Gonzalo
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LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:36 am

Good God, I wonder what this ( and some other airline's managers who are making "noise" against the 787 this days ) would do in the "Comet Age" when the design flaws were discovered making forensic analysis to the remains of the aircraft....The 787 is a whole new desing with a lot of innovation and some problems should be expected. The attitude of some managers at the airline industry is really annoying...


http://news.airwise.com/story/view/1380186288.html

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SKAirbus
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:42 am

Quoting Gonzalo (Thread starter):
Good God, I wonder what this ( and some other airline's managers who are making "noise" against the 787 this days ) would do in the "Comet Age" when the design flaws were discovered making forensic analysis to the remains of the aircraft....The 787 is a whole new desing with a lot of innovation and some problems should be expected. The attitude of some managers at the airline industry is really annoying...

That is no excuse whatsoever. We all know it is new technology with a lot of innovation but that does not mean Boeing is absolved of responsibility here. They delivered a faulty product that has cost the airlines operating it millions of dollars and that should be righted.

Good on LOT for making noise about this...
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JimJupiter
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:46 am

Quoting Gonzalo (Thread starter):
The attitude of some managers at the airline industry is really annoying...

Might it be just as annoying to see your whole medium to long term strategy go down the drain because of long delays and malfunctions that are not within your responsibility? Some smaller carriers are heavily affected by the problems of the 787 program, and those "some managers" have all reason to fear for their companies, employees etc. (Not saying that there aren't other serious problems e.g. LOT has to deal with...)

I hope they sort the issues out soon (same goes for DY), but I can understand managers going public about their troubles now.

[Edited 2013-09-26 03:56:09]
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Gonzalo
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:48 am

Quoting SKAirbus (Reply 1):
That is no excuse whatsoever. We all know it is new technology with a lot of innovation but that does not mean Boeing is absolved of responsibility here. They delivered a faulty product that has cost the airlines operating it millions of dollars and that should be righted.

Good on LOT for making noise about this...

Maybe you are right.... maybe not...

I will expect how the "quiet" strategy of other airlines also affected by the 787 grounding ( like LA to mention one ) pays in their future negotiations with Boeing...

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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:54 am

Quoting SKAirbus (Reply 1):
That is no excuse whatsoever. We all know it is new technology with a lot of innovation but that does not mean Boeing is absolved of responsibility here. They delivered a faulty product that has cost the airlines operating it millions of dollars and that should be righted.

   It is all about contracts and guarantees. And both contracts or guarantees do not care if it is about a 300 year old painting, or a modern civil airliner. If one of the parties who have committed themselves to that contract does not hold up its side of the bargain, then compensations are in place. And are usually already part of the contract when signed.

Quoting Gonzalo (Reply 3):
Maybe you are right.

Oh, I am sure he is.

So LOT is perfectly in her right to be angry with Boeing for not holding up their part of the bargain.

[Edited 2013-09-26 03:55:42]
 
BestWestern
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:59 am

LO has no long term sustainable strategy in long haul flying except to diaspora cities in North America using a high Density low cost model with proper low costs.

this time I see Boeing being used as a scapegoat for continued losses and ordering too many aircraft. Yes the Boeing 787 rollout is a disaster, but not anyway as bad as LO's over order of aircraft.
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travelavnut
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 10:59 am

Quoting Gonzalo (Thread starter):
The 787 is a whole new desing with a lot of innovation and some problems should be expected.

It has been in service for two years now, these problems should not be expected...
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JimJupiter
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:03 am

Quoting BestWestern (Reply 5):
LO has no long term sustainable strategy in long haul flying except to diaspora cities in North America using a high Density low cost model with proper low costs.

Not saying it was a good strategy. 

Their annoyance may have multiple sources.
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kellmark
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:06 am

Actually, the legal argument is normally on Boeings' side.

When the customer and Boeing sign an agreement for acquisition of an aircraft, there is normally a clause which absolutely prohibits "consequential" damages. This means things like flight cancellations, etc. The warranty normally extends to repairing or replacing the aircraft, not those types of damages.

