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How And Who Orders Aircraft For An Airline?  
User currently offlineAeroflot001 From Argentina, joined Oct 2009, 412 posts, RR: 0
Posted (4 years 5 days 5 hours ago) and read 5747 times:

Airlines of course will look at the economics of an aircraft and what suits their needs etc. However after all of this is decided and more or less they know what they want, How does the order take place? Does the CEO have a special number for Boeing/Airbus and others, is it a group conference? Do airline reps personally go to the company?

I, mean Im sure its more formal and broadened out than just, 'Hey this is Gerard Arpey and id like 150 787-9s, how much is that gonna run me?"

Thanks for any and all your help

Аэрофлот 001
Искрене Ваш

22 replies: All unread, jump to last
 
User currently offlineEMBQA From United States of America, joined Oct 2003, 9364 posts, RR: 11
Reply 1, posted (4 years 5 days 5 hours ago) and read 5685 times:

The sales department of the manufacture and the marketing department of the airline meet and work out the basics....then lawyers of both the manufacture and the airline complete the sale as it is a legal contract


"It's not the size of the dog in the fight, but the size of the fight in the dog"
User currently offlineArmitageShanks From UK - England, joined Dec 2003, 3645 posts, RR: 15
Reply 2, posted (4 years 5 days 4 hours ago) and read 5634 times:

Quoting Aeroflot001 (Thread starter):
I, mean Im sure its more formal and broadened out than just, 'Hey this is Gerard Arpey and id like 150 787-9s, how much is that gonna run me?"

Like with any corporation in modern times its lawyers lawyers lawyers.


User currently offlineAeroflot001 From Argentina, joined Oct 2009, 412 posts, RR: 0
Reply 3, posted (4 years 5 days 4 hours ago) and read 5599 times:

Quoting ArmitageShanks (Reply 2):
Like with any corporation in modern times its lawyers lawyers lawyers.


Yes, I can imagine, its like my History teacher tells us, Its all about the damned money!
Along with the lawyers how many reps for the airline and manufacturer are present, typically?


User currently offlineLAXintl From United States of America, joined May 2000, 26139 posts, RR: 50
Reply 4, posted (4 years 5 days 4 hours ago) and read 5557 times:

Most airlines have established procurement departments that handle the purchase in association with other supporting groups like financial planning, enginnering, network management and such.
The actual procurement approval comes in most cases from the board of directors.
Execs enjoy to participate in public signing events, however virtually all the hard work is done by hundreds of unseen folks in the background.



From the desert to the sea, to all of Southern California
User currently offlineAeroflot001 From Argentina, joined Oct 2009, 412 posts, RR: 0
Reply 5, posted (4 years 5 days 4 hours ago) and read 5543 times:

Quoting LAXintl (Reply 4):
Execs enjoy to participate in public signing events, however virtually all the hard work is done by hundreds of unseen folks in the background.

As, always execs seem as they would be on the easy side in front of the camera just smiling away and putting down their signature. Those in the background are the ones who probably determine which aircraft how many and an almost endless amount of calculations

Thankyou!


User currently offlineAirNZ From , joined Dec 1969, posts, RR:
Reply 6, posted (4 years 4 days 20 hours ago) and read 5245 times:

Quoting EMBQA (Reply 1):
then lawyers of both the manufacture and the airline complete the sale as it is a legal contract

Hmmm! nope, not really. A lawyer's role is drawing up/wording a contract based on what has been negotiated previously.......but they don't complete any sale.

Quoting Aeroflot001 (Reply 3):
Along with the lawyers how many reps for the airline and manufacturer are present, typically?

Why would a lawyer be present at the announcement of a sale? They only worded the contract which is being signed by both parties. Is a lawyer present when one buys a new car etc?


User currently offlineBtriple7 From United States of America, joined Sep 2005, 1182 posts, RR: 8
Reply 7, posted (4 years 4 days 19 hours ago) and read 5155 times:

Quoting Aeroflot001 (Reply 5):
As, always execs seem as they would be on the easy side in front of the camera just smiling away and putting down their signature. Those in the background are the ones who probably determine which aircraft how many and an almost endless amount of calculations

You make it sound like being an airline executive is easy. Sure, it has its benefits, but I wouldn't say it's the "easy side". There is no easy job in commercial aviation in my opinion.

Bt7



Just...fly.
User currently offlinerfields5421 From United States of America, joined Jul 2007, 7607 posts, RR: 32
Reply 8, posted (4 years 4 days 19 hours ago) and read 5071 times:

Quoting Aeroflot001 (Thread starter):
How does the order take place?

Ever buy a new house?

