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Polot
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 1:42 pm

B777LRF wrote:
I must applaud Lightsaber for the mental gymnastics which leads to the conclusion, that the prices are better now (when Boeing have started to amass Max orders again, to the point they flatly refused Ryanair's "offer") than they were in 2020 when Boeing hadn't received a single Max order for almost a year, but instead had to book upwards of 1.000 cancellations. I would dearly like to know how that conclusion was reached, and I don't for one second buy the idea that the engines - or the maintenance thereof - have suddenly become cheaper. Why would they, when CFM have exclusivity on the Max and are selling the Leap in record numbers.

The only plausible explanation is that the LOI was nothing but a marketing stunt, which might just be a single piece of paper saying "we agree that BA are interested in purchasing 200 Max aircraft", with no further details on pricing, delivery timetable or support agreement.

The IAG LOI was signed in June 2019, only a few months into the grounding when Boeing expected the plane back in service by the end of the year, not in 2020. It had not been years since the last order nor had there been thousands canceled.

Most Max cancelations have been because of covid (with the grounding delay providing an easy out of contracts), not the plane itself. The Ryanair comparison is not a good one. We don’t know what price they were asking for, how that compares to the price in the LOI, nor how it compares to price Boeing achieved in other recent deals signed this year (and how those prices compare to the LOI). It’s entirely possible that the LOI was for a 50% discount, recent orders have been at 60% discount, and Ryanair was asking for 70% discount.
 
B777LRF
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 1:58 pm

Thanks for the correction. Doesn't really distract from the fact that Boeing needed a bit of good news at the time, and Willi was happy to deliver as it cost him nothing.

As for your theories on the pricing you are absolutely correct nobody here knows anything about the prices, and it's just as likely your theory of 50% discount holds about as mine that pricing wasn't even included in the LOI.

PS
The purpose of list prices is marketing, as it enables the OEM to issue a presser saying they've sold x amount of aircraft at a list price of x billion Dollars. They bear absolutely no resemblance what so ever to the actual prices those airlines command, but the imbeciles at Wall Street* swallow it whole and up goes the share prices.

*Feel free to replace with imbeciles from other stock exchanges at your leisure.
 
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scbriml
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 4:14 pm

B777LRF wrote:
The purpose of list prices is marketing, as it enables the OEM to issue a presser saying they've sold x amount of aircraft at a list price of x billion Dollars.


To the extent that Airbus no longer publishes its list price for our edification
 
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lightsaber
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 4:55 pm

B777LRF wrote:
I must applaud Lightsaber for the mental gymnastics which leads to the conclusion, that the prices are better now (when Boeing have started to amass Max orders again, to the point they flatly refused Ryanair's "offer") than they were in 2020 when Boeing hadn't received a single Max order for almost a year, but instead had to book upwards of 1.000 cancellations. I would dearly like to know how that conclusion was reached, and I don't for one second buy the idea that the engines - or the maintenance thereof - have suddenly become cheaper. Why would they, when CFM have exclusivity on the Max and are selling the Leap in record numbers.

Let me check explain why we are going into a buyers market and that always hurts pricing. Recall the LOI was in June 2019 before all the Covid19 lockdowns:
https://simpleflying.com/iag-airbus-captivity/

Please compare resale values of aircraft
viewtopic.php?t=1460947

viewtopic.php?t=1422705

All prices in millions
738 dropped from 9 to 46.5 down to 6.8 to 35.5 (a harsh drop, probably supported, ironically, by MAX grounding)
no spring 2019 MAX pricing, but -8 at 33.7 to 45.8 (cheaper than a new 737-800 when the LOI was signed).

A320 dropped from 2 to 44.8 (bottom scrap pricing) down to 2.5 (better scrap values, probably engines) to 33.5. (harsh drop for last off the line).

A320NEO was 42 to 50 now 41.5 to 56 (or NEOs held pricing with inflation, maybe a little better).

So no mental gymnastics. -8 MAXes new now sell for less than a new 737-800 did back then, despite inflation, instead of a premium. Airbus will try to play a spoiler role. IAG should rebid.

There is only one winner, IAG.

