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Air India Has 'no Money' To Pay For 787s  
User currently offlinePart147 From Ireland, joined Dec 2008, 482 posts, RR: 0
Posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29479 times:

Did a search, can't find it mentioned here so...

It's a shame that Air India seem to be having trouble raising funds to pay for their 787s, some of which have already been built, parked and are currently being prepared for delivery...

http://www.aviationweek.com/aw/gener...0787,%20Says%20Aviation%20Minister

http://www.foxbusiness.com/industrie...-pay-for-boeing-787-orders-report/

http://articles.economictimes.indiat...ar-ravi-boeing-aircraft-new-planes

http://www.firstpost.com/fwire/air-i...in-wake-up-poor-finance-80483.html

What would happen to those frames if the worst should happen and they aren't delivered? Would it take long to fit them out for another airline?

Edit: added extra news links

[Edited 2011-09-12 15:13:06]


It's better to ask a stupid question during training, rather than make a REALLY stupid mistake later on!
72 replies: All unread, showing first 25:
 
User currently offlinebrahmin From United States of America, joined Dec 2007, 76 posts, RR: 0
Reply 1, posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29357 times:

Boeing will release them knowing that they will get paid. Boeing also has to keep them happy for future commercial and military orders.

User currently offlinejonathanxxxx From United States of America, joined Feb 2011, 673 posts, RR: 1
Reply 2, posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29340 times:

Quoting Part147 (Thread starter):
t's a shame that Air India seem to be having trouble raising funds to pay for their 787s, some of which have already been built, parked and are currently being prepared for delivery...

I'm pretty sure some of them have already been painted too. They're really close to delivery.

Quoting Part147 (Thread starter):
What would happen to those frames if the worst should happen and they aren't delivered?

There were rumors of AA getting them. Although I doubt that..


User currently offlinekaitak From Ireland, joined Aug 1999, 12411 posts, RR: 37
Reply 3, posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29309 times:

And they think of this now!

The thing is that AI definitely needs this aircraft; there is nothing between the 260 seat ULH 777LR and the 190 seat A321. Whether it actually needs 27 is another issue, but it's incredible to think it has got to within 3 months of the aircraft (finally) being delivered and they say they can't pay for it!

I believe that the aircraft is being fitted out with a normal two class layout, so provided another carrier is willing to take the AI seats (which, judging by the 777s, won't be too bad), then it shouldn't be too hard - provided another carrier is willing to take the AI colours inside (which might not be consistent with theirs).


User currently onlinekiwiandrew From New Zealand, joined Jun 2005, 8544 posts, RR: 13
Reply 4, posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29223 times:
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I am sure that the long-suffering Indian taxpayer will find themselves footing the bill for these aircraft one way or another.


Moderation in all things ... including moderation ;-)
User currently onlinekanban From United States of America, joined Jan 2008, 3405 posts, RR: 26
Reply 5, posted (2 years 10 months 3 weeks 3 days 4 hours ago) and read 29069 times:
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You will probably see a leasing company pick them up and lease those completed to Air India (if Boeing doesn't offer them a lease first) , those still in the pipe line will be deferred. Note the leasing company may just switch positions and handle these as options.

User currently offlineqf002 From Australia, joined Jul 2011, 2949 posts, RR: 2
Reply 6, posted (2 years 10 months 3 weeks 3 days 1 hour ago) and read 28202 times:

Quoting kanban (Reply 5):

     Seems to be the most logical solution. This could actually be very good for Boeing -- I'm sure everyone is happy to move up in the delivery list thanks to a whole pile of deferred orders by AI (assuming they take 5-10 frames initially on a lease).


User currently offlinesxf24 From United States of America, joined Aug 2007, 1257 posts, RR: 0
Reply 7, posted (2 years 10 months 3 weeks 3 days 1 hour ago) and read 28064 times:

Quoting brahmin (Reply 1):
Boeing will release them knowing that they will get paid. Boeing also has to keep them happy for future commercial and military orders.

Absolutely not. Boeing would never hand over an aircraft without getting payment first.


User currently offlineck8msp From United States of America, joined Oct 2010, 72 posts, RR: 0
Reply 8, posted (2 years 10 months 3 weeks 3 days ago) and read 27756 times:

Hasn't AI been making a stink and demanding compensation for the delays? Have they been given any concessions? If they cancel, do they still have any claim or recourse towards Boeing?

