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Boeing, Airbus May Have To Park 200 White Tails  
User currently offlineKeesje From , joined Dec 1969, posts, RR:
Posted (6 years 1 month 1 week 5 days 1 hour ago) and read 19914 times:

posted this yesterday but got accidently deleted

Airbus and Boeing may end up with as many as 200 new planes without buyers next year because airlines are unable to obtain funds to pay for them amid the global credit squeeze. http://www.busrep.co.za/index.php?fA...=4700728&fSectionId=565&fSetId=662


photo : http://www.flickr.com/photos/irishflyguy/

Many Airlines that ordered aircraft druing the recent boom will have a hard time getting financing, the curent crises hit the banks and leasing companies badly. The funding gap might be $20 billion according to JPMorgan.

Boeing and Airbus can't hide behind their enormous backlogs (that will probably take hits too..). Order books being "exposed" to a limiitted number of oil rich Middle East Carriers vs Western carriers doesn't look so bad anymore..

Anyway both risk a serious cash flow hit next yr, more money going out then coming in.

60 replies: All unread, showing first 25:
 
User currently offlineSU From Russia, joined Apr 2004, 360 posts, RR: 2
Reply 1, posted (6 years 1 month 1 week 5 days 1 hour ago) and read 19918 times:

wait - didn't airlines think of a possibility of not being able to get a credit to finance their deals?

Bad planning? If I am going to buy $150M asset next year - I better have proper financing plans - taking all the risks into account.

Are there any sort of prepaiments made for next year orders?



"Life is too short to take it serious..."
User currently offlineSEPilot From United States of America, joined Dec 2006, 7109 posts, RR: 46
Reply 2, posted (6 years 1 month 1 week 5 days 1 hour ago) and read 19917 times:



Quoting SU (Reply 1):
Bad planning? If I am going to buy $150M asset next year - I better have proper financing plans - taking all the risks into account.

But even if financing is lined up, if the company doing the financing doesn't have the money then you're back at square 1. Nobody has that kind of money just sitting around, and if unforeseen things happen the best laid plans can fall apart.



The problem with making things foolproof is that fools are so doggone ingenious...Dan Keebler
User currently offlineFlyingAY From Finland, joined Jun 2007, 713 posts, RR: 0
Reply 3, posted (6 years 1 month 1 week 5 days ago) and read 19918 times:



Quoting SEPilot (Reply 2):
But even if financing is lined up, if the company doing the financing doesn't have the money then you're back at square 1. Nobody has that kind of money just sitting around, and if unforeseen things happen the best laid plans can fall apart.

Yep. Or if the airline goes belly up.


User currently offlineKC135TopBoom From United States of America, joined Jan 2005, 12178 posts, RR: 51
Reply 4, posted (6 years 1 month 1 week 5 days ago) and read 19921 times:



Quoting SEPilot (Reply 2):
Nobody has that kind of money just sitting around,

Wait, let me check my wallet..................nope, I don't have an extra $20B, either.

 duck   duck   duck 

I think most of the "stable" airlines, like SA, AA, DL/NW, EK, WN, BA, LH, AF, QF, JL, NH, and others, could have financing already lined up, and paid. That is at leats for purchased airliners from both Boeing and Airbus. I would think those airlines that have arranged to lease new airliners from GE, IFLC, and other leasing companies, may find no financing available at the time of delivery.


User currently offlineEmiratesUK From United Kingdom, joined Jan 2005, 288 posts, RR: 0
Reply 5, posted (6 years 1 month 1 week 5 days ago) and read 19924 times:



Quoting KC135TopBoom (Reply 4):
think most of the "stable" airlines, like SA, AA, DL/NW, EK, WN, BA, LH, AF, QF, JL, NH,

Ummm, I think you can remove SA from being a stable airline!! with their current financial position I dont think they can be included in this list!!



EK A380 Private suite - Here I come!!
User currently offlineBabybus From , joined Dec 1969, posts, RR:
Reply 6, posted (6 years 1 month 1 week 5 days ago) and read 19922 times:

Are aircraft really built with Cash On Delivery type deals?

