Sponsor Message:
Civil Aviation Forum
My Starred Topics | Profile | New Topic | Forum Index | Help | Search 
Terms Used In "Buying An Aircraft"  
User currently offlinePylon101 From Russia, joined Feb 2008, 1566 posts, RR: 0
Posted (6 years 4 months 3 weeks 4 hours ago) and read 3051 times:

Guys,

Would you help me to sort out all this stuff related to the process of buying an aircraft.

Sometimes people refer to
orders;
confirmed orders;
options to buy, etc.

It would be helpful to me (and perhaps to other people) if I get a clear understanding about ways of buying an aircraft.

When a deposit is transferred/if escrow accounts used/full price paid up front.

What I am trying to say: how does correlate a form of buying an a/c, methods of payments and terms of contracts.

At least it would be easier to understand issues like Boeing - Airbus financial obligation/legal consequences and so on.

Thanks.

4 replies: All unread, jump to last
 
User currently offlineMoo From Falkland Islands, joined May 2007, 3948 posts, RR: 4
Reply 1, posted (6 years 4 months 3 weeks 3 hours ago) and read 2996 times:

The general terms include an interest to purchase, which means the manufacturer and customer are in talks, a Letter of Intent or a Memorandum of Understanding, which means an agreement in principle has been reached, production slots tentatively reserved and the legal contract to purchase is being drawn up for both parties to sign, and a firm order is when that legal contract to purchase is signed by both parties.

The exact terms of contracts differ and are highly confidential to both parties, as they are commercially sensitive - disclosing the terms of one customers contract could have a detrimental effect on the manufacturer when it comes to agreeing purchasing terms with another customer. If you are interested in the actual agreement, check out the leaked Airbus-Kingfisher MoU here http://www.wikileaks.org/wiki/Airbus-Kingfisher_60_plane_MOU_(2007)

Deposits are typically paid on signing of the purchase contract, and are paid direct to the manufacturer.

Options are simply an agreement to extend a purchase contract by a certain number of airframes within a certain time, but no obligation to convert to firm orders exist. They are a cheap and easy way to place follow on orders without the added cost of extra legal involvement. Options typically include a firm production slot for a period of time, which is why they expire - the manufacturer will go to great lengths to not have blank production slots wherever possible.

Purchase rights are a level below options, in that the legal framework for acquiring the airframes is in existence, but no production slots are held.

Methods of payment differ greatly, from outright purchase, to sale and leaseback, to finance, to partial ownership. As an example, SQ recently took ownership of 4 A380s, each and every one of which SQ immediately sold to German financial institutions and agreed to a lease term of no less than 10 years. What this means is SQs initial financial outlay is vastly lower than it would otherwise have been, and the aircraft are not counted on SQs books as capital expenditure or as a debt - it makes SQ look a lot healthier if they do not have to write down a $200m debt.


User currently offlinePylon101 From Russia, joined Feb 2008, 1566 posts, RR: 0
Reply 2, posted (6 years 4 months 3 weeks 3 hours ago) and read 2963 times:

Thanks, Moo.

It's a good explanation.


User currently offlineJimbobjoe From United States of America, joined Oct 2001, 657 posts, RR: 0
Reply 3, posted (6 years 4 months 2 weeks 6 days 16 hours ago) and read 2842 times:

Don't options also allow the carrier to purchase an aircraft at today's prices at some time in the future...which is the other benefit of exercising options?

User currently offlineMoo From Falkland Islands, joined May 2007, 3948 posts, RR: 4
Reply 4, posted (6 years 4 months 2 weeks 6 days 15 hours ago) and read 2821 times:



Quoting Jimbobjoe (Reply 3):
Don't options also allow the carrier to purchase an aircraft at today's prices at some time in the future...which is the other benefit of exercising options?

Yes, hence my
Options are simply an agreement to extend a purchase contract by a certain number of airframes within a certain time
- the options are covered under whatever was previously agreed in the purchase agreement, including pricing.


Top Of Page
Forum Index

This topic is archived and can not be replied to any more.

Printer friendly format

Similar topics:More similar topics...
Tracking The A/c Used In "Airport" posted Mon May 31 2004 05:04:58 by Pylotguy1
"Famous Aircraft" Used In Movies And TV? posted Thu Sep 25 2003 22:56:13 by A340pilot
Where In The World Is "The Spirit Of Delta" 772LR? posted Thu Mar 13 2008 10:55:39 by WindowSeat
ATA-Arrested For Using IPhone In "Airplane Mode?" posted Thu Oct 11 2007 09:34:09 by Clickhappy
Chairman - Alitalia Is In A "comatose" State... posted Wed Sep 26 2007 12:21:21 by Gilesdavies
What Exactly Is An "option"? posted Mon Aug 6 2007 22:58:54 by EGBJ
Crash Landing Bracing In "Diagonal Seating"? posted Mon May 14 2007 19:57:51 by Viscount630
Old ONT Terminal Shots In "Zodiac" posted Sun Mar 4 2007 23:40:00 by DCA-ROCguy
Saab 2000 In "Skins" posted Fri Mar 2 2007 16:42:01 by Vasu
PSA Ads In "In Persuit Of Happyness" posted Sun Dec 17 2006 01:55:15 by Lincoln