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BA Asks For A Delay On 787 Payment  
User currently offlineKl911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Posted (5 years 3 months 4 weeks 13 hours ago) and read 8746 times:

http://online.wsj.com/article/SB124889252624990979.html

Quote:

British Airways PLC is pressing Boeing Co. to renegotiate installment payments on 787 Dreamliners the carrier has ordered -- a money-saving effort that highlights a new headache for airlines and plane makers amid the credit crunch and plunging air traffic.

BA Chief Executive Willie Walsh said in an interview in London he is seeking to delay cash payments that all airlines make to Boeing and its European rival Airbus as new planes are being built.

The move is the latest in a series of setbacks for Boeing. Its 787 Dreamliner was originally supposed to enter service in May 2008 but is now running more than two years late after a series of supply and production glitches

35 replies: All unread, showing first 25:
 
User currently offlineKaitak From Ireland, joined Aug 1999, 12565 posts, RR: 35
Reply 1, posted (5 years 3 months 4 weeks 13 hours ago) and read 8739 times:

Given the delays Boeing has imposed on airlines, I don't see how they can refuse ... and they certainly won't refuse BA.

By the way, does anyone know when BA's first 77W is due to arrive?


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 2, posted (5 years 3 months 4 weeks 12 hours ago) and read 8724 times:

The article also states that Boeing needs the pre-payments to pay it's staff and subcontractors.
How will this hurt Boeing? Pre-payments are normally about 30% of the price, so quite a lot of money.


User currently offlineBabybus From , joined Dec 1969, posts, RR:
Reply 3, posted (5 years 3 months 4 weeks 11 hours ago) and read 8564 times:

I wouldn't worry if I was BA, the answer is a most definite 'Yes'.

You can't expect one of your most loyal companies to walk to the brink of bankruptcy so you can pay off your debts on a plane not even nearly ready.

BA will probably enjoy compensation payments from Boeing. Every little helps to the balance sheet.


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 4, posted (5 years 3 months 4 weeks 6 hours ago) and read 8171 times:



Quoting Babybus (Reply 3):
BA will probably enjoy compensation payments from Boeing. Every little helps to the balance sheet.

And Boeing wants compensation from BA for not being able to pay the deposit..

Quoting Babybus (Reply 3):
You can't expect one of your most loyal companies to walk to the brink of bankruptcy so you can pay off your debts on a plane not even nearly ready.

Ha, and all your subcontractors will agree with that? That's not how it works in this world.


User currently offlineFlyglobal From Germany, joined Mar 2008, 595 posts, RR: 3
Reply 5, posted (5 years 3 months 4 weeks 5 hours ago) and read 8013 times:

BA is asking for a change in rules of how airplanes are paid. Kind if according to build progress with advanced payment today towards a lump sum at time of delivery.

Whatever comes out: it's cost saving will have to be balanced against discounts or other benefits the manufacturer agreed with the airline at the end.

I do not believe that either Boeing or Airbus will agree to such a fundamental change w/o any compensation of the the cost for the manufacturer or even just would eat it up.
BA wants to save money, but any saving they would achieve would increase the cost at the manufacturer. Simply: what BA saves on financing cost, the manufacturer has to bear and finance loans for it and has cost with it. So the pp proposal is nothing else then to move cost from Airline to manufacturer.

I do not think that this leads to anything then a +/- 0 game at the end of all cost balancing.

With the continuous stream of new planes at large airlines it may even not help temporary (save today and pay later) as any time there would be planes at start, middle and end of build. so in the beginning 30% payment cost saved for a plane just to start, at the end a higher price tag to be paid for the plane in latest stage.

Not sure if this proposal will lead to anything.

regards

Flyglobal

[Edited 2009-08-02 11:47:33]

User currently offlineBA777ER236 From United Kingdom, joined Sep 2006, 278 posts, RR: 8
Reply 6, posted (5 years 3 months 4 weeks 5 hours ago) and read 7994 times:



Quoting Kaitak (Reply 1):
By the way, does anyone know when BA's first 77W is due to arrive?

Depending on which source you believe, it is either June 2010 or August, but definitely mid next year.

Cheers
 Smile



Flying would be easy if it wasn't for the ground
User currently offlinePar13del From Bahamas, joined Dec 2005, 7498 posts, RR: 8
Reply 7, posted (5 years 3 months 4 weeks 4 hours ago) and read 7943 times:



Quoting Flyglobal (Reply 5):
BA is asking for a change in rules of how airplanes are paid. Kind if according to build progress with advanced payment today towards a lump sum at time of delivery.