But, Boeing could have made an amended agreement to keep LOT as a customer once the delays of the 787 became a major factor. But without seeing the agreement, no one can really tell what the actual terms are.
 
milan320
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:35 am

Correct me if I'm wrong, but aren't other airlines also seeking compensation? Wasn't JAL, ANA and now I heard Norwegian seeking compensation? If so, why shouldn't LOT be entitled to seek it.
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scbriml
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:37 am

Quoting BestWestern (Reply 5):
this time I see Boeing being used as a scapegoat for continued losses and ordering too many aircraft.

Eight is too many? According to the "experts" in the DY thread, they should have a few laying around "just in case".   
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:48 am

Quoting kellmark (Reply 8):
Actually, the legal argument is normally on Boeings' side.

When the customer and Boeing sign an agreement for acquisition of an aircraft, there is normally a clause which absolutely prohibits "consequential" damages. This means things like flight cancellations, etc. The warranty normally extends to repairing or replacing the aircraft, not those types of damages.

But, Boeing could have made an amended agreement to keep LOT as a customer once the delays of the 787 became a major factor. But without seeing the agreement, no one can really tell what the actual terms are.

100% true, but on the other hand LO might be jumping on DY wagon to seek compensation. I wonder how all this all pan out...(not that they will make it public BTW)

Quoting scbriml (Reply 10):
Eight is too many? According to the "experts" in the DY thread, they should have a few laying around "just in case".   

I dropped my laptop, thanks for the very funny comment! (great way to start the day)...

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raffik
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:49 am

Quoting scbriml (Reply 10):
Eight is too many? According to the "experts" in the DY thread, they should have a few laying around "just in case".

 

These is absolutely NO doubt that this aircraft launch has been a disaster for Boeing and have caused the airlines involved serious headaches.

LOT does have its problems but this has been made considerably worse by having to ground their 787 fleet for a lengthy period.

Same for DY. Some people are so protective of Boeing they try and argue that it's the airline's fault for not having a spare 787 or two sitting around incase another goes tech. We're talking about one of the most technologically advanced airliners in the world. These aircraft should have been fit for purpose on delivery, not plagued by a raft of potentially serious faults and oversights that force groundings.

It will obviously affect smaller airlines more who do not have the extra capacity to replace aircraft that go tech but Boeing should do the decent thing here and compensate the airlines who have had losses as a direct result of having 787 problems. If not, this could well affect how these airlines order in the future and Airbus is a very good competitor who would be more than happy to take on some more customers!

[Edited 2013-09-26 04:50:24]
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:50 am

Quoting TheRedBaron (Reply 11):
100% true, but on the other hand LO might be jumping on DY wagon to seek compensation. I wonder how all this all pan out...(not that they will make it public BTW)

LOT is seeking compensation since the grounding.
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 11:55 am

Quoting KarelXWB (Reply 13):
LOT is seeking compensation since the grounding.

I know, but maybe they are following the old saying : "never kick a man unless he is on the floor", seeing that Boeing Execs are in Norway, maybe they are trying to make more pressure and get some "freebies".

Never hurts anyone to ask....LOL

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dtw2hyd
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:08 pm

News about compensation to national carriers are for domestic consumption, just to show tax payers carrier is hard at saving their money. In reality Boeing never pays much, only requirement is to call as many news outlets they can and tell how difficult the compensation negotiations were with the carrier. Local media runs with story, tax payers are happy, Boeing is happy and carrier is happy. Because of non-disclosure agreements no one knows the actual amount. It could be dollar.
 
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:12 pm

But Norwegian has nothing to do with the taxpayer's money... The flying public, yes - but DY is not state-owned.
 
petera380
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:13 pm

This doesn't help:

B787: missing filters in Rolls-Royce engines at LOT Polish Airlines

blog.seattlepi.com/flyinglessons/2013/09/23/lot-dreamliners-spend-the-weekend-grounded/
 
LO231
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:17 pm

Not only LO suffered during grounding period, but also during wait period for I think 4 years of past original delivery date...

And now, according to Polish news, 2 dreamliners were grounded again as they discovered no fuel filters were even installed on two frames...

