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Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 5:46 am

In a complaint filed in Chicago federal court, ALAFCO Aviation Lease and Finance Co (ALAF.KW) accused Boeing of breach of contract for keeping the payments despite being unable to deliver the planes or provide a revised delivery schedule.

Link: https://www.reuters.com/article/us-boei ... SKCN2243FY



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Blerg
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ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 6:56 am

Good morning,

Seems like ALAFCO is suing Boeing for $336 million for supposedly breaching contract after the plane manufacturer failed to return the downpayment for the MAX order that is now cancelled. Seems like the Kuwaiti leasing company cancelled the whole deal after Boeing failed to deliver 9 aircraft on time.

More on this story here: https://www.cnbc.com/2020/04/22/boeing- ... order.html

So why hasn't Boeing returned the funds? Are they experiencing liquidity issues? Has anyone else sued them over MAX?
 
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FrenchPotatoEye
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 7:03 am

Maybe Alfco had some customer lined up?

Wonder if other lease giants copy this route?
 
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Jayafe
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 7:15 am

This is probably the first of many to come if the outcome is fair and get the money back.

Time for Boeing to take responsibility of their developments and show some respect for their customers. They´ll receive taxpayers money anyway to bail them out, and start the circle again.
 
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scbriml
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 7:21 am

Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.
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Scotron12
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 7:33 am

scbriml wrote:
Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.


It's the same for EYs 777X order. They still list the full order of 25 even tho EY said they would only take 6. Leeham says that EY doesn't even want the 6.
 
Blerg
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 8:58 am

scbriml wrote:
Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.


Interesting observation though if I had to bet on someone it would be ALAFCO. I am sure they have an expensive team of lawyers working on this lawsuit.
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 9:02 am

scbriml wrote:
Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.


I suspect the same thing, I imagine a lot of airlines with orders will watch this lawsuit closely.
I'm no lawyer but if ALAFCO takes this to court and wins, it probably opens the door for airlines that also want to get rid of their MAX-orders.
 
Blerg
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 9:23 am

So if ALAFCO wins the case, what total amount could Boeing be exposed to if others follow suit? Can they afford this? Many airlines might be encouraged to do this in order to get access to additional funding.
 
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scbriml
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 9:29 am

Blerg wrote:
So if ALAFCO wins the case, what total amount could Boeing be exposed to if others follow suit? Can they afford this? Many airlines might be encouraged to do this in order to get access to additional funding.


It would vary airline to airline (or lessor) depending at what stage of manufacture their planes are. For example, for ALAFCO I don't believe any of their 40 have been built, and part of their rationale (convenient excuse) for cancelling is that Boeing can't tell them when their planes would be delivered. Negotiations will be more complex if an airline has planes already built but undelivered.
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Blerg
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 9:33 am

scbriml wrote:
Blerg wrote:
So if ALAFCO wins the case, what total amount could Boeing be exposed to if others follow suit? Can they afford this? Many airlines might be encouraged to do this in order to get access to additional funding.


It would vary airline to airline (or lessor) depending at what stage of manufacture their planes are. For example, for ALAFCO I don't believe any of their 40 have been built, and part of their rationale (convenient excuse) for cancelling is that Boeing can't tell them when their planes would be delivered. Negotiations will be more complex if an airline has planes already built but undelivered.


It was mentioned that Boeing was late with the delivery of 9 aircraft. Will be interesting to know if these were manufactured or not.
 
Kilopond
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 9:53 am

Here is what several sources claim:
Reuters wrote:
[...]ALAFCO said it canceled its order on March 6 after Boeing failed to deliver nine aircraft on time. It said Boeing has resisted its claim that the problems amounted to a “non-excusable delay” that would justify repayment.[...]


https://www.reuters.com/article/us-boei ... SKCN2243FY
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 10:45 am

Blerg wrote:
It was mentioned that Boeing was late with the delivery of 9 aircraft. Will be interesting to know if these were manufactured or not.


I'm pretty sure that none of the undelivered frames are for ALAFCO, but happy to be corrected. Boeing lists ALAFCO at end of March as still having all 40 outstanding.