User currently offlineStitch From United States of America, joined Jul 2005, 30654 posts, RR: 84
Reply 9, posted (2 years 10 months 3 weeks 3 days ago) and read 27596 times:
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Quoting ck8msp (Reply 8):
Hasn't AI been making a stink and demanding compensation for the delays?

Yes. They wanted something north of USD 1 billion and as of last report (May 2011), had settled for USD 500 million, of which $264 million is notional compensation as that is the difference in price of aircraft ordered by AI and May 2011.


User currently offlineck8msp From United States of America, joined Oct 2010, 72 posts, RR: 0
Reply 10, posted (2 years 10 months 3 weeks 2 days 23 hours ago) and read 27265 times:

Quoting ck8msp (Reply 8):
Yes. They wanted something north of USD 1 billion and as of last report (May 2011), had settled for USD 500 million, of which $264 million is notional compensation as that is the difference in price of aircraft ordered by AI and May 2011.

Will this not be void if they indeed cancel their orders? Pretty shady on their part to bitch and moan and then when the time comes to pay up they are broke. OTOH, if Boeing had delivered on time they may have been in better financial shape.

If they cancel does Boeing get to keep their deposit?


User currently offlineqf002 From Australia, joined Jul 2011, 2949 posts, RR: 2
Reply 11, posted (2 years 10 months 3 weeks 2 days 22 hours ago) and read 25571 times:

Quoting ck8msp (Reply 10):
Will this not be void if they indeed cancel their orders?

Have Boeing paid any compensation yet?? They could put that money towards payments for the aircraft if Boeing is yet to actually give them any cash.


User currently offlinefrigatebird From Netherlands, joined Jun 2008, 1577 posts, RR: 1
Reply 12, posted (2 years 10 months 3 weeks 2 days 20 hours ago) and read 24174 times:

Quoting jonathanxxxx (Reply 2):
I'm pretty sure some of them have already been painted too. They're really close to delivery.

IIRC, CFRP needs to be painted quickly, apparantly it's not that good if it's kept outside without the protection of paint. And a paintjob is not that much of job compared to the rework that needs to be incorporated in the early build frames. If AI really can't pay for their 787's, Boeing will just put these frames last in order for rework, store them and concentrate on customers who can pay.

Quoting jonathanxxxx (Reply 2):
There were rumors of AA getting them. Although I doubt that..

So do I, since AA hasn't ordered 787-8's. True, their order for 787-9's needs to be firmed up formally as well, but that will happen.

Quoting kaitak (Reply 3):
I believe that the aircraft is being fitted out with a normal two class layout, so provided another carrier is willing to take the AI seats (which, judging by the 777s, won't be too bad), then it shouldn't be too hard - provided another carrier is willing to take the AI colours inside (which might not be consistent with theirs).

I don't think the AI 787's have their interiors fitted yet.



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User currently offlinewale03 From United States of America, joined Aug 2010, 36 posts, RR: 0
Reply 13, posted (2 years 10 months 3 weeks 2 days 19 hours ago) and read 23355 times:

Quoting frigatebird (Reply 12):
I don't think the AI 787's have their interiors fitted yet.

Correct,in fact only one has it's engines fitted and has flown,it's presently at Lackland AFB, San Antonio, Tx where the interior is possibly being fitted


User currently offlineInsideMan From Vatican City, joined Aug 2011, 213 posts, RR: 0
Reply 14, posted (2 years 10 months 3 weeks 2 days 19 hours ago) and read 23179 times:

None of us(?) know the exact details of the contract and settlement.
Normally liquidated damages due to unexcusable delay (what we had now with the 787) start x days after the scheduled delivery month and are capped at a certain value, which I assume was in this case north of 1BUSD.
Since sticking with the terms 100% in all cases would bankrupt Boeing a settlement to let everyone save face is agreed. This could be "free" 777 as compensation or interim lift, "free" 787s instead of the compensation, favorable financing conditions etc etc. anything can be put on the table.

Normally you would also negotiate new termination clauses for these AC. If not, the normal contract applies again and you would have something like 1 year before delivery you can terminate and only the deposit is sunk. What is also clear is, that once the Airline is officially notified that the AC is "ready for delivery" and don't take it, Boeing can claim compensation!

