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PanAm_DC10
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Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 10:56 pm

Air Europa the first Spanish to sign for the A350 have re-affirmed their intention to stay with the model.

By Thomas Mulier

Dec. 6 (Bloomberg) -- Air Europa SA, the first Spanish airline to order A350 planes from Airbus SAS, wants compensation from the planemaker for the delay in their delivery, El Economista said, citing people at the company it didn't name.

Air Europa will keep its order for 10 planes even though they'll be at least two years late, the newspaper said.

The Spanish airline will seek either a discount on the price or ask Airbus to provide substitute planes until the A350s are delivered, the newspaper said.


(El Economista 12-6 13) See http://www.eleconomista.es

[END - Fair use excerpt http://www,bloomberg.com

2 years late? I assume they had 2011 as initial delivery. Pleasing to see a carrier re-affirm their commitment now that the Industrial Launch has been authorised

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PolymerPlane
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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 10:58 pm

It's gonna be a hell for compensation negotiations though.

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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 10:59 pm

Quoting PanAm_DC10 (Thread starter):
wants compensation from the planemaker for the delay in their delivery

Not a good way for Airbus to start off a program by having to pay compensation out the gate, but, hey, at least compensation is better than having to remove the order from their books.
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DLPMMM
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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 11:05 pm

How can you reaffirm a purchase intention when you still have not agreed to pricing/compensation and terms? Heck, does anyone even know the plane's significant specifications yet?

Looks to me like Air Europa just wants a little attention.
 
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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 11:37 pm

Quoting DLPMMM (Reply 3):
How can you reaffirm a purchase intention when you still have not agreed to pricing/compensation and terms? Heck, does anyone even know the plane's significant specifications yet?

That's a valid point however Air Europa signed a firm contract and there is a "twist" to their order contract which I cannot supply a link to.

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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 11:37 pm

Quoting DLPMMM (Reply 3):
Looks to me like Air Europa just wants a little attention

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RE: Air Europa Re-Affirm A350 Order

Fri Dec 08, 2006 11:52 pm

I think UX has a valid business plan for the long haul flights to South America and this delay is going to change part of the expantion plans. So that's why they try to get a discount plus substitute planes.
 
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 12:47 am

Well a mixed batch of news for Airbus.

On one hand it's a good sign that the customer is re-comitting.

On the other hand, it's really a bad sign they want a discount from the price they agreed to for what was ostensibly, a cheaper aircraft to begin with. If Airbus wasn't so cash constrained at the moment it might be better for them to cancel and pay the penalties on those old contracts. Unfortunately their hands would appear tied.
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 12:50 am

Quoting PanAm_DC10 (Thread starter):
Air Europa the first Spanish to sign for the A350 have re-affirmed their intention to stay with the model.

It was actually the Launch customer
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:07 am

Quoting DLPMMM (Reply 3):
How can you reaffirm a purchase intention when you still have not agreed to pricing/compensation and terms?

Maybe on the basis that air Europa has a firm order for the original A350? scratchchin 

I see two separate issues here.

1 - The A350XWB is a significantly better plane than the one that air Europa signed for. So Airbus has some credit in the "account" here.

2 - The better A350 will be delivered later than the A350 that Air Europa signed for. So UX has some credit in the "account" here.

What's the solution? Perhaps the simplest thing is for UX to get the better A350 later, but at the same price as the old A350. Presumably, as one of the first airlines to buy the old A350, they got a pretty good price on them.
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:08 am

Quoting DLPMMM (Reply 3):
How can you reaffirm a purchase intention when you still have not agreed to pricing/compensation and terms?

Maybe on the basis that air Europa has a firm order for the original A350? scratchchin 

I see two separate issues here.

1 - The A350XWB is a significantly better plane than the one that air Europa signed for. So Airbus has some credit in the "account" here.

2 - The better A350 will be delivered later than the A350 that Air Europa signed for. So UX has some credit in the "account" here.