Their original order for 20 was announced at Farnborough 2012 and firmed in November of that year. No mention of delivery dates in the Boeing presser:
https://boeing.mediaroom.com/2012-11-04 ... g-737-MAXs

This Reuters article on their firming of the 20 MAX options in 2017 talks about deliveries starting in 2020 (but not clear if that's the original order or the options):
https://www.reuters.com/article/us-emir ... SKBN1DD1B2
The aircraft will start being delivered from 2020, Boeing Commercial Airplanes sales chief Ihssane Mounir said at a news conference.
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LJ
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 10:52 am

Kilopond wrote:
Here is what several sources claim:
Reuters wrote:
[...]ALAFCO said it canceled its order on March 6 after Boeing failed to deliver nine aircraft on time. It said Boeing has resisted its claim that the problems amounted to a “non-excusable delay” that would justify repayment.[...]


https://www.reuters.com/article/us-boei ... SKCN2243FY


I wonder what Boeing considers "non-excusable delay". March 6th was before COVID-19 came into play for the US, thus COVID-19 shouldn't be the excuse for Boeing.
 
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par13del
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 11:28 am

LJ wrote:
Kilopond wrote:
Here is what several sources claim:
Reuters wrote:
[...]ALAFCO said it canceled its order on March 6 after Boeing failed to deliver nine aircraft on time. It said Boeing has resisted its claim that the problems amounted to a “non-excusable delay” that would justify repayment.[...]


https://www.reuters.com/article/us-boei ... SKCN2243FY


I wonder what Boeing considers "non-excusable delay". March 6th was before COVID-19 came into play for the US, thus COVID-19 shouldn't be the excuse for Boeing.

Grounding by the FAA perhaps?
 
Blerg
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 11:44 am

par13del wrote:
LJ wrote:
Kilopond wrote:


I wonder what Boeing considers "non-excusable delay". March 6th was before COVID-19 came into play for the US, thus COVID-19 shouldn't be the excuse for Boeing.

Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 12:43 pm

Blerg wrote:
So if ALAFCO wins the case, what total amount could Boeing be exposed to if others follow suit? Can they afford this? Many airlines might be encouraged to do this in order to get access to additional funding.


Depends on what we think the average deposit on a MAX is, ballpark 8% deposit on $88m aircraft (70% of list price) is $7.04m per MAX x 250 cancelled according to Leeham = $1.76bn so far this year. Boeing don't have that sort of money lying around.

Thats without any damages awarded in court.
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sxf24
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 12:45 pm

Blerg wrote:
par13del wrote:
LJ wrote:

I wonder what Boeing considers "non-excusable delay". March 6th was before COVID-19 came into play for the US, thus COVID-19 shouldn't be the excuse for Boeing.

Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


Generally, government action is defined as an excuseable delay. While we can draw a connection between Boeing’s action and the grounding, I don’t know that it is legally so clear. The litigant will need to prove that the duration of the grounding up until the point the contract could be terminated was controllable by Boeing. That will be tough and the lawsuit, like most lawsuits, is probably a tactic to force negotiations in their favor.

P.S. ALAFCO is a joke of a leasing company and was probably struggling to place and pay for these airplanes before the grounding.
 
Exeiowa
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 12:47 pm

The amount being requested probably gives us an insight into the amount for deposits that Boeing would typically have, something normally held confidential and would normally not slip.
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 12:49 pm

sxf24 wrote:
Blerg wrote:
par13del wrote:
Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


Generally, government action is defined as an excuseable delay. While we can draw a connection between Boeing’s action and the grounding, I don’t know that it is legally so clear. The litigant will need to prove that the duration of the grounding up until the point the contract could be terminated was controllable by Boeing. That will be tough and the lawsuit, like most lawsuits, is probably a tactic to force negotiations in their favor.

P.S. ALAFCO is a joke of a leasing company and was probably struggling to place and pay for these airplanes before the grounding.


