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We all hear about how aircraft development costs multiple billions if not tens of billions of dollars, but what does this money go into?
The material used in making a a single prototype aircraft isn't close to these numbers, neither does the design process cost that much. Custom manufacturing parts for trial also wouldn’t bring up the cost that much.
What do these billions go into? Approval costs? Developing manufacturing plants?
That money is spent primarily on engineering, research and development, manufacturing, and flight test. Boeing employs nearly 60,000 people up at their plant in Everett alone, and these people are making at or in excess of $100,000 annually. Then there’s the cost of operating the buildings, the manufacturing and capital required to build the aircraft, cost associated with transportation of raw materials to the manufacturing site. If new facilities have to be built to manufacture of the aircraft as well as the parts and tooling needed to build it can cost at least 2 to 3 billion. And that’s just the original equipment manufacturer. There are thousands and thousands of subcontractors on each of those programs providing everything from major components such as engines all the way down to the bolts and rivets that hold the whole thing together. The costs associated with carrying out a flight test program, as well as numerous small incidentals i.e. rollout ceremony etc. If you figure an aircraft takes on average about 8 to 10 years from initial concepts to FAA certification, a price tag of around eight to ten billion dollars in development costs is not unreasonable for a large aircraft.
Complex defense aircraft are equally as expensive. I remember watching a documentary on Northrop's YF-23 airplane, and one of the program managers commented that near the end of the development project on that aircraft, Northrop was spending approximately $1 million a day on that program.
A lot is labor and indirect overhead burden costs (vacation time, sick time, state taxes, federal taxes, 401K matching, oversight of all that). Then engineering - someone has to enter all the thousands of pieces that go into an aircraft and engines. Model it. Create a simulator for it. Develop training for it. Line up business partners across the continent (US and/or Europe for example). Actually make all the pieces. Assemble all the pieces into subcomponents, then major components. Ship all the components to the final assembly site. Connect them all together. Install all the wiring, hydraulics, fuel lines. Test the engine, the avionics, the electrical systems, the hydraulic systems. Eventually test flying and all the costs that go with it. Maybe even paint it.
And I bet I'm not even touching on 1/2 of what goes into it.
Developing an aircraft (or really any complex system) is not like someone sketches an aircraft and then some people build it, fly it and then more aircrafts are built.
You start with making concepts, then designs, which are prototyped or simulated. Then these designs are discussed over and over and revised. And this is not only done for the whole aircraft, but for many components, e.g. fuselage, wings, landing gears, engines, avionics, mission systems, hardware and software.
If and only if all people involved are convinced that this is the most feasible solution in time, quality and cost, the actual manufacturing of the first aircraft takes place. And keep in mind that usually for an aircraft many parts are not just assembled, but also developed from scratch.
And all components are tested alone, then integrated and tested again until the whole aircraft is tested first on ground and then in flight.
So hundreds or thousands of people work for a couple of years for this aircraft while everyone earns 100k, so that's a real big chunk of the money.
