Looks like some people can defer the downpayment and still get their planes. I guess this is what competition is all about.
Dow Jones Business News
China Air To Accept Plane Delivery, Delay Payment
Thursday June 19, 4:41 am ET
TAIPEI -(Dow Jones)- China Airlines Ltd. will still have to accept the delivery of 18 passenger jets it ordered last year from Boeing Co. (NYSE
:BA - News) and Airbus , but it will be able to defer the advance payment originally scheduled for the second half of 2003, which is likely to help the airline's bottom line this year.
The news helped boost China Airlines' shares 2.1% to NT
$14.95, its highest close since Feb. 7.
"The planes will be delivered as scheduled, and by postponing the payment (for six months) we can cut interest costs as well," Roger Han, spokesman for Taiwan's largest commercial carrier, told Dow Jones Newswires on Thursday.
The lower interest costs could help China Airlines' earnings this year, which have been hurt by higher oil prices in the run-up to the war in Iraq and fewer travelers due to the outbreak of SARS.
"This is a definitely good news for China Airlines from the standpoint of cost control," said D.C. Wang, an analyst at Yuanta Core Pacific Capital Management.
China Airlines began talks with the two airplane makers to delay the delivery, scheduled to start next year, after the SARS outbreak damped demand for air travel.
The airline reported May revenue slumped 40% on year to NT
$4.03 billion ($1= NT
$34.59) as SARS kept travelers at home.
However, in recent weeks several regional airlines have announced a restoration of some flights that had been canceled during the height of the severe acute respiratory syndrome outbreak, and on Tuesday the World Health Organization lifted its travel warning on Taiwan due to SARS.
As a result, Han said he isn't too worried that the deliveries can't be delayed.
Now "it seems everybody has thrown their (SARS) fears into the air, so I think we also need to ensure capacity is sufficient down the road," said Han.
The Economic Daily reported this week that China Airlines plans to resume all flights suspended due to SARS in August.
In addition, the airline has joined the "Fly Taiwan Fly" campaign and cut ticket prices in order to lure back business to the island in the aftermath of SARS.
Delayed Payments Total US$300 Million
The 18 passenger jets are part of a 22-plane package China Airlines ordered in October to expand its fleet and replace some older planes.
Six are Boeing long-haul B747-400s and 12 are Airbus medium-range A330-300s. The remaining four are Boeing 747-400 Freighters, which are slated for delivery later this year.
The list price of each B747-400 is US$200 million, while that of an A330 is around US$158 million.
Another senior executive at China Airlines said the advance payments that have been delayed total roughly US$200 million to Boeing and US$100 million to Airbus.
Boeing and Airbus confirmed the timetable for the plane deliveries remain unchanged.
"Everything is on schedule...there has been no change, and Boeing acknowledges that both sides are working together to work out mutually agreeable terms," Ivy S. Takahashi, a Boeing spokeswoman in Seattle, told Dow Jones Newswires.
She wouldn't comment on the financial agreement.
An Airbus spokesman in Singapore said he "is not aware of any changes to the delivery schedule," but added he couldn't comment on the financial details.
-By Perris Lee, Dow Jones Newswires; 8862-2502-2557; firstname.lastname@example.org
"Two things are infinite: the universe and human stupidity; and I'm not sure about the universe." (Albert Einstein, 1879 - 1955)