Thats why you see EuroAtlantic 772 and 763 on flight radar flying with LO flight nrs, I guess.. I think Poles are fed up with the dreamcrap, after it being all over news, they interviewed a pax coming in at WAW. He said situation was tence on board during whole flight, although it went uneventful... Its just scaring people off,

I know, all of us Anetters would fly on a burning flying carpet, if allowed and possible. And cheap. Imagine trip reports...
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speedbored
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:32 pm

Quoting DTW2HYD (Reply 15):
News about compensation to national carriers are for domestic consumption, just to show tax payers carrier is hard at saving their money.

Care to provide some evidence to support such a crazy statement? Why would 'national carriers' be treated any differently from other airlines?

Quoting DTW2HYD (Reply 15):
In reality Boeing never pays much

No, in reality, it is a matter of public record that Boeing has already paid out many 100's of millions in compensation for the 787 debacle, and has made provisions for quite a lot more compensation yet to be paid. Boeing are legally obliged to account for such things in their published accounts and to warn the markets about possible future liabilities in their public financial statements.

Quoting DTW2HYD (Reply 15):
Because of non-disclosure agreements no one knows the actual amount.

Any straight cash compensation payments cannot be hidden, regardless of the existence of a non-disclosure agreement, as they would have to be included in the published accounts of both Boeing and the airline. The only way for the parties to hide compensation payments would be when they are made in the form of discounts on future aircraft orders, spares, or other services.
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SKAirbus
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:44 pm

Quoting milan320 (Reply 9):
Correct me if I'm wrong, but aren't other airlines also seeking compensation? Wasn't JAL, ANA and now I heard Norwegian seeking compensation? If so, why shouldn't LOT be entitled to seek it.

For DY the matter of compensation was never discussed, the meeting with Boeing was how they would help to ensure that the planes can fly with minimal delays...

Anyway, I posted this in the other thread:

----------------------------

Norwegian CEO Bjørn Kjos has issued an apology on Facebook re. the problems (in Norwegian). I have translated it:

"I want to apologise to all our passengers that have been affected by the unacceptable delays on our long haul routes recently. I understand how frustrating it must be to wait for hours for your plane to depart.

Last night Norwegian had a meeting with Boeing where the company gave a clear message that the situation is unacceptable. Boeing said that they will put together a dedicated team that will continuously follow Norwegian to ensure that any technical challenges that occur going forward are dealt with immediately. In addition, they will make sure that the necessary spare parts are available at all airports we fly to and from with the Dreamliner so that our passengers won't be hit by large delays".
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 12:46 pm

Quoting petera380 (Reply 17):
This doesn't help:

B787: missing filters in Rolls-Royce engines at LOT Polish Airlines

blog.seattlepi.com/flyinglessons/2013/09/23/lot-dreamliners-spend-the-weekend-grounded/

Whoah!
"A source tells me during testing at Boeing in Everett, Washington, mechanics at the plane maker removed the engine's fuel filters and failed to re install them. The planes were then delivered to the airline and began flying in passenger service - even though running the engines in this condition could lead to engine damage. "

Boeing really is working on its image!
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dtw2hyd
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:02 pm

Quoting Speedbored (Reply 19):
No, in reality, it is a matter of public record that Boeing has already paid out many 100's of millions in compensation for the 787 debacle, and has made provisions for quite a lot more compensation yet to be paid.

You are quoting another news article. At the time of B787 grounding there were only 6 carriers, two Japanese carriers doesn't need to paid because Japan is the source of the source of the problem. Very few of remaining 28 were in commercial service. Why would Boeing pay $100s of Millions.

Quoting Speedbored (Reply 19):
Why would 'national carriers' be treated any differently from other airlines?

Because for national carriers news is more valuable than cash.

Quoting Speedbored (Reply 19):
Any straight cash compensation payments cannot be hidden, regardless of the existence of a non-disclosure agreement, as they would have to be included in the published accounts of both Boeing and the airline.

I rest my case. BTW how much BA paid for each B788.

[Edited 2013-09-26 06:11:13]
 
oldeuropean
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:13 pm

Quoting DTW2HYD (Reply 22):
At the time of B787 grounding there were only 6 carriers, two Japanese carriers doesn't need to paid because Japan is the source of the source of the problem.