So, without detailed knowledge of the original purchase agreement and consecutive settlement agreements none of us will know for sure. But I am quite sure that Air India will receive the 787s one way or the other.


User currently offlineCricket From India, joined Aug 2005, 2967 posts, RR: 7
Reply 15, posted (2 years 10 months 3 weeks 2 days 16 hours ago) and read 21605 times:

There is a 'Sovereign Guarantee' built into the contract - that is teh Government of India will have to pay for the planes if Air India can't pock them up. Air India, thanks to mismanagement due to bureaucratic interference in India's semi-privatised skies has been bleeding money and needs taxpayer dole to survive, this is just a bargaining trick by the current Aviation Minister, who is quite an open socialist and would happily shut down Indian skies for private operators if he could.


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User currently offlinejfk777 From United States of America, joined Aug 2006, 8293 posts, RR: 7
Reply 16, posted (2 years 10 months 3 weeks 2 days 16 hours ago) and read 21412 times:
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Air india's ancient fleet, not the 777's, would be very sorry if they didn't take delivery of the 787's. Without the 787 Air India should consider liquidation which would be politically impossible. There will be 787 for AI.

User currently offlineNimish From India, joined Feb 2005, 3213 posts, RR: 9
Reply 17, posted (2 years 10 months 3 weeks 2 days 16 hours ago) and read 21188 times:

Note: Rs. 1 Crore is approx USD220,000.

From: http://www.moneycontrol.com/news/cur...or-cancel-praful-patel_585566.html

The ex-Minister of Civil Aviation speaking here, says he thinks the 787 order can be cancelled entirely without (significant) loss to the govt.

Quote:
Q: The CAG says decisions were taken by Air India to buy planes worst almost Rs 35,000 crore when you were minister of civil aviation on an invalid assumption. They say ‘that increase in capacity share would automatically lead to a substantial increase in Air India's market share’. That presumption that buying planes would increase market share was wrong and therefore the purchase was based on a false presumption?

A: All projections were made by Air India from within. While we talk today Rs 18,000 crore worth of planes have neither been paid for neither have they been delivered. So how does the CAG come to the conclusion that too many planes have caused Air India's financial health to be where it is?

Q: Are you saying that out of the order of Rs 35,000 crore, Rs 18,000 crore worth hasn’t been paid for. Can that Rs 18 000 crore now because the demand picture has changed dramatically be cancelled and can that money be saved?

A: I am not the minister now but as I know from my own background there in the ministry that the delay is on part of Boeing because their 787 Dreamliner got delayed and that’s the reason 27 of the 50 planes have not yet been manufactured for Air India.

Q: Can you get out?

A: I think so because the delay is on their part and it’s not just normal delay. In fact Air India can either cancel or claim a huge compensation. I don’t know what the decision will eventually be.

Q: So you believe that something like Rs 18,000 crore of orders can be got out of because Boeing has delayed the delivery. Was this known to the CAG when that report was written?

A: As I had been told during the exit conference, the Ministry of civil aviation made this representation that out of the 50 big planes we are talking about only 20 have joined the fled, 30 planes have neither been paid for nor have they joined and the ministry can review this decision.



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User currently offlineKaiarahi From Canada, joined Jul 2009, 2951 posts, RR: 28
Reply 18, posted (2 years 10 months 3 weeks 2 days 15 hours ago) and read 20327 times:

Quoting sxf24 (Reply 7):
Absolutely not. Boeing would never hand over an aircraft without getting payment first.

And your authority for this statement is?



Note à moi-même - il faut respecter les cons.
User currently offlineBurkhard From Germany, joined Nov 2006, 4387 posts, RR: 2
Reply 19, posted (2 years 10 months 3 weeks 2 days 15 hours ago) and read 20093 times:

Besides the minor problem what to do with the aircraft that are almost ready for delivery, Boeing will be very happy to get out of having to deliver these aircraft at a huge loss, can forward others a bit and sell aircraft then for a price that creates a profit.

User currently offlineflyglobal From Germany, joined Mar 2008, 573 posts, RR: 3
Reply 20, posted (2 years 10 months 3 weeks 2 days 14 hours ago) and read 19918 times:

how stupid could AI be, not to take the aircrafts for the discounted price?
Better sell something else to fund it and even somebody may want to lease it from AI.

