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B-787 Delivery: Miffed AI To Seek $240m Refund Re  
User currently offlinehawkercamm From United Kingdom, joined Jul 2007, 405 posts, RR: 0
Posted (4 years 1 month 1 week 5 days 21 hours ago) and read 8976 times:

The Time of India are reporting that AI are seeking repayment of their $240m pre-delivery payment for the delayed delivery of 27 B787s. Interestingly they are contractually entitled to "only" $145 million.

Quote:
AI will also seek a refund of $240 million paid three years ago as pre-delivery payment (PDP) for the B-787s. "We are telling Boeing that there will be no more PDPs for 787s and payment will begin only after actual delivery now," said sources. In fact, AI is also likely to warn Boeing that it can cancel the 787 order if these conditions are not met.

This action will be in addition to the $710 million damage already claimed by AI for the delay in 787. "Under the agreement clause with Boeing, we were entitled to a maximum of $145 million as consolidated damages. But that clause is redundant as far as we are concerned. The delay and uncertainty surrounding the 787 has completely spoilt our capital acquisition programme. We are forced to have sub-optimal utilisation on routes where we had planned to use the 787, by using other aircraft," said sources.

Read more: B-787 delivery: Miffed AI to seek $240m refund - India Business - Business - The Times of India http://timesofindia.indiatimes.com/b...tqPO.



I think it is worth noting that the pre-delivery payment represents ~5% of list price.
The $140m quoted also represents ~3% of list.

If this level of compensation is standard throughout the order book Boeing would be liable for $4b. However the exact length of delay airline by airline and the exact contract details are unknown. The 2nd line will obviously help reduce compensation. I think it has to be accepted that BCA face a massive compensation penalty for the B787 delays. The ROI for most of the early order book may not be that good.

29 replies: All unread, showing first 25:
 
User currently offlineStitch From United States of America, joined Jul 2005, 31000 posts, RR: 86
Reply 1, posted (4 years 1 month 1 week 5 days 20 hours ago) and read 8670 times:
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They originally wanted $710 million in March, so they evidently seem to be trying to negotiate. Then again, I believe they cancelled a couple of 777 orders so they're probably trying to not forfeit those deposits, as well...

They must not be too upset, since they are going to be one of the first tranche of operators (there first frame should already be in the FAL).


User currently offlinejfk777 From United States of America, joined Aug 2006, 8375 posts, RR: 7
Reply 2, posted (4 years 1 month 1 week 5 days 20 hours ago) and read 8591 times:
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Air India has been a major international airline since 1948, it was THE airline in Asia before Emirates, Singapore Airlines, Cathay and Thai. It should be familiar by now on the delays invovled with new aircraft types. They got paid what their contract with Boeing stipulated. They are happy with their new 777 fleet but want extra rebates for delays in their 787, why should they get a special deal. Many airlines have 20 to 30 787 just like Air India's 27 787 order.

User currently offlinekaran69 From India, joined Oct 2004, 2889 posts, RR: 17
Reply 3, posted (4 years 1 month 1 week 5 days 5 hours ago) and read 7911 times:

Rumour has it AI has apparently served a notice for 1 billion USD to Boeing, US govt is not happy

Karan


User currently offlineBMI727 From United States of America, joined Feb 2009, 15744 posts, RR: 27
Reply 4, posted (4 years 1 month 1 week 5 days 4 hours ago) and read 7860 times:

Quoting jfk777 (Reply 2):
They got paid what their contract with Boeing stipulated. They are happy with their new 777 fleet but want extra rebates for delays in their 787, why should they get a special deal.

I don't think that they are being malicious or acting like a prima donna as much as they might just need the money.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinePM From Germany, joined Feb 2005, 6920 posts, RR: 63
Reply 5, posted (4 years 1 month 1 week 5 days 4 hours ago) and read 7846 times:

Quoting karan69 (Reply 3):
US govt is not happy

What does the US govt have to do with it?


User currently offlineBMI727 From United States of America, joined Feb 2009, 15744 posts, RR: 27
Reply 6, posted (4 years 1 month 1 week 5 days 4 hours ago) and read 7819 times:

Quoting PM (Reply 5):
What does the US govt have to do with it?

