squirrel83
Posts: 1219
Joined: Mon May 24, 2004 12:28 pm

Airbus: Who Controls The Price Of Each Aircraft?

Wed May 04, 2005 9:02 pm

My question is sparked by the following article

Why should IA pay an extra Rs 5,000 crore for 43 aircraft when the EU major has offered Air Asia a price of $26 million or less per aircraft in ready-to-fly condition for delivery in 2006? the MPs ask. If IA benchmarks its contract on the price offered to Air Asia, it will spend $1.2 billion against the $2 billion reportedly being paid out.

http://www.hindustantimes.com/news/181_1347363,0008.htm

WHO DECIDEDS THE FINAL PRICE ON EACH AIRCRAFT/DEAL? THE EU OR AIRBUS CORP.

I think some of you can see where im going with this . .

Example - Lets say Canada and France or an EU coutry have good economic ties and would like to purchase a a346 and received a lower price due to the relation . . .See where IM going ?
A346, 7E7, 747, 777, Sonic Cruiser
 
jwenting
Posts: 9973
Joined: Mon Apr 23, 2001 10:12 pm

RE: Airbus: Who Controls The Price Of Each Aircraft?

Wed May 04, 2005 9:08 pm

Yup.
In part your suspicions may well be right.
In part (hopefully for free trade a larger part) it's due to market forces though.

Airbus will give volume discounts as will just about anyone. Airbus will also lower the price if they see the potential customer leaning to the competition.

Maybe IA were just poor negotiators.
I wish I were flying
 
trex8
Posts: 4577
Joined: Sat Nov 02, 2002 9:04 am

RE: Airbus: Who Controls The Price Of Each Aircraft?

Thu May 05, 2005 12:05 pm

there is also the costs of the financing which is not always part of the announced "price". ie it may be more expensive ultimately to buy a plane for say 10 million at 9% interest over 12 years as opposed to 12 million at 4% over 6 years.(actual numbers may not be right but you get the idea!)
 
DLKAPA
Posts: 7962
Joined: Wed Dec 03, 2003 10:37 am

RE: Airbus: Who Controls The Price Of Each Aircraft?

Thu May 05, 2005 12:07 pm

And back with the subsidies argument. Yay the worms are coming out of the can...
And all at once the crowd begins to sing: Sometimes the hardest thing and the right thing are the same
 
trex8
Posts: 4577
Joined: Sat Nov 02, 2002 9:04 am

RE: Airbus: Who Controls The Price Of Each Aircraft?

Thu May 05, 2005 12:20 pm

Quoting DLKAPA (Reply 3):
And back with the subsidies argument

and which argument is that, AWST had an article maybe last fall when they quoted someone as saying if Airbus had to pay commercial interest rates on their "low interest" loans from the Euro govts it would increase the price of every plane they made by all of several tens of thousands of dollars only! hardly anything to make or break a deal. you change the basis points for the interest rate for the financing a little and you get more spread!

in any case with the a320 program they are just printing money like a mint whenever they sell one. and if they want to not make money on that particular line as they have paid off their govt creditors already, its hardly a new business practise to subsidise one product by making a loss on another!
 
danialanwar
Posts: 420
Joined: Fri Mar 16, 2001 6:13 pm

RE: Airbus: Who Controls The Price Of Each Aircraft?

Fri May 06, 2005 12:30 am

It's a commercial company. So the final decision will be with the CEO or maybe some very senior manager (given rather low volume high impact of purchases). The CEO is then responsible to ensure Airbus produced the results that it's owners (EADS and whoever else) commissioned him to achieve.

I have never heard of complaints that subsidies go to specific purchases ... as far as I am aware, all subsidies go into development. So I really dont see the EU or one government telling Airbus to give Air Asia extra discount!!! Governments may help countries purchase planes by giving loans to those countries that will then be used to buy the planes. Or help the decision making by offering traffic rights into Paris.
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