Now imagine there are only two builders in your area and they each have just a few floorplans - one for 1,200 sq ft, one for 1,800 sq ft, one for 3,000 sq ft and one for 4,500 sq ft.

Now imagine having to make your basic selection from those limited options.

Now multiply the research, the paperwork by 200 times what it takes to buy a house. And the financing is even more complicated. That's what it takes to buy commercial passenger or freight aircraft.


User currently offlineflyby519 From United States of America, joined Jul 2007, 1234 posts, RR: 0
Reply 9, posted (4 years 4 days 17 hours ago) and read 4918 times:

They pull up to the drive-thru window just like at McD's and say "Hey, I'll take a #3 with the GE engines and 32" pitch layout. Can you throw in some fries with that?"  


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User currently offlineDTWPurserBoy From United States of America, joined Feb 2010, 1775 posts, RR: 7
Reply 10, posted (4 years 4 days 16 hours ago) and read 4806 times:

Actually, after the decision has been made to purchase a new airliner, a committee consisting of the board, engineering and maintenance, finance, inflight, flight opns (pilots) and others make a joint decision. Price and availability of mainentance support are always critical issues. Now an airline like DL or UA does not pay nearly the price of a small company that only buys a few airplanes. ALso, prices are lowered for "launch" customers as they take the greatest risk. That's why ANA is getting such a good deal on the 787-8. Most major airlines like DL and UA keep respresentatives at the factories of BOeing and Airbus that are involved in the negotiations and they personally monitor the construction sequence of each individual airfame to be sure that everything the airline ordered is in place and works.


Qualified on Concorde/B707/B720/B727/B737/B747/B757/B767/B777/DC-8/DC-9/DC-10/A319/A320/A330/MD-88-90
User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 11, posted (4 years 4 days 15 hours ago) and read 4709 times:

Quoting DTWPurserBoy (Reply 10):
Actually, after the decision has been made to purchase a new airliner, a committee consisting of the board, engineering and maintenance, finance, inflight, flight opns (pilots) and others make a joint decision. Price and availability of mainentance support are always critical issues. Now an airline like DL or UA does not pay nearly the price of a small company that only buys a few airplanes. ALso, prices are lowered for "launch" customers as they take the greatest risk. That's why ANA is getting such a good deal on the 787-8. Most major airlines like DL and UA keep respresentatives at the factories of BOeing and Airbus that are involved in the negotiations and they personally monitor the construction sequence of each individual airfame to be sure that everything the airline ordered is in place and works.


Very good explanation.

I have a copy of an amendment to the L-1011 contract between Lockheed and Air Canada (raising the price $19,000 per aircraft). It is signed by the president of Lockheed Western Export Company (Lockheed's Sales Agent) and the president and corporate secretary of Air Canada.


User currently offlineALTF4 From United States of America, joined Jul 2010, 1214 posts, RR: 4
Reply 12, posted (4 years 4 days 13 hours ago) and read 4603 times:

Quoting Aeroflot001 (Reply 5):
As, always execs seem as they would be on the easy side in front of the camera just smiling away and putting down their signature. Those in the background are the ones who probably determine which aircraft how many and an almost endless amount of calculations

Well, who else would it be? The janitor?

The executives have far from an easy job, in any company. Sure, they may not be physically straining as they throw bags into the cargo bin, nor do they crunch numbers all day, but much of the success or failure of the company is tied to what they do and the policies they set.

So, they might 'have it easy' in the sense that their paycheck is normally very large and they don't have to do 'boring' work, necessarily - but they are getting paid for the stress of the job, as well as their superior experience and decision making abilities.

(Maybe your post come across as it did due to a language barrier - if so, please note that I am not criticizing you, just trying to explain things)



The above post is my opinion. Don't like it? Don't read it.
User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9813 posts, RR: 52
Reply 13, posted (4 years 4 days 12 hours ago) and read 4574 times:

The ordering process starts with the fleet planning team. They continuously evaluate fleet performance, typically on a quarterly basis. They work with corporate strategy and there is typically a long term process known for when airplanes are to be acquired. The airline needs to figure out what type of airplane would be the best fit for their network with all the associated operating and financial costs. The airline looks at revenue and makes decisions such as, which hubs support what size of plane? What is the balance between frequency and capacity? This plan is reviewed up through the vice president and president level within the company and for some CEOs may be involved.

When the time arrives to start considering an order. Airlines send out requests for information and then solicit bids from various manufacturers. The sales and marketing teams at the manufacturers respond to these with face to face visits, tours of showcases of displays and mockups, technical and financial information. It is a large technical package that is reviewed. Despite what some post on the internet, it is not a case of a CEO saying: I prefer this manufacturer, so go buy this plane.

