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PepeTheFrog
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Boeing is being forced to give larger discounts

Wed Apr 22, 2020 9:44 am

At least one Middle East airline is taking abuse of the pandemic to get steep discounts:

At the end of March, just days before Boeing was set to hand over a new 787 Dreamliner to one of its most valued customers in the Middle East, the airline’s head of procurement picked up the phone to the US aircraft maker. The deal was off, unless Boeing was willing to increase the 55 per cent discount it had already agreed on the $338m list price. 

In normal times, an airline would hesitate before threatening to cancel an order at such a late stage. Cancellation would normally mean heavy penalties and forfeiting the downpayments, which for Boeing’s state of the art twin-aisle model amounted to close to $100m of the agreed $150m price tag. 

But these are not normal times. Boeing caved in and cut the price by a further 15 per cent, according to people involved in the deal.


FT https://www.ft.com/content/3fe8a876-7d7 ... pe=blocked

This would undermine Boeing's cash flow, isn't?
Good moaning!
 
Someone83
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 9:51 am

I do not think this only applies to Boeing, but all aircraft manufactures
 
eamondzhang
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 10:34 am

I'm not surprised by a single second that airlines, or any entity as a matter of fact, use the pandamic chance to try lobbying for a deal.

And given some unit price I know Boeing sold 787 for, 55% discount is not a big amount.

Bet that airline is ET as they're the only one near the region that takes delivery of a new 787 at the end of the month and if so well done ET's management team.

Michael
 
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FrenchPotatoEye
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 10:50 am

eamondzhang wrote:
I'm not surprised by a single second that airlines, or any entity as a matter of fact, use the pandamic chance to try lobbying for a deal.

And given some unit price I know Boeing sold 787 for, 55% discount is not a big amount.

Bet that airline is ET as they're the only one near the region that takes delivery of a new 787 at the end of the month and if so well done ET's management team.

Michael


ET is the African airline, not middles east.

Etihahad would be my guess.
 
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lightsaber
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 11:24 am

Any airline not doing this for any aircraft is being silly. The value of aircraft just dropped. All aircraft.

For many airlines, it won't be a threat, they just won't be able to make the payments.

Lightsaber

PS (late edit): Consider the implications for competing widebodies.
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eamondzhang
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 11:30 am

FrenchPotatoEye wrote:
eamondzhang wrote:
I'm not surprised by a single second that airlines, or any entity as a matter of fact, use the pandamic chance to try lobbying for a deal.

And given some unit price I know Boeing sold 787 for, 55% discount is not a big amount.

Bet that airline is ET as they're the only one near the region that takes delivery of a new 787 at the end of the month and if so well done ET's management team.

Michael


ET is the African airline, not middles east.

Etihahad would be my guess.

But Etihad did not accept any 787s recently AFAIK. Correct me if I'm wrong though.

That's why I'm picking ET as they accepted a plane on 26 March.

Cheers,
Michael
 
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garpd
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 11:40 am

I would be very surprised if it was just Boeing.
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xwb777
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 12:18 pm

What about QR? They have received 7 B789s lately.
 
sxf24
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 12:39 pm

xwb777 wrote:
What about QR? They have received 7 B789s lately.


It almost certainly has to be Qatar. This is normal behavior for them, especially talking about it to the media.

ET’s delivery was leased from AerCap. I think Gulf and Oman have 787s ready but can’t currently leave their countries to take delivery.
 
Ziyulu
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 12:41 pm

I wish I could take 55% off the MSRP of a new vehicle. I tried car shopping this past weekend, and the dealers were not eager to make a sale.
 
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 12:55 pm

PepeTheFrog wrote:
This would undermine Boeing's cash flow, isn't?

"Eating" the airplane would undermine cash flow even more.

It cost something to make the plane, no cash in means it's all negative cash flow.

Yet it kind of suggests Boeing still had 15% to give even after the 55% discount.

If it went below the cost of production to a serious degree Boeing probably would have kept the airplane.

The customers must have a good idea of what Boeing is making.

If they asked for too much of a give back Boeing would not have made the deal.

Since this move is now being openly discussed in the media and through the finance grapevine, all customers will be making this move.

It makes me wonder why Boeing is restarting production and Airbus is only cutting production by one third.