I would have thought it would be a case of "Here's our money (bank details) and can we have a plane built please".

I guess we'll never know the answer.


User currently offlineZkpilot From New Zealand, joined Mar 2006, 4865 posts, RR: 10
Reply 7, posted (6 years 1 month 1 week 5 days ago) and read 19928 times:

There could be some pretty good bargains out there for airlines in a strong financial position... A bit of fleet modernisation perhaps...

I doubt we will see any 77W whitetails as they are in high demand with a backlog. Sure other aircraft are backlogged also but replacing a 737 with a newer 737 doesn't quite have the same cost saving effect as replacing a 744 with a 77W!



56 types. 38 countries. 24 airlines.
User currently offlinePlanesarecool From United Kingdom, joined Nov 2001, 4124 posts, RR: 11
Reply 8, posted (6 years 1 month 1 week 5 days ago) and read 19925 times:



Quoting Babybus (Reply 6):

I would have thought it would be a case of "Here's our money (bank details) and can we have a plane built please".

Probably more like a deposit system similar to how we might book holidays. Part fee upon ordering, pay the rest closer to/on delivery.


User currently onlinePanHAM From Germany, joined May 2005, 9734 posts, RR: 31
Reply 9, posted (6 years 1 month 1 week 4 days 23 hours ago) and read 19921 times:



Quoting SU (Reply 1):
wait - didn't airlines think of a possibility of not being able to get a credit to finance their deals?

you have to service the loan from the income, the cash flow your investment generates. If that income is no longer there, or reduced, you will not be able to do that, Hence, you have difficulties getting the loan, even if that was previously approved.

Banks always have such provisions in their loan agreements..



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently onlineMEA-707 From Netherlands, joined Nov 1999, 4358 posts, RR: 35
Reply 10, posted (6 years 1 month 1 week 4 days 23 hours ago) and read 19925 times:

I think even while it's a drag for Airbus and Boeing, it will also give some opportunities to iron some of the long backlogs away, to offer more attractive packages to airlines and to cover delays of some programs and due to the Boeing strike.
You already see chain reactions in effect, airlines like Arik and Ethiopian who have to wait long for their 787s and so on, scoop up unwanted new and 2nd hand widebodies from the market.

And for instance with the 737, ATR or A-320; because of the long waiting time to get new airframes in the boom era 2006-early 2008, they have lost some potential orders to a competitor or the second hand market, but now an airline can select fresh and ready made frames which are not taken up by Kingfisher, Skybus, XL and others and this way, they gain long term operators of their aircraft families (replacing the ceasing airlines partially).
I am sure they have a list in file of customers who would (still) be interested in earlier delivery positions and who they can approach with offers they can't refuse, as only 5 months ago many airlines whined they couldn't get the planes they wanted soon enough.
The thing which will be pushed out of the market in this downturn even quicker are the older aircraft like MD-80s, 737-3/4/500s etc while the production levels of new aircraft will not grow as much as they thought, but at least stabilize as the backlogs are still big, even when a third gets cancelled.



nobody has ever died from hard work, but why take the risk?
User currently offlineSU From Russia, joined Apr 2004, 360 posts, RR: 2
Reply 11, posted (6 years 1 month 1 week 4 days 23 hours ago) and read 19921 times:



Quoting MEA-707 (Reply 10):
I think even while it's a drag for Airbus and Boeing, it will also give some opportunities to iron some of the long backlogs away, to offer more attractive packages to airlines and to cover delays of some programs

Can't agree with you more

Quoting PanHAM (Reply 9):
you have to service the loan from the income, the cash flow your investment generates. If that income is no longer there, or reduced, you will not be able to do that, Hence, you have difficulties getting the loan, even if that was previously approved.

That's finance 101 - I would think airline executives would be more careful in today's economy placing an order without proper calculation of risks.



"Life is too short to take it serious..."
User currently onlinePanHAM From Germany, joined May 2005, 9734 posts, RR: 31
Reply 12, posted (6 years 1 month 1 week 4 days 23 hours ago) and read 19920 times:



Quoting SU (Reply 11):
That's finance 101 - I would think airline executives would be more careful in today's economy

well, you asked.