Lightsaber

PS, supporting information Boeing must discount more (not a late edit):
Udvar-Hazy just chastised Boeing and Airbus for the glut of aircraft:
https://www.msn.com/en-US/news/companie ... NewsSearch

Airbus said in May it would lift production of its best-selling A320 jets beyond pre-pandemic levels within two years. Boeing, which is starting to emerge from a deep slump triggered by the grounding of its 737 Max model after two fatal crashes, plans to double output of the single-aisle jets by early next year.


Both Boeing and Airbus must increase production for the economics of scale. Whomever produces slower is going to have a cost disadvantage (economics of scale in an automated world).

This is much more of a buyers market than when the LOI was signed. Boeing lost over a thousand MAX orders!

Boeing fell from grace:
https://www.forbes.com/sites/danielreed ... a8a9782d57

Plus, a lot of the MAX sales that Boeing has negotiated and announced this year fall into the “Make Good” or “Re-sale” or “Deeply Discounted” categories, meaning those sales are worth far less than meets the eye.

...
“But over a projected 3,500 planes sold,” down from more than 4,500 projected to be sold prior to the grounding, “it is pretty clear that Boeing won’t make an actual profit on the MAX,” Hamilton said.


Not selling weakens a pricing position...
Ryanair probably demanded unprofitable pricing. Boeing must sell at a profit, but margins will be reduced.
 
B777LRF
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 4:58 pm

lightsaber wrote:
Let me check explain why we are going into a buyers market and that always hurts pricing.


Appreciate the effort, thanks for the education.
 
ElectroWizard
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 5:01 pm

BA abandons plans for short-haul subsidiary airline at Gatwick

https://www.theguardian.com/business/20 ... sh-airways
 
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keesje
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Re: B737MAX Still considered for IAGs future fleet

Thu Sep 23, 2021 5:06 pm

Opus99 wrote:
scbriml wrote:
Opus99 wrote:
That makes sense. But do you agree it will be bad business for it to be uncontested? I think the LOI can be alive and well and still be contested. It doesn’t mean it has to be dead and buried


Most folks don't seem to have a problem with uncontested orders from Southwest or Ryanair, so I'm not sure why IAG should be seen differently.

That said, the normal process would be for an LOI or MOU to be signed after a competition. IAG clearly intended to only order MAX when they signed the LOI. To say things have now changed would be something of an understatement. Without the massive upheaval of Covid-19, that LOI might have already been firmed, but it now seems the slate has been wiped clean and we have a new competition. One assumes Boeing will submit a new bid (which may or may not be very similar to the previous one).

We'll see how this plays out. It won't be dull.

This one is different because there’s an LOI involved. In southwest or Ryanair there’s nothing but talk and rumours. That’s what makes this different.

Also WW says his biggest regret was actually not buying the 737.


https://youtu.be/pZPbSjb7wWQ


Before the MAX drama's.. timing is everthing.

Btw I could sum up consequences for IAG members switching to 737MAX, but I guess most know..

Ryanair CEO is right observing there are few 737 MAX LCC's operators left in Europe. And more in general.

Is there any news on IAG and the 737MAX, or are we keeping hope alive here? Can't seem to find anything..
 
TC957
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Thu Sep 23, 2021 8:15 pm

[quote="ElectroWizard"]BA abandons plans for short-haul subsidiary airline at Gatwick

Indeed what is the point now of BA getting MAX's that they said at the time of placing the LOI that they were mainly for LGW ops.
 
rbavfan
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Re: B737MAX Still considered for IAGs future fleet

Fri Sep 24, 2021 2:23 am

Opus99 wrote:
I think the difference between WW and Luis is that he’ll allow Airbus bid. WW did not want to. But This is the first time Boeing has been invited to bid since the 737 classics at BA. They will be ruthless


WW made that old 200 plane order to show support for the 737 during the crash & grounding to help Boeing look good. Thats the only reason only Boeing got that LOI.
 
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Revelation
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Re: B737MAX Still considered for IAGs future fleet

Fri Sep 24, 2021 3:13 pm

Strato2 wrote:
"Among other European prospects, British Airways parent IAG has reopened a fresh competition between Airbus and Boeing for narrowbody jets, revisiting a large provisional order for 200 MAX jets that was never finalised, the sources said."

https://www.yahoo.com/entertainment/air ... 26124.html

It seems IAG MAX LOI is dead and buried.

I think the newsy part of the post is that IAG is still talking to Boeing about narrow bodies i.e. 737, regardless of the status of a 2+ years old LOI.

