Lumberton
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Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 8:48 pm

http://www.thehindubusinessline.com/...12/21/stories/2007122152390100.htm

Quote:
Bangalore, Dec 20 The UB Group is considering a move to cancel excess aircraft orders and return production slots to Airbus Industrie which could yield the company as much as $5 million for each aircraft.

A top official with the UB Group told Business Line that after identifying excess capacity, both its airlines, Kingfisher Airlines as well as Deccan Aviation, plan to either lease out aircraft to other airlines or defer their induction into the fleet or cancel the orders in consultation with Airbus.

On Wednesday, the boards of Kingfisher Airlines as well as Deccan Aviation are learnt to have decided to lease two of their Airbus aircraft to another airline.

In case, both the airlines decide to cancel any of the orders, Airbus Industrie which is currently not able to meet the aircraft demand, will sell those aircraft to other airlines after paying about $5 million for each of these airplanes to the UB Group.

"When all is said and done, more will be said than done".
 
starrion
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 8:55 pm

So about 56 aircraft in the pipeline total.

A lot of airlines were throwing around 100 plane orders at one point. The really good new for Airbus is that they have so many other people in line that they won't miss these orders.
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aa1818
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 9:01 pm

I guess these will be A32X family returns rather than Long Haul a/c! Great news for Airbus that they have early delivery slots now available. I look forward to seeing another long haul operator in India after the merger is complete and UB group can fly internationally.

AA1818
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Lumberton
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 9:06 pm



Quoting AA1818 (Reply 2):
I guess these will be A32X family returns rather than Long Haul a/c!

I'm not sure. IIRC they ordered A332s, A345s, A380s, and A350s; quite an assortment of widebodies. Any guesses?
"When all is said and done, more will be said than done".
 
khobar
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 9:18 pm

56 excess capacity cancellations for money from an airline that has ordered your A380 and A350XWB is good to great news for Airbus? When would such cancellations not be good to great news for Airbus?
 
OldAeroGuy
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 9:21 pm



Quoting Starrion (Reply 1):
The really good new for Airbus is that they have so many other people in line that they won't miss these orders.

Unless the cancellations include the A345.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
 
slz396
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 9:39 pm

There are something weird about this report:

in short: the airline has excess capacity and so it wants to cancel part of their firm orders, yet by doing so it gets paid 5M dollars by the manufacturer????  scratchchin 

Either the money transaction is the other way round and Airbus gets paid 5M dollars per plane from the airline for breaching the purchase agreement, or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

Would make sense too as it has been said in the past some mega-orders have all the looks of a slot hedge.
 
khobar
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:12 pm



Quoting Slz396 (Reply 6):
Either the money transaction is the other way round and Airbus gets paid 5M dollars per plane from the airline for breaching the purchase agreement, or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

Or it might speak directly to the contract and how Airbus does business.
 
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Stitch
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:20 pm

I had recently heard IT wished to defer deliveries of some A320 and ATR planes, but I guess they have decided their is money to be made selling the production slots back to Airbus...
 
scouseflyer
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:24 pm



Quoting Slz396 (Reply 6):
Would make sense too as it has been said in the past some mega-orders have all the looks of a slot hedge.

Is it not also to do with the fact that both IT and Air Deccan have large narrow-body orders as yet undelivered and there's too many now for the size of carrier.
 
behramjee
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:44 pm

smart move...the combined fleet of KF and Deccan is more than enough to fufil their domestic needs as both airlines are hubbed at BLR hence may not need to fly at virtually the same time or within few minutes of each other on many domestic trunk routes. Those un-unused A 320s can be redeployed for future flights to the Far East, DAC, CMB and Middle East. Also since KF and Deccan will become one airline, they would then not to be required to maintain their loss making tier 2 and tier 3 domestic routes to satisfy the Indian Govt hence no more need for additional ATRs.

I dont think so any widebodied aircraft on order will be cancelled...if any WB aircraft needed to be cancelled it should be their A 380s as they dont need the excess capacity offered by this aircraft except for PR and branding purposes.
 
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Stitch
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:48 pm



Quoting Behramjee (Reply 10):
I dont think so any widebodied aircraft on order will be cancelled...if any WB aircraft needed to be cancelled it should be their A 380s as they dont need the excess capacity offered by this aircraft except for PR and branding purposes.