Have you seen larger orders in the past 4 weeks? OK, AA with their 787 but that' was long time awaited and they need the metal to replace ageing 767s, high time to do that .

The white tails which are speculated here have been ordered in boom times, now we have a set-back and there will be boom times again.

Ordering aircraft is a bit different than re-stocking super market shelfs.



Es saugt und blaest der Heinzelmann wo Mutti sonst nur blasen kann. Frueher war mehr Lametta.
User currently offlineSxf24 From United States of America, joined Aug 2007, 1262 posts, RR: 0
Reply 13, posted (6 years 1 month 1 week 4 days 22 hours ago) and read 19923 times:

Boeing has publicly said it will not build any white tails. I would expect rates to be reduced instead.

User currently offlineImag From United Kingdom, joined Feb 2007, 197 posts, RR: 0
Reply 14, posted (6 years 1 month 1 week 4 days 22 hours ago) and read 19921 times:



Quoting EmiratesUK (Reply 5):
Ummm, I think you can remove SA from being a stable airline!! with their current financial position I dont think they can be included in this list!!

They're stable. The government just keeps giving them more money.... Big grin


User currently offlineNA From Germany, joined Dec 1999, 10816 posts, RR: 9
Reply 15, posted (6 years 1 month 1 week 4 days 21 hours ago) and read 19922 times:



Quoting Zkpilot (Reply 7):
I doubt we will see any 77W whitetails as they are in high demand with a backlog. Sure other aircraft are backlogged also but replacing a 737 with a newer 737 doesn't quite have the same cost saving effect as replacing a 744 with a 77W!

Not on a one to one basis, but percentage wise I doubt there is any considerable difference. Also there are many more old 737s out there which need to be replaced than old 747s. A 77W on the other hand costs 150 million bucks more than a 15 year old 744, big money, not to speak of the fact it doesn´t hold as many pax. A 19 year old 744 still represents value, and a cash-stricken airline might think its wiser to keep it rather than paying 230 million they don´t have for a new 77W, especially as fuel prices are down, and unless the economy is getting better soon, it won´t rise to the crazy heights of last July in near term, making a 744 again interesting. Also lets see if we see a 777 operator go belly up soon. I´m sure there will be some 777s in the desert too. There were a number after 9/11, so why not now as the first are dumped even on a regular basis (by CX, SQ, Emirates, China Southern) ?


User currently offlineBramble From , joined Dec 1969, posts, RR:
Reply 16, posted (6 years 1 month 1 week 4 days 21 hours ago) and read 19924 times:



Quoting Zkpilot (Reply 7):

There could be some pretty good bargains out there for airlines in a strong financial position...

Look at the highway robbery Ryanair got away with in 2001-2003. They still have incoming aircarft from that order on the books. 737-800: 166 in service, 138 still on order.


User currently offlineSU From Russia, joined Apr 2004, 360 posts, RR: 2
Reply 17, posted (6 years 1 month 1 week 4 days 21 hours ago) and read 19921 times:



Quoting PanHAM (Reply 12):
Have you seen larger orders in the past 4 weeks

Just because there were no big orders in the past 4 weeks - it doesn't mean there will be many white tails soon...

I still believe this is just a panic and analysts/media exaggeration...



"Life is too short to take it serious..."
User currently offlineSunriseValley From Canada, joined Jul 2004, 5216 posts, RR: 5
Reply 18, posted (6 years 1 month 1 week 4 days 21 hours ago) and read 19921 times:



Quoting KC135TopBoom (Reply 4):
that have arranged to lease new airliners from GE, IFLC, and other leasing companies

I wonder how the AIG debacle will affect it's IFLC subsidiaries ability to raise funds at low enough interest rates to cover off the lease commitments they have and make a profit.


User currently offlinePlanesNTrains From United States of America, joined Feb 2005, 5792 posts, RR: 28
Reply 19, posted (6 years 1 month 1 week 4 days 18 hours ago) and read 19923 times:



Quoting SU (Reply 11):
That's finance 101 - I would think airline executives would be more careful in today's economy placing an order without proper calculation of risks.

