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A Billion Dollar Delay? AI Says Yes...  
User currently offlinemaxter From Australia, joined May 2009, 223 posts, RR: 0
Posted (2 years 7 months 1 week 2 days 18 hours ago) and read 14082 times:

Sorry if it is covered elsewhere, but I see the demand has grown to 1 billion dollars US...

Fair use excerpt

Air India increased its demands for compensation from Boeing to about $US1 billion ($A920 million) following the planemaker's delays in delivering new 787 Dreamliners, an India civil-aviation ministry official said in New Delhi.

Read more: http://www.watoday.com.au/travel/tra...-20120210-1saov.html#ixzz1ly54fQfR


maxter
45 replies: All unread, showing first 25:
 
User currently offlineNUAir From Malaysia, joined Jun 2000, 1181 posts, RR: 0
Reply 1, posted (2 years 7 months 1 week 2 days 18 hours ago) and read 13969 times:

It always makes me feel a bit better when I read news of Airlines demanding reimbursement for having to deal with delays.

If only they understood the irony.



"How Many Assholes we got on this ship?" - Lord Helmet
User currently offlinerotating14 From United States of America, joined Jan 2012, 659 posts, RR: 0
Reply 2, posted (2 years 7 months 1 week 2 days 17 hours ago) and read 13846 times:

Quoting NUAir (Reply 1):

   tis true mate! The sad part of this whole thong is I believe that AI is trying to get a payout because of the latest delays regarding the fuselage delamination. How is it that nobody else is commanding payouts yet at the same time they are so far in the red they can't tell which way is up. If Boeing has said that these latest delays wont affect time tables for delivery why are they demanding anything l. Didn't Boeing pay a hefty sum already to them?!?!?


User currently offlinemacc From Austria, joined Nov 2004, 1042 posts, RR: 3
Reply 3, posted (2 years 7 months 1 week 2 days 16 hours ago) and read 13522 times:

If you are missing 4 billions in your balance sheet, you would also give it a try  


I exchanged political frustration with sexual boredom. better spoil a girl than the world
User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 4, posted (2 years 7 months 1 week 2 days 15 hours ago) and read 13250 times:

The lack of 787 has killed AI's operation...

The 777 is just too much plane for the US routes they fly, with the possible exception of EWR. They've been hemorrhaging money on their international operations while subsidizing it with their domestic ops, clearly not an ideal or sustainable situation.

If they had the 787 when they were supposed to get them, they'd be in a far better financial situation. I don't think that it is unfair to expect serious compensation for this.



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User currently offlineRevelation From United States of America, joined Feb 2005, 12541 posts, RR: 25
Reply 5, posted (2 years 7 months 1 week 2 days 14 hours ago) and read 13229 times:

Quoting NUAir (Reply 1):
It always makes me feel a bit better when I read news of Airlines demanding reimbursement for having to deal with delays.

If only they understood the irony.

Interestingly enough, there is contract language that addresses both situations.

The fact that Boeing keeps negotiating instead of quietly paying face value suggests to me at least that the contract terms are pretty stiff, of course amplified by Boeing's colossal problems with the B787.

And if AI gets their $1B, good on them. There has to be some sort of back pressure on the vendors when they miss their targets by this much.

Can you imagine how different the airline business would now be if Boeing delivered when it said it would, instead of the current Douglodian reality we find ourselves in?

I wasn't a huge aviation fan in the early days of the MD11, but now I know what it's like to witness overpromise and underdeliver, and it's awful!



Inspiration, move me brightly!
User currently offlineburnsie28 From United States of America, joined Aug 2004, 7545 posts, RR: 8
Reply 6, posted (2 years 7 months 1 week 2 days 14 hours ago) and read 13035 times:

Quoting aeroblogger (Reply 4):

The lack of 787 has killed AI's operation... The 777 is just too much plane for the US routes they fly, with the possible exception of EWR. They've been hemorrhaging money on their international operations while subsidizing it with their domestic ops, clearly not an ideal or sustainable situation.

Then thats just poor management if they are putting all their eggs into the 787 basket that if they had the plane they would be fine, it doesn't come down to one single plane, their problems stem well before the 787, and if the routes are not profitable don't fly them until you actually have a 787. For them to blame all their problems on the plane being late, maybe they should look at themselves to figure out what they can do to make a profitable airline with what they actually have.