When I watched Jet Airways go down here I saw posters who were clearly being played to influence opinion on here which I always thought was strange thing to bother with but hey......
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 12:51 pm

Blerg wrote:
par13del wrote:
LJ wrote:

I wonder what Boeing considers "non-excusable delay". March 6th was before COVID-19 came into play for the US, thus COVID-19 shouldn't be the excuse for Boeing.

Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


But it's not just the FAA that grounded MAX..

I'm finding it difficult to see the MAX grounding as an "non-excusable delay" as it was grounded because Boeing completely screwed up on MCAS, but I can see why Boeing's lawyers would claim that.
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 1:04 pm

The end result of democracy is that the lawyers get it all...
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 1:07 pm

scbriml wrote:
Blerg wrote:
par13del wrote:
Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


But it's not just the FAA that grounded MAX..

I'm finding it difficult to see the MAX grounding as an "non-excusable delay" as it was grounded because Boeing completely screwed up on MCAS, but I can see why Boeing's lawyers would claim that.


They will claim that because of Covid and the FAA shutting down the MAX was unable to be returned to service by this summer as publicly suggested by the head of the FAA. That is what they say was beyond their control.

That public statement by the FAA could save them a lot.
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 1:16 pm

morrisond wrote:
scbriml wrote:
Blerg wrote:

Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


But it's not just the FAA that grounded MAX..

I'm finding it difficult to see the MAX grounding as an "non-excusable delay" as it was grounded because Boeing completely screwed up on MCAS, but I can see why Boeing's lawyers would claim that.


They will claim that because of Covid and the FAA shutting down the MAX was unable to be returned to service by this summer as publicly suggested by the head of the FAA. That is what they say was beyond their control.

That public statement by the FAA could save them a lot.


ALAFCO claims they cancelled the order on 6th March, so Covid-19 wouldn't really be a factor. MAX is grounded because Boeing screwed up MCAS, that was entirely within Boeing's own control. MAX isn't grounded because the World's aviation authorities wanted to "get Boeing", despite what some here think.
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alyusuph
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 1:37 pm

Perhaps its a smart counter attack to escape cancellation penalties :-)
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 2:08 pm

sxf24 wrote:
Blerg wrote:
par13del wrote:
Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


Generally, government action is defined as an excuseable delay. While we can draw a connection between Boeing’s action and the grounding, I don’t know that it is legally so clear. The litigant will need to prove that the duration of the grounding up until the point the contract could be terminated was controllable by Boeing. That will be tough and the lawsuit, like most lawsuits, is probably a tactic to force negotiations in their favor.

P.S. ALAFCO is a joke of a leasing company and was probably struggling to place and pay for these airplanes before the grounding.

The governments actions were because they ultimately found the product was unfit for its duty, something that's also usually in contracts and allows for the customer to terminate the contract,
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 2:49 pm

scbriml wrote:
Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.


It may well be that if the financial conditions relating to the termination of the order are still in dispute, then the "order" as a legal vehicle still exists - much the same as the Iran orders stayed on Airbus books for so long without a means of closure being available.

Rgds
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 2:51 pm

Blerg wrote:
Good morning,

Seems like ALAFCO is suing Boeing for $336 million for supposedly breaching contract after the plane manufacturer failed to return the downpayment for the MAX order that is now cancelled. Seems like the Kuwaiti leasing company cancelled the whole deal after Boeing failed to deliver 9 aircraft on time.

More on this story here: https://www.cnbc.com/2020/04/22/boeing- ... order.html

So why hasn't Boeing returned the funds? Are they experiencing liquidity issues? Has anyone else sued them over MAX?


AVIA Capital Services sued BA last summer to get out of a contract for 35x MAX

https://www.cbsnews.com/news/boeing-737 ... 2019-08-27
 
LJ
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 3:49 pm

astuteman wrote:
It may well be that if the financial conditions relating to the termination of the order are still in dispute, then the "order" as a legal vehicle still exists - much the same as the Iran orders stayed on Airbus books for so long without a means of closure being available.