Huh? You are kidding – right?  Wow!
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lightsaber
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:14 pm

From the OP link:Polish national airline LOT has given Boeing until the end of the year to settle on compensation over faults with its 787 Dreamliners or face court action, the company's chairman was reported as telling a newspaper on Thursday.

How are we all getting so excited about that? LOT says they're owed money (which they direly need) and they'll go to court if not paid.   

We all know there have been issues with the 787.

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avek00
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:22 pm

Quoting DTW2HYD (Reply 22):
Why would Boeing pay $100s of Millions.

Because while the 787s were inoperable, lease/financing payments still had to be made, crews sat idle, and schedules had to be reworked at great expense on short notice.

It's absolutely worth Boeing paying up for that kind of stuff. The alternative could be a series of lawsuits under various consumer protection laws around the world that would result in detailed disclosures of 787 shortcomings no one wants publicized.
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TheRedBaron
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:24 pm

Quoting LO231 (Reply 18):
I know, all of us Anetters would fly on a burning flying carpet, if allowed and possible. And cheap. Imagine trip reports...

Signature material. I am glad this very ominous thread, has had a couple of very good jokes.

Back on topic, I wonder if Boeing is doing some damage control with other customers, what they dont need is an angry line of customers, blaming their new product for almost anything...

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EPA001
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:41 pm

Quoting oldeuropean (Reply 23):
Huh? You are kidding – right?  

He must be. Because Japanese airlines have nothing to do with Japanese manufacturing firms. Even if they were the cause of the B787 problems.

But by far the most of the problems which faced the development, production of, and operations with the B787 were on Boeings own side, instead of the "side" of their suppliers.
 
dtw2hyd
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:41 pm

Quoting avek00 (Reply 25):
Because while the 787s were inoperable, lease/financing payments still had to be made, crews sat idle, and schedules had to be reworked at great expense on short notice.

All valid points and Boeing need to compensate. But throwing a number $100s of Millions!!! Boeing's liability is not unlimited.
 
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EPA001
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:43 pm

Quoting DTW2HYD (Reply 28):
Boeing's liability is not unlimited.

It is limited to the extend of what has been written down in the purchase contracts the airlines and Boeing have signed together when they formalised the deal.
 
dtw2hyd
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 1:54 pm

Quoting EPA001 (Reply 29):
It is limited to the extend of what has been written down in the purchase contracts the airlines and Boeing have signed together when they formalised the deal.

So lets assume the purchase price $100 Million a pop, Do you think the compensation clause for a single plane exceeds $100 Million. There were only 28 delivered to other airlines. I stand by my statement not paying Japanese.

Let me give an example of AI, AI had quite a few 77x sitting around, definitely B787s were more profitable to operate than a 77x. So a reasonable compensation for AI would be the difference between two for the period of grounding.

UA,QR,ET,LAN,LOT all had only handful of commercial flights at that time. Math for $100s of Millions doesn't add up.
 
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speedbored
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:06 pm

Quoting EPA001 (Reply 29):
It is limited to the extend of what has been written down in the purchase contracts the airlines and Boeing have signed together when they formalised the deal.

In the big business world, what is written in the contract actually tends to be more of a start point for negotiations.

If Boeing cares about their on-going relationship with an airline, they will always be prepared to negotiate over whatever compensation claims the airline puts forward, whether they are within what's written in the contract, or not. Usually some sort of compromise will be reached, and that may or may not be outside the contractual obligations.

I suspect that Boeing realise that they have screwed up on this one and will be pretty generous with compensation offers, mainly in order to maintain good customer relations. They can, of course, mitigate the amounts offered, and help to retain the customer, by offering compensation mainly in the form of discounts on future products and services.

Of course, if the relationship irretrievably breaks down, and it all get litigious, then written contract terms will become the leading factor in any settlement. Boeing would, IMO, be mad to let things get that far.
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EPA001
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:07 pm

Quoting DTW2HYD (Reply 30):
So lets assume the purchase price $100 Million a pop, Do you think the compensation clause for a single plane exceeds $100 Million.