I can't believe

regards

flyglobal


User currently offlineHAWK21M From India, joined Jan 2001, 31667 posts, RR: 56
Reply 21, posted (2 years 10 months 3 weeks 2 days 14 hours ago) and read 19728 times:

I feel AI will take the Aircraft & funds will be arranged......Its Taxpayers money afterall.


Think of the brighter side!
User currently offlineqf002 From Australia, joined Jul 2011, 2949 posts, RR: 2
Reply 22, posted (2 years 10 months 3 weeks 2 days 14 hours ago) and read 19611 times:

Quoting Kaiarahi (Reply 18):
Quoting sxf24 (Reply 7):
Absolutely not. Boeing would never hand over an aircraft without getting payment first.

And your authority for this statement is?

I'm willing to bet it's basic business acumen and sense. No business is going to give away product without some guarantee of being paid for it -- Boeing isn't going to deliver aircraft to a company that has publicly said that they're unable to pay for them, the same as any business.

Quoting Nimish (Reply 17):
A: I think so because the delay is on their part and it’s not just normal delay. In fact Air India can either cancel or claim a huge compensation. I don’t know what the decision will eventually be.

Haven't they already claimed their compensation though?? If there's been no compensation agree as yet then I have no doubt that they can cancel -- whether they get their deposit back in another matter, which will be covered under the sales contract.


User currently offlineKaiarahi From Canada, joined Jul 2009, 2951 posts, RR: 28
Reply 23, posted (2 years 10 months 3 weeks 2 days 14 hours ago) and read 19207 times:

Quoting qf002 (Reply 22):
No business is going to give away product without some guarantee of being paid for it

Agreed - but that's not the same as:

Quoting sxf24 (Reply 7):
Boeing would never hand over an aircraft without getting payment first.

I was just wondering how the poster was informed of the terms and conditions of the Boeing-AI contract.



Note à moi-même - il faut respecter les cons.
User currently offline3rdGen From Bahrain, joined Jul 2011, 235 posts, RR: 0
Reply 24, posted (2 years 10 months 3 weeks 2 days 13 hours ago) and read 18612 times:

What about AI taking them and immediately selling or leasing them out, if they're getting them for a discount they could sell them for less than list but still reap a profit. I'm sure there are tons of airlines that would love to get their hands on their 787s early. Maybe AI could swap their orders with another airline with a future delivery date.

