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Kingfisher (UB Group) May Cancel Orders-Report  
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Posted (6 years 9 months 2 days 23 hours ago) and read 8165 times:

http://www.thehindubusinessline.com/...12/21/stories/2007122152390100.htm

Quote:
Bangalore, Dec 20 The UB Group is considering a move to cancel excess aircraft orders and return production slots to Airbus Industrie which could yield the company as much as $5 million for each aircraft.

A top official with the UB Group told Business Line that after identifying excess capacity, both its airlines, Kingfisher Airlines as well as Deccan Aviation, plan to either lease out aircraft to other airlines or defer their induction into the fleet or cancel the orders in consultation with Airbus.

On Wednesday, the boards of Kingfisher Airlines as well as Deccan Aviation are learnt to have decided to lease two of their Airbus aircraft to another airline.

In case, both the airlines decide to cancel any of the orders, Airbus Industrie which is currently not able to meet the aircraft demand, will sell those aircraft to other airlines after paying about $5 million for each of these airplanes to the UB Group.




"When all is said and done, more will be said than done".
27 replies: All unread, showing first 25:
 
User currently offlineStarrion From United States of America, joined Jul 2003, 1126 posts, RR: 2
Reply 1, posted (6 years 9 months 2 days 23 hours ago) and read 8129 times:

So about 56 aircraft in the pipeline total.

A lot of airlines were throwing around 100 plane orders at one point. The really good new for Airbus is that they have so many other people in line that they won't miss these orders.



Knowledge Replaces Fear
User currently offlineAA1818 From Trinidad and Tobago, joined Feb 2006, 3435 posts, RR: 4
Reply 2, posted (6 years 9 months 2 days 23 hours ago) and read 8080 times:

I guess these will be A32X family returns rather than Long Haul a/c! Great news for Airbus that they have early delivery slots now available. I look forward to seeing another long haul operator in India after the merger is complete and UB group can fly internationally.

AA1818



“The moment you doubt whether you can fly, you cease for ever to be able to do it.” J.M. Barrie (Peter Pan)
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 3, posted (6 years 9 months 2 days 23 hours ago) and read 8050 times:



Quoting AA1818 (Reply 2):
I guess these will be A32X family returns rather than Long Haul a/c!

I'm not sure. IIRC they ordered A332s, A345s, A380s, and A350s; quite an assortment of widebodies. Any guesses?



"When all is said and done, more will be said than done".
User currently offlineKhobar From United States of America, joined Mar 2006, 2379 posts, RR: 3
Reply 4, posted (6 years 9 months 2 days 23 hours ago) and read 7958 times:

56 excess capacity cancellations for money from an airline that has ordered your A380 and A350XWB is good to great news for Airbus? When would such cancellations not be good to great news for Airbus?

User currently offlineOldAeroGuy From United States of America, joined Dec 2004, 3523 posts, RR: 66
Reply 5, posted (6 years 9 months 2 days 22 hours ago) and read 7933 times:



Quoting Starrion (Reply 1):
The really good new for Airbus is that they have so many other people in line that they won't miss these orders.

Unless the cancellations include the A345.



Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
User currently offlineSlz396 From , joined Dec 1969, posts, RR:
Reply 6, posted (6 years 9 months 2 days 22 hours ago) and read 7814 times:

There are something weird about this report:

in short: the airline has excess capacity and so it wants to cancel part of their firm orders, yet by doing so it gets paid 5M dollars by the manufacturer????  scratchchin 

Either the money transaction is the other way round and Airbus gets paid 5M dollars per plane from the airline for breaching the purchase agreement, or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

Would make sense too as it has been said in the past some mega-orders have all the looks of a slot hedge.


User currently offlineKhobar From United States of America, joined Mar 2006, 2379 posts, RR: 3
Reply 7, posted (6 years 9 months 2 days 22 hours ago) and read 7683 times:



Quoting Slz396 (Reply 6):
Either the money transaction is the other way round and Airbus gets paid 5M dollars per plane from the airline for breaching the purchase agreement, or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

Or it might speak directly to the contract and how Airbus does business.