"Some People Just Know How To Fly"- Best slogan ever, RIP NW 1926-2009
User currently offlineMaverickM11 From United States of America, joined Apr 2000, 17489 posts, RR: 45
Reply 7, posted (2 years 7 months 1 week 2 days 12 hours ago) and read 12675 times:

AI is just in desperate need of cash, so can't blame them for trying!

Quoting aeroblogger (Reply 4):
The lack of 787 has killed AI's operation...

The 787 would certainly help but it is far from the biggest problem at AI.



E pur si muove -Galileo
User currently offlineDLPMMM From United States of America, joined Apr 2005, 3592 posts, RR: 10
Reply 8, posted (2 years 7 months 1 week 2 days 12 hours ago) and read 12609 times:

It is just an Indian bureaucrat making noises.

Negotiations in the sub-continent are generally drawn out with unrealistic demands as starting points.

This won't be settled for a long time, but there will be regular "updates" like this in the Indian press.


User currently offlineStitch From United States of America, joined Jul 2005, 30977 posts, RR: 86
Reply 9, posted (2 years 7 months 1 week 2 days 12 hours ago) and read 12598 times:
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Quoting Revelation (Reply 5):
The fact that Boeing keeps negotiating instead of quietly paying face value suggests to me at least that the contract terms are pretty stiff, of course amplified by Boeing's colossal problems with the B787.

Boeing's contract with AI capped compensation at 0.5% of the contract price, setting the limit at $145 million.

In early 2010, AI demanded $710 million, raising it to $840 million in late 2010. They then raised that demand to $1 billion in May of 2011. Boeing countered with $500 million, of which half ($264 million) was notional compensation to reflect the rise in Average Sales Price between the time AI placed their original order and what Boeing was securing for orders in May 2011.

During these negotiations, AI did threaten to reduce or cancel their 787 order, but in July of 2011 they agreed to maintain their full order and put forward an invitation of offers for long term loan funds to finance the purchase of the first eight 787-8s.


User currently offlinejfk777 From United States of America, joined Aug 2006, 8370 posts, RR: 7
Reply 10, posted (2 years 7 months 1 week 2 days 11 hours ago) and read 12543 times:
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Quoting aeroblogger (Reply 4):
The 777 is just too much plane for the US routes they fly, with the possible exception of EWR. They've been hemorrhaging money on their international operations while subsidizing it with their domestic ops, clearly not an ideal or sustainable situation.

Air India purchased the 777, no one in the US Government or Boeing "forced" them to buy 777-300ER's. India's government may have made the " decision" for politcal reasons but its an Indian choice made for India by Indians. AI was deperate to fly nonstop to the USA because of all the One-atop competition over Dubai and Europe.


User currently offlinehigherflyer From United States of America, joined Oct 2006, 131 posts, RR: 0
Reply 11, posted (2 years 7 months 1 week 2 days 5 hours ago) and read 9918 times:

Quoting aeroblogger (Reply 4):

The lack of 787 has killed AI's operation...


Anyone with knowledge of Air India and their operations knows that the 787 is not what has killed the AI operation. The structural issues in place preclude the 787 orders! The delays haven't helped, but they are not the main problem.


User currently offlinedarksnowynight From United States of America, joined Jan 2012, 1361 posts, RR: 3
Reply 12, posted (2 years 7 months 1 week 2 days 5 hours ago) and read 9537 times:

Quoting burnsie28 (Reply 6):
For them to blame all their problems on the plane being late, maybe they should look at themselves to figure out what they can do to make a profitable airline with what they actually have.
Quoting MaverickM11 (Reply 7):
The 787 would certainly help but it is far from the biggest problem at AI.

More or less. There's no nice way to say it, but they're just being a bunch of opportunistic Chugs.



Posting without Knowledge is simply Tolerated Vandalism... We are the Vandals.
User currently onlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 13, posted (2 years 7 months 1 week 2 days 4 hours ago) and read 9036 times:

Quoting aeroblogger (Reply 4):
The lack of 787 has killed AI's operation...

I don't know if that's true or not. But I am sure that's a terrible position to be in if you want to get compensation. The reason being that it concedes that AI is desperate for these aircraft and can't cancel them. Therefore there is no financial motive for Boeing to go beyond what their contract requires. That only leaves moral reasons. Problem is that it's very difficult to explain to the board of Boeing why they should fork out hundreds of millions of dollars that they are not required to and with no financial justification.