I would think IT's first four A345s will work nicely as "route-provers" for two years until their A388s start arriving. I am guessing one pair to LHR and one to SFO in 2008, replaced in 2010 with two each A388s. I suppose the fifth A388 will tool around the subcontinent (NRT or DXB?) to stay close in case a bird breaksdown at LHR or SFO. Then the other six A345s can be used on other long-haul services.
 
Lumberton
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 10:57 pm



Quoting Slz396 (Reply 6):
nd is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars, in which case it will be most likely A320s indeed...

This could be the case; ATW reported a few months back that Air Deccan has already sold their slots.

Quoting Scouseflyer (Reply 9):
Is it not also to do with the fact that both IT and Air Deccan have large narrow-body orders as yet undelivered and there's too many now for the size of carrier.

This could also be the case.

Quoting Khobar (Reply 7):
Or it might speak directly to the contract and how Airbus does business.

 scratchchin 
"When all is said and done, more will be said than done".
 
ikramerica
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Thu Dec 20, 2007 11:46 pm



Quoting Starrion (Reply 1):
The really good new for Airbus is that they have so many other people in line that they won't miss these orders.

Only if it's an anomoly. I think the huge amount of orders Airbus and Boeing have earned recently, and especially the huge A320 orders from non-established carriers, are not nearly as strong as some thought. Even some analysts predict cancelation of many orders, and Boeing has said as much.

Quoting Slz396 (Reply 6):
or UB group is simply making good use of the huge demand for Airbusses (notably the A320s) and is reselling their early delivery slots back to Airbus for the mentioned price of 5M dollars

I believe this is possible. To prevent Kingfisher from selling the planes outright once purchased, Airbus may have a clause that says Airbus has the first right to buy any excess plane contracts Kingfisher, and can do so at $5 million per plane rather than the full markup UB may be able to get. This would indicated Kingfisher got a really sweet deal, but Airbus may have been very eager to gain a stronger foothold into emerging carriers in the Indian market.

Quoting Behramjee (Reply 10):
smart move...the combined fleet of KF and Deccan is more than enough to fufil their domestic needs as both airlines are hubbed at BLR hence may not need to fly at virtually the same time or within few minutes of each other on many domestic trunk routes.

This I don't get.

I was under the a.net impression that India is an explosive growth market. How could combining two companies lead to capacity glut? If each carrier individually was expected to need tons of planes just to keep up with the Indian growth, why would combining them all of a sudden lead to decrease in growth in the market? Did 100 million people just disappear or something? I don't get it...
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Lumberton
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 12:15 am

Given the losses cited in the article I quoted in reply #17, will the UB group push for an IPO or defer for a few years? If they defer, where will the capital come from? Operations? The beer business?
"When all is said and done, more will be said than done".
 
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mariner
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 12:41 am



Quoting Ikramerica (Reply 13):
I think the huge amount of orders Airbus and Boeing have earned recently, and especially the huge A320 orders from non-established carriers, are not nearly as strong as some thought.

A John Leahy indicated, a few months ago. From memory, he suggested some 30% might be suspect?

mariner
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ikramerica
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 12:45 am



Quoting Mariner (Reply 15):
A John Leahy indicated, a few months ago. From memory, he suggested some 30% might be suspect?

I think one of the Randys also indicated as much. They would know the out clauses and the deals they put together, and the financials behind them, as would the major players in the market, so when they say the orders aren't that strong, I'd trust em...  Smile
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brendows
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 12:52 am



Quoting Slz396 (Reply 6):
in short: the airline has excess capacity and so it wants to cancel part of their firm orders, yet by doing so it gets paid 5M dollars by the manufacturer????

Do like FR did: buy cheap, then sell to other airlines when there is a huge desire in the market for early slots, thus earning a nice sum per frame.
 
rktsci
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 1:29 am

I think we're going to see a lot more order deferments and cancellations in the next couple of years. It's simply a matter a market cycles and cold hard reality of the global economy.
 
ikramerica
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RE: Kingfisher (UB Group) May Cancel Orders-Report

Fri Dec 21, 2007 1:51 am



Quoting Rktsci (Reply 18):
I think we're going to see a lot more order deferments and cancellations in the next couple of years.

And the reality that most startup airlines fail, and ordering 100 frames as a startup is not a proven business case, even if B6 did it.

That'll wipe out 1/3rd of the A320/737 orders right there, and then there's a matter of placing all the delivered, very new A320/737s from failed ventures...
Of all the things to worry about... the Wookie has no pants.