Aircraft Development and Lifecycle.
The development of a new airframe was characterized by huge initiat cash outflows that might require between one and two decades to recoup. For example, the development costs for the Boeing 777 were rumored to be $7 billion. Any pricing would not only have to recoup the upfront development costs but also the production costs. In addition. pricing would be subject to rigorous. competitive pressures. In short. because of the financial strains a new products and having the deep financial pockets with which to survive the initially gushing cash flow.
While aircraft sales were subject to subject to short-term, cyclical deviations. there was some degree of predictability in sales. Sales would typically peak shortly after the introduction of the new aircraft. and than fall. Thereafter. sales would rise and fall as derivatives of the aircraft were offered. Exhibit 6 shows the cycles for the first 20 years of the 737 and 767 sales.