No, I don't think so. And nowhere have I said that a compensation could be worth $ 100 million for a single plane. But if in the contracts would have been written that the compensation could be $ 200 million per plane (extremely unlikely), then that is what is at stake here when LOT files her claims against Boeing.

It all has to do with contract law. Nothing more, nothing less.
 
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EPA001
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:10 pm

Quoting Speedbored (Reply 31):
In the big business world, what is written in the contract actually tends to be more of a start point for negotiations.

If Boeing cares about their on-going relationship with an airline, they will always be prepared to negotiate over whatever compensation claims the airline puts forward, whether they are within what's written in the contract, or not. Usually some sort of compromise will be reached, and that may or may not be outside the contractual obligations.

I suspect that Boeing realise that they have screwed up on this one and will be pretty generous with compensation offers, mainly in order to maintain good customer relations. They can, of course, mitigate the amounts offered, and help to retain the customer, by offering compensation mainly in the form of discounts on future products and services.

Of course, if the relationship irretrievably breaks down, and it all get litigious, then written contract terms will become the leading factor in any settlement. Boeing would, IMO, be mad to let things get that far.

Very well written. And I totally agree with your post.  
 
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:11 pm

If the compensation Boeing had to pay out exceeded the value of the airframe, I am sure Boeing would offer to take back the airframe or the customer would accept whatever limit of liability Boeing agreed to. Boeing won't pay an airline to essentially operate the 787. Boeing owes LOT exactly what was agreed to in their purchase agreement. Nothing more and nothing less. I suspect many of these smaller carriers took on more than they can handle and are trying to shake Boeing down for more than their contracts allow for.
 
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speedbored
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:11 pm

Quoting DTW2HYD (Reply 30):
So lets assume the purchase price $100 Million a pop, Do you think the compensation clause for a single plane exceeds $100 Million.

I doubt anyone thinks that. And I'm not aware that anyone has tried to claim such a thing.

Quoting DTW2HYD (Reply 30):
I stand by my statement not paying Japanese.

Fortunately for the shareholders (many of which are not Japanese, btw) of those Japanese airlines affected, your opinion will be irrelevant to the compensation discussions. I have absolutely no doubt that JAL and ANA, as some of Boeing's best customers, will both get significant compensation from Boeing.

Quoting DTW2HYD (Reply 30):
Let me give an example of AI, AI had quite a few 77x sitting around, definitely B787s were more profitable to operate than a 77x. So a reasonable compensation for AI would be the difference between two for the period of grounding.

In the real world, it's far more complicated than that.
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JHwk
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:17 pm

Quoting EPA001 (Reply 27):
But by far the most of the problems which faced the development, production of, and operations with the B787 were on Boeings own side, instead of the "side" of their suppliers.

The blame is really shared between suppliers and Boeing. Boeing for asking the impossible of their suppliers (shared risk), and the suppliers for accepting it.

Some of the quality control issues sound suspicious... Boeing should have procedures in place that prevent things like failure to reinstall a fuel filter. Other issues seem much more along the lies of infant mortality exacerbated by a small in service fleet.
 
UALWN
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:30 pm

Quoting DTW2HYD (Reply 30):
I stand by my statement not paying Japanese.

Interesting. Then I guess that, by the same logic, UA won't be compensated either, because Boeing for sure shares some blame, and both Boeing and United are American...
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:33 pm

Quoting Speedbored (Reply 31):

You are the one who dragged me in to off topic discussion by claiming Boeing paid 100s of Millions of dollars and you have receipts for that. Can you provide actual B787 purchase prices and compensation details?

Otherwise lets stay on topic.

[Edited 2013-09-26 07:50:29]
 
dynamo12
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:45 pm

Boeing is more likely to respond I think with an engineering solution in these cases (increased customer engineering support). This is a win-win. The client get's improved dispatch reliability with minimal additional cost. Boeing get's more insight into the root cause of dispatch reliability and maintenance issues, which is valuable for continued development of the platform.