Rgds


Yet if that is the case, one would expect that Boeing would list the 40 MAX in their ASC 606 changes of March.
 
morrisond
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 4:29 pm

scbriml wrote:
morrisond wrote:
scbriml wrote:

But it's not just the FAA that grounded MAX..

I'm finding it difficult to see the MAX grounding as an "non-excusable delay" as it was grounded because Boeing completely screwed up on MCAS, but I can see why Boeing's lawyers would claim that.


They will claim that because of Covid and the FAA shutting down the MAX was unable to be returned to service by this summer as publicly suggested by the head of the FAA. That is what they say was beyond their control.

That public statement by the FAA could save them a lot.


ALAFCO claims they cancelled the order on 6th March, so Covid-19 wouldn't really be a factor. MAX is grounded because Boeing screwed up MCAS, that was entirely within Boeing's own control. MAX isn't grounded because the World's aviation authorities wanted to "get Boeing", despite what some here think.


Covid-19 was definitely a factor by March 6th - they were just being smart and looking forward.

What does the MAX being grounded due to Boeing's screw up have anything to do with what I wrote? Where did I imply that the Worldwide Aviation authorities are out to get Boeing in what I wrote above?

Or are you just upset because I pointed out that Boeing might have a defensible position in this case?
 
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 4:33 pm

Exeiowa wrote:
The amount being requested probably gives us an insight into the amount for deposits that Boeing would typically have, something normally held confidential and would normally not slip.


336 mio USD translates to 8,4 mio per aircraft. Does this give any insight on the purchase price as well? Has anyone who may have seen maybe an old contract an idea of how much is put forward with an order?
I doubt its 10%, for an early order from 2012 a purchase price of 84 mio per aircraft seems unlikely. I'd consider 20% and a 42 mio USD purchase price reasonable. But it might be even less?
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 4:53 pm

scbriml wrote:
ALAFCO claims they cancelled the order on 6th March, so Covid-19 wouldn't really be a factor.


I would disagree a bit. The Covid-19 Nursing Home incident in Washington State happened at the end of February. It's at least a minor 'factor'. Larger factor was Boeing's inability to return the plane to safe service almost a year after the last fatal crash of the airframe. (Last - 10 Mar 2019, First - 29 Oct 2018.)
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LJ
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 5:05 pm

morrisond wrote:
Covid-19 was definitely a factor by March 6th - they were just being smart and looking forward.


It's almost certainly a factor for ALAFCO. However, it cannot be used as an excuse by Boeing for not returning their deposit as Boeing did operate normally at the time. And yes, they were smart to identify the consequences of COVID-19 (then again, the may have seen what happened in China and how it affected aviation in that country).
 
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par13del
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 5:28 pm

scbriml wrote:
Blerg wrote:
par13del wrote:
Grounding by the FAA perhaps?


Yeah but they were not grounded because the FAA had nothing better to do. They were grounded because the product they were selling was unsafe and it killed over 300 innocent people.


But it's not just the FAA that grounded MAX..

I'm finding it difficult to see the MAX grounding as an "non-excusable delay" as it was grounded because Boeing completely screwed up on MCAS, but I can see why Boeing's lawyers would claim that.

Well the a/c is built in the USA, so if the authority there has the a/c grounded it cannot be sold to anyone in any other country.

As to whether the grounding is a "non-excusable delay", the grounding and if we want to be technical the revocation of certification is the reason why the a/c cannot be delivered.

Boeing has over 400 a/c sitting down and most were there prior to the March cancellation, COVID-19 interruptions came AFTER hundreds of a/c were built.

Not sure if folks are equating non-excusable delay with Boeing saying they are not responsible for MCAS, however, I can see a judge in this case putting the case on hold until the RTS is given and all compensation around the delays is resolved to finally settle on what is non-excusable. I think we can agree that will take years, so this case may be deferred for a long time.
 
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 5:32 pm

scbriml wrote:
Blerg wrote:
So if ALAFCO wins the case, what total amount could Boeing be exposed to if others follow suit? Can they afford this? Many airlines might be encouraged to do this in order to get access to additional funding.