Why make more airplanes if you won't even be breaking even?
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RickNRoll
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:01 pm

They have the same problem the oil industry has. What do you do with all that stock sitting around? Can you actually store it economically?
 
phxa340
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:01 pm

PepeTheFrog wrote:
At least one Middle East airline is taking abuse of the pandemic to get steep discounts:

At the end of March, just days before Boeing was set to hand over a new 787 Dreamliner to one of its most valued customers in the Middle East, the airline’s head of procurement picked up the phone to the US aircraft maker. The deal was off, unless Boeing was willing to increase the 55 per cent discount it had already agreed on the $338m list price. 

In normal times, an airline would hesitate before threatening to cancel an order at such a late stage. Cancellation would normally mean heavy penalties and forfeiting the downpayments, which for Boeing’s state of the art twin-aisle model amounted to close to $100m of the agreed $150m price tag. 

But these are not normal times. Boeing caved in and cut the price by a further 15 per cent, according to people involved in the deal.


FT https://www.ft.com/content/3fe8a876-7d7 ... pe=blocked

This would undermine Boeing's cash flow, isn't?


How is this unique to Boeing ? If the 787 is going out the door with a 55% discount , you can bet the A350 is as well and the A330neo probably even more than 55%.
 
smokeybandit
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:03 pm

RickNRoll wrote:
They have the same problem the oil industry has. What do you do with all that stock sitting around? Can you actually store it economically?


Convert the beached planes to tankers and put the overflow oil there. Problem solved!
 
VSMUT
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:03 pm

eamondzhang wrote:
FrenchPotatoEye wrote:
eamondzhang wrote:
I'm not surprised by a single second that airlines, or any entity as a matter of fact, use the pandamic chance to try lobbying for a deal.

And given some unit price I know Boeing sold 787 for, 55% discount is not a big amount.

Bet that airline is ET as they're the only one near the region that takes delivery of a new 787 at the end of the month and if so well done ET's management team.

Michael


ET is the African airline, not middles east.

Etihahad would be my guess.

But Etihad did not accept any 787s recently AFAIK. Correct me if I'm wrong though.

That's why I'm picking ET as they accepted a plane on 26 March.

Cheers,
Michael


The article did not specify that the aircraft had actually been handed over and/or taken into service yet, did it?

I see that Turkish took 2 787s in March with another not far away. Saudia took a 787-10. Qatar has one that was already spotted flying about doing testing which has yet to be delivered.
 
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:05 pm

sxf24 wrote:
xwb777 wrote:
What about QR? They have received 7 B789s lately.


It almost certainly has to be Qatar. This is normal behavior for them, especially talking about it to the media.

ET’s delivery was leased from AerCap. I think Gulf and Oman have 787s ready but can’t currently leave their countries to take delivery.

One aviation reporter thinks it's EY:

https://twitter.com/SpaethFlies/status/ ... 5583459328
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:07 pm

smokeybandit wrote:
RickNRoll wrote:
They have the same problem the oil industry has. What do you do with all that stock sitting around? Can you actually store it economically?

Convert the beached planes to tankers and put the overflow oil there. Problem solved!

Finally, an after market for the A380!
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WayexTDI
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 1:13 pm

Ziyulu wrote:
I wish I could take 55% off the MSRP of a new vehicle. I tried car shopping this past weekend, and the dealers were not eager to make a sale.

That just shows the Catalog Price of aircraft is nothing but an inflated number to make deals virtually huge but in reality more reasonable.
Boeing could list the 737MAX at $300+ million each, and give 90% discounts; would result in similar prices as now, but more impressive "official" numbers.
 
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 4:14 pm

WayexTDI wrote:
That just shows the Catalog Price of aircraft is nothing but an inflated number to make deals virtually huge but in reality more reasonable. Boeing could list the 737MAX at $300+ million each, and give 90% discounts; would result in similar prices as now, but more impressive "official" numbers.

RIght, the list price is just a convenient fiction.

The real issue here is that customers seem to be gaining a new understanding of how they can get Boeing to deliver products at something approximating their cost of production and leave Boeing with little or no profit.

Boeing doesn't seem to have the appetite to do what Airbus just did with AirAsia: refuse the offer and put the aircraft up for sale.