What's the solution? Perhaps the simplest thing is for UX to get the better A350 later, but at the same price as the old A350. Presumably, as one of the first airlines to buy the old A350, they got a pretty good price on them.
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osiris30
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:12 am

Quoting Scbriml (Reply 9):
What's the solution? Perhaps the simplest thing is for UX to get the better A350 later, but at the same price as the old A350. Presumably, as one of the first airlines to buy the old A350, they got a pretty good price on them.

A new 350 for the price of an old 350 would be a steal of a deal. The new 350s are significantly more expensive than the old 350s would have been. Even without a good launch discount that would be a hell of a deal. I would take it even if I didn't want the plane just to resell the plane. (I'm not saying that UX doesn't want them).

If UX got standard launch discounts on the old 350, they probably would be paying close to (or maybe even a little below) cost for the new 350 at the same price. That's good business however you slice it.
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:22 am

Quoting Osiris30 (Reply 7):
it's really a bad sign they want a discount from the price they agreed to for what was ostensibly, a cheaper aircraft to begin with

This might only be half the truth. It could well be that the discount Air Europa is seeking will be based on the price of the newest proposed A350.

The difference in listprice between both models is about US$40 million, as the launch customer it is not unthinkable that Air Europa was going to get a huge discount on their order (think 30 to 40%). It seems impossible that they would get an additional US$40 million from each aircraft on top of their launch discount, more so that they would even drive a bargain to get another discount on top of that.

Mr. Leahy said that he expects some customers to cancel. Reading between the lines that probably means.. 'We rather loose contracts then loosing money on contracts'.
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osiris30
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:34 am

Quoting Manni (Reply 12):
This might only be half the truth. It could well be that the discount Air Europa is seeking will be based on the price of the newest proposed A350.

Manni,

I would agree with you, except the way I read it, they are excepting their initial contract to be honored (at least from a price perspective). Ofcourse, what I read and what the truth may be depends largely on the author's ability to convey the situation accurately.

Quoting Manni (Reply 12):
The difference in listprice between both models is about US$40 million, as the launch customer it is not unthinkable that Air Europa was going to get a huge discount on their order (think 30 to 40%).

Yes.. that's why it will be interesting to see what the real story would be (and why I said, if they hold their original contract, they will likely be buying @ or near cost).

Quoting Manni (Reply 12):
Mr. Leahy said that he expects some customers to cancel. Reading between the lines that probably means.. 'We rather loose contracts then loosing money on contracts'.

As long as Airbus can afford the penalties from a cashflow perspective that would likely be the wise move. There will be penalties to cancel some of those contracts. I bet some are steep enough Airbus will eat a conversion. Some on the other hand are likely light enough to eat the penalty and cancel the contract.

I will say that I expect those who have contracts cancelled will defect to the 787 as it's purchase price is lower than the new 350 and when adding that to the penalty payments will likely put them 'in the ball park' from a financial planning perspective. (Additionally, the new 350 might not fit the plans for everyone, as it's bigger than the 'old' 350.... ugh we really need to come up with an acceptable abbreivation for the 3 'major' 350s that have been available)
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RE: Air Europa Re-Affirm A350 Order

Sat Dec 09, 2006 1:54 am

Quoting Osiris30 (Reply 13):
except the way I read it, they are excepting their initial contract to be honored (at least from a price perspective). Ofcourse, what I read and what the truth may be depends largely on the author's ability to convey the situation accurately.

Unfortunately the link posted in the threadstarter does no longer work (the Bloomberg article) I'm not going to guess the content of an article -the spanish one- in a language I can only order beer or charm girls with  duck . I tried to google the article without succes. Going by the quote in the thread starter it is not mentioned from where the negotations will start.

Quoting PanAm_DC10 (Thread starter):
The Spanish airline will seek either a discount on the price or ask Airbus to provide substitute planes until the A350s are delivered, the newspaper said.
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