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787 And A350 Final Prices  
User currently offlinepanais From Cyprus, joined May 2008, 446 posts, RR: 0
Posted (3 years 11 months 2 weeks 3 days 2 hours ago) and read 14780 times:

The 787-8 has a list price of $161.0 - $171.5, the 787-9 $194.0 -$205.5 while the A350-800XWB $225.2 and the A350-900XWB $254.5. (Prices at million USD)

I know that final price is a guarded secret but does anyone has any idea or empirical evidence as to what is the price that airlines actually pay for them?

23 replies: All unread, jump to last
 
User currently offlinekaitak From Ireland, joined Aug 1999, 12323 posts, RR: 35
Reply 1, posted (3 years 11 months 2 weeks 3 days 2 hours ago) and read 14736 times:

I always think these list prices are completely meaningless, because the only people likely to pay anything near to these prices are people who would order them as VIP aircraft and even then, they may play one against the other. However, when you get to the big carriers, it's a different ball game. Most of what you hear about the unit prices are guesswork by the media and analysts, because neither the airlines nor Airbus/Boeing divulge what the actual unit prices are; however, I have heard that discounts of up to a quarter or even a third are not unusual.

It does of course depend on the market at the time; if a particular aircraft - like the 777 or 330 - is selling like hotcakes, the discount is likely to be lower than if there is a downturn and manufacturers are scrabbling for any order they can get.


User currently offlineChiad From Norway, joined May 2006, 1079 posts, RR: 0
Reply 2, posted (3 years 11 months 2 weeks 2 days 21 hours ago) and read 14234 times:

Quoting kaitak (Reply 1):
I always think these list prices are completely meaningless, because the only people likely to pay anything near to these prices are people who would order them as VIP aircraft and even then, they may play one against the other. However, when you get to the big carriers, it's a different ball game. Most of what you hear about the unit prices are guesswork by the media and analysts, because neither the airlines nor Airbus/Boeing divulge what the actual unit prices are; however, I have heard that discounts of up to a quarter or even a third are not unusual.

It does of course depend on the market at the time; if a particular aircraft - like the 777 or 330 - is selling like hotcakes, the discount is likely to be lower than if there is a downturn and manufacturers are scrabbling for any order they can get.

And in addition come service, spare-parts, training, engines and probably another 100 other things which is not a part of the initial price list.


User currently offlinetrex8 From United States of America, joined Nov 2002, 4493 posts, RR: 14
Reply 3, posted (3 years 11 months 2 weeks 2 days 18 hours ago) and read 13843 times:
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from CIs website, investor relations, annual report 2008, page 27

Contract price for 14 firm A359 orders US$3.933 billion , options for 6 A359 US$1.802billion US$119 million paid already to Airbus by end of 08.

if you go thru their earlier years you will also see the prices they paid for their A333s and 744Fs and while they don't say what the contract prices include they were all near "list prices"


User currently offlineChiad From Norway, joined May 2006, 1079 posts, RR: 0
Reply 4, posted (3 years 11 months 2 weeks 2 days 14 hours ago) and read 11151 times:

Quoting trex8 (Reply 3):
Contract price for 14 firm A359 orders US$3.933 billion , options for 6 A359 US$1.802billion US$119 million paid already to Airbus by end of 08.

That would mean a list price of some $280 million per plane.
The A350-900 list price (according to Wiki) is some $240 million.
So the China Airlines contract clearly includes more than just the frames.


User currently offlineCFBFrame From United States of America, joined May 2009, 531 posts, RR: 3
Reply 5, posted (3 years 11 months 2 weeks 2 days 12 hours ago) and read 9975 times:

Are there really discounts, or does the list price reflect an all-in cost to the buyer? So the airline may buy engines and other parts on their own, and those purchases end up costing the airline somewhere close to list price? So an airline may get a discount for quantity purchases and that coupled with the independent buys may make it appear there is a significant discount? I may be wrong but having been a supplier, the prices we offered were not discounted 20% and higher so I don't know how the airframer made up for any type of discount?