The next step is negotiations. Costs of an airplane are evaluated in many ways. It is not just a one time check to the manufacturer. Airlines are continuously paying the manufacturer for support and spares. All of that gets negotiated. Warranty and similar commitments are drafted up. Also customer options are evaluated and the whole supply base has to be considered. Some airlines have different needs than others. For instance there are some airlines that have a reputation for being very proactive with their fleet and incorporate all optional service bulletins or improvements as time goes. Others go with the strategy of only improving or modifying planes as necessary when a need arises. Airplanes act like living, breathing creatures that evolve over time and need constant maintenance and attention. The maintenance plans are always changing. For bigger airlines, this is all handled based on the needs that the airline has come up with internally before ever approaching a manufacturer.

From the airline I worked at, it was a small team of employees from different divisions in management within the company. There would be airport ops, maintenance, engineering, quality, purchasing, planning/strategy, marketing, crew ops, finance, legal, and some executive participation. Each member evaluates the proposals presented and compares them to the business case that the airline has in their particular expertise. The employees were typically very senior people and in the leadership team with many years of experience, but they are not necessarily executives. Airlines do have fleet planning teams that do more than just deal with orders. It is not a top executive decision since the details that justify ordering a specific type are way beyond the detail level knowledge that an executive would have.



If you have never designed an airplane part before, let the real designers do the work!
User currently offlineAeroflot001 From Argentina, joined Oct 2009, 412 posts, RR: 0
Reply 14, posted (4 years 4 days 10 hours ago) and read 4521 times:

Quoting Btriple7 (Reply 7):
You make it sound like being an airline executive is easy
Quoting ALTF4 (Reply 12):
(Maybe your post come across as it did due to a language barrier - if so, please note that I am not criticizing you, just trying to explain things)

Yes that was a bit of an ignorant statement on my part and because I am aware of all the pressure and stress that is constantly being thrown at CEOs and Im sure they have some very restless nights as they try to figure out what they can do to make sure their company stays afloat, it seems that a lot of the public is constantly throwing them under the bus because of their salaries especially when they get bonuses.

And, no problem ALTF4 if anything I enjoy constructive criticism and hearing what others have to say. However rest assured there is no language barrier present, I was born, raised and currently live in Miami, FL granted I did not begin to learn English until I was 5 but those effects were already gone by the time i was 7 . I have the Flag of Argentina up because I have great admiration for my Argentine background, Argentine Spanish and my fathers family that is still living there, I am even in the process of acquiring my Argentine citizenship. On my Mothers side I am Puerto Rican.

Quoting RoseFlyer (Reply 13):
The ordering process starts with the fleet planning team. They continuously evaluate fleet performance, typically on a quarterly basis. They work with corporate strategy and there is typically a long term process known for when airplanes are to be acquired. The airline needs to figure out what type of airplane would be the best fit for their network with all the associated operating and financial costs. The airline looks at revenue and makes decisions such as, which hubs support what size of plane? What is the balance between frequency and capacity? This plan is reviewed up through the vice president and president level within the company and for some CEOs may be involved.


Brilliant Post, Thankyou very much

Quoting flyby519 (Reply 9):
They pull up to the drive-thru window just like at McD's and say "Hey, I'll take a #3 with the GE engines and 32" pitch layout. Can you throw in some fries with that?"  

 

Who is the very first to contact the manufacturer to express an interest in making a purchase and how?


User currently offlineRoseFlyer From United States of America, joined Feb 2004, 9813 posts, RR: 52
Reply 15, posted (4 years 3 days 16 hours ago) and read 4348 times:

Quoting Aeroflot001 (Reply 14):


Who is the very first to contact the manufacturer to express an interest in making a purchase and how?

While I no experience doing the process, general practice is for someone in fleet planning to send a formal letter which a request for information or a request for proposal. Again it is not a CEO or executive, but just a regular management employee who typically has his/her manager sign the formal letters. Aviation contracts usually start with a written list of requirements and a request for some type of package describing how the supplier can meet those requirements.

And before you ask who does it go to at Airbus or Boeing, both manufacturers have account managers that manage each airline and are the focal point for all commercial discussions. On top of that, the larger airlines almost always have representatives from either or both Airbus and Boeing based on site at their technical/engineering headquarters. Sometimes it is a bit comical when the Airbus and Boeing representatives have offices next to each other at an airline.



If you have never designed an airplane part before, let the real designers do the work!
User currently offline474218 From United States of America, joined Oct 2005, 6340 posts, RR: 9
Reply 16, posted (4 years 3 days 16 hours ago) and read 4338 times:

Quoting RoseFlyer (Reply 15):
Sometimes it is a bit comical when the Airbus and Boeing representatives have offices next to each other at an airline.