My wife has worked for the same company for 25 years. They are in restaurants, and just opened a new location. Despite their size (30+ locations) and financial health, they have yet to be able to secure financing for the new restaurant. Going into it, they probably had two choices - not move forward, or move forward and hope the markets loosen up, and they chose the latter. The family has enough money to carry it, but I think the current credit crisis is deeper than many people realize, and while past practices or agreements may have been in place and fine, it all changed relatively quickly.

Anyhow, I think the problem is more acute for the airlines, because it seems that they quite often are arranging financing closer to delivery day, and this can make it a challenge when the economy/crediit markets turn south.

-Dave



Next Trip: SEA-ABQ-SEA on Alaska
User currently offlineMarky From United Kingdom, joined Nov 2003, 215 posts, RR: 0
Reply 20, posted (6 years 1 month 1 week 4 days 18 hours ago) and read 17541 times:



Quoting Planesarecool (Reply 8):
Probably more like a deposit system similar to how we might book holidays. Part fee upon ordering, pay the rest closer to/on delivery.

Thats pretty much correct, deposit on ordering, balance at delivery. Often airlines will order and pay the deposit, and then before delivery arrange financing through a bank or leasing company, so the finance company will pay the balance and own the aircraft and then lease it to the original airline.


User currently offlineEBJ1248650 From United States of America, joined Jun 2005, 1932 posts, RR: 1
Reply 21, posted (6 years 1 month 1 week 4 days 18 hours ago) and read 17451 times:



Quoting SU (Reply 17):
I still believe this is just a panic and analysts/media exaggeration...

You may be very close to the truth. Time will tell.



Dare to dream; dream big!
User currently offlineYyzflyboy From Canada, joined May 2007, 32 posts, RR: 0
Reply 22, posted (6 years 1 month 1 week 4 days 17 hours ago) and read 17236 times:



Quoting KC135TopBoom (Reply 4):

Well, where is CX or SQ?


User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9803 posts, RR: 52
Reply 23, posted (6 years 1 month 1 week 4 days 17 hours ago) and read 17106 times:

Financing normally doesn't get lined up until 6 months before delivery, yet orders are made years in advance.

Quoting Sxf24 (Reply 13):
Boeing has publicly said it will not build any white tails. I would expect rates to be reduced instead.

Yes Boeing has stated that it won't build white tails, but Boeing can self finance planes. Boeing Capital Corporation has billions to act as a financer. In the past BCC has financed less popular planes like the 717 and late generation 757s since finance companies didn't want to be stuck with a plane with no resale market. However, BCC might end up financing 777s and 737s.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineBEYauty From Lebanon, joined Aug 2005, 163 posts, RR: 0
Reply 24, posted (6 years 1 month 1 week 4 days 16 hours ago) and read 15475 times:

I work for one of the largest banks in the Arabian Gulf, and we were approached by LH not long ago to finance some of their Airbus aircraft on order which will be delivered in the next few months. When I started talking to LH about it a few months ago, my bank was somewhat eager to do the deal, however now, it's a totally different story. My bank has backed off, and it doesn't look like we have the appetite to finance $100 + million per aircraft. It totally sucks because I was really excited about starting the relationship and closing the deal. Now I wonder how and where LH will be getting their funding, as most banks in the region are in the same situation as my bank.