User currently offlinebrilondon From Canada, joined Aug 2005, 4058 posts, RR: 1
Reply 6, posted (3 years 11 months 2 weeks 2 days 12 hours ago) and read 9468 times:

Quoting kaitak (Reply 1):
I always think these list prices are completely meaningless, because the only people likely to pay anything near to these prices are people who would order them as VIP aircraft and even then, they may play one against the other. However, when you get to the big carriers, it's a different ball game. Most of what you hear about the unit prices are guesswork by the media and analysts, because neither the airlines nor Airbus/Boeing divulge what the actual unit prices are; however, I have heard that discounts of up to a quarter or even a third are not unusual.
Quoting Chiad (Reply 2):
And in addition come service, spare-parts, training, engines and probably another 100 other things which is not a part of the initial price list.

Its kind of like buying a car. You don't even know what the final price is until you consider all of the borrowing costs that are associated with the purchase. Also as mentioned above there are dozens of different factors that figure into the price of the airliner even the airline won't know what the eventual final cost is of acquiring the aircraft. I addition to the costs of the plane there is also the costs of the power plants and any additional costs associated with that as well.

So as you can see the only way of comparing the purchase price of aircraft is really just a guess using list costs.



Rush for ever; Yankees all the way!!
User currently offlineuaeflyer From United Arab Emirates, joined Nov 2006, 961 posts, RR: 0
Reply 7, posted (3 years 11 months 2 weeks 2 days 12 hours ago) and read 9375 times:

Emirates gets discount in almost all their orders, i heard from a source working for EK, that they got close to 50% discount on some of the A380s they ordered, in addition to the penalties paid by Airbus due to the delays.
The only place where you will pay what is listed would be the grocery. In business you will always look for a barging price.


User currently offlineCFBFrame From United States of America, joined May 2009, 531 posts, RR: 3
Reply 8, posted (3 years 11 months 2 weeks 2 days 8 hours ago) and read 7131 times:

Quoting uaeflyer (Reply 7):
Emirates gets discount in almost all their orders, i heard from a source working for EK, that they got close to 50% discount on some of the A380s they ordered, in addition to the penalties paid by Airbus due to the delays.

That makes sense. EK got penalty payments which does reflect in a lower per unit selling price. And those are only for the frame portion of the equation. The associated equipment had to be very close to list; reason being, second tier suppliers had so much carrying cost due to delays that they would have no way of offsetting the costs. And, you can't fly the a/c without engines? EK will also pay through the nose for aftermarket support. Somewhere the secondary suppliers will make up the loss, but not on the airframer side.

I bet the A380 is a terrible example for a discount analysis because there are so few that owners will pay through the nose for any aftermarket support. Not having a large worldwide fleet to spread the cost will mean additional ongoing operating expenses. Discounts/penalty payments may have reduced the upfront costs, but long term ownership will be high.

Quoting uaeflyer (Reply 7):
The only place where you will pay what is listed would be the grocery. In business you will always look for a barging price.

And that's if and only if there is enough volume that suppliers are willing to negotiate. Buy something rare, try to get it fixed, and see if your theory holds true.


User currently offlinekanban From United States of America, joined Jan 2008, 3212 posts, RR: 26
Reply 9, posted (3 years 11 months 2 weeks 2 days 6 hours ago) and read 6237 times:
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Customers who haggle and buy in bulk get break on the airframe, they also may get a break on engines. However there are quite a few options, including interiors and exterior paint that affect the price so there is no single price only a range.

User currently offlineSSTsomeday From Canada, joined Oct 2006, 1276 posts, RR: 1
Reply 10, posted (3 years 11 months 2 weeks 2 days 6 hours ago) and read 5917 times:

I recall the KSS Group (KLM, Sabena, Swissair) cooperation existed in order to collaborate (and save money) in the areas maintenance, training, certification, as well as buying A/C in bulk. If you buy 15 A/C you are more likely to get a higher discount than if you buy 5.

Further, there must be many other factors that affect price, in addition to maintenance and support offered by the manufacturer and its affiliates after the fact, such as:

1) If you buy so many "787s," we will give you a deal on "777s."

2) I believe that launch customers are accustomed to more discounting because they assume higher risk, and the first A/C off the assembly lines do not end up being the best ships.

3) The state of the economy.

4) Whether we are in a buying cycle.