As others have pointed out, compensation for delays and compensation for consequential damages will be specified and limited in the agreement. I think the A380 may have had some delay compensation go out, perhaps a result of the greater difficulty in initial sales leading to sweeter agreements. Even things like SFC on the engine side may come with a guarantee, but it's not unlimited payments forever if they miss a fuel consumption target, likely to be more like for every point missed we take x% off sale price.

I would be very interested in the LOT court action they are threatening, and particularly the choice of venue in the contract.
 
PresRDC
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:55 pm

Quoting kellmark (Reply 8):
Actually, the legal argument is normally on Boeings' side.

When the customer and Boeing sign an agreement for acquisition of an aircraft, there is normally a clause which absolutely prohibits "consequential" damages. This means things like flight cancellations, etc. The warranty normally extends to repairing or replacing the aircraft, not those types of damages.

But, Boeing could have made an amended agreement to keep LOT as a customer once the delays of the 787 became a major factor. But without seeing the agreement, no one can really tell what the actual terms are.

BAck when I was drafting and negotiating jet engine contracts with airlines, every contract we executed had such a clause. This was a walk-away provision and I think the airframers have the same clause.

That said, our contracts also had AOG and other dispatch reliability guarantees, that called for some form of compensation in the event the event occurred (typically a credit to be used toward the purchase of spare parts). This compensation would never make the airline whole, but it was something.

Of course, if there was a really big screw-up, we typically would provide more compensation than we were contractually required to do. Often, the airframer was the entity pushing for the compensation (at the request of the airline) and we were very reluctant to upset the airframer.
 
holzmann
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 2:58 pm

Question: when the 777 was initially being built, was it being built by experienced pros at the end of their Boeing career? What happened in the meantime? Did these pros retire without training their younger successors on how to build an airplane or are the 787's woes mostly a product of its outsourced nature?

To me, a missing engine filter is a problem with final assembly or a job done in Everett. Am I right?

If the culprit is a new generation of young, lazy, and incompetent employees at Boeing, then either one of two things needs to happen. Either fire them all or empower them with better pay and training. Bring back the "old guard" to show them how it's done. Or perhaps Boeing should send a few teams over to Germany to study how vocational education training (to become airplane builders/mechanics) is done properly.
 
PresRDC
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 3:03 pm

Quoting EPA001 (Reply 27):
He must be. Because Japanese airlines have nothing to do with Japanese manufacturing firms. Even if they were the cause of the B787 problems.

But by far the most of the problems which faced the development, production of, and operations with the B787 were on Boeings own side, instead of the "side" of their suppliers.

It is a basic tenant of contract law that sellers are responsible for the performance of their subcontractors. If a part or service obtained from a subcontractor is faulty and such fault triggers a compensation requirement on the part of the seller, the seller cannot avoid the liaiblity by placing blame on the subcontractor. The seller pays the buyer and the seller may, depending on the contract, have the right to obtain compensation from the subcontractor.

We always tried to have our subcontracts aligned with our obligations to our customers, such that liability became a pass through, but that is not always possible for several reasons. First, a different group within the company was responsible for our supplier contracts and those of us on the sell side didn't always have visibility into what the buy side was negotiating. And, second, a supplier contract is often executed early in a program and the sales of the product often come later, such that by the time we would negotiate a contract with a buyer, the subcontracts were executed. The key is to have very broad rights of recovery from your suppliers, but the savy ones will not allow for unlimited rights of recovery.
 
PresRDC
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 3:06 pm

Quoting Speedbored (Reply 19):
Any straight cash compensation payments cannot be hidden, regardless of the existence of a non-disclosure agreement, as they would have to be included in the published accounts of both Boeing and the airline. The only way for the parties to hide compensation payments would be when they are made in the form of discounts on future aircraft orders, spares, or other services.

Which is how compensation is provided 90% of the time.

That said, I am not sure that discounts are treated differently than cash compensation from an accounting basis.
 
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kanban
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 3:31 pm

Quoting petera380 (Reply 17):
missing filters in Rolls-Royce engines at LOT Polish Airlines

While everybody is assessing blame, where are these low pressure filters located, and how often are the changed?