It would vary airline to airline (or lessor) depending at what stage of manufacture their planes are. For example, for ALAFCO I don't believe any of their 40 have been built.


From the photo database, there's a fair few 737MAXs built which are currently in the livery of airlines that never ordered MAXs, so it's likely that some of these could be the ALAFCO ones.
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 6:00 pm

morrisond wrote:
What does the MAX being grounded due to Boeing's screw up have anything to do with what I wrote?


Boeing can hardly say "It's the FAA's fault we couldn't deliver your planes." when the grounding was caused by Boeing's fatally flawed implementation of MCAS.

morrisond wrote:
Where did I imply that the Worldwide Aviation authorities are out to get Boeing in what I wrote above?


Where did I imply you did? I said "despite what some here think", if I'd meant you, I would have said "despite what you think". I hope that clears that up?

morrisond wrote:
Or are you just upset because I pointed out that Boeing might have a defensible position in this case?


Upset? :lol:
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 6:03 pm

par13del wrote:
As to whether the grounding is a "non-excusable delay", the grounding and if we want to be technical the revocation of certification is the reason why the a/c cannot be delivered.


And what is the root cause of the grounding? It's Boeing's implementation of MCAS 1.0.
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par13del
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Re: ALAFCO Sues Boeing Over Max

Thu Apr 23, 2020 7:03 pm

scbriml wrote:
par13del wrote:
As to whether the grounding is a "non-excusable delay", the grounding and if we want to be technical the revocation of certification is the reason why the a/c cannot be delivered.


And what is the root cause of the grounding? It's Boeing's implementation of MCAS 1.0.

Well Boeing did fix MCAS fix in June 2019 but the a/c is still grounded, but I am sure we can track back bit flip, dual computers, wire bundles, nacelle changes, everything back to MCAS.
Unfortunately, we now have a legal issue, whether this one has to wait until the FBI and DOJ complete their investigation of all things Boeing remains to be seen.
 
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 8:43 pm

Where an order remains on published OEM databases, cancellations announced by customers are not mutual, and are / will be disputed.
 
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 8:54 pm

MaxiAir wrote:
Exeiowa wrote:
The amount being requested probably gives us an insight into the amount for deposits that Boeing would typically have, something normally held confidential and would normally not slip.


336 mio USD translates to 8,4 mio per aircraft. Does this give any insight on the purchase price as well? Has anyone who may have seen maybe an old contract an idea of how much is put forward with an order?
I doubt its 10%, for an early order from 2012 a purchase price of 84 mio per aircraft seems unlikely. I'd consider 20% and a 42 mio USD purchase price reasonable. But it might be even less?

Many times greater than the value of the deposits, even if some milestone payments have been made on long lead items, though based on comments up thread, they haven't. Claim will include loss of revenue on the nine, which had been placed.

Interesting to see what information is / is not contained in court papers, and if it gets that far, if held in closed court, with redacted findings / decision. Detailed contract financial information, especially side agreements surrounding values, milestones and payments are covered by strong confidentiality agreements, breach of which includes described financial penalties.
 
Raptormodeller
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 9:19 pm

Boeing really can't catch a break with the MAX can it....

Play stupid games; win stupid prizes.
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Asiaflyer
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Thu Apr 23, 2020 9:38 pm

The lawsuit chicken race has just started. To run a fierce fight against customers is never a winning concept. There will for sure be mutual settlements and this will drag out for years to come.
Pass me the popcorns please.
 
Exeiowa
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 12:39 am

The leasor only has a contract with Boeing, therefore the only party they would have standing against would be Boeing. There also might be some sovereign immunity involved. If it's the government's fault then Boeing would then go after the government for it's loss. So the material facts would only be if Boeing failed to fulfill it's obligation according to the contract, not the reason.
 
sibibom
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 2:20 am

There are no winners here. Airlines are desperate cos well....the world and airline industry is on a brink. Boeing was desperate since March 2019 and it will only get worst before things improve.

Is it worth it for Boeing to fight this? Wouldn't such actions piss off lessors and airlines whom they had a long relationship with?

