Joni From , joined Dec 1969, posts, RR: Posted (1 year 8 months 3 weeks 3 days 6 hours ago) and read 9772 times:
Apparently several B787 customers are growing frustrated with the unfortunate delays. The source mentions that the delay compensation may cost "billions of dollars".
Quote: nternational Lease Finance Corp (ILFC), the world's top plane leasing firm, said it will seek large compensation from Boeing for the delays, which will push its Dreamliner deliveries back by between 9-12 months to late 2010 or early 2011.
(...)
"We've put Boeing on notice that there will be some very serious talks," Steven Udvar-Hazy, chief executive of ILFC, told Reuters. When asked if ILFC will seek compensation, he said: "Definitely, on a large scale."
ScrubbsYWG From Canada, joined Mar 2007, 1270 posts, RR: 0 Reply 4, posted (1 year 8 months 3 weeks 3 days 6 hours ago) and read 9581 times:
Quoting Sxf24 (Reply 3): No, Boeing could go tell Mr. Udvar-Hazy tough luck and offer to sell the slots to someone else. Not a good business move, but still an option.
well, i am sure there are some parts of the contract stipulating compensation with regards to delays, so i dont think boeing could really say tough luck without paying something and risk an even costlier breach of contract action.
I think it will all be in the interpretation of those clauses that will be the major part.
Moo From , joined Dec 1969, posts, RR: Reply 6, posted (1 year 8 months 3 weeks 3 days 5 hours ago) and read 9467 times:
Quoting Sxf24 (Reply 3): No, Boeing could go tell Mr. Udvar-Hazy tough luck and offer to sell the slots to someone else. Not a good business move, but still an option.
And put themselves in for a much larger judgement against them for breach of contract? No option at all.
ZTagged From Niger, joined Oct 2007, 516 posts, RR: 0 Reply 8, posted (1 year 8 months 3 weeks 3 days 5 hours ago) and read 9344 times:
Reminds me of the phrase, don't write checks your ass can't cash.
Boeing sold more 787s than it could produce in the alloted time (Due to suppliers, solar flares, sea monkies, L. Ron Hubbard, etc) and now people are getting angry and antsy. Rightfully so, they've delayed three or four times now if I recall.. Boeing is indeed, starting to feel the heat Airbus once had from the A380 pushbacks.
Moo From , joined Dec 1969, posts, RR: Reply 10, posted (1 year 8 months 3 weeks 3 days 5 hours ago) and read 9253 times:
Quoting Ag92 (Reply 9): Except that Boeing has 4x more orders if not more than Airbus
Which surely means there are more potential claimants for compensation depending on how far down the chain deliveries are affected? Its a two edged sword.
One existing 787 customer has already bought 23 more this year, so I expect other carriers affected by delayed deliveries to apply their compensation to new 737, 747, 767, 777 and 787 orders.
Ag92 From India, joined Jul 2006, 1206 posts, RR: 0 Reply 12, posted (1 year 8 months 3 weeks 3 days 5 hours ago) and read 9126 times:
Quoting Moo (Reply 10): Which surely means there are more potential claimants for compensation depending on how far down the chain deliveries are affected? Its a two edged sword.
Hmmm didn't think about that one, do companies such as Boeing and Airbus give leeways for situations like this or is the delivery schedule tightly packed?
Stitch From United States, joined Jul 2005, 15816 posts, RR: 63 Reply 13, posted (1 year 8 months 3 weeks 3 days 4 hours ago) and read 9092 times:
Quoting Ag92 (Reply 12): Hmmm didn't think about that one, do companies such as Boeing and Airbus give leeways for situations like this or is the delivery schedule tightly packed?
They likely put in a bit of slack to cover monthly variances, but nothing like what happened on the A380 and 787 programs.
It is important to note that compensation payments are capped and capped at a low percentage of the contract price. So nobody got a free A380 and nobody is going to get a free 787. And it is also why Airbus and Boeing are successful at converting these payments into new orders for their own planes because they can say "okay, we'll write you a check to pay for 5% of the other guy's plane, or we'll discount your next order with us 8%". Since all these airlines have already committed to the A380 and 787, they are already inclined to order more, so getting a few more million off that next order is almost always enough to close the deal.