User currently onlineStitch From United States of America, joined Jul 2005, 30978 posts, RR: 86
Reply 8, posted (6 years 9 months 2 days 22 hours ago) and read 7645 times:
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I had recently heard IT wished to defer deliveries of some A320 and ATR planes, but I guess they have decided their is money to be made selling the production slots back to Airbus...

User currently offlineScouseflyer From United Kingdom, joined Apr 2006, 3390 posts, RR: 9
Reply 9, posted (6 years 9 months 2 days 21 hours ago) and read 7628 times:



Quoting Slz396 (Reply 6):
Would make sense too as it has been said in the past some mega-orders have all the looks of a slot hedge.

Is it not also to do with the fact that both IT and Air Deccan have large narrow-body orders as yet undelivered and there's too many now for the size of carrier.


User currently offlineBehramjee From Canada, joined Aug 2003, 4784 posts, RR: 43
Reply 10, posted (6 years 9 months 2 days 21 hours ago) and read 7537 times:

smart move...the combined fleet of KF and Deccan is more than enough to fufil their domestic needs as both airlines are hubbed at BLR hence may not need to fly at virtually the same time or within few minutes of each other on many domestic trunk routes. Those un-unused A 320s can be redeployed for future flights to the Far East, DAC, CMB and Middle East. Also since KF and Deccan will become one airline, they would then not to be required to maintain their loss making tier 2 and tier 3 domestic routes to satisfy the Indian Govt hence no more need for additional ATRs.

I dont think so any widebodied aircraft on order will be cancelled...if any WB aircraft needed to be cancelled it should be their A 380s as they dont need the excess capacity offered by this aircraft except for PR and branding purposes.


User currently onlineStitch From United States of America, joined Jul 2005, 30978 posts, RR: 86
Reply 11, posted (6 years 9 months 2 days 21 hours ago) and read 7504 times:
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Quoting Behramjee (Reply 10):
I dont think so any widebodied aircraft on order will be cancelled...if any WB aircraft needed to be cancelled it should be their A 380s as they dont need the excess capacity offered by this aircraft except for PR and branding purposes.

I would think IT's first four A345s will work nicely as "route-provers" for two years until their A388s start arriving. I am guessing one pair to LHR and one to SFO in 2008, replaced in 2010 with two each A388s. I suppose the fifth A388 will tool around the subcontinent (NRT or DXB?) to stay close in case a bird breaksdown at LHR or SFO. Then the other six A345s can be used on other long-haul services.


User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 12, posted (6 years 9 months 2 days 21 hours ago) and read 7460 times:



Quoting Slz396 (Reply 6):
nd is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

This could be the case; ATW reported a few months back that Air Deccan has already sold their slots.

Quoting Scouseflyer (Reply 9):
Is it not also to do with the fact that both IT and Air Deccan have large narrow-body orders as yet undelivered and there's too many now for the size of carrier.

This could also be the case.

Quoting Khobar (Reply 7):
Or it might speak directly to the contract and how Airbus does business.

 scratchchin 



"When all is said and done, more will be said than done".
User currently offlineIkramerica From United States of America, joined May 2005, 21529 posts, RR: 59
Reply 13, posted (6 years 9 months 2 days 20 hours ago) and read 7216 times:



Quoting Starrion (Reply 1):
The really good new for Airbus is that they have so many other people in line that they won't miss these orders.

Only if it's an anomoly. I think the huge amount of orders Airbus and Boeing have earned recently, and especially the huge A320 orders from non-established carriers, are not nearly as strong as some thought. Even some analysts predict cancelation of many orders, and Boeing has said as much.

Quoting Slz396 (Reply 6):
or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars

I believe this is possible. To prevent Kingfisher from selling the planes outright once purchased, Airbus may have a clause that says Airbus has the first right to buy any excess plane contracts Kingfisher, and can do so at $5 million per plane rather than the full markup UB may be able to get. This would indicated Kingfisher got a really sweet deal, but Airbus may have been very eager to gain a stronger foothold into emerging carriers in the Indian market.

