Developing a commercial jetliner is incredibly expensive. The budgets for new aircraft development programs are in the billions of dollars, and the inevitable cost overruns can drive development costs to $20-30 billion or more.
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The cost of developing a new commercial aircraft can be a significant fraction of, if not greater than, the entire value of the company. The $186 million Boeing spent developing its first jet airliner in 1952, the 707, was $36 million more than the company was worth. When Boeing began development of the 747 in 1965, the company was valued at $375 million, less than a third of what it spent on the 747’s development. Most other programs aren’t quite so lopsided, but still represent enormous risk. The Boeing 777 cost an estimated $12-14 billion to develop at a time when Boeing was worth in the neighborhood of $30 billion. And when Airbus launched the A380 program, it budgeted $10.7 billion, half the value of the company (and much less than was ultimately spent). Aircraft manufacturers are frequently betting the company when they decide to develop a new jet model.
From the article:
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