MountainFlyer
Topic Author
Posts: 486
Joined: Sat Jul 09, 2005 10:19 am

AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 8:32 pm

http://leehamnews.wordpress.com/2012...s-737-cost-not-price-bob-crandall/

Quote:
Based on the change in YTD flight equipment additions, AER added $80MM in planes in Q4; since the only Q4 additions were two new 737-800s leased back to American Airlines, the 20-F implies a $40MM unit price.

In the thread about DL (potentially) buying 717's, some figures of $60mil or so were thrown around as a price point of a brand new 738. Perhaps it's lower than that.

Is this a fair assessment, or am I missing something?
SA-227; B1900; Q200; Q400; CRJ-2,7,9; 717; 727-2; 737-3,4,5,7,8,9; 747-2; 757-2,3; 767-3,4; MD-90; A319, 320; DC-9; DC-1
 
roseflyer
Posts: 9606
Joined: Fri Feb 13, 2004 9:34 am

RE: AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 8:57 pm

Often you can get a good estimate for price of a new airplane from reading SEC filings, but the problem is that you don't really know what the price includes. Does it include engines? Does it include buyer furnished equipment, interiors, etc? There's quite a bit of variability. Also values in SEC filings are ammortized over years so it can further be difficult to understand what the actual purchase price is. A sale leaseback provides the best information on value, but again there are some key features missing.
If you have never designed an airplane part before, let the real designers do the work!
 
User avatar
Stitch
Posts: 22920
Joined: Wed Jul 06, 2005 4:26 am

RE: AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 9:45 pm

Quoting MountainFlyer (Thread starter):
In the thread about DL (potentially) buying 717's, some figures of $60mil or so were thrown around as a price point of a brand new 738. Perhaps it's lower than that.

Average list price for a 737-800 is $95 million, but 50% is the standard discount rate nowadays.

DL's SEC filing in August 2011 implied that they received 51% off their 100 frame 737-900ER order (including engines).

As for what AA paid, assuming these planes were part of an order from a few years back, $35 million sounds about right. FR paid $29 million (after special "price concessions") per 737-800 back in 2005 when they placed their 70-frame order.

[Edited 2012-03-27 14:53:03]
 
PlaneAdmirer
Posts: 248
Joined: Mon Jul 06, 2009 8:39 pm

RE: AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 10:59 pm

Quoting Stitch (Reply 2):
Average list price for a 737-800 is $95 million

Just to be clear - is that with engines and fully outfitted?

Did the FR price you stated include engines as well? If so, I know why MOL used the term he did to describe the transaction.
 
BMI727
Posts: 11089
Joined: Mon Feb 02, 2009 9:29 pm

RE: AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 11:03 pm

Quoting MountainFlyer (Thread starter):
AA Pays Only $40mil For A 738?

Not surprising. I just recently did a statistical correlation that indicated than a 737-800 costs (with engines, again a correlation) around $36,000,000 to make. In reality the number is probably smaller since the development is likely long been paid off.
Why do Aerospace Engineering students have to turn things in on time?
 
gizmonc
Posts: 243
Joined: Sun Mar 27, 2011 3:51 pm

RE: AA Pays Only $40mil For A 738?

Tue Mar 27, 2012 11:58 pm

Very interesting information, but if AA is paying 50% and they have not bought that many 737NG from Boeing what is WN paying for their aircraft. We all realize that the list prices are but that is a heavy discount off the list price.
 
TWASkyliner747
Posts: 7
Joined: Thu Apr 07, 2011 1:38 am

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 12:19 am

It might have something to do with the 172 738's AA has in service and the 135 738's AA has on order. But still, only paying $40 Million is a big haircut for Boeing.
 
User avatar
lightsaber
Crew
Posts: 11732
Joined: Wed Jan 19, 2005 10:55 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 12:53 am

Quoting Stitch (Reply 2):
As for what AA paid, assuming these planes were part of an order from a few years back, $35 million sounds about right. FR paid $29 million (after special "price concessions") per 737-800 back in 2005 when they placed their 70-frame order.

It sounds about right as Boeing will still make the planes for less than they are paid when the planes go out the door.


Now here is a thought, what price did Airbus offer? Note: I do not believe Airbus lost money on the order. I just think that Boeing made a single digit (percentage wise) profit while Airbus was at or near breakeven.

Quoting TWASkyliner747 (Reply 6):
But still, only paying $40 Million is a big haircut for Boeing.

Out the door at an estimated single digit profit with future ancillary sales? Not a bad business for Boeing to be in!

Quoting BMI727 (Reply 4):
I just recently did a statistical correlation that indicated than a 737-800 costs (with engines, again a correlation) around $36,000,000 to make.

But there is also R&D for improvements to pay for that are 'loaded' onto current aircraft production. Either way, my 'thumb in the wind' estimate was ~$34M. So maybe Boeing is making an OK profit.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
User avatar
Stitch
Posts: 22920
Joined: Wed Jul 06, 2005 4:26 am

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 1:06 am

Quoting PlaneAdmirer (Reply 3):
Just to be clear - is that with engines and fully outfitted?

Yes.

Quoting PlaneAdmirer (Reply 3):
Did the FR price you stated include engines as well? If so, I know why MOL used the term he did to describe the transaction.

Yes they did.