This would imply that they are also approaching Airbus for the A380's on order, but the article does not mention that, so I'll take the approach of a quid pro quo. BA may be due compensation if their 787's are late, so attempt to offset that against the pending payments.


User currently offlineStitch From United States of America, joined Jul 2005, 31259 posts, RR: 85
Reply 8, posted (5 years 3 months 4 weeks 4 hours ago) and read 7933 times:
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With BA recently posting a loss and having to cut some domestic amenities to try and balance the books, even if the 787 wasn't late, I would not be surprised if they asked Boeing if they can defer some payments to help conserve cash.

I would also be surprised if BA was the only airline asking Boeing (and Airbus) for such slack.


User currently offlineBritPilot777 From United Kingdom, joined Apr 2004, 1075 posts, RR: 2
Reply 9, posted (5 years 3 months 4 weeks 4 hours ago) and read 7874 times:



Quoting Kaitak (Reply 1):
By the way, does anyone know when BA's first 77W is due to arrive?

August 2010 IIRC



Forever Flight
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 10, posted (5 years 3 months 4 weeks 2 hours ago) and read 7587 times:



Quoting Stitch (Reply 8):
With BA recently posting a loss and having to cut some domestic amenities to try and balance the books, even if the 787 wasn't late, I would not be surprised if they asked Boeing if they can defer some payments to help conserve cash.

I would also be surprised if BA was the only airline asking Boeing (and Airbus) for such slack.

With the trouble BA ( and others) are in, is it possible they would delay or cancel the 787 at all? This doesn't look good, and it's serious enough to alarm the market monday morning. Sad times.... Sad


User currently offlineDavid_itl From United Kingdom, joined Jun 2001, 7415 posts, RR: 13
Reply 11, posted (5 years 3 months 4 weeks 1 hour ago) and read 7403 times:
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Quoting KL911 (Reply 10):
is it possible they would delay or cancel the 787 at all?

Boeing's looking after the delaying part  Wink


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 12, posted (5 years 3 months 4 weeks 1 hour ago) and read 7367 times:



Quoting David_itl (Reply 11):
Boeing's looking after the delaying part

Haha, right....! I did mean delay in taking the plane....  Smile


User currently offlineKen777 From United States of America, joined Mar 2004, 8433 posts, RR: 9
Reply 13, posted (5 years 3 months 4 weeks 1 hour ago) and read 7304 times:

This is a pretty good time for Boeing to rework some of the contracts they have with airlines.

I can see an agreement where BA gets relief and Boeing gets out of paying compensation for their delays. Works well for both companies and a good template for working with other airlines.

Between that type of agreement and rescheduling of deliveries Boeing might get through this economic period in better shape than anticipated.


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 14, posted (5 years 3 months 4 weeks 1 hour ago) and read 7295 times:



Quoting Ken777 (Reply 13):
I can see an agreement where BA gets relief and Boeing gets out of paying compensation for their delays. Works well for both companies and a good template for working with other airlines.

True, but if other airlines follow Boeing will be out of cash soon, and have a big problem with subcontractors. I think it will be a one off deal. Both can't afford to loose in this climate.


User currently offlineStitch From United States of America, joined Jul 2005, 31259 posts, RR: 85
Reply 15, posted (5 years 3 months 3 weeks 6 days 22 hours ago) and read 6753 times:
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Quoting KL911 (Reply 14):
True, but if other airlines follow Boeing will be out of cash soon, and have a big problem with subcontractors. I think it will be a one off deal. Both can't afford to loose in this climate.

Boeing makes more money delivering 737s, 767s, and 777s then they do on progress payments for 787s. Within a year they'll also be delivering 747s again, as well.

Plus there are all the other programs Boeing generates revenues and incomes from.

Trust me, cutting customers some slack on 787 pre-delivery payments is not going to cripple Boeing's cash flow.  Wink


User currently offlineMax Q From United States of America, joined May 2001, 4751 posts, RR: 18
Reply 16, posted (5 years 3 months 3 weeks 6 days 22 hours ago) and read 6502 times:

Well, they did it for Continental.


While we're on the subject of BA what happened to their cash position ?


It seems perilously low,



The best contribution to safety is a competent Pilot.
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 17, posted (5 years 3 months 3 weeks 6 days 7 hours ago) and read 4442 times:



Quoting Stitch (Reply 15):
Trust me, cutting customers some slack on 787 pre-delivery payments is not going to cripple Boeing's cash flow.