The only play I see is approaching Airbus and going for the A350 instead. Or at least making it seem like they will do that and therefore are willing to cancel their 787's and replace their 777's. That will create some incentive for Boeing to play along. But it's a game of chicken where the first one to flinch will lose.


User currently offlineRheinbote From Germany, joined May 2006, 1968 posts, RR: 52
Reply 14, posted (2 years 7 months 1 week 2 days 4 hours ago) and read 8780 times:

Quoting Stitch (Reply 9):
Boeing's contract with AI capped compensation at 0.5% of the contract price, setting the limit at $145 million.

So the contract price was $29 billion?  


User currently offlinedarksnowynight From United States of America, joined Jan 2012, 1361 posts, RR: 3
Reply 15, posted (2 years 7 months 1 week 2 days 2 hours ago) and read 7917 times:

Quoting eaa3 (Reply 13):
The only play I see is approaching Airbus and going for the A350 instead. Or at least making it seem like they will do that and therefore are willing to cancel their 787's and replace their 777's. That will create some incentive for Boeing to play along. But it's a game of chicken where the first one to flinch will lose.

What good would that do? Boeing doesn't lose real money on cancellations (they'd be foolish to write their contracts out that way), and those 777s are already paid for (even if AI financed them through a third party, Boeing has still been paid).

AI can go to Airbus all they want, but I'm not sure how enthusiastic Airbus would be. They're going to use up a lot of financial patience as it is on the AA BK, and may not have time to entertain someone in AI's health. But that's just speculation...



Posting without Knowledge is simply Tolerated Vandalism... We are the Vandals.
User currently offlinegarpd From UK - Scotland, joined Aug 2005, 2654 posts, RR: 4
Reply 16, posted (2 years 7 months 1 week 2 days 2 hours ago) and read 7883 times:

Quoting aeroblogger (Reply 4):

I call BS on that. AI could have ordered any number of replacement aircraft in the meantime. They chose to sit idle and do nothing. The 777s may not suit them, but they ordered them. No one else on the 787s order book is suffering like AI. If there was, I'd have an easier time beliving in AI's claims.



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User currently offlineCargolex From United States of America, joined Apr 2010, 1271 posts, RR: 8
Reply 17, posted (2 years 7 months 1 week 2 days 2 hours ago) and read 7690 times:

Quoting aeroblogger (Reply 4):
The lack of 787 has killed AI's operation...

I honestly do not mean this to sound disrespectful, but I genuinely just don't believe that.

Air India has a ton of problems, and not having the 787 is only one of them. Not having the 787 did not "kill" NH, QR, JL, or NZ, even though those carriers have placed alot of faith in the 787 and the delays have had an impact.

AI's poor fleet planning predates the 787. If smaller planes were needed, if the routes don't work with the current aircraft (and I can't say either way) - there's a willing market or 77W's. If they're not workable then get rid of them and buy or lease smaller aircraft like more A330s. Now obviously, it's not all 1-2-3 like that, but there are practical ways to recover from a poor choice and remake the fleet into something that works better. I've heard that they want to lease out some 77Ls, but only if the prospective lessee (or buyer) takes some (rather ragged) 744s as well. That's basically a non-starter. If you really can't use them and you need them out earning instead of sitting or being underutilized - find a more pragmatic way -it's not impossible.

This says nothing about the other issues that AI has to deal with that, in some cases, don't relate at all to flight operations.

On top of that, we heard in September - in so many words from Aviation Minister Vayalar Ravi - that Air India "has no money to pay for the 787." Now there is a demand for $1Bn in compensation for Aircraft the airline cannot pay for?


User currently offlineStitch From United States of America, joined Jul 2005, 30977 posts, RR: 86
Reply 18, posted (2 years 7 months 1 week 2 days ago) and read 6761 times:
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Quoting eaa3 (Reply 13):
The only play I see is approaching Airbus and going for the A350 instead. Or at least making it seem like they will do that and therefore are willing to cancel their 787's and replace their 777's.

The Government of India have already re-confirmed the entire 787 order so that's effectively a card that is no longer in their deck to play.


Quoting Rheinbote (Reply 14):
So the contract price was $29 billion?    



Might be why AI is squawking.  

