trex8 wrote:smartplane wrote:Waterbomber2 wrote:There is no shortage of space to store aircraft in the desert, so it doesn't make sense to me to reduce production rates.
Imo Boeing should keep producing aircraft at full rate to limit the financial impact of this mess.
But there is a cost of hanging engines on them all, when Airbus may be in a position to accept more LEAPS in the meantime.
As production reduces, will be interesting to see whose aircraft are not built, a possible indicator of cancellation or deferral.
If there is no set date when these planes can be delivered can BA make the customer continue to make previously scheduled progress payments? Presumably suppliers still need to be paid by B even if the plane is not delivered but B will not begetting paid.This could get quite expensive.
I doubt CFM can just ramp up LEAP1A production quickly, the fan is a different size and a long lead item
Most customers use pre-delivery finance, then on delivery, sometimes the same financier (usually different), will take out the pre-shipment finance.
Even if the customer is feeling charitable towards Boeing, will the financier? Very unlikely.
Payment milestones come thick and fast as delivery nears. Working backwards, the last payment is post-delivery, referred to as a withholding payment (sometimes eliminated / offset by retrospective credits, but not usually, as this can have tax implications). Usually 5-10% of the total value, though care if the engines have been negotiated direct by the owner (these earn separate retrospective credits). Boeing won't be receiving these payments, on already delivered grounded aircraft.
There is a payment on technical delivery. The biggest made, usually 20-40%, but again, care with engines. No customers / financiers will be making those either. Shareholders will ask some hard questions if they do, when the aircraft heads to storage.
When engines are attached, and aircraft deemed 'complete' (can be minus buyer supplied items), another payment is due.
Both Boeing and Airbus have attempted to stop / discourage the practice of customers sourcing engines direct, with Boeing further down this track than Airbus. When everything is running smoothly, it means the air frame OEM has more control over price and revenue streams (including maintenance). When there is a delivery issue, as now, it means instead of the customer having direct exposure to the engine OEM, Boeing has that honour. Boeing are invoiced by CFM, and can't pass that on to the customer.
Likely Boeing has called in some favours with CFM, who have struggled with assembly and some component volumes. May enable assembly to catch up with component stocks. Would expect CFM are deferring invoicing, or extending due dates for progress payments and delivered engines.
How is Boeing handling? Will Boeing Capital be settling for already built / stored aircraft? Will Boeing Capital be settling for future completed aircraft? A flurry of new subsidiaries, one for each customer?