25 FrmrCAPCADET : It does not strike me as a bad thing to see airframe orders and deliveries slow down a bit. I suspects that accomodations will be made on all sides.
26 Post contains links Breiz : Airbus reports 119 cancellations so far in 2008. http://afp.google.com/article/ALeqM5i1Pzz4bYZC5nAgNsyrE-Vkwx5oNw How many for Boeing?
27 Astuteman : Although none of these have manifestly become "whitetails" yet.... Rgds
28 Post contains links Sxf24 : I think 2. There have Boeing has reported 2 cancellations this year. http://active.boeing.com/commercial/orders/index.cfm
29 Alessandro : I wonder how many used airplanes A and B owns which they can´t sell?
30 Tdscanuck : Boeing has already said they're pumping cash into Boeing Capital Corp to address exactly this problem, and I have to assume Airbus has something simi
31 SkyyKat : If an airline has the ability to leverage a 77W, they are building equity and making profit. Building equity and making profit on a 77W makes more se
32 Breiz : Funny. However, when a plane enters the assembly process, it has only 3 possibilities: - to be delivered as planned, - to be re-assigned to a new wil
33 Ruscoe : and last I heard 80 deferrals. Ruscoe
34 Post contains links RoseFlyer : I hope airframe orders and deliveries don't slow down because if they do, I might lose my job. That big backlog is what is keeping Boeing going throu
35 Jbernie : The big question is which airlines are hurting the most and where do they stand in the queue for their orders? If an airline is hurting but they are #
36 FrmrCAPCADET : Actually overtime would be the first to see any slowdown. But making up for 2 months of strike will keep everyone busy for many months. And steady pr
37 Ikramerica : If oil stays low (squeezing budgets in the region), and the overall world economy slows, I'm not sure how having a huge backlog of ME carriers is any
38 Flyglobal : Wonder your managements decisison too. The question rises: will they allow any finances these days? If a rather blue chip airline is rejected whom el
39 EK413 : Hmmm, AA and DL/NW...? Not so sure about a US carrier belonging in the "stable" column... Deposits paid when an order is placed and final payment upo
40 NCB : I don't think that we would see any parked white tails from A or B. Air One has a huge order for A320's and they can't wait to put their hands on them
41 Woodsboy : It doesnt seem like there is an understanding of just what the credit crisis is here. It does not matter at all if the company has good credit or alre
42 Tdscanuck : Boeing's financial footing regarding cash is pretty darn good, at least according to their last balance sheet. If they have a customer who is solvent
43 Astuteman : Yup. And as far as I can see, Airbus has managed to re-assign every one of the 119 slots which have been cancelled in 2008 (bearing in mind that many
44 BEYauty : I handle all sort of corporate and commercial finance, although recently it has been primarily real estate based, we have slowed that down too. As fa
45 Plobax : Dubai ?
46 Euclid : As Imag said in reply 14 as well, as long as the government have one of their own "comrades" in charge of SAA they'll rather keep pumping money into
47 Frigatebird : Why? Boeing produces less 737's than Airbus does A320's, and it's backlog is equally huge. Many years of production left for both types... I do think
48 Astuteman : IIRC it's about 2 600 for the A32X vs 2 100 for the 737.. Rgds
49 NCB : Let's put it simply... except for FlyDubai, that will have no issues securing funding for the 737's, the 737 has only few reliable buyers, none of th
50 Tdscanuck : Boeing has 30 737 orders from Air China, 55 from China Southern, and 25 from Xiamen...that would qualify the Chinese airlines as a "huge" customer. Y
51 Gsosbee : First of all I suspect that in the end, Boeing will have more than 2 cancellations. They have had that many in the good years. Banks lending the money
52 Frigatebird : Thanks. That would mean about 5 years of production for both types, doesn't it? If Airbus is going through with their plans for an output of 40 a mon
53 MEA-707 : True ! If you look at the current 737 order book, for sure some deliveries will be cancelled or delayed. Most of the big orders are soft, let me anal
54 WorldTraveler : let's keep in mind that alot of airlines just don't want to take delivery of near as many aircraft as they had on order... the global financial crisis
55 Alessandro : So Boeing got 27 planes in stock right now, including 16 new B717s. Others seem to be 2nd hand ones.
56 NCB : Spot on, the leasing market has shrinked considerably: rates are diving, availability increasing, etc... Lessors are holding on to their cash and I s
57 Revelation : It seems the headline writer sensationalized what the article really is saying. There's a big difference between saying 200 planes won't have buyers
58 Art : I agree with Revelation that once a customer fails to take delivery of an aircraft due to credit problems, the rest of the order will be postponed. I
59 Ikramerica : Yes, but deferrals aren't cancelations. Especially China. Even if they don't have as much international growth as they expect, they are still going t
60 Flygirl83 : Does anyone know what happens to the airline if they have to cancel a delivery? Do they lose the deposit money that they had paid up-front? If so, how
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