Well, the EXIM finances quite a few major aerospace deals for foreign carriers.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinekanban From United States of America, joined Jan 2008, 3559 posts, RR: 26
Reply 7, posted (4 years 1 month 1 week 4 days 21 hours ago) and read 5158 times:
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Quoting BMI727 (Reply 4):
Quoting jfk777 (Reply 2):
They got paid what their contract with Boeing stipulated. They are happy with their new 777 fleet but want extra rebates for delays in their 787, why should they get a special deal.

I don't think that they are being malicious or acting like a prima donna as much as they might just need the money


Or they need a bargaining position... there seem to be several threads on them at the moment... a new VIP a/p and something about 777's AI May Swap 777s For 330s (by JerseyFlyer Aug 10 2010 in Civil Aviation)


User currently offlineastuteman From United Kingdom, joined Jan 2005, 10031 posts, RR: 96
Reply 8, posted (4 years 1 month 1 week 4 days 20 hours ago) and read 5025 times:
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Quoting hawkercamm (Thread starter):
If this level of compensation is standard throughout the order book Boeing would be liable for $4b.

There aren't many times a slim order book is an asset, but the A380's delays must surely count as one of them.....

Quoting Stitch (Reply 1):
They must not be too upset, since they are going to be one of the first tranche of operators (there first frame should already be in the FAL).

The trouble is, I guess, the better the plane is, the more "miffed" they'll be at the delays.

Just like the A380. Mind you, no-one cancelled an A380 order because of the delays., so...   

Quoting Stitch (Reply 1):
They originally wanted $710 million in March, so they evidently seem to be trying to negotiate

The article suggests that the $240m is on top of that.

Rgds


User currently offlinejfk777 From United States of America, joined Aug 2006, 8375 posts, RR: 7
Reply 9, posted (4 years 1 month 1 week 3 days 23 hours ago) and read 4606 times:
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Quoting BMI727 (Reply 4):
Quoting jfk777 (Reply 2):
They got paid what their contract with Boeing stipulated. They are happy with their new 777 fleet but want extra rebates for delays in their 787, why should they get a special deal.

I don't think that they are being malicious or acting like a prima donna as much as they might just need the money

The first Air India 787 is already getting made for spring 2011 deilvery, Air India must have other early delivery slots which can be sold. Many airlines and leasing firms out there who will gladly pay AI for the value of thiose early slots and let AI get rid of it "prblem". I would like AI's "problem".


User currently offlinezeke From Hong Kong, joined Dec 2006, 9104 posts, RR: 75
Reply 10, posted (4 years 1 month 1 week 3 days 22 hours ago) and read 4435 times:

Quoting karan69 (Reply 3):
Rumour has it AI has apparently served a notice for 1 billion USD to Boeing

Seems to have substance behind it...

Quote:
Air India came up with the $1 billion dollar number after adding up the increased cost of operating 25 old planes.

from http://www.kirotv.com/news/24591779/detail.html



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineLAXDESI From United States of America, joined May 2005, 5086 posts, RR: 47
Reply 11, posted (4 years 1 month 1 week 3 days 22 hours ago) and read 4339 times:

The real negotiations would involve paying off some of the politicians/officials to reduce AI's official claims. Along with "leasing out B777/leasing in A330", it is an excellent opportunity for politicians/officials to make some fast money.

User currently offlineWarpSpeed From United States of America, joined Feb 2010, 591 posts, RR: 3
Reply 12, posted (4 years 1 month 1 week 3 days 20 hours ago) and read 4160 times:

Quoting LAXDESI (Reply 11):
The real negotiations would involve paying off some of the politicians/officials to reduce AI's official claims.

Maybe the "real negotiations" failed because Boeing wouldn't line the right pockets and this is the result?


Quoting BMI727 (Reply 4):
I don't think that they are being malicious or acting like a prima donna as much as they might just need the money.

It does seem that AI wants Boeing to fund its losses.


Overall, it is not like Boeing is receiving unjust enrichment from the delays. Quite the opposite. Had Boeing realized monetary gain from the delays then maybe AI could legitimately ask for compensation to cover its actual losses.

Since Boeing is not benefiting at AI's expense, customary compensation would seem to be the most appropriate remedy for this dispute.