25 enilria : With all the delays I wouldn't doubt Boeing could easily find other homes.
26 gr8circle : What are you talking about? The bulk of AI's fleet now comprises of relatively new A320 family planes, 777's and a few older 744s.....the "ancient" A
27 sxf24 : Accounting rules. Boeing can't book revenue from delivery of the aircraft unless it receives payment. Booking the revenue is critical to meeting the
28 Grid : You can't have a contract that says Company Y will pay Company Z $XXX for Product C, and then Company Z delivers without having received funds? I was
29 bravo1six : You can, so long as the agreement carries on to say that Company Y will pay the purchase price at a later date. No business should just be handing ov
30 blueflyer : I find it interesting that it's not just Air India that's a bit short of funds, but the Indian Civil Aviation ministry as well, with the minister quot
31 Grid : I was asking generally, not specifically about Air India and Boeing's current situation. Thanks.
32 yeelep : Sure they are. Ever heard of Boeing Capitol Corp..
33 gr8circle : Isn't it the banks that would have to advance the payments to Boeing on behalf of AI? No airline actually pays cash out of their coffers to take deli
34 bravo1six : Boeing Capital Corp. wouldn't exist if all of Boeing Commercial Aircraft's customers had the ways and means to pay for their aircraft. All the OEMs h
35 blueflyer : In a perfect, capitalist, good-credit-record world, that is indeed how it goes. The aviation minister is on the record saying he needs to get the mon
36 MHTripple7 : These planes will get delivered to AI. I personally think that AI is saying this to persuade the Indian government to inject more cash into the carrie
37 Post contains images Babybus : Nice idea but I can't imagine any government falling to blackmail like this. I wouldn't, would you? It's your problem you get yourself out of it. Let
38 gr8circle : It's not blackmail.....considering that AI is a public sector co and owned by the GOI, there's not much of a choice to say "It's your problem you get
39 FAEDC3 : Financing is a very lucrative part of the business, there is no pro-bono in it. If financing purchases made by its own customers wasn't a great busin
40 kanban : Question: Would a major manufacturer underwrite a customers purchase of a competitor's product to ensure a sale? Example: airline 'x' wanted 10 narrow
41 bravo1six : But not as lucrative as selling aircraft (or cars for that matter) for cash... Assume the selling price is $100 with a 10% margin. At delivery, the O
42 bravo1six : I think the sales team would have a hard time convincing management that it was a good idea to willingly put money in the pockets of a competitor.
43 sxf24 : One OEM has historically declined to provide a customary level of support to its aircraft owned or financed by the other OEM. The other OEM could rea
44 qf002 : Sure it does, when Company Z is guaranteed payment eventually. This is a different situation -- Company Y cannot necessarily guarantee payment. Nobod
45 InsideMan : that's how it works for A and B. No money in the bank, no Aircraft delivery. This would then be a third party. A bank, lessor, maybe even Boeing Capi
46 scbriml : I think you'll find one OEM threatened to withdraw support for its aircraft sold on by the other OEM. Threatening and doing are, and were, two very d
47 Post contains images lightsaber : AI is broke. Who would lend them money? I suspect the answer will be a government loaned down payment. Tell that to Udvar-Hazy or GECAS. Aircraft leas
48 qf002 : LOL loan... More like a government payout.
49 Post contains links FAEDC3 : Evidently not.... but if you take a quick look at their FS for ´10 (source: BCC Form 10-K) Link: http://tiny.cc/55h2i Revenue $ 639 Mil Dividends to
50 Post contains images Stitch : AI's 777s sat at PAE for something like six months before delivery, so worst-case, they appear in the background of Matt Cawby's pictures through next
51 HAWK21M : Exactly........
52 Fyano773 : I guess this comprises 27 787s + 3 77Ws. What about those 77Ws? Have they been built? Is AI willing to take them yet? Regards...
53 Post contains images lightsaber : The first is legal, the 2nd runs into WTO rules violation. So it will be a loan. Or at least called such... Amazingly valuable aircraft that might ha
54 InsideMan : what you don't want to do (and Boeing Capital did that mistake in the past) is p*** off your most valued customers (leasing companies) by fishing in
55 Post contains links LAXDESI : Looks like AI has decided to go ahead with acquistion of 787s, but it is not clear how the funds will be raised. AI may have decided to go ahead with
56 Post contains links and images Stitch : Boeing should deliver a suitcase full of these.
57 LAXDESI : Good find.
58 comorin : They could also be used to pay Air India staff.
59 Post contains images lightsaber : That is a find... and quite a statement! and AI's fuel! Lightsaber
60 HAWK21M : 14 out of 27 B787 now.
61 scbriml : So are they cancelling or deferring the other 13?
62 Post contains links Stitch : AI's Board have asked the order be cut from 27 to 14, but the Ministries of Finance and Civil Aviation will make the final decision since they will b
63 LAXDESI : Could this be part of a scheme where Boeing is off the hook for paying any penalty when the order is reduced by GOI. In that scenario Boeing would be
64 HAWK21M : Currently no Decision yet.but looks like AI wont go for the remaining unless they are having the cash.
65 InsideMan : I highly doubt it. At least as per the original contract the penalties should be a lot higher than anything AI has to write off. Who knows...
66 Post contains images N1120A : At least if AI doesn't take delivery of these, the carbon fiber construction will keep them from turning into Rustbuckets
67 cslusarc : It's too bad that AI and the GOI couldn't repeat what DL did when it sold some Boeing 737-800s it had on order for more than what it paid. I'm sure th
68 ojas : Rumor suggests that AI is going ahead with the purchase of B787s, although not all 27 but just 16-17 of them.
69 HAWK21M : I heard 14.......But the rest may come along later.
70 comorin : MEL, does 14 planes typically translate into 7 routes? Thanks
71 Stitch : AI management have formally requested the order be reduced from 27 to 14, however the Indian Government will make the final decision on how many.
72 HAWK21M : Depends on the routes......Wont be surprised if the remaining 50% of the B787 arrives later.
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