5) The backlog vs the number of orders in the books

6) the value of the dollar and of the local currency, or of the Euro.

7) Is the type becoming long in the tooth. (How long has it been around.)

8) How badly does the airline need that particular type?

But, as was said, there must be many reasons; these are just guesses off the top of my head.



I come in peace
User currently offlinewn700driver From , joined Dec 1969, posts, RR:
Reply 11, posted (3 years 11 months 2 weeks 2 days 3 hours ago) and read 4439 times:

Quoting uaeflyer (Reply 7):
i heard from a source working for EK, that they got close to 50% discount on some of the A380s they ordered, in addition to the penalties paid by Airbus due to the delays.

Ok, I'm going to call BS on that. Here are a few things to consider...

A.First of all ( http://www.reuters.com/article/idUSL303548620080430 ), there is acknowledgement that they received far less than that percentage off as a delay penalty. The figure discussed here works out to .06% of the order's value, based on the 58 frame order they placed.
I know that this is an old article, and likely more penalties were accepted. But I'm sure they won't more than double that. If Airbus is only willing to take that much off for a two year delay, it's difficult to imagine they would go much further than 10-15% off for the total order in the first place.

B. Common sense. Neither Airbus nor Boeing price the frames they way they do for the fun of it. Something the size of the A380 will have a tremendous materials, processing and assembly cost. I very much doubt you can fabricate a 388 for much less than about 80-85% of the list price. This is not a Toyota; EADS can hardly give away aircraft just to please a customer, or sell an order. Remember, this is an Aircraft that has no competing model at this time.


I think there's no doubt that EK, SQ, and most other users of the 380 have/will get a hefty price reduction. But 50%? Put the zero on the other side and you're probably a lot closer to the truth. . .


User currently offlineCFBFrame From United States of America, joined May 2009, 531 posts, RR: 3
Reply 12, posted (3 years 11 months 2 weeks 2 days 2 hours ago) and read 4322 times:

Quoting wn700driver (Reply 11):
I think there's no doubt that EK, SQ, and most other users of the 380 have/will get a hefty price reduction. But 50%? Put the zero on the other side and you're probably a lot closer to the truth. . .

No!!!! Isn't it like buying an IPOD at a bazaar? Can't you just write a price on a piece of paper and pass it back to the salesman and then just say, "not a penny more!!!" Really?


User currently offlinewn700driver From , joined Dec 1969, posts, RR:
Reply 13, posted (3 years 11 months 2 weeks 2 days 2 hours ago) and read 4292 times:

Quoting CFBFrame (Reply 12):
No!!!! Isn't it like buying an IPOD at a bazaar? Can't you just write a price on a piece of paper and pass it back to the salesman and then just say, "not a penny more!!!" Really?

Lol, I certainly wish. The might have some nice 321-200s you can look at though,  


User currently offlineSSTsomeday From Canada, joined Oct 2006, 1276 posts, RR: 1
Reply 14, posted (3 years 11 months 2 weeks 2 days ago) and read 4052 times:

Quoting wn700driver (Reply 11):
If Airbus is only willing to take that much off for a two year delay, it's difficult to imagine they would go much further than 10-15% off for the total order in the first place.

I don't see why the 380 would command less discounting than the 787 or 350.

50% seems unreasonably high, I agree. But considering that EK bought BY FAR the most frames, and are a launch customer, and are instrumental in getting the line moving in any appreciable way, I think ALL of that speaks to them probably getting the biggest discount of any airline for the type... up until now.

IMHO there is current pressure for Airbus to get more orders in the books, beyond what seems to now be most airlines initial quota for the foreseeable future. If ever there was pressure on Airbus to discount the 380, it's NOW. And the recession must be a motivting factor as well. Airbus needs to get the line moving faster (for profitability), but such acceleration of production can only be justified by a bigger backlog. It's a catch-22 situation.

More specifically to the thread, final prices may in and of themselves not reflect the whole story. What if a late-delivered A/C (say, a 380) officially retains it's original price, but the discounting is applied to the compensating 330 sale? I would suggest creative accounting and "packaging" makes it very hard for anyone to know what airlines are really paying. And this way, an airline cannot say: "Well, so-and-so paid this much, so WE want to pay this much."