BrianDromey From Ireland, joined Dec 2006, 2939 posts, RR: 10 Reply 14, posted (1 year 8 months 3 weeks 3 days 4 hours ago) and read 9000 times:
Quoting Stitch (Reply 11): One existing 787 customer has already bought 23 more this year, so I expect other carriers affected by delayed deliveries to apply their compensation to new 737, 747, 767, 777 and 787 orders.
Yet when airbus offered discounts on 320 & 330s in lieu of cash compensation, Boeing cheerleaders were gleefully guffawing into their keyboards,widely predicting the demise of Airbus. I love the 787, but a years delay before 1st flight and SERIOUS production line/supplier problems have and could still further throw the schedule way off track. The first of the aircraft was to be delivered in just 3 months time originally, if not sooner. Yet it still has not flown, or even one has been put together yet. IMHO 1st flight will not mean the 787 is out of the woods yet.....
Still....the airlines will wait, I am sure of that. What option do they have, 767s? 330, both are fine aircraft, but not in the league of the 787.
Quoting Ag92 (Reply 12): Hmmm didn't think about that one, do companies such as Boeing and Airbus give leeways for situations like this or is the delivery schedule tightly packed?
Seemingly not....judging by the delays encountered on both the 380 and 787 projects. The 380 was two years late because of a silly, stupid and appalling software inerface problems, which never should have happened. At this point I think the 787 will be at least 1.5 years behind too. However, it could be that Boeing will get to grips quickly with putting 787s together, and get their supply chain management in order, I think the delays might take longer to sort out though, becasue of how tightly Boeing has timetabled deliveries. Vey little padding, so it seems. Its the certification programme I wonder about - it seems woefully short for such a "different" aircraft.
Brian.
Next flights: ORK-MAN (WW); MAN-ORK (EI) DUB-HHN-DUB(FR)
Astuteman From United Kingdom (England), joined Jan 2005, 6146 posts, RR: 84 Reply 15, posted (1 year 8 months 3 weeks 3 days 4 hours ago) and read 8946 times:
Quoting Stitch (Reply 13): It is important to note that compensation payments are capped and capped at a low percentage of the contract price.
Although a lot was made (on A-net) of the "fact" that after the full A380 delays became known, contracts subsequently became a lot "tighter".
The more boastful detractors went on to add "But Boeing are still happy to sign because they U + O"
(U+O what I mean )
To be fair, I wouldn't wish it on the 787 any more than the A380.
To back your point up though, Stitch, Airbus seem to have emerged from the A380 fiasco a stronger, fitter, more learned company, and I see no reason why the same won't happen to Boeing.
Whatever the compensations may be, they won't "kill" Boeing.
And whatever doesn't kill you makes you stronger, does it not?
Stitch From United States, joined Jul 2005, 15816 posts, RR: 63 Reply 16, posted (1 year 8 months 3 weeks 3 days 4 hours ago) and read 8812 times:
Quoting BrianDromey (Reply 14): Yet when airbus offered discounts on 320 & 330s in lieu of cash compensation, Boeing cheerleaders were gleefully guffawing into their keyboards,widely predicting the demise of Airbus.
And such actions didn't reflect well on them, just as the actions of Airbus cheerleaders who are gleefully predicting the same for Boeing do not reflect well on them, either.
BrightCedars From Belgium, joined Nov 2004, 1016 posts, RR: 3 Reply 17, posted (1 year 8 months 3 weeks 3 days 3 hours ago) and read 8774 times:
Could it be that our dear A & B are actually finding a way to lure customers into further purchases?
Let me ellaborate. It happened several time that we fly LH and get denied boarding compensation, at the time in LH vouchers which you could use at full value for LH tickets or at 1/2 value for cash refunds, which actually ties you in buying LH and eventually (it happened to us) take another round of denied boarding compensation, etc.
Now I make a plane and it gets delayed, by contract I must give some compensation to my client, which enables me to sell them more of my products, unless they want to run away with petty cash.
Would that be fair? Are the contractual compensations always/ever full cash amounts? Food for thought.
SEPilot From United States, joined Dec 2006, 3900 posts, RR: 23 Reply 19, posted (1 year 8 months 3 weeks 3 days 2 hours ago) and read 8463 times:
Quoting Astuteman (Reply 15): To back your point up though, Stitch, Airbus seem to have emerged from the A380 fiasco a stronger, fitter, more learned company, and I see no reason why the same won't happen to Boeing.
Whatever the compensations may be, they won't "kill" Boeing.
And whatever doesn't kill you makes you stronger, does it not?