Seriously, we know AI is paying around $100 million a frame, so the contract would have been ~$2.7 billion. So I am guessing that the liquidated damages percentage is actually 5% and the reporter just muffed it. The actual compensation amount was $145 million, which would be 5% of $2.7 billion.

[Edited 2012-02-10 18:41:26]

User currently offlineneutronstar73 From United States of America, joined Mar 2011, 506 posts, RR: 0
Reply 19, posted (2 years 7 months 1 week 2 days ago) and read 6420 times:

Quoting aeroblogger (Reply 4):

Wrong. Air India's woeful management, wrong attitude, and complacency killed the airline, not the delay of ONE AIRCRAFT TYPE.

Seriously, how dare they DEMAND $1 billion from Boeing over manufacturing delays, as if NOTHING they did or FAILED TO DO caused their own problems. Nope, it was all the Americans in Seattle's fault; nothing Indians did at all. Boeing forced them to NOT buy an aircraft in the interim while the 787 was going through growing pains But I think it comes down to them wanting to blame an external source rather than looking at themselves and saying they are terrible at business decisions or just running a business.

Let me guess; they weren't able to order an A330 or 767 in the meantime because Boeing blocked their internet access, so they had NO IDEA they could order another aircraft type to keep them over until their aircraft became available? Or Boeing made them fly unprofitable routes, so it's their fault?

Air India's failures are Air India's failures alone.


User currently offlineCZ346 From United States of America, joined Feb 2012, 95 posts, RR: 0
Reply 20, posted (2 years 7 months 1 week 2 days ago) and read 6244 times:

Quoting aeroblogger (Reply 4):

I know I'm the 15th person responding to this but - what the hey. As posted before, AI barely has a pawn protecting their queen. I mean - for them to say "We're using 777's and can't come close to filling them, we have to have the 787 to replace those routes" shows weakness and necessity for the aircraft. Their only stronghold in the last round of debacles of this sort was that they would cancel the 787. They've already shut themselves out of that one.

And I know personally the whole US - India market is very difficult. It's on the other side of the world and the major cities there have a MASSIVE Indian presence. I have relatives in Indiana - even the suburbs of Indianapolis have huge Indian communities. I lived on the dirty side of the Hudson River - and boy, if I didn't know better I would say 70% - 80% of the populations in Jersey City and Hoboken are Indian. But I've always found that there are very few Indians (on a relative scale) who go back and forth frequently.. Yes, their families may come and visit once a year, or they will go back once a year, but on the larger scale there are not many people who frequently go back and fourth like there are in other markets. A perfect example is the Asian markets. There are TONS of people who do Asia - US on a bi-monthly basis (I'm one of them). I'm on a flight back to NY at least once a month, but every Indian I've spoken to states how rare it is for them to go back. Just my 2c. If I were AI I would set up flight from a focus city in Europe and bridge the US and India that way , capture 2 markets instead of 1 very small one...


User currently offlinelightsaber From United States of America, joined Jan 2005, 13110 posts, RR: 100
Reply 21, posted (2 years 7 months 1 week 1 day 21 hours ago) and read 5146 times:
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Quoting NUAir (Reply 1):
If only they understood the irony.

  
Well played sir.

Quoting macc (Reply 3):
If you are missing 4 billions in your balance sheet, you would also give it a try

Sad but true. Would AI have been ready to expand if the 788s had come on time?

I've read every post. What I don't know is what routes weren't launched or which planes would have been retired by AI. It wouldn't have been the 777s.

I'm suspecting that AI would have had issues accepting 788s on time...

Lightsaber



Societies that achieve a critical mass of ideas achieve self sustaining growth; others stagnate.
User currently offlineaeroblogger From India, joined Dec 2011, 1363 posts, RR: 0
Reply 22, posted (2 years 7 months 1 week 1 day 21 hours ago) and read 5076 times:

OK, I will admit that I didn't make my point clear...

Air India had no choice but to fly nonstop to the USA, because our lovely corrupt politicans in India want a lot of prestige routes. We Indians are a proud people, and it's just the way things work. Air India was much better off with their scissor hub at LHR, but politicans don't understand the economics of the aviation industry and it would be a waste of time to try to explain it to them...

Considering that Air India was required to fly nonstop to the USA, the 777 is currently the best option they have. However, it still is not a good option. It makes AI lose a lot of cash. It has too much capacity, high fuel burn, etc.