Talk about being between a rock and a hard place: either you accept little or no profit, or you accept no cash flow at all while you try to sell a plane that no one wants to buy.

Between having massive debts due to MCAS, deliveries with little or no profit, and customers seeking deferrals, it's not looking good for Boeing Commercial Airplanes these days, sigh.
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 4:34 pm

Revelation wrote:
The real issue here is that customers seem to be gaining a new understanding of how they can get Boeing to deliver products at something approximating their cost of production and leave Boeing with little or no profit.

If Boeing delivers an aircraft at cost or with a thin profit margin but gets a contract for services as part of the sale, it is not a bad deal at all. Recurring revenues are what everyone is after, even in manufacturing.
 
imthedreamliner
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 5:28 pm

Not honoring the terms of a contract which was signed long ago ? This pandemic will not last forever and when this airline calls Boeing to order new aircraft, I am sure Boeing will remember this.
 
Exeiowa
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 6:06 pm

imthedreamliner wrote:
Not honoring the terms of a contract which was signed long ago ? This pandemic will not last forever and when this airline calls Boeing to order new aircraft, I am sure Boeing will remember this.


At which point a competitor will be more than happy to accept some business. This is how the world goes round.
 
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 6:47 pm

imthedreamliner wrote:
Not honoring the terms of a contract which was signed long ago ? This pandemic will not last forever and when this airline calls Boeing to order new aircraft, I am sure Boeing will remember this.

If- and that is a pretty big if - there will be a need for a new aircraft in foreseeable future, and if - again a big if - Boeing will survive long enough to be in business by then, at least in its current form.
 
MIflyer12
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 6:57 pm

kalvado wrote:
imthedreamliner wrote:
Not honoring the terms of a contract which was signed long ago ? This pandemic will not last forever and when this airline calls Boeing to order new aircraft, I am sure Boeing will remember this.

If- and that is a pretty big if - there will be a need for a new aircraft in foreseeable future, and if - again a big if - Boeing will survive long enough to be in business by then, at least in its current form.


You're kidding yourself if you think Boeing's commercial aircraft business is going away. There is no big if. There is no if at all.

At some point, some carrier with a more vendor-friendly legal system is going to try this trick and Boeing's going to say 'No problem. You're in default. For now we're keeping our plane and your deposit. See you in court.'
 
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 7:06 pm

MIflyer12 wrote:
At some point, some carrier with a more vendor-friendly legal system is going to try this trick and Boeing's going to say 'No problem. You're in default. For now we're keeping our plane and your deposit. See you in court.'

This appears to be what Airbus is doing with AirAsia's three A321neo and three A320neo.

I'm not sure it's a better answer since no one wants airplanes in the current environment.
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 7:39 pm

sxf24 wrote:
xwb777 wrote:
What about QR? They have received 7 B789s lately.


It almost certainly has to be Qatar. This is normal behavior for them, especially talking about it to the media.


Agreed. IMO, extortion is right in line with QR's business philosophy and with Al Baker's psychopathic behavior.

Boeing should turn the tables on ANY airline behaving in this way (yes, ANY airline). The next time Boeing is contacted by an airline that urgently needs a plane and is willing to pay a premium to get one quickly, they should simply say to the airline that pulled this stunt previously and is about to take delivery that, "Since another carrier is now willing to pay a premium to get your plane, the previously negotiated price has now changed. You may pay the new higher price, or you can get back in line and wait for another plane."
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 7:49 pm

Based on some of the posts here, I wouldn't trust you to negotiate the price of a candy bar, let alone a plane. It's almost like some of you believe that paying full market rate on something is the "right" thing to do. Yeeesh!
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Re: Boeing is being forced to give larger discounts

Wed Apr 22, 2020 7:53 pm

blueflyer wrote:
If Boeing delivers an aircraft at cost or with a thin profit margin but gets a contract for services as part of the sale, it is not a bad deal at all. Recurring revenues are what everyone is after, even in manufacturing.

