let’s say it cost $6 billion to bring c series to market and the market for the c series is 2000 unit over 20 years. That means for each airplane sold assuming 2000 will be sold the program cost added to each c series sold will be $3 million. Now let’s assume it cost them $22 million to make the plane (unit cost) therefore total cost of c series is $25 million. If the plane is sold below $25 million then the difference needs to be made up with higher total price on later model plus profit added .
Now when Airbus says they are selling at a loss are they taking about unit cost, program cost or total cost. I am assuming total cost. But again is that loss on current units being build or the units that they have just sold and haven’t started building yet but will be at loss. I am assuming it’s current model build. Either way unit cost will come down as this is natural progression of production culture. Program cost can also come down if more units are sold then predicted.
So yes it’s costing money to get each a220 out but the cost is slowly coming down from unit to unit. A320neo/737max has lower program cost due to the fact they have huge backlog and the the program refresh didn’t cost as much compared to new design build. Also the 40 plus getting build a month brings the unit cost down too.