So, the point is that if AI had gotten the 787 on time, they would be in a BETTER place... A good place? No. But a better place. For that, they want compensation. I don't think this is particularly unfair.

However, as many of you have noted, AI has pretty much no bargaining power whatsoever. They have reconfirmed their 787 order with Boeing. The current 787 order is likely going to be the last major Boeing order in the next 5-8 years, so AI can't say that they'll take future business away.

So, will they get a billion? No way in hell. But it would be nice if it happened  

The airline has a lot of potential, but it just isn't taking advantage of it. It should look at TK as an example of how it should turn itself around..



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User currently offlinetimpdx From United States of America, joined Jul 2009, 553 posts, RR: 0
Reply 23, posted (2 years 7 months 1 week 1 day 20 hours ago) and read 4676 times:

Air india can't make America work, Jet can't make America work, kingfisher can't make long haul work...yet emirates, etihad and the major euro carriers make it work using a connection, not a non stop. I doubt the 787 would make any difference. No insult to India intended. AA even dropped direct to DEL.

User currently offlineCZ346 From United States of America, joined Feb 2012, 95 posts, RR: 0
Reply 24, posted (2 years 7 months 1 week 1 day 20 hours ago) and read 4509 times:

Quoting timpdx (Reply 23):

Air india can't make America work, Jet can't make America work, kingfisher can't make long haul work...yet emirates, etihad and the major euro carriers make it work using a connection, not a non stop. I doubt the 787 would make any difference. No insult to India intended. AA even dropped direct to DEL.

And that is the ONLY way to make it work. As I said in my above post, the business market US - India is VERY small - and this is truly the only way to make it work.


25 aeroblogger : Nope, they had Ex-Im bank guarantees at a sweetheart deal. Financing has been lined up for years now...
26 Rheinbote : Not at all. The final element of sales-and-leaseback never came to fruition for lack of a lessor willing to take the risk and accept the conditions l
27 aeroblogger : I don't think you understand... The RFPs are just for show. In the end, part of SBI (State Bank of India) will cover the balance of whatever AI needs
28 Post contains images maxter : Now you're talking. It was probably some state chief minister's cousin twice removed who got his son's father in law to broker the deal through anoth
29 garpd : Which basically means that they can do whatever the like, blame others for failures and get cash to repeat it all again.
30 bennett123 : Am I missing the obvious, if a B777-300 is too much, what about the B777-200?.
31 ltbewr : Let us not forget that AI's hub is at LHR, a large but overstuffed airport so having non-stops to the USA were needed to properly serve their customer
32 Post contains images aeroblogger : Well said
33 Stitch : Their 777-200LRs are larger than the 787-8s they had on order, but they seat less because they have three classes as opposed to the two AI is (eviden
34 DTWLAX : India-USA is mostly O&D. Not many people from other Asian countries connect through India. Emirates, Etihad and other Euro carriers rely on conne
35 MaverickM11 : DEL has a brand new big beautiful terminal. AI could easily funnel passengers from North America and Europe/Africa/Asia to DEL and then onward to Ind
36 Rheinbote : "Things will go on normally" then means the Indian government will keep wasting money on expensive Exim bank loans and SLB arrangements... Last time
37 DTWLAX : Agreed. But that depends on what Asian countries you are talking about. I do not see anybody connecting at DEL if the final destination is HKG, NRT,
38 sunrisevalley : I wonder why Boeing does not decline to make any deliveries while this action is pending. Tell AI to withdraw the action , be satisfied with the terms
39 aeroblogger : Because it would be illegal? Boeing can't just decide to break the contract and not deliver the planes on their own whim....
40 Rheinbote : Unlikely. A growing number of early customers is deferring deliveries into 2014/15, e.g. LAN deferred all but the first two. Fair to assume this is d
41 sunrisevalley : So you are saying that it is acceptable for AI to break the contract by it's own whim because it no longer likes some of the terms that it agreed to
42 LAXDESI : It seems AI has recognised that with its configuration of its B788 as noted below by Stitch. DEL, with its geographic location, could be a great hub.
43 flightsimer : nope... Every time they called Boeing for support, they kept on being redirected to India and couldn't understand what they were saying. So they miss
44 Revelation : They're a lot more than just positions. Having been at KPAE a few months ago, I can tell you that several of the planes are already built and painted
45 sunrisevalley : Except to stand fast to the original terms of the contract.
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