That makes sense.
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 1:18 am

Given the list price, time frame and this statement "one of its most valued customers in the Middle East" mentioned in the OP, I think it may be SV. SV took delivery of a 787-10 on 19 March 2020 and has a long history with Boeing.
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garpd
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 10:41 am

This forum is so fixated with list prices and the theory that any discount eats into Boeing's profit margin considerably.
Rest assured that any deal made will result in revenue for Boeing. Be it upfront at sale or in recurring form from support, parts, etc for X amount of years.
The same will be true for all manufacturers.
List price is just a place to begin negotiations. Like the price tag on a car.

Boeing has been around for a long time and have not gotten to where they are without knowing how to make money.
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RalXWB
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 10:49 am

Yet we have heard on this forum for years that Airbus is giving their planes away but when Boeing does it...#doublestandard. The above poster is right, every business has its list prices but no customer ever is paying them.
 
smartplane
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 11:31 am

Increased discounts at the front, and credits at the back, are only part of the issue in a buyers market. If your customers advise they no longer have funding to make the delivery milestone payment and repay their pre-shipment financier, OEM's are not only being asked to provide post-delivery finance, but also defer repayments. The alternative is the OEM parks the aircraft.
 
leghorn
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 11:35 am

All hail Boeing and their new found sense of Altruism.
If they can just re-engineer the 737Max 10 into an inferior A321XLR competitor which can credibly traverse the Atlantic forcing Airbus to keep themselves competitive on the A321XLR pricing then all the better.
 
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enzo011
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 11:46 am

garpd wrote:
This forum is so fixated with list prices and the theory that any discount eats into Boeing's profit margin considerably.
Rest assured that any deal made will result in revenue for Boeing. Be it upfront at sale or in recurring form from support, parts, etc for X amount of years.
The same will be true for all manufacturers.
List price is just a place to begin negotiations. Like the price tag on a car.

Boeing has been around for a long time and have not gotten to where they are without knowing how to make money.



I just wonder if all airlines received a 55% discount on their 78X orders and also whether they would be more bold to ask for further discounts now that this story has come out. If the article is accurate then as other has speculated it seems like the airline in question would either be EY or SV and you have to wonder if other airlines with similar amount of ordered aircraft is getting the same discounts.

It doesn't really matter other than to satisfy our curiosity really. Boeing will sell the aircraft at the price they fell is right. The list price of Boeing aircraft is higher than Airbus so if they sell at roughly the same price if you assume both companies aren't idiots and chase the same efficiencies in producing the aircraft, then it stands to reason the discounts on Boeing could be higher just based on the listed price.
 
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 11:50 am

Revelation wrote:
smokeybandit wrote:
RickNRoll wrote:
They have the same problem the oil industry has. What do you do with all that stock sitting around? Can you actually store it economically?

Convert the beached planes to tankers and put the overflow oil there. Problem solved!

Finally, an after market for the A380!


Gosh, you really do hate it with a passion, never quite understood why...…?

Back to the subject, QR!
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Revelation
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 2:47 pm

cougar15 wrote:
Revelation wrote:
smokeybandit wrote:
Convert the beached planes to tankers and put the overflow oil there. Problem solved!

Finally, an after market for the A380!

Gosh, you really do hate it with a passion, never quite understood why...…?

I'm not seeing the issue. If you strip the interior and seal all the openings, you could store a LOT of oil in its pressure hull. The wasted space due to the curved hull now gets utilized. No after market emerged for the A380 before COVID-19 and it'll be even worse post-COVID-19. There will be dozens if not hundreds of hulls to choose from. Seems to me to be a great engineering adaptation. We need to think outside the box in these troubled times.
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astuteman
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 2:57 pm

Revelation wrote:
MIflyer12 wrote:
At some point, some carrier with a more vendor-friendly legal system is going to try this trick and Boeing's going to say 'No problem. You're in default. For now we're keeping our plane and your deposit. See you in court.'

This appears to be what Airbus is doing with AirAsia's three A321neo and three A320neo.

I'm not sure it's a better answer since no one wants airplanes in the current environment.


Does it?
I haven't seen anywhere that Airbus have put 2 fingers up to AirAsia and said "we're keeping your money - see you in court".
And to be honest, with the size of the outstanding orders left with AirAsia, I'd be astonished if they did.

I'm pretty sure anything that Airbus is doing with those frames is with the agreement of Air Asia.
What that agreement might be, I don't know.