While the causes of the delays differ, your conclusion is valid. Neither company wanted this to happen, but it did to both. With such a complicated endeavor as designing and building a new airliner it is not an unlikely occurrence, so I for one am not surprised, especially with all of the innovations introduced on the 787. As to compensation, I'm sure that it is covered in the contracts. Not to do so would be simply irresponsible, and I'm sure neither SUH or Boeing would have neglected it. It makes good press for SUH to say that "he'll be demanding heavy compensation" but I believe it's mostly window dressing. The amount will not be in dispute; just the way it gets disbursed.
The problem with making things foolproof is that fools are so doggone ingenious...Dan Keebler
OHLHD From Finland, joined Dec 2004, 3864 posts, RR: 26 Reply 20, posted (1 year 8 months 3 weeks 3 days 2 hours ago) and read 8390 times:
Just like Airbus Boeing is having the same situation. If they can´t deliver on time they have to compensate! Easy like that, regardless what kind of compensation this would be.
Justloveplanes From United States, joined Jul 2004, 471 posts, RR: 0 Reply 21, posted (1 year 8 months 3 weeks 3 days 2 hours ago) and read 8075 times:
Well, one things for sure, Boeing won't be saying the delays don't impact the financials anymore......
Teme82 From Finland, joined Mar 2007, 706 posts, RR: 0 Reply 23, posted (1 year 8 months 3 weeks 3 days 1 hour ago) and read 7455 times:
Quoting Flysherwood (Reply 22): Mr. Carson must be feeling some serious heat right about now. I still say that his days as BCA CEO are numbered.
Yes they are. I've already made a bet when he will leave willingly or unwillingly... Anyway the only way out of this is pay the compensations, I think JL would welcome some hard cash back to their bank account, to the airliners...
PW100 From Netherlands, joined Jan 2002, 1585 posts, RR: 11 Reply 24, posted (1 year 8 months 3 weeks 3 days ago) and read 7142 times:
Quoting Ruscoe (Reply 1): By 2010 Boeing may be able to do some catch up
Seems unlikely as Boieng already had a very aggresive production build up scheme that some/many in the industry considered as unrealistic/challenging. I guess a month from now we will hear more news, good or bad??
Quoting Stitch (Reply 11): More likely a sign of a lot more orders.
One doesn't necessarily exclude the other
Quoting Cruiser (Reply 18): Finally, someone who can put two and two together: Ilfc In Talks For Large Orders
Very true. However if they would be negotiating for heavy discounts, they must be in a strong position themselves. Especially if they play it public . . . which could hint indeed at further delays, sadly . . .
Immigration officer: "What's the purpose of your visit to the USA?" Spotter: "Shooting airliners with my Canon!"
Rheinbote From Germany, joined May 2006, 1535 posts, RR: 46 Reply 25, posted (1 year 8 months 3 weeks 3 days ago) and read 7070 times:
Quoting BrianDromey (Reply 14): The 380 was two years late because of a silly, stupid and appalling software inerface problems, which never should have happened.
That's about as close to the truth as the 787 being late because of a silly fastener shortage.
Quoting SEPilot (Reply 19): As to compensation, I'm sure that it is covered in the contracts...It makes good press for SUH to say that "he'll be demanding heavy compensation" but I believe it's mostly window dressing. The amount will not be in dispute; just the way it gets disbursed.
Quoting Stitch (Reply 13): It is important to note that compensation payments are capped and capped at a low percentage of the contract price
Keep On Doing What You're Doing But Make It Funky
26 Slider: LOL! If you blame Scientology, Tom Cruise and his cult wackos might come after you!
27 Mptpa: Exactly... they get the aircraft they need/want, and will pay a little less by spreading the compensation amount. I say it is a win-win situation. Pe
28 PW100: [Speculation Mode] * Assumption: ToC for delay compensation Boeing equals those of Airbus * 787 is half the price of A380 --> 787 delay compensation 1
29 Jbernie: It will be interesting to see if any of the current customers take compensation in the form of new orders (at a discount). With QF having so many conf
30 BrianDromey: There is only one poster on here who thinks the 787 will never fly, and that sure as hell aint me! Im not an airbus cheerleader, or a Boeing basher.