Quoting Behramjee (Reply 10):
smart move...the combined fleet of KF and Deccan is more than enough to fufil their domestic needs as both airlines are hubbed at BLR hence may not need to fly at virtually the same time or within few minutes of each other on many domestic trunk routes.

This I don't get.

I was under the a.net impression that India is an explosive growth market. How could combining two companies lead to capacity glut? If each carrier individually was expected to need tons of planes just to keep up with the Indian growth, why would combining them all of a sudden lead to decrease in growth in the market? Did 100 million people just disappear or something? I don't get it...



Of all the things to worry about... the Wookie has no pants.
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 14, posted (6 years 9 months 2 days 20 hours ago) and read 7085 times:

Given the losses cited in the article I quoted in reply #17, will the UB group push for an IPO or defer for a few years? If they defer, where will the capital come from? Operations? The beer business?


"When all is said and done, more will be said than done".
User currently offlineMariner From New Zealand, joined Nov 2001, 25248 posts, RR: 85
Reply 15, posted (6 years 9 months 2 days 19 hours ago) and read 7013 times:
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Quoting Ikramerica (Reply 13):
I think the huge amount of orders Airbus and Boeing have earned recently, and especially the huge A320 orders from non-established carriers, are not nearly as strong as some thought.

A John Leahy indicated, a few months ago. From memory, he suggested some 30% might be suspect?

mariner



aeternum nauta
User currently offlineIkramerica From United States of America, joined May 2005, 21529 posts, RR: 59
Reply 16, posted (6 years 9 months 2 days 19 hours ago) and read 6996 times:



Quoting Mariner (Reply 15):
A John Leahy indicated, a few months ago. From memory, he suggested some 30% might be suspect?

I think one of the Randys also indicated as much. They would know the out clauses and the deals they put together, and the financials behind them, as would the major players in the market, so when they say the orders aren't that strong, I'd trust em...  Smile



Of all the things to worry about... the Wookie has no pants.
User currently offlineBrendows From Norway, joined Apr 2006, 1020 posts, RR: 4
Reply 17, posted (6 years 9 months 2 days 19 hours ago) and read 6962 times:



Quoting Slz396 (Reply 6):
in short: the airline has excess capacity and so it wants to cancel part of their firm orders, yet by doing so it gets paid 5M dollars by the manufacturer????

Do like FR did: buy cheap, then sell to other airlines when there is a huge desire in the market for early slots, thus earning a nice sum per frame.


User currently offlineRktsci From United States of America, joined Dec 2005, 59 posts, RR: 0
Reply 18, posted (6 years 9 months 2 days 18 hours ago) and read 6869 times:

I think we're going to see a lot more order deferments and cancellations in the next couple of years. It's simply a matter a market cycles and cold hard reality of the global economy.

User currently offlineIkramerica From United States of America, joined May 2005, 21529 posts, RR: 59
Reply 19, posted (6 years 9 months 2 days 18 hours ago) and read 6806 times:



Quoting Rktsci (Reply 18):
I think we're going to see a lot more order deferments and cancellations in the next couple of years.

And the reality that most startup airlines fail, and ordering 100 frames as a startup is not a proven business case, even if B6 did it.

That'll wipe out 1/3rd of the A320/737 orders right there, and then there's a matter of placing all the delivered, very new A320/737s from failed ventures...



Of all the things to worry about... the Wookie has no pants.
User currently offlineKaran69 From India, joined Oct 2004, 2889 posts, RR: 17
Reply 20, posted (6 years 9 months 2 days 13 hours ago) and read 6524 times:

This is a similar move to quite a common practice that has been done before by DN, when they deffered some of their A320 deliveries in exchange for hefty sums of cash from the sponsoring banks who were able to place them with other airlines at higher leasing rates given the demand of the A320.

Ofcourse this being a cancellation something similar to what Ikramerica said in reply 13 may have been worked out.

And as long as they do not cancel their WB orders i dont think Airbus will be bothered too much

Karan


User currently offlineCloudyapple From Hong Kong, joined Jul 2005, 2454 posts, RR: 9
Reply 21, posted (6 years 9 months 2 days 13 hours ago) and read 6397 times:



Quoting Slz396 (Reply 6):
the airline has excess capacity and so it wants to cancel part of their firm orders, yet by doing so it gets paid 5M dollars by the manufacturer????