DaHjaj jaj QaQ Daghajjaj !!!!
User currently offlineastuteman From United Kingdom, joined Jan 2005, 10031 posts, RR: 96
Reply 13, posted (4 years 1 month 1 week 3 days 20 hours ago) and read 4141 times:
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Quoting WarpSpeed (Reply 12):
Since Boeing is not benefiting at AI's expense, customary compensation would seem to be the most appropriate remedy for this dispute.

Claims for damages aren't usually predicated on whether or not the respondent has benefitted from the "damage"..

Rgds


User currently offlinescbriml From United Kingdom, joined Jul 2003, 12566 posts, RR: 46
Reply 14, posted (4 years 1 month 1 week 3 days 19 hours ago) and read 4047 times:
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Is it just a coincidence that AI is looking at the 748i for its VVIP duties?   


Time flies like an arrow, but fruit flies like a banana!
User currently offlineKaiarahi From Canada, joined Jul 2009, 3002 posts, RR: 27
Reply 15, posted (4 years 1 month 1 week 3 days 19 hours ago) and read 3976 times:

Quoting WarpSpeed (Reply 12):
It does seem that AI wants Boeing to fund its losses.


Overall, it is not like Boeing is receiving unjust enrichment from the delays. Quite the opposite. Had Boeing realized monetary gain from the delays then maybe AI could legitimately ask for compensation to cover its actual losses.

Since Boeing is not benefiting at AI's expense, customary compensation would seem to be the most appropriate remedy for this dispute.

I suspect this would be a claim for breach of contract (compensation for loss resulting from the breach), not restitution, so unjust enrichment wouldn't come into it. Obviously it all depends on the terms of the contract (particularly the terms relating to delivery and any provisions regarding compensation for losses resulting from delayed delivery).



Empty vessels make the most noise.
User currently offlineastuteman From United Kingdom, joined Jan 2005, 10031 posts, RR: 96
Reply 16, posted (4 years 1 month 1 week 3 days 17 hours ago) and read 3819 times:
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Quoting Kaiarahi (Reply 15):
I suspect this would be a claim for breach of contract (compensation for loss resulting from the breach), not restitution, so unjust enrichment wouldn't come into it.

That's how I would see it too. Whether it is successful or not is a different matter..

Rgds


User currently offlineairfrnt From United States of America, joined Jul 2004, 2826 posts, RR: 42
Reply 17, posted (4 years 1 month 1 week 3 days 17 hours ago) and read 3784 times:

Quoting zeke (Reply 10):
Seems to have substance behind it...

There is not a large business contract in the world that indemnifies a client for losses above and beyond the actual product itself. Ie, not having the product on day one can lead to the cancellation of purchasing the product, but never damages for not having the product in the first place.

I do find it amusing that this is a exact repeat of the A380 contract discussions, with everyone having shifted sides on which view they now endorse.


User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 18, posted (4 years 1 month 1 week 3 days 15 hours ago) and read 3617 times:

Quoting jfk777 (Reply 2):
why should they get a special deal

By the same vein one could always 'argue' why then do certain airlines receive special treatment of early delivery slots when only ordering relatively recently? Why do they get a special deal?

Quoting BMI727 (Reply 6):
Well, the EXIM finances quite a few major aerospace deals for foreign carriers.

Finances......or are you saying 'paying for'? As financiers they are still independent of what a supplying company becomes liable for regarding breach of contract.


User currently offlinezeke From Hong Kong, joined Dec 2006, 9104 posts, RR: 75
Reply 19, posted (4 years 1 month 1 week 3 days 15 hours ago) and read 3583 times:

Quoting airfrnt (Reply 17):
I do find it amusing that this is a exact repeat of the A380 contract discussions, with everyone having shifted sides on which view they now endorse.

I did not express a view or opinion.

I provided a link to an article that showed some evidence to what a previous poster claimed was a rumour.

I fail to see what a discussion about the A380 contract discussions has on this thread, apart from to incite an AvB.

Can we stick to the topic ..... Air India and the 787 ?



We are addicted to our thoughts. We cannot change anything if we cannot change our thinking – Santosh Kalwar
User currently offlineikramerica From United States of America, joined May 2005, 21531 posts, RR: 59
Reply 20, posted (4 years 1 month 1 week 3 days 14 hours ago) and read 3486 times:

I think Boeing will tell AI to shove it. $1b payout would take an additional future $10b contract to make up.