I come in peace
User currently onlineastuteman From United Kingdom, joined Jan 2005, 9836 posts, RR: 96
Reply 15, posted (3 years 11 months 2 weeks 2 days ago) and read 3980 times:
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Quoting CFBFrame (Reply 5):
Are there really discounts, or does the list price reflect an all-in cost to the buyer?

The list price does indeed reflect the all-in acquisition cost to the buyer.

Quoting CFBFrame (Reply 5):
So the airline may buy engines and other parts on their own, and those purchases end up costing the airline somewhere close to list price? So an airline may get a discount for quantity purchases and that coupled with the independent buys may make it appear there is a significant discount?

In my opinion, you're exactly right. Subtract the separate engine contract, and CFI contracts, and suddenly the "discount" looks massive. I'd be astonished if, in reality, it was.
And of course, 4-holers will suffer in comparison as the engine costs are higher.  
Quoting wn700driver (Reply 11):
Neither Airbus nor Boeing price the frames they way they do for the fun of it.

Another comment I completely agree with. There HAS to be an underlying basis (e.g. cost + margin)

Quoting trex8 (Reply 3):
Contract price for 14 firm A359 orders US$3.933 billion , options for 6 A359 US$1.802billion US$119 million paid already to Airbus by end of 08.

And as these figures from Trex8 imply, even then, the initial acquisition cost is a LONG way from being the whole picture....

In summary, I don't think "list" price is a meaningless number..

But it might indeed be so in terms of trying to define either a) discount rates, or b) the total price associated with the contract and all its ancillaries.

Rgds


User currently offlineB777LRF From Luxembourg, joined Nov 2008, 1208 posts, RR: 3
Reply 16, posted (3 years 11 months 2 weeks 1 day 23 hours ago) and read 3972 times:

For what it's worth, and I don't know the list price, the lot I'm working for paid roughly 90 million USD each for an order of 6 Boeing 767, including engines. That was the first time we bought new from Boeing, and the order did not include any other aircraft or options.


From receips and radials over straight pipes to big fans - been there, done that, got the hearing defects to prove
User currently offlineStitch From United States of America, joined Jul 2005, 29686 posts, RR: 84
Reply 17, posted (3 years 11 months 2 weeks 1 day 16 hours ago) and read 3658 times:
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In the current climate, you can figure the actual contract price is less than 50% of the list price, if for no other reason the resale value of a brand new delivery is less than 50% of the list price.


CX provided a general price breakdown for their A330-300s and 777-300ERs. Including airframe, engines, avionics, seating and other ancillaries:

They pay $93 million for an A330-300, which is a 56% off the average 2010 list price of $212 million.

They pay $140 million for a 777-300ER, which is 49% off the average 2010 list price of $272 million.


User currently offlineLAXDESI From United States of America, joined May 2005, 5086 posts, RR: 48
Reply 18, posted (3 years 11 months 2 weeks 1 day 11 hours ago) and read 3350 times:

Quoting B777LRF (Reply 16):
For what it's worth, and I don't know the list price, the lot I'm working for paid roughly 90 million USD each for an order of 6 Boeing 767, including engines. That was the first time we bought new from Boeing, and the order did not include any other aircraft or options.

That's a nice discount from the $145-160 million list range for 763ER. 762ER's list range is $127-139 million.

Quoting Stitch (Reply 17):
CX provided a general price breakdown for their A330-300s and 777-300ERs. Including airframe, engines, avionics, seating and other ancillaries:

They pay $93 million for an A330-300, which is a 56% off the average 2010 list price of $212 million.

They pay $140 million for a 777-300ER, which is 49% off the average 2010 list price of $272 million.

I have no reason to doubt these numbers, but I am surprised at the level of discount CX received. Was this during a certain economic cycle, or is this the norm?


User currently offlineStitch From United States of America, joined Jul 2005, 29686 posts, RR: 84
Reply 19, posted (3 years 11 months 2 weeks 1 day 9 hours ago) and read 3224 times:
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Quoting LAXDESI (Reply 18):
I have no reason to doubt these numbers, but I am surprised at the level of discount CX received. Was this during a certain economic cycle, or is this the norm?