Rgds
 
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Revelation
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 3:05 pm

astuteman wrote:
Revelation wrote:
MIflyer12 wrote:
At some point, some carrier with a more vendor-friendly legal system is going to try this trick and Boeing's going to say 'No problem. You're in default. For now we're keeping our plane and your deposit. See you in court.'

This appears to be what Airbus is doing with AirAsia's three A321neo and three A320neo.

I'm not sure it's a better answer since no one wants airplanes in the current environment.

Does it?
I haven't seen anywhere that Airbus have put 2 fingers up to AirAsia and said "we're keeping your money - see you in court".
And to be honest, with the size of the outstanding orders left with AirAsia, I'd be astonished if they did.

I'm pretty sure anything that Airbus is doing with those frames is with the agreement of Air Asia.
What that agreement might be, I don't know.

Rgds

The media report that kicked off our thread on that deal suggests otherwise.

Manufacturers usually insist an airline takes delivery of jets that have been built, while showing flexibility on delivery dates of planes yet to be produced, especially for top clients.

Although “pop-up” sales of unwanted aircraft are not new, they rarely involve high-profile customers and typically include the manufacturer keeping the deposit, the sources said. Airbus declined to comment on whether it had done so this time.

It is a harsh step to take,” said one source, speaking on condition of anonymity due to the sensitivity of the matter.

Ref: https://www.reuters.com/article/us-heal ... SKBN2221R2

This coverage suggests is not being done in an atmosphere of cooperation.
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 3:22 pm

Exeiowa wrote:
imthedreamliner wrote:
Not honoring the terms of a contract which was signed long ago ? This pandemic will not last forever and when this airline calls Boeing to order new aircraft, I am sure Boeing will remember this.


At which point a competitor will be more than happy to accept some business. This is how the world goes round.

No airline should play nice Everyone will imitatate AAB's school of carpet inspection. Both Boeing and Airbus will have to discount and defer just to keep orders. Airlines must preserve cash.

Prior threads had Boeing cash flowing about 20% of the sales prices (actual, not list), so giving up most of the profit as a compromise is reasonable.

Any business that holds grudges is quickly out of customers. In a few years the salespeople will only care about their bonus and will negotiate accordingly. If a particular VP or sales person or team is holding a grudge, they will be rotated out.

The reality is oil is selling for less than the cost to produce it. There is a whole industry flying less. Cruise ships are pretty much docked for 2020. I cannot imagine construction will have a good year.

As another poster already noted, this impacts Airbus widebodies just as much. If Airbus will not discount, airlines will find every excuse imaginable, including AAB's infamous carpet. This is bad for the 777x, A350, and A330 (all types).

The reality is no one needs aircraft now. The world we were in 3 months ago is not today's world. Some airlines just will not be able to accept aircraft for years.

Now is not the time to be greedy. If either Boeing or Airbus tries to be rigid to contracts, the customers will revolt. Unfortunately, this ends well for no one.

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JayinKitsap
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 4:39 pm

Revelation wrote:
cougar15 wrote:
Revelation wrote:
Finally, an after market for the A380!

Gosh, you really do hate it with a passion, never quite understood why...…?

I'm not seeing the issue. If you strip the interior and seal all the openings, you could store a LOT of oil in its pressure hull. The wasted space due to the curved hull now gets utilized. No after market emerged for the A380 before COVID-19 and it'll be even worse post-COVID-19. There will be dozens if not hundreds of hulls to choose from. Seems to me to be a great engineering adaptation. We need to think outside the box in these troubled times.


Some rough assumptions with volume inside the pressure bulkheads finds that the hull + fuel tank storage could reach 5,000,000 pounds, but that puts the weight at 5,625,000 lb or 4.5x the MTOW. Will need to introduce saddles down the keel that extend up probably to the lower deck as the hydro static pressure is over 8 PSI. An excellent idea, could cover the wings in solar panels too. The perfect recycling project.
 
planecane
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 4:57 pm

Revelation wrote:
PepeTheFrog wrote:
This would undermine Boeing's cash flow, isn't?

"Eating" the airplane would undermine cash flow even more.


Yet it kind of suggests Boeing still had 15% to give even after the 55% discount.