Why? When I was a Lockheed field service representative in our office at Air Canada in Montreal we got along fine with the Boeing and Douglas reps. In fact because the Canadian mail system was so bad (always on strike), we all had post office boxes in Champlain, New York. We would take turns driving down to pick up each others mail. We even socialized after work.

Another time when I was setting up an office to do a large repair in Nerita. The people in the Boeing office let me use a desk and phones in their office until our offices equipment and phones were delivered and set up.


User currently offlineAeroflot001 From Argentina, joined Oct 2009, 412 posts, RR: 0
Reply 17, posted (4 years 3 days 8 hours ago) and read 4241 times:

Quoting 474218 (Reply 16):
Why? When I was a Lockheed field service representative in our office at Air Canada in Montreal we got along fine with the Boeing and Douglas reps. In fact because the Canadian mail system was so bad (always on strike), we all had post office boxes in Champlain, New York. We would take turns driving down to pick up each others mail. We even socialized after work.

Im sure he didnt mean it in a bad way, probably just found it a bit comical that the offices were all next to each other. In society you cant always be grabbing people from the competition by throat. They should each do their own jobs to the best of their abilities however they should get along as well

Quoting RoseFlyer (Reply 15):
And before you ask who does it go to at Airbus or Boeing, both manufacturers have account managers that manage each airline and are the focal point for all commercial discussions. On top of that, the larger airlines almost always have representatives from either or both Airbus and Boeing based on site at their technical/engineering headquarters. Sometimes it is a bit comical when the Airbus and Boeing representatives have offices next to each other at an airline.

Well, actually that question had not crossed my mind so thank you very much for that extra bit along with all the information.


User currently offlinestlAV8R From United States of America, joined Nov 2010, 113 posts, RR: 0
Reply 18, posted (3 years 11 months 3 weeks 4 days ago) and read 3707 times:

Is there a posting of options that airlines can order on various aircraft types?

User currently onlineBMI727 From United States of America, joined Feb 2009, 15831 posts, RR: 27
Reply 19, posted (3 years 11 months 3 weeks 3 days 23 hours ago) and read 3694 times:

Quoting stlAV8R (Reply 18):

Is there a posting of options that airlines can order on various aircraft types?

Yes, but it isn't exactly like a car though. First, as far as options go, the airlines want things to be very customizable, but manufacturers and lessors want things as standardized as possible in the interests of simplicity and residual value respectively.

Anyway, the manufacturer will have various options available for the aircraft. Other equipment, like seats and galleys, are typically buyer furnished equipment, meaning that the airline is responsible for negotiating for it separately, and ensuring that it is at the assembly line on time, or otherwise just installing it themselves after delivery. I suppose the best analogy would be building a house and then going down to Sears or wherever to get appliances.



Why do Aerospace Engineering students have to turn things in on time?
User currently offlinestlAV8R From United States of America, joined Nov 2010, 113 posts, RR: 0
Reply 20, posted (3 years 11 months 3 weeks 1 day 11 hours ago) and read 3443 times:

Quoting BMI727 (Reply 19):

Thanks but I guess I should have been more clear. Do you know of a list of OEM options? I was looking more for that than customer furnished.


User currently offlineImperialEagle From United States of America, joined Jan 2006, 2630 posts, RR: 22
Reply 21, posted (3 years 11 months 3 weeks 1 day 9 hours ago) and read 3408 times:

Here is a link to a related article that appeared in today's N.Y.Times in case you didn't see the thread over on "civil".

http://www.nytimes.com/2011/01/03/bu...wikileaks-boeing.html?pagewanted=1



"If everything seems under control, you're just not going fast enough!"
User currently offlinetdscanuck From Canada, joined Jan 2006, 12709 posts, RR: 80
Reply 22, posted (3 years 11 months 3 weeks 1 day 8 hours ago) and read 3374 times:

Quoting stlAV8R (Reply 20):
Do you know of a list of OEM options? I was looking more for that than customer furnished.

It depends on the aircraft. Some things that are often optional:
-Radio vendor
-Brake vendor
-Engine vendor
-Crew rests (size, number, & location)
-Avionics settings (HUD takeoff or not, altitude callouts on the radio altimeter, ability of flight crew to run their own performance numbers, etc.)
-Communication equipment (SATCOM number & type, HF number)
-FO steering tiller

However, as noted above, OEM's are pushing towards standardization so the number of OEM options has been steadily dropping for many years.

Tom.


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