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Exeiowa
Posts: 343
Joined: Fri Jul 06, 2018 4:49 pm

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

Fri Apr 24, 2020 7:55 am

The argument clearly comes down to what each party believes the force majeure terms in the contract mean. Which are probably too vague (due to the nature of such a situation expected to trigger such a clause) that each party can feel they have something to hang their hat on.

This will be an interesting test case to follow.
 
kalvado
Posts: 2847
Joined: Wed Mar 01, 2006 4:29 am

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

Fri Apr 24, 2020 8:15 am

Exeiowa wrote:
The argument clearly comes down to what each party believes the force majeure terms in the contract mean. Which are probably too vague (due to the nature of such a situation expected to trigger such a clause) that each party can feel they have something to hang their hat on.

This will be an interesting test case to follow.

I would expect more of Boeing saying they were on track to delivery in some foreseeable future when force majeure occurred, so ongoing delay is due to a FM, and airlines saying that FM came a year after grounding, production is on hold, and FM is just an icing on the cake and not a real reason for delay.
Both are somewhat reasonable approaches, I would say.
 
XaraB
Posts: 131
Joined: Fri Aug 17, 2007 9:23 pm

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

Fri Apr 24, 2020 8:29 am

Flying-Tiger wrote:
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.


Depending on bankruptcy jurisdiction, the bankruptcy estate may have to actively choose whether to enter into or withdraw from all contracts existing at the time of bankruptcy. If electing to enter into an airliner purchase contract results in committing to take delivery of aircraft, or resell them, the costs associated with that work and risk may outweigh the possible penalty revenue. Hence, an estate may elect to NOT pursue the compensation by abstaining from honouring the purchase contracts, and being better off without it.
An open mind is not an empty one
 
Flying-Tiger
Posts: 4045
Joined: Mon Aug 23, 1999 5:35 am

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

Fri Apr 24, 2020 8:55 am

XaraB wrote:
Flying-Tiger wrote:
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.


Depending on bankruptcy jurisdiction, the bankruptcy estate may have to actively choose whether to enter into or withdraw from all contracts existing at the time of bankruptcy. If electing to enter into an airliner purchase contract results in committing to take delivery of aircraft, or resell them, the costs associated with that work and risk may outweigh the possible penalty revenue. Hence, an estate may elect to NOT pursue the compensation by abstaining from honouring the purchase contracts, and being better off without it.


I think we´ve the same point of view: the value to creditors has to be maximzed by the bankruptcy lawyers. If it means taking the aircraft and selling it onwards, or to go for the compensation is up to them. They will go the venue with a higher return. We only disagree on the probability, but that´s fair enough.
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XaraB
Posts: 131
Joined: Fri Aug 17, 2007 9:23 pm

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

Fri Apr 24, 2020 9:49 am

Flying-Tiger wrote:
XaraB wrote:
Flying-Tiger wrote:

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.


Depending on bankruptcy jurisdiction, the bankruptcy estate may have to actively choose whether to enter into or withdraw from all contracts existing at the time of bankruptcy. If electing to enter into an airliner purchase contract results in committing to take delivery of aircraft, or resell them, the costs associated with that work and risk may outweigh the possible penalty revenue. Hence, an estate may elect to NOT pursue the compensation by abstaining from honouring the purchase contracts, and being better off without it.


I think we´ve the same point of view: the value to creditors has to be maximzed by the bankruptcy lawyers. If it means taking the aircraft and selling it onwards, or to go for the compensation is up to them. They will go the venue with a higher return. We only disagree on the probability, but that´s fair enough.

Agreed! :bigthumbsup:
An open mind is not an empty one
 
intaJET
Posts: 52
Joined: Tue Apr 17, 2018 3:22 pm

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

Fri Apr 24, 2020 9:53 am

The following came to mind. "possession (in this instance, deposit funds) is nine points of the law".

https://definitions.uslegal.com/p/posse ... f-the-law/

Keep safe wherever you are during this trying time.



Flying-Tiger wrote:
XaraB wrote:
Flying-Tiger wrote:

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.


Depending on bankruptcy jurisdiction, the bankruptcy estate may have to actively choose whether to enter into or withdraw from all contracts existing at the time of bankruptcy. If electing to enter into an airliner purchase contract results in committing to take delivery of aircraft, or resell them, the costs associated with that work and risk may outweigh the possible penalty revenue. Hence, an estate may elect to NOT pursue the compensation by abstaining from honouring the purchase contracts, and being better off without it.


I think we´ve the same point of view: the value to creditors has to be maximzed by the bankruptcy lawyers. If it means taking the aircraft and selling it onwards, or to go for the compensation is up to them. They will go the venue with a higher return. We only disagree on the probability, but that´s fair enough.
 
CFRPwingALbody
Posts: 373
Joined: Thu Oct 19, 2017 8:13 pm

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

Sun Apr 26, 2020 4:15 pm

I think Boeing needs to write off about two years worth of 737max production, at rate 52/month. That's roughly 1250 planes Boeing sold but won't deliver in the 2019-2022 period.

This case looks like a full termination of a contract. The worst case for Boeing because the downpayments are claimed back.
For Boeing delivery delays by 3+years are better, this basicly comes down to follow-on order being (partually) fulfilled by delaying the deliveries. I think Covid-19 could actually turn beneficial for Boeing. Because airlines benefit from not taking up ordered planes the comming year. Before covid-19 airlines missed revenue because their ordered 737max can't be delivered. Without covid-19 Boeing had to get rid of a year production worth of 737max. The covid-19 crisis results in another year production lost, but mainly caused by fallen demand.
 
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Phosphorus
Posts: 1008
Joined: Tue May 16, 2017 11:38 am

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

Sun Apr 26, 2020 5:47 pm

CFRPwingALbody wrote:
I think Boeing needs to write off about two years worth of 737max production, at rate 52/month. That's roughly 1250 planes Boeing sold but won't deliver in the 2019-2022 period.

This case looks like a full termination of a contract. The worst case for Boeing because the downpayments are claimed back.
For Boeing delivery delays by 3+years are better, this basicly comes down to follow-on order being (partually) fulfilled by delaying the deliveries. I think Covid-19 could actually turn beneficial for Boeing. Because airlines benefit from not taking up ordered planes the comming year. Before covid-19 airlines missed revenue because their ordered 737max can't be delivered. Without covid-19 Boeing had to get rid of a year production worth of 737max. The covid-19 crisis results in another year production lost, but mainly caused by fallen demand.


Airlines are no fools. If their delivery time has overrun by the necessary length (a year, right?) AND they have second thoughts about actually taking MAX, their legal teams will try to make the money back. Especially now, when survival of airlines is hanging in the balance, and every drop of cash counts.
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