31 Briguy1974: The two delays are very different for a couple of reasons and the compensation for the delays will reflect this. The 787 is replacing current aircraft
32 Yellowtail: Conversation goes like this...Boeing: "we will give you preferential pricing on you next order, if you choose not to make us pay penalty payments...o
33 SEPilot: If they have not long since passed it then they have severely underpriced it. Any other airliner would have been a major financial success with the n
34 Sebring: It may get buried in discounts on existing or further orders or other benefits, such as discounts on OEM parts. Sorry, each contract is unique. Certa
35 EbbUK: Well the Boeing bean counters have attempted to tinker with the gestation period of a new jetliner to their cost. Was the 787 ever going to be ready i
36 Flysherwood: Airbus is far from being over the DISASTER that the delay caused. It is not like the dollar is going to strengthen against the Euro anytime soon. Boe
37 SunriseValley: If Mcinerney is a true disciple of Jack Welch and the GE culture, Carson has to go, as did Mike Bair.
38 Astuteman: A plethora of alternatives for the airlines come to mind.... Regards
40 Flysherwood: Could you imagine a Division head of G.E. coming to Mr. Welch when he was CEO to announce a delay of three months each, three times, in a year?!?! I
41 Flysherwood: What good is selling a thousand frames if you don't make a dime of profit from it?
42 Glbltrvlr: Cash is the name of the game. The development costs are for the most part sunk. There's no indication at this point that the A380s are being sold bel
43 Flysherwood: How many "new" orders, that were not subject to late delivery compensation, have been sold to start the recovery of sunk costs? And yes, cash is abso
44 ER757: Forgive me if I sound unsympathic, but if this sort of thing gets you that worked up, pehaps you need another hobby. On the list of things to be worr
45 Glideslope: Should have gone 6m ago with Bair. Boeing is now paying the price for letting Allan go. Buy your FORD stock now @ $6 a share. In 10 years you will be
46 ER757: I don't think they so much "let him go" as he wanted something different. I don't think Boeing could have kept him regardless of what they offered.
47 Tdscanuck: Can you imagine GE producing something as complex as an airliner? It's not supposed to have flown yet (based on the current schedule). How is the fac
48 Flysherwood: A whole host of things. From Turbines for Dams to aircraft engines to complex medical equipment to auxiliary power units for the Space Shuttle. Oh le
49 Cruiser: He got passed over one too many times and there was no other place for him to go. He must have left in somewhat of a bad way, because he wasn't even
50 PM: Are you sure? My information is that this was two different orders announced (as unidentified) at the same time.
51 Flysherwood: If anyone could do the job, they wouldn't be paid the kind of money that they are. Take a look at Starbucks or Nike to see that just not anybody can
52 ER757: It just seems logical to me that once the flight testing gets underway, some unforeseen issues will arise that could add to the delays of EIS. I hope
53 Mptpa: Guys, I think Boeing has some great people in finance to figure out what the "appropriate" pricing for a product should be based on costs, value and
54 Art: If 787 take off before July would be miraculous, how come Boeing said they would achieve this just a few weeks ago? Is Boeing being unrealistic (read
55 Revelation: I'll think about that next time my head gets shoved in a GE MRI machine.
56 Ikramerica: I agree with the sentiment that if ILFC tries to get too much in compensation, Boeing would be best served to allow them to cancel. With such a huge b
57 Sxf24: Boeing has plenty of cash coming in - more than it knows what to do with - right now. A lot of it is from deposits it receives when customers place a
58 Stitch: He only just oversaw the best order and delivery year in the history of the company and even with Boeing not moving a single 787 this year out of 40-