I'm pretty sure the 15% is 15% of the 55%, not added to it. The way I read it, they got a 63.25% discount in the end, not a 70% discount.
 
kevin5345179
Posts: 111
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 5:05 pm

phxa340 wrote:
PepeTheFrog wrote:
At least one Middle East airline is taking abuse of the pandemic to get steep discounts:

At the end of March, just days before Boeing was set to hand over a new 787 Dreamliner to one of its most valued customers in the Middle East, the airline’s head of procurement picked up the phone to the US aircraft maker. The deal was off, unless Boeing was willing to increase the 55 per cent discount it had already agreed on the $338m list price. 

In normal times, an airline would hesitate before threatening to cancel an order at such a late stage. Cancellation would normally mean heavy penalties and forfeiting the downpayments, which for Boeing’s state of the art twin-aisle model amounted to close to $100m of the agreed $150m price tag. 

But these are not normal times. Boeing caved in and cut the price by a further 15 per cent, according to people involved in the deal.


FT https://www.ft.com/content/3fe8a876-7d7 ... pe=blocked

This would undermine Boeing's cash flow, isn't?


How is this unique to Boeing ? If the 787 is going out the door with a 55% discount , you can bet the A350 is as well and the A330neo probably even more than 55%.


Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.
 
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Revelation
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 6:36 pm

kevin5345179 wrote:
Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.

True, yet https://www.reuters.com/article/us-heal ... SKBN2221R2 says Airbus already has 60 undelivered planes, some for "logistical reasons". As is being said in other threads, most airlines are going to use every trick in the book to not take delivery.
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oldJoe
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 6:52 pm

Revelation wrote:
kevin5345179 wrote:
Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.

True, yet https://www.reuters.com/article/us-heal ... SKBN2221R2 says Airbus already has 60 undelivered planes, some for "logistical reasons". As is being said in other threads, most airlines are going to use every trick in the book to not take delivery.


It could be that even 100 or more at the end of next month. The advantage Airbus has is simply an airline could fly it out at any time if needed.
Without recertication you can`t take a MAX.
Yes , airlines will get ( have to ? ) tricky not take dilivery
 
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Stitch
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 9:12 pm

enzo011 wrote:
I just wonder if all airlines received a 55% discount on their 78X orders and also whether they would be more bold to ask for further discounts now that this story has come out.


Average Sales Prices do not seem to really be "State Secrets". Many sales contracts are in the public domain and while they do redact things like actual amounts, they often leave in percentages for things like price escalation clauses and down payments and such. And since most airlines are publicly-traded, they have to report their financials so it is not too hard to get the general pricing of a deal by comparing how much an airline's projected CAPEX rose during the quarter they made a major purchase. As such, any financial advisory team worth their payroll would have a pretty decent general idea of what their competitors are roughly paying in terms of "discount from list" with widebody discounts looking to now be comfortably in the 50%+ range off List with narrowbodies well into the 60th percentile.
 
smartplane
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Re: Boeing is being forced to give larger discounts

Thu Apr 23, 2020 9:29 pm

Stitch wrote:
enzo011 wrote:
I just wonder if all airlines received a 55% discount on their 78X orders and also whether they would be more bold to ask for further discounts now that this story has come out.


Average Sales Prices do not seem to really be "State Secrets". Many sales contracts are in the public domain and while they do redact things like actual amounts, they often leave in percentages for things like price escalation clauses and down payments and such. And since most airlines are publicly-traded, they have to report their financials so it is not too hard to get the general pricing of a deal by comparing how much an airline's projected CAPEX rose during the quarter they made a major purchase. As such, any financial advisory team worth their payroll would have a pretty decent general idea of what their competitors are roughly paying in terms of "discount from list" with widebody discounts looking to now be comfortably in the 50%+ range off List with narrowbodies well into the 60th percentile.

Which is why the industry (OEM's and customers) prefer to use retrospective credits, contingent on the last aircraft delivered from the order, contingent on how and when the credits are utilised, and contingent on the allocation between customer and lessor / financier.

Mega customers assume they have comparable deals, but as usual it's the detail that sets contracts apart, like one airline's air frame and engine parts held on consignment until used.
 
