khenleydia
Posts: 383
Joined: Tue Feb 15, 2005 2:18 am

787 Airline Order Options...

Tue Apr 12, 2005 12:30 am

Once again, I tried searching the DB for answers to my questions, but had no luck.

When airlines place orders which include options, I assume a few things, but have questions on others and love to confirm my assumptions. I am referring to all orders, but have in mind the 787 just because it hasn't even been built yet.

Assumptions:
1. The prices related to the initial orders are the same on the options?
2. There is a limited amount of time to use the options? (In years)
3. Options are only good for the same family of aircraft or they modify the original deal?

Questions:
1. When do companies usually use their options? Clearly they must have money. With the 787, will companies likely wait until they see it fly and get the final Boeing results?
2. What if a family is discontinued, like the 757 line? If customers still had options, would they roll over to another family?
3. Can options be given from one airline to another?

Thanks for any answers!
KhenleyDIA
Why sit at home and do nothing when you can travel the world.
 
DAYflyer
Posts: 3546
Joined: Wed Sep 08, 2004 9:35 pm

RE: 787 Airline Order Options...

Tue Apr 12, 2005 2:11 am

Good questions, all. I have often wondered the same things. I think part of the answer lies within the bound of the contracts with each individual airline.
One Nation Under God
 
khenleydia
Posts: 383
Joined: Tue Feb 15, 2005 2:18 am

RE: 787 Airline Order Options...

Tue Apr 12, 2005 6:37 am

Quoting DAYflyer (Reply 1):
I think part of the answer lies within the bound of the contracts with each individual airline.

Good point. I wonder how much is standard or if they change a bunch each time. You know the lawyers make GREAT money working for Boeing, Airbus and etc.

KhenleyDIA
Why sit at home and do nothing when you can travel the world.
 
Boeing7E7
Posts: 5512
Joined: Sat Jul 31, 2004 9:35 pm

RE: 787 Airline Order Options...

Tue Apr 12, 2005 6:59 am

Quoting KhenleyDIA (Thread starter):
Assumptions:
1. The prices related to the initial orders are the same on the options?
2. There is a limited amount of time to use the options? (In years)
3. Options are only good for the same family of aircraft or they modify the original deal?

Generally, prices are set on the order date. Generally there is an exercise period, and changes are negotiable based on the contract. Options can also be shifted to other aircraft as part of a deal. Basically, a contract can be renegotiated, usually in favor of the manufacturer.

Quoting KhenleyDIA (Thread starter):
.
1. When do companies usually use their options? Clearly they must have money. With the 787, will companies likely wait until they see it fly and get the final Boeing results?
2. What if a family is discontinued, like the 757 line? If customers still had options, would they roll over to another family?
3. Can options be given from one airline to another?

The option absorption is based on the initial contract. Contracts signed before proving of the aircraft (assuming a deposit) are refundable in the event the aircraft fails. There would have to be a material defect or breach of promised performance within tolerances established by the contract. This is why there are announcements for orders, and actual orders on the 787. The "non-firmed up" orders may have a stipulation on first flights or a stretched out payment schedule. As for a new line, it's possible the options could be rolled. Generally the change would somehow favor the manufacturer. Options have in the past been given to other carriers for delivery slots. Delta still has a pile of option slots for CRJ's which have been shelled out to Comair, ASA, and SkyWest over the past few years.

[Edited 2005-04-12 00:00:14]
 
khenleydia
Posts: 383
Joined: Tue Feb 15, 2005 2:18 am

RE: 787 Airline Order Options...

Tue Apr 12, 2005 7:46 am

Thanks for the info 7E7!

KhenleyDIA
Why sit at home and do nothing when you can travel the world.

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