Joni From , joined Dec 1969, posts, RR: Posted (13 years 9 months 3 weeks 3 days 13 hours ago) and read 777 times:
Does anyone present know the industry practice in options? I was wondering, if for instance Singapore Airlines were to convert their A380 options to firm order, what price would they be likely to pay - the launch order price or a regular price? If it's the launch order price, the options could in some years be worth a fortune, as the market value of an A380 would be substantially higher than the price the options would get them.
WorldTraveller From Germany, joined Jun 1999, 624 posts, RR: 5
Reply 1, posted (13 years 9 months 3 weeks 3 days 13 hours ago) and read 758 times:
Most of the time the deals include that all options can be taken at the price agreed upon when the deal was signed.
You're right that obviously, the options are worth a fortune in a couple of years, but this is a way for Boeing and Airbus to guarantee that the options are taken and that there is no switch to the competitor at a later date.
Yaki1 From , joined Dec 1969, posts, RR:
Reply 2, posted (13 years 9 months 3 weeks 2 days 16 hours ago) and read 740 times:
Usually the contracted price remains the same for the option but there is one factor to protect the seller. The options end at contracted dates, for example the buyer may have an option for 10 aircraft but must firm up 5 within one year and 5 more one year later. With fluctuating generally increasing prices the buyer does have an incentive to take the options beyond their immediate needs.