What I find funny is that AI feels they can rewrite the contract in terms of damages, but expects BAC to honor the contract AI is effectively tearing up.

Liquidated damages are there for a reason. They dictate the maximum downside risk each party has. AI would need to prove fraud in a court of law to collect anything more. Then again, I think some of Boeing's actions re: the 787 have bordered on fraud.



Of all the things to worry about... the Wookie has no pants.
User currently offlinejfk777 From United States of America, joined Aug 2006, 8375 posts, RR: 7
Reply 21, posted (4 years 1 month 1 week 3 days 14 hours ago) and read 3485 times:
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Quoting AirNZ (Reply 18):
why should they get a special deal

By the same vein one could always 'argue' why then do certain airlines receive special treatment of early delivery slots when only ordering relatively recently? Why do they get a special deal?

What you are seeking is a "Second special deal". Let me be clear, AI got somekind of discount for its large 777/787 order in 2006/07, why wouldn't they it was a decent sized order from a customer Boeing wants to keep selling planes to. AI wants extra compensation," beyond the contract" as a "second special deal."


User currently offlinetrex8 From United States of America, joined Nov 2002, 4769 posts, RR: 14
Reply 22, posted (4 years 1 month 1 week 3 days 14 hours ago) and read 3479 times:
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Quoting airfrnt (Reply 17):
There is not a large business contract in the world that indemnifies a client for losses above and beyond the actual product itself. Ie, not having the product on day one can lead to the cancellation of purchasing the product, but never damages for not having the product in the first place.

maybe not exactly what you had in mind but CIs contract for GE powered A333s had GE pay a million $ an aircraft if they did not have the -80E1-A4/A333 combination certified by a specific date in time for Airbus' delivery schedule and they had to take the A2 or A3 engine instead


User currently offlineikramerica From United States of America, joined May 2005, 21531 posts, RR: 59
Reply 23, posted (4 years 1 month 1 week 3 days 13 hours ago) and read 3426 times:

Quoting trex8 (Reply 22):
maybe not exactly what you had in mind but CIs contract for GE powered A333s had GE pay a million $ an aircraft if they did not have the -80E1-A4/A333 combination certified by a specific date in time for Airbus' delivery schedule and they had to take the A2 or A3 engine instead

Yes, but that is a time based damages contract. Many performance contracts are written with lateness penalties, but those are proscribed penalties. What AI is asking for is money outside the contract. It would be like CI coming back and saying to GE: "we estimate our damages due to the A4 miss to be $10 million, so you owe us that instead." No contract in the world is open ended like that.



Of all the things to worry about... the Wookie has no pants.
User currently offlineastuteman From United Kingdom, joined Jan 2005, 10031 posts, RR: 96
Reply 24, posted (4 years 1 month 1 week 3 days 9 hours ago) and read 3238 times:
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Quoting airfrnt (Reply 17):
I do find it amusing that this is a exact repeat of the A380 contract discussions, with everyone having shifted sides on which view they now endorse.

Everyone? A bit of a broad brush if I might venture......

As it is, these comments from AI have all the hallmarks of negotiation about them, just like we used to see with the A380  
Quoting ikramerica (Reply 20):
I think Boeing will tell AI to shove it. $1b payout would take an additional future $10b contract to make up.

Watch out for a $10Bn AI contract coming Boeing's way in the next couple of years  

Rgds


25 Kaiarahi : Two minutes with any set of law reports would show you otherwise. AI could also attempt to show that the damages provisions were not a genuine pre-es
26 ikramerica : True, but that I supposed could be considered fraud. If BAC knew that the contract would favor them greatly and damage AI far beyond the damages scop
27 WarpSpeed : That's giving BAC too much credit! Appearances, at least, suggest BAC does not know what's going on with the 787 program. Further, in the general leg
28 ikramerica : I would say "did not" more than "does not." I think they know now that there is a chance of additional delay at most 3 months, but if things go well
29 Baroque : Not sure if that is really so. B were still stating that first flight would be in a couple of months at the time of the Potemkin roll out when it was
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