Per regulatory filings at the time, the "basic price" of FR's 737-800s was $52 million, which represented a discount of between 17-27% off the list prices at the time (which ranged from $62-69 million). That included airframe, engines, optional features and customer supplied equipment. However, Boeing agreed to perform some work for free (installing the winglets, for example) and also provided some free ancillaries (like maintenance and spares). They also provided credits and allowances that reduced the "basic price" by "a significant amount" per airframe.

The $29 million figure was derived by taking the $593 million allocated to cover the delivery payment first 29 airframes (which works out to $20 million an airframe) and adding another $9 million to cover the deposit and pre-delivery progress payments spelled out in the contract.
 
adam42185
Posts: 54
Joined: Tue Dec 20, 2005 9:18 am

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 2:37 am

How much money does Boeing or Airbus make selling parts for repairs or maintenance over the lifetime of an aircraft such as a 737 or 320?
 
User avatar
Stitch
Posts: 22920
Joined: Wed Jul 06, 2005 4:26 am

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 2:53 am

Quoting lightsaber (Reply 7):
Now here is a thought, what price did Airbus offer?

I believe Airbus' financing package also helped land them the order. I also wonder if Airbus provided some value guarantees on the back-end since an A320 generally doesn't hold it's value quite as well as a 737NG (for when AA looks to resell their planes once the A320neo and 737MAX fleets arrive in quantity).
 
sxf24
Posts: 595
Joined: Wed Aug 15, 2007 12:22 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 2:54 am

Quoting Stitch (Reply 10):
I believe Airbus' financing package also helped land them the order. I also wonder if Airbus provided some value guarantees on the back-end since an A320 generally doesn't hold it's value quite as well as a 737NG (for when AA looks to resell their planes once the A320neo and 737MAX fleets arrive in quantity).

Airbus provides residual value guarantees for many of its orders - something Boeing rarely does.
 
User avatar
lightsaber
Crew
Posts: 11732
Joined: Wed Jan 19, 2005 10:55 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 4:03 am

Quoting Stitch (Reply 10):
I also wonder if Airbus provided some value guarantees on the back-end since an A320 generally doesn't hold it's value quite as well as a 737NG (for when AA looks to resell their planes once the A320neo and 737MAX fleets arrive in quantity).

IMHO, with the increase from 48k cycles/60k hours to 90k cycles/180k hours, the A320 resale values will do much better in the past.

http://www.asianaviation.com/article...4/Airbus-plans-A320-life-extension

Airbus extended maintenance intervals in 2007. I fully expect them to do so again after the current life extension.  
That will help the resale values of the A320s.   

Note: the above link noted a further extension of the A320 C-check interval in work in 2010, I do not know if that extension has yet happened. If it did, it will help bring 'in line' A320 maintenance scheduling and further lower type costs.

Longer life with lower maintenance costs will help resale. But not for OEO vs. NEO.  

In other words, I think Airbus will do ok with the sale to AA. I just made my comment as the pricing must have been excellent to convince AA to break commonality.

Lightsaber
"They did not know it was impossible, so they did it!" - Mark Twain
 
penguins
Posts: 416
Joined: Mon Mar 01, 2010 9:52 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 10:45 am

It sounds like Boeing wants to keep a customer. I didn't know that 50% discounts were common.
 
User avatar
flylku
Posts: 585
Joined: Sat Apr 08, 2006 10:44 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 4:42 pm

Quoting penguins (Reply 13):
I didn't know that 50% discounts were common.

List price for the ariframers is like the rack rate you see on the back of a hotel door: laughable!
...are we there yet?
 
PHX787
Posts: 7877
Joined: Thu Mar 15, 2012 7:46 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 7:20 pm

Quoting Stitch (Reply 2):
Average list price for a 737-800 is $95 million, but 50% is the standard discount rate nowadays.

now would this be a brand new 737 or something that's second hand?
Follow me on twitter: www.twitter.com/phx787
 
AirframeAS
Posts: 9811
Joined: Thu Feb 05, 2004 3:56 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 7:37 pm

Quoting Stitch (Reply 2):
Average list price for a 737-800 is $95 million

Where are these Average list prices found? (No, I don't want to see SEC filings.... I want to see like what car dealerships put on the side of the windows for each new car.)

So where do we find these "List prices" that are spoken of?
A Safe Flight Begins With Quality Maintenance On The Ground.
 
Fabo
Posts: 1141
Joined: Tue Aug 16, 2005 1:30 am

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 7:49 pm

Boeing Commercial site is your friend. http://www.boeing.com/commercial/prices/
The light at the end of tunnel turn out to be a lighted sing saying NO EXIT
 
BMI727
Posts: 11089
Joined: Mon Feb 02, 2009 9:29 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 7:55 pm

Quoting AirframeAS (Reply 16):
So where do we find these "List prices" that are spoken of?

Websites for manufacturers. Also, you can use sales sites (I like globalplanesearch.com) to get a cross section of market values.
Why do Aerospace Engineering students have to turn things in on time?
 
AirframeAS
Posts: 9811
Joined: Thu Feb 05, 2004 3:56 pm

RE: AA Pays Only $40mil For A 738?

Wed Mar 28, 2012 8:21 pm

Quoting Fabo (Reply 17):

Interesting! Thank you! I should start saving up for my own 73G!  
A Safe Flight Begins With Quality Maintenance On The Ground.

Who is online

Users browsing this forum: Baidu [Spider], blooBirdie, BlueSky1976, David L, deconz, ek17, glen, Google Adsense [Bot], Joelatbsl, Mani87, mrwhistler, northwest_guy, rj777, robr, rutankrd, sassiciai, smokeybandit and 209 guests