No? Pre delivery payments are 30-50 percent of the cost of a new plane. If all carriers do this for every plane, Boeing will have a big problem. And BA is nowhere as big a customer as EK, SQ,WN, FR etc etc


User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 18, posted (5 years 3 months 3 weeks 6 days 7 hours ago) and read 4442 times:

And BA stock is up 3%, what a strange world.....  Smile

User currently offlineIkramerica From United States of America, joined May 2005, 21562 posts, RR: 59
Reply 19, posted (5 years 3 months 3 weeks 6 days 6 hours ago) and read 4425 times:



Quoting Max Q (Reply 16):
Well, they did it for Continental.

Did what? What's "it"? What is it...



Of all the things to worry about... the Wookie has no pants.
User currently offlineNomadd22 From United States of America, joined Feb 2008, 1896 posts, RR: 0
Reply 20, posted (5 years 3 months 3 weeks 6 days 6 hours ago) and read 4391 times:

Boeing carries a lot of debt at 6% or so. BA is actually asking for an interest free loan from a company that has to pay for their money. Saying that it won't hurt Boeing because they make money somewhere else shows an interesting business attitude.
Boeing isn't in the welfare business.



Andy Goetsch
User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 21, posted (5 years 3 months 3 weeks 6 days 6 hours ago) and read 4382 times:



Quoting KL911 (Reply 17):
And BA is nowhere as big a customer as EK, SQ,WN, FR etc etc

You think not? In which case they do a hell of a job of courting them when an aircraft order is possible.

Quoting Par13del (Reply 7):
This would imply that they are also approaching Airbus for the A380's on order, but the article does not mention that,

Whilst it may indeed be so, it doesn't automatically imply any such thing at all.......so that could be a reason why the article doesn't mention it.


User currently offlineShankly From United Kingdom, joined Jan 2000, 1547 posts, RR: 1
Reply 22, posted (5 years 3 months 3 weeks 6 days 6 hours ago) and read 4361 times:

This is interesting as it now prompts me to ask a question I should probably know the answer to but don't: How are airplanes paid for?

I spend my daily life in property and there are a thousand and one ways that land and buildings can be procured, purchased and paid for.

Are planes simple?, e.g 20% down, balance on handover, or are their contract arrangements and payment profiles as complex as property?

BTW in asking this question I am putting aside the issue of raising finance



L1011 - P F M
User currently offlineKL911 From Czech Republic, joined Jul 2003, 5260 posts, RR: 15
Reply 23, posted (5 years 3 months 3 weeks 6 days 6 hours ago) and read 4338 times:



Quoting Shankly (Reply 22):
This is interesting as it now prompts me to ask a question I should probably know the answer to but don't: How are airplanes paid for?

There is an interesting part halfway the WSJ article mentioned in the 1st post.


User currently offlineStitch From United States of America, joined Jul 2005, 31259 posts, RR: 85
Reply 24, posted (5 years 3 months 3 weeks 6 days 4 hours ago) and read 4158 times:
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Quoting KL911 (Reply 17):
No? Pre delivery payments are 30-50 percent of the cost of a new plane.

That is what they'll tell you on the Boeing and Airbus plant tours (1/3rd due at signing, 1/3rd paid during production and 1/3rd paid on delivery), but the truth of the matter is the significant bulk of monies are handed over at delivery.


25 KL911 : Can you show proof? I don't believe it. Sorry.
26 Stitch : No I cannot, because I am not at liberty to show the Purchase Contracts I have been made privy to. No skin off my nose. Nor Boeing's or Airbus', for
27 KL911 : Lol, ok, never mind...
28 United1 : I'm not privy to any contracts or inside information on this but I believe I remember reading/hearing its somewhere around 5% at signing 10% during p
29 Mutu : Well just for the record, it CAN make the payments. It has committed non cancellable lines available specifically for the 380 773 and 787 deliveries.
30 VV701 : When BA takes delivery of the 787s it has ordered two things change for the airline. First the financing BA has arranged for the purchase comes into
31 Max Q : Well, if you remember, shortly after Bethune took over Cal and we were facing yet another bankruptcy he was able to help avert it by persuading Boein
32 Bennett123 : IMO, given that Boeing were supposed to get the B787 into service last year, and can not say yet when they will even get into the air, they are not in
33 Ken777 : My fading memory seems to remember that Boeing was going with a $1 Million refundable deposit in 787 sales. Very few airlines have anything to loose
34 Ikramerica : Uh, most people wouldn't remember something that happened 15 years ago. Also, didn't Bethune also commit to huge orders for Boeings and dropping Airb
35 Max Q : Bethune did commit to a huge Boeing order and dropped all the Airbuses. He also got the best possible deal for all future Boeing deliveries. Being ab
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