If more Airlines take this route they are looking at an Airbus monopoly in the near future for narrowbodies and that doesn't bode well for keeping the manufacturer honest on prices.

Go back to the negotiation table and work out a deal. Wear your big boy pants and accept the new reality. There are no winners here!
 
Blerg
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 4:56 am

Such a shame McDonnell is no longer around, at least we wouldn't have to worry about an Airbus monopoly right now if Boeing keeps on struggling.
 
2175301
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Re: ALAFCO Sues Boeing Over Max

Fri Apr 24, 2020 5:44 am

astuteman wrote:
scbriml wrote:
Something isn't adding up here. :scratchchin:

Leeham lists the MAX cancellations for this year and ALAFCO isn't included.
https://leehamnews.com/2020/04/22/hotr- ... e-january/

Boeing still lists ALAFCO as having 40 MAX on order with all 40 still outstanding. So, for whatever reason, Boeing clearly doesn't consider those frames cancelled yet. I suspect this won't be the last disagreement over MAX.


It may well be that if the financial conditions relating to the termination of the order are still in dispute, then the "order" as a legal vehicle still exists - much the same as the Iran orders stayed on Airbus books for so long without a means of closure being available.

Rgds


Agree. If ALAFCO clearly met the contract conditions for cancellation; then I would have expected Boeing to list the cancellation in it's March report (posted in April). It is in my opinion that ALAFCO likely stated their intention and may have started the process, but have not yet met all the terms and conditions necessary to complete the cancellation process (Boeing's reported comments seem to indicate this is the case). If that is the case... They will loose the lawsuit if it goes to trial. How much hardball is Boeing willing to play here. This cold backfire on ALAFCO.

Have a great day,
 
XaraB
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 6:05 am

If I were a cynical Boeing, I would hold off any actual payments for as long as possible towards airlines likely to topple, and only settle with those likely to survive, in order to bring the total compensation liability down... :stirthepot: :duck:
An open mind is not an empty one
 
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moo
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 6:30 am

XaraB wrote:
If I were a cynical Boeing, I would hold off any actual payments for as long as possible towards airlines likely to topple, and only settle with those likely to survive, in order to bring the total compensation liability down... :stirthepot: :duck:


The bankruptcy court might have something to say about that - companies dont just disappear, especially if they are owed money. That money is pursued.
 
XaraB
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 7:43 am

moo wrote:
XaraB wrote:
If I were a cynical Boeing, I would hold off any actual payments for as long as possible towards airlines likely to topple, and only settle with those likely to survive, in order to bring the total compensation liability down... :stirthepot: :duck:


The bankruptcy court might have something to say about that - companies dont just disappear, especially if they are owed money. That money is pursued.

True, but what's possible is entirely dependent on the bankruptcy laws in the country where the airline is registered, and may differ significantly.

In any case, the PROBABILITY of having to pay the full amount in compensation according to Contract decreases if the Customer goes bankrupt. Given the amount of contractual breaches Boeing is in at the moment, the cynical approach would be to squeeze every penny worth out of that probability difference. It may also lessen the cash flow burden, postponing payments until income is recovering.
An open mind is not an empty one
 
Flying-Tiger
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Re: Boeing is sued for $336 million over canceled 737 MAX order

Fri Apr 24, 2020 7:51 am

True, but what's possible is entirely dependent on the bankruptcy laws in the country where the airline is registered, and may differ significantly.

In any case, the PROBABILITY of having to pay the full amount in compensation according to Contract decreases if the Customer goes bankrupt. Given the amount of contractual breaches Boeing is in at the moment, the cynical approach would be to squeeze every penny worth out of that probability difference. It may also lessen the cash flow burden, postponing payments until income is recovering.


On the contrary: from what I´ve seen it is far more likely that a lawyer (law firm) will go all the way through court once a company is bankrupt to maximze the return to creditors as it is their legal obligation. They have years to go through this if necessary, and rarely cut deals. Very much oppose to a going concern, they will be far more likely to cut a deal to get money back to work.
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