Also one report said hydraulic filters, and another fuel filters.. of course who can trust the news to get it right..
 
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OA412
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 4:03 pm

Quoting Gonzalo (Thread starter):
Good God, I wonder what this ( and some other airline's managers who are making "noise" against the 787 this days ) would do in the "Comet Age" when the design flaws were discovered making forensic analysis to the remains of the aircraft

The Comet was a much bigger leap in technology in its day than the 787 is today. The Comet was the very first passenger jet in a world of props, flying at altitudes then unheard of for passenger travel. The 787 is a huge leap in terms of materials used, but it is not as big a technological leap as was the Comet. Of course, some of what has happened could not have been foreseen, but I'm sure the airline's were justifiably confident that they wouldn't be dealing with as many problems at this point in the game.
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exFWAOONW
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 4:05 pm

Quoting holzmann (Reply 41):
Question: when the 777 was initially being built, was it being built by experienced pros at the end of their Boeing career? What happened in the meantime? Did these pros retire without training their younger successors on how to build an airplane or are the 787's woes mostly a product of its outsourced nature?

I've heard Alan Mulally had a lot to do with how well the 777 entered service. Ford stole him from Boeing. I'm sure he was far from the only reason.

Quoting holzmann (Reply 41):
If the culprit is a new generation of young, lazy, and incompetent employees at Boeing, then either one of two things needs to happen. Either fire them all or empower them with better pay and training. Bring back the "old guard" to show them how it's done

The "old guard" was laid off during the last economic downturn and drop in A/C orders. You have to wonder how many came back. Lack of job security is an incentive to move on. That is one reason there is an "ex" in my screen name.
Is just me, or is flying not as much fun anymore?
 
max999
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 4:44 pm

Quoting Speedbored (Reply 31):
If Boeing cares about their on-going relationship with an airline, they will always be prepared to negotiate over whatever compensation claims the airline puts forward, whether they are within what's written in the contract, or not. Usually some sort of compromise will be reached, and that may or may not be outside the contractual obligations.

I suspect that Boeing realise that they have screwed up on this one and will be pretty generous with compensation offers, mainly in order to maintain good customer relations. They can, of course, mitigate the amounts offered, and help to retain the customer, by offering compensation mainly in the form of discounts on future products and services.

I completely agree here. I can think of two caveats to this though.

One is how Boeing defines the criticality of the client relationship. For Boeing, they may see their relationship with UA much more important than with LOT so they're more willing to give compensation to UA. Boeing could feel that there's more potential future sales from UA than they would receive from LOT so Boeing is more likely to be amenable to UA's claims.

Second is when word leaks out the amount and type of compensation each airline got. Because Boeing views its client relationships differently, some airlines will get more from Boeing and some less. This may be a reason why the smaller airlines like Norwegian and LOT, who probably are viewed with lower importance by Boeing, are screaming so loud about compensation. While the larger airlines like ANA and UA are quiet. It's likely that Boeing has been working harder to keep the latter two airlines happy while the smaller airlines are getting a different treatment.

Quoting roswell41 (Reply 34):
Boeing owes LOT exactly what was agreed to in their purchase agreement. Nothing more and nothing less.

That's not how it works in the business world when it comes to client relationships. It's not so black and white...there are a lot of grays.
All the things I really like to do are either immoral, illegal, or fattening.
 
LTC8K6
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 4:54 pm

Depending on which story you read, the engines were missing oil, fuel, or hydraulic filters....

Most of the accounts seem to have it as low pressure fuel filters.

Since missing fuel filters should trigger a warning, it doesn't seem like they could have flown far without them.
 
max550
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RE: LOT Gives Boeing Ultimatum About 787 Compensation

Thu Sep 26, 2013 5:02 pm

Quoting holzmann (Reply 41):
To me, a missing engine filter is a problem with final assembly or a job done in Everett. Am I right?

According to the article in Seattlepi the filters were removed in Everett and Boeing failed to reinstall them, so you're correct.

Quoting 1337Delta764 (Reply 47):
I hope that the A350 has an even rougher entry into service and hope that the FAA revokes its type certificate.

Why would you hope for that?

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