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lightsaber
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Re: Boeing is being forced to give larger discounts

Fri Apr 24, 2020 3:51 am

kevin5345179 wrote:
phxa340 wrote:
PepeTheFrog wrote:
At least one Middle East airline is taking abuse of the pandemic to get steep discounts:



FT https://www.ft.com/content/3fe8a876-7d7 ... pe=blocked

This would undermine Boeing's cash flow, isn't?


How is this unique to Boeing ? If the 787 is going out the door with a 55% discount , you can bet the A350 is as well and the A330neo probably even more than 55%.


Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.

If Boeing discounts and Airbus doesn't, then volume shifts to Boeing and Airbus starts seeing more contentious customer relations.

Aircraft are building up, 60 per prior link. If too pricey, airlines will find any excuse to not accept and delay deposits.

Both are reducing production.

The A320NEO has more pricing power, but the A350 and A330NEO just lost that. If AirAsia is not accepting A320NEO, than the A330NEO won't be picked up either.


Lightsaber
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kevin5345179
Posts: 111
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Re: Boeing is being forced to give larger discounts

Fri Apr 24, 2020 4:29 am

lightsaber wrote:
kevin5345179 wrote:
phxa340 wrote:

How is this unique to Boeing ? If the 787 is going out the door with a 55% discount , you can bet the A350 is as well and the A330neo probably even more than 55%.


Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.

If Boeing discounts and Airbus doesn't, then volume shifts to Boeing and Airbus starts seeing more contentious customer relations.

Aircraft are building up, 60 per prior link. If too pricey, airlines will find any excuse to not accept and delay deposits.

Both are reducing production.

The A320NEO has more pricing power, but the A350 and A330NEO just lost that. If AirAsia is not accepting A320NEO, than the A330NEO won't be picked up either.


Lightsaber


I guess my previous point was no one wants widebodies today and the problem for Boeing is that's the sole source of cash flow. I disagree the volume shift will happen as majority of airlines just don't want widebodies and the remaining ones hardly make much difference.
 
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stl07
Posts: 2473
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Re: Boeing is being forced to give larger discounts

Fri Apr 24, 2020 6:11 am

Revelation wrote:
cougar15 wrote:
Revelation wrote:
Finally, an after market for the A380!

Gosh, you really do hate it with a passion, never quite understood why...…?

I'm not seeing the issue. If you strip the interior and seal all the openings, you could store a LOT of oil in its pressure hull. The wasted space due to the curved hull now gets utilized. No after market emerged for the A380 before COVID-19 and it'll be even worse post-COVID-19. There will be dozens if not hundreds of hulls to choose from. Seems to me to be a great engineering adaptation. We need to think outside the box in these troubled times.

Good grief you got me actually considering that for a split second
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lightsaber
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Re: Boeing is being forced to give larger discounts

Fri Apr 24, 2020 11:47 am

kevin5345179 wrote:
lightsaber wrote:
kevin5345179 wrote:

Agree. Shouldn't be unique to Boeing. However, Airbus will need to give less discount considering they still have the cash flow from A320neo family while Boeing is paying for 737MAX program.

If Boeing discounts and Airbus doesn't, then volume shifts to Boeing and Airbus starts seeing more contentious customer relations.

Aircraft are building up, 60 per prior link. If too pricey, airlines will find any excuse to not accept and delay deposits.

Both are reducing production.

The A320NEO has more pricing power, but the A350 and A330NEO just lost that. If AirAsia is not accepting A320NEO, than the A330NEO won't be picked up either.


Lightsaber


I guess my previous point was no one wants widebodies today and the problem for Boeing is that's the sole source of cash flow. I disagree the volume shift will happen as majority of airlines just don't want widebodies and the remaining ones hardly make much difference.

Today no airlines want widebodies and for a few months of the restart. The MAX will eventually be certified and Boeing will find a price they sell at.

This is bad, but not the end for either company.

Boeing found a small discount would move the 787s. More will be required (not amount of discount, but everyone now expects it). This means the A350 will have to match as will the A330NEO.

When the MAX is recertified, the NEO must compete. While 2020 is very tough for Boeing, this makes 2021 very tough for Airbus. This is not a one way street.

Considering we are losing 500+ jobs per death, a decision is past due to restart. But that quickly goes off topic.

Lightsaber
Flu+Covid19 is bad. Consider a flu vaccine, if not for yourself, to protect someone you care about.

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