Boeing advance payments are typically 25-30% of catalog price, though subject to negotiation. Boeing could be motivated to cancel if they didn’t think the airline would accept the delivery.
Depends on the customer and build stage of each aircraft.
Milestone payments are often deferred, or more protracted for new aircraft under development, as the build rate is so low, and starts at zero, especially for launch customers.
Take a theoretical 20 aircraft order, in say two tranches of 10.
On a new model, depending on the urgency with which the aircraft are required, and OEM's willingness to guarantee performance (or compensate for under performance), it's likely tranche 1 will go unconditional while tranche 2 will remain conditional until early deliveries of production aircraft are received / assessed by the customer (or the OEM, with real data, will guarantee higher levels of performance).
When the 20 aircraft order is conditional, the deposit will be at most 1%, fully refundable.
When tranche 1 goes unconditional, the deposit will increase to a maximum of 5%, and still refundable, but not 100% if taken as cash. This is the last time all 10 aircraft will be invoiced at the same time.
All subsequent payments are due on reaching milestones, with each aircraft billed separately.
When the OEM is ready to order long lead items (not always engines, as these may be negotiated and paid for separately by customers, with their own unique set of milestone payments), the first non-refundable payment falls due. The deposit on the specific aircraft is also no longer refundable.
Further milestones are roll out minus xx days, rollout, engines ready to ship or delivered (rollout and engines may not be in order), engine installed / run, acceptance / delivery, and finally withheld payment.
The way OEM's incentivise airlines to take their full order, is by offering retrospective credits, which are back end loaded. The downside of this, is that cancelling when no aircraft have been delivered is very inexpensive for customers, compared to when 25% or more have been delivered. Of course airlines want the credits to be at least even or front end loaded (the latter will never happen).
Take a hypothetical 20 aircraft order, where the OEM negotiates a 40% retrospective credit, with say the first 5 units attracting 1%, units 6-15 2% and 16-20 3%, though it can be much more pronounced where the OEM has low confidence of order completion. When aircraft 1 is delivered and paid for, the airline receives a 1% credit, which will be more than offset by the final withholding payment. When aircraft 2 is delivered and paid for, the airlines receives a 2% credit on aircraft number 2, and a further 1% on aircraft number 1, and so on.
OEM credits have a dollar value. More than 100% for purchasing a new aircraft model, 100% for purchasing existing OEM aircraft, products and services, 80-90% for OEM distributed products and services, 50-75% for cash, and somewhere in between if traded between customers (though depends how they are to be used).
For a new model under development, everything is negotiable. Even though some frames have already been completed and others are under construction for launch customers, it's likely milestone payments have been deferred and / or discounted, reflecting they are far from ready for delivery.
EK will have likely used credits from 777's delivered (though some may be shared with lessors) and 737's for FZ for X deposits.
Long story short. New model order, at this stage of development, behind schedule versus, part delivered order with accrued credits. Cancelling the latter = big cost to customers. Cancelling the former = less cost compared to cancelling the latter.
Airbus won't want to be too accommodating, as this will be at their expense, and to Boeing's benefit. Smart Airbus negotiators will negotiate delivery delays and model swapping (1000 to 900), subject to the customer taking no other WB deliveries in the same time period.
Last edited by smartplane
on Sat Apr 18, 2020 2:40 am, edited 1 time in total.