I believe it was from within the past 12 months.

And it probably is the norm, considering how much of the final flyable product is purchased through multiple contracts. I think the only reason Boeing and Airbus have a "List Price" is so that press releases have a figure to put on a deal, even if it bears no real relation to the actual price paid.

For example, in the data CX supplied, the actual airframe cost for a 777-300ER was $56 million, while the cost of the GE90-115B engines was $60 million. The cabin fittings ran $16 million, avionics another $4 million and the APU was $2 million.

For the A330-300, they gave an airframe cost of $43 million, $30 million for the engines, $12 million for the cabin, $3 million for the avionics, $2 million for the APU and $3 million for the landing gear.


User currently offlineruscoe From Australia, joined Aug 1999, 1517 posts, RR: 2
Reply 20, posted (3 years 11 months 2 weeks 1 day 9 hours ago) and read 3178 times:

Quoting Stitch (Reply 19):
I think the only reason Boeing and Airbus have a "List Price" is so that press releases have a figure to put on a deal, even if it bears no real relation to the actual price paid

The other reason is that it is used to value the contracted backlog, at list prices.
This obviously makes the balance sheet look much better.

Ruscoe


User currently offlineLAXDESI From United States of America, joined May 2005, 5086 posts, RR: 48
Reply 21, posted (3 years 11 months 2 weeks 1 day 8 hours ago) and read 3097 times:

Quoting Stitch (Reply 19):
For example, in the data CX supplied, the actual airframe cost for a 777-300ER was $56 million, while the cost of the GE90-115B engines was $60 million. The cabin fittings ran $16 million, avionics another $4 million and the APU was $2 million.

For the A330-300, they gave an airframe cost of $43 million, $30 million for the engines, $12 million for the cabin, $3 million for the avionics, $2 million for the APU and $3 million for the landing gear.

Thanks for the details. I need to save this information for future reference.


User currently offlinetrex8 From United States of America, joined Nov 2002, 4493 posts, RR: 14
Reply 22, posted (3 years 11 months 2 weeks 1 day 7 hours ago) and read 3027 times:
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one other issue someone else had described in previous pricing discussions on the engine pricing needs to be remembered, apparently its SOP for the airframe manufacturer to charge the airline "full price" for the engines and then the engine manufacturers essentially kick a rebate back to the airlines. accounting issues during the fiscal year for the engine OEM may make significant differences to the size of this rebate which may influence engine selection by the airlines

User currently offlinewn700driver From , joined Dec 1969, posts, RR:
Reply 23, posted (3 years 11 months 2 weeks 1 day 6 hours ago) and read 2985 times:

Quoting SSTsomeday (Reply 14):
I don't see why the 380 would command less discounting than the 787 or 350.

I don't either. I was just responding to an example posted further above. Airframes, of any make/model, are not items that can priced by econmoies of scale.

Quoting SSTsomeday (Reply 14):
More specifically to the thread, final prices may in and of themselves not reflect the whole story. What if a late-delivered A/C (say, a 380) officially retains it's original price, but the discounting is applied to the compensating 330 sale? I would suggest creative accounting and "packaging" makes it very hard for anyone to know what airlines are really paying. And this way, an airline cannot say: "Well, so-and-so paid this much, so WE want to pay this much."

I'm sure that's a big part of the story. For an airline to brag about getting x% off list would be very bad business in most cases, unless the framer sets the "list" price at least as high over actuall break-even as that airline got off. No matter what write-offs the 787, or A350 have or will have taken on R&D costs, there is no way to produce one (Safely) below a certain cost. And that's when it makes more sense to have an angry customer walk out than to get ridiculous on pricing. These aren't used cars after all!
As for package discounts, that sort of makes sense. I can see telling airline that they're paying 75% of list price for an order, provided they contract with that framer for MX, spares, tech support, etc... But even those items have break even numbers as well. After all, neither Boeing nor Airbus has yet found a way to conjure up spares out of fat air. So if they can do that effectively, good. Otherwise, that may have its pitfalls (and thusly, limitations) too.

But, since neither A, B, nor their clients are very forthcoming about these specifics, this level of hypothosizing is the best I can do,  


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