59 Manfredj: Umm no, but nice try. Exactly what will happen.
60 ZTagged: Never fear, a rogue band of internet hackers on steroids is keeping them busy.
61 KC135TopBoom: No, there have been just two delays, for a total on 9 months. Read: " we want a better price on our next Boeing order". Don't forget, ILFC doesn't de
62 Astuteman: Only if they're strong enough to break through thin ice............ Do you seriously think that either of these companies is on financial thin ice? A
63 Antonovman: Well this is a typical type comment from our american "experts" They dont know anyting about the airline business, that is proven by some of the redi
64 Art: Unfair comment IMO. 1. Do you know the exact profit line for the A380 or do you know how close Airbus is to it? 2. If you can't answer "yes" to 1 abo
65 Astuteman: Not a good example, my friend, seeing as Airbus themselves say they're nowhere near it......... Regards
66 Rheinwaldner: You find that tone even in this thread! Not delivering at all is surely more costly than delivering late. If Boeing can not afford to spend compensat
68 AirNZ: Just a technicality (and nothing to do with either aircraft or manufacturer themselves), but how can you seriously make such a nonsense statement? If
69 Mariner: I remember several posters saying exactly that, loudly and often. mariner
70 Sebolino: So do I. At that times, 2 or 3 genius were happy to point Airbus problems and to predict the near end of the company. Don't play the naive KC135, you
71 PW100: Sit and watch the very same thing now to happen on the 787 program. I'm sure the 777 program will most certainly not be hurt by this . . . With curre
72 BrianDromey: I think what ILFC are geting annoyed over is that they have placed or are near placing these aircraft with airlines. At the very least, not deliverin
73 JoshSixtySeven: So why not cite some sort of information that leads you to believe this? It would make your point ten times more credible. Perhaps a tad unfair seein
75 Ruscoe: If Boeing is facing compensation payments large enough to effect their bottom line, they will be legally bound to inform the market. Since they have n
76 Art: Any idea what maximum "industry standard" late delivery penalties would be? 2% of price? 5%? What latitude are manufacturers allowed before penalties
77 Zeke: Boeing and Airbus generally use different accounting methods for this, from what I have seen Airbus make it an upfront loss over a year, and Boeing g
78 Sxf24: US Generally Accepted Accounting Principles would require Boeing to immediately incur the full amount of the loss.
79 Baroque: My goodness, nearly ten posts and nary a mention of free money. Things are beginning to look up for logic. Question is ERIA* the a.netter's equivalen
80 Slider: off topic I know, but "Anonymous" is really getting after them hard...the global protests on Feb 10 really drummed up support and shone a light on th
81 Zeke: Boeing uses program accounting, a good article on how they "covered up" problems on the 777 was in Business week http://www.businessweek.com/magazine
82 Glbltrvlr: That's the point - from a financial standpoint there is no such thing as recovering sunk costs. The money was spent in prior years and the books are
83 Stitch: It would be interesting to know how many 787s Boeing had originally blocked. I highly doubt it was 1000, which would be a reasonable current block ba
84 Flysherwood: Most of those accomplishments were due to the management of Mr. Mulally before him. Generally, when things go bad with a project or product, the pers
85 Astuteman: You think companies only undertake improvement initiatives when they're on the skates? You think Airbus have never launched initiatives like this bef
86 Flysherwood: You must be joking. Did not Mr. Streiff resign over the Power 8 issue because he told the Board that if it wasn't implemented, the Group would be in
87 Stitch: Which is why Michael Bair was kicked aside and will eventually be kicked out. Alan Mulally also "oversaw" the 7E7 and 787 programs until late in 2006
88 Flysherwood: I guess that is why the Airbus share price has done so well over the last two years.
89 Swissy: Right on the money, and I am sure it is not just ILFC alone looking for some comp.$$$$. We are right now @ about a 9 month delay and based on what ha
90 AirNZ: Do I have numbers/figures to back what up exactly, considering I never gave an opinion or conjectured about anything? If you understood my post (and
92 SunriseValley: GAAP is being replaced by IFRS I have no idea how IFRS deals with program accounting.
93 Art: With regard to the A380 and how close that programme is to breakeven, I recall that Airbus in 2007 said that breakeven would not be before ca 425 sal
94 SEPilot: If the delay causes the whole production schedule to slip, that would be a reasonable assessment. If it only affects early deliveries and Boeing is a
95 Art: To digress back to the 787 and late delivery compensation claims, has anyone noticed the thread entitled "Flightblogger: Boeing Considers Suspending 7
96 SEPilot: Quite true. The question is whether those compensations (since only two customers are involved) are more than those to all the 789 customers that wou
97 PW100: Well, that was already factored in my guestimate. 50% if they manage to return to original schedule within two to three years starting EIS. If not co
98 Joni: They may be able to at least partly catch up, like Airbus with the A380. One way to do so is to not sell a slot here and there, whereby the deliverie
99 SEPilot: Obviously, catching up costs money, but so does delivering planes late. It is not really serious for Boeing at this point, since barring major proble
100 Astuteman: The whole of the A380 production schedule didn't slip either, BTW (probably more than half, though..) Regards
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Very true. However if they would be negotiating for heavy discounts, they must be in a strong position themselves. Especially if they play it public . . . which could hint indeed at further delays, sadly . . .
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