That confirms Airbus is not only giving out free planes but actually paying people to take their products!!!  stirthepot   duck 



A310/A319/20/21/A332/3/A343/6/A388/B732/5/7/8/B742/S/4/B752/B763/B772/3/W/E145/J41/MD11/83/90
User currently offlineLumberton From United States of America, joined Jul 2005, 4708 posts, RR: 20
Reply 22, posted (6 years 9 months 2 days 9 hours ago) and read 6129 times:

Financially speaking, this airline ain't doing so good.

http://sify.com/finance/fullstory.php?id=14579248

Quote:
A few optimistic analysts reckon that the merger will strengthen the company, as Kingfisher enjoys higher yields of Rs 4,200-4,400 as against Deccan's Rs 2,700-2,900. Rati Pandit at Networth said that news of the merger is good since it offers "tremendous" cost synergies besides benefits on the fleet and route front.

But not everyone agrees that the picture is rosy. An analyst from a foreign brokerage house, who did not want to be named, said: "The bottomline for any business is profitability; Deccan was not geared towards profitability as much as towards expansion and market share. It had grown too fast. Mallya has been making the right noises but it's going to be a huge task to effect a turnaround. Realistic fares are probably the most important component in cutting down losses."

The real reason for the merger is thought to be Mallya's urge to fly abroad. An analyst said, "Mallya is taking delivery of the long haul Airbuses in 2008 and there is no way he would have allowed these high-cost assets to sit idle." With Deccan's permits, Kingfisher would be able to commence international operations by mid-2008, as Deccan completes the mandatory five years of domestic service.

But is it treading dangerous territory in terms of the brand image when the two brands cater to different audiences when the aircraft sport similar livery? Brand consultant Ramesh Narayan feels that there is not much to fear. He said, "In aviation, which is a 'me too' sector, image is purely experiential. Whatever livery you have, if the airlines are able to deliver what they promise, then it should do."

But worldwide, there have been more failures than successes in such marriages.




"When all is said and done, more will be said than done".
User currently offlineBlr2Syr From United States of America, joined Dec 2007, 68 posts, RR: 0
Reply 23, posted (6 years 9 months 2 days 5 hours ago) and read 4864 times:

They might need some of the new machine to fly to the Middle East and SE asia once the International market opens up and besides they could sell their older aircrafts and keep the new birds. But then it seems like a win-win in all ways for UB. Smart.

User currently offlineIkramerica From United States of America, joined May 2005, 21529 posts, RR: 59
Reply 24, posted (6 years 9 months 2 days 3 hours ago) and read 4034 times:



Quoting Karan69 (Reply 20):
Ofcourse this being a cancellation something similar to what Ikramerica said in reply 13 may have been worked out.

Again, my guess is Airbus is not to fond of airlines negotiating low prices and turning around and selling new planes to others as some kind of broker, and wised up, writing into the contract that it's not against the rules to do it, but Airbus gets the first right of refusal, and the price was contractually set ahead of time.

But it really does speak to the deals being made to place these vast number of A320s with "growth" airlines when they are given such low prices that it would be profitable for Airbus or the airline to turn around and resell the planes. Why does Airbus need to do this? They are the leading manufacturer, the A320 is a hot seller, yet they are selling A320s at below market average rates to 2nd tier carriers? (and Boeing may have changed tactics too, but they didn't make these kind of deals in the past. the best, most reliable customers got the best deals, and part of the deals were that they couldn't resell the birds...)



Of all the things to worry about... the Wookie has no pants.
25 Lumberton : I would still be interested in how the deposits factor into this, assuming Kingfisher paid deposits?[Edited 2007-12-21 08:53:34]
26 JayinKitsap : Just like in real estate, during the boom everybody is building with projections of lucrative rents. When it starts to really drop, owners make the h
27 LAXDESI : Good points. Airbus may rethink the terms for future contracts.
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