Opus99 wrote:
Revisiting a 200 MAX jet provisional order that was never finalised.

You translated that to the LOI is dead and buried?

Can somebody else explain this to me

Indeed, let's not bury the lede.

tommy1808 wrote:
Opus99 wrote:
I’ve heard Heathrow has a problem with connections and uncontainrised baggage. Personally I think that is ridiculous for an airport like that. How can you not handle containerised baggage? If they can’t. Can it be introduced? And if can be introduced can it be the MAX be the mainstay of BA?


It can, even at T5, it is just more of a hassle. Why is it designed to handle containers only? Because that is what BA was planning to use, and just like everybody else they probably assumed the 737 is at the end of its line, and replacement BA might buy to one day replace the A320 would be a clean sheet Boeing design or a new Airbus that both, of course, would load containers.
Containers safe a little bit of labor, and cost a bit more fuel for the extra weight being hauled around. Container handling is also less prone to stoppage and damaged bags, so good for reliability.

Meanwhile, the operator of the world's largest A320 fleet, AA, doesn't use containers, nor does UA. Different horses for different courses.

Opus99 wrote:
Oh give me break. My point is the LOI can be revisited as a reference point WHILST the competition is still in the running. Which is what the article is trying to point out. An LOI is not an order as we all know. No need to get your knickers in a twist

It's funny people argued earlier that the LOI wasn't an order, now they argue it was. It never was an order, and clearly the longer it stayed in 'intent' state, the weaker the 'intent' was.

scbriml wrote:
That said, the normal process would be for an LOI or MOU to be signed after a competition. IAG clearly intended to only order MAX when they signed the LOI. To say things have now changed would be something of an understatement. Without the massive upheaval of Covid-19, that LOI might have already been firmed, but it now seems the slate has been wiped clean and we have a new competition. One assumes Boeing will submit a new bid (which may or may not be very similar to the previous one).

If they clearly intended to order MAX, they would have just gone ahead and ordered MAX, just like WN and FR did.

IAG clearly intended to send the signal that they intended to order MAX IMO to get Airbus to become more responsive to its current and future needs, and really did not intend to order MAX.

I personally doubt WW and IAG would go through the process of doing a LOI if it was mainly to help raise Boeing's stature during a crisis, there's nothing in it for them.

If they truly wanted to order MAXes there was nothing stopping them from doing that, instead they pulled up short of that.

None of that is by accident.
 
CX747
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Fri Sep 24, 2021 5:48 pm

With LGW operations being drastically changed, one wonders if any new narrowbodies, from either manufacturer are needed in a way forecasted a few months back.
 
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enzo011
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Re: B737MAX Still considered for IAGs future fleet

Fri Sep 24, 2021 8:26 pm

Revelation wrote:
I think the newsy part of the post is that IAG is still talking to Boeing about narrow bodies i.e. 737, regardless of the status of a 2+ years old LOI.


I think it is interesting that an airline that signed a LOI to order one aircraft has now seemingly opened that order up again. I would be more worried about what it says about the LOI and the aircraft it covered than the silver lining that Boeing is still in the running for an order that they had the inside lane in only 2 years ago.


Revelation wrote:
It's funny people argued earlier that the LOI wasn't an order, now they argue it was. It never was an order, and clearly the longer it stayed in 'intent' state, the weaker the 'intent' was.


Pick a lane. People were treating the LOI as an order in the initial thread. You yourself said, "Because WW himself told us that BA will operate 737s from LGW."

viewtopic.php?f=3&t=1425047&start=100#p21447151

Now that people seem to agree with you, you tell them they were wrong to listen to you in that thread. That is an interesting stance to take.

Revelation wrote:
If they clearly intended to order MAX, they would have just gone ahead and ordered MAX, just like WN and FR did.

IAG clearly intended to send the signal that they intended to order MAX IMO to get Airbus to become more responsive to its current and future needs, and really did not intend to order MAX.

I personally doubt WW and IAG would go through the process of doing a LOI if it was mainly to help raise Boeing's stature during a crisis, there's nothing in it for them.

If they truly wanted to order MAXes there was nothing stopping them from doing that, instead they pulled up short of that.

None of that is by accident.


I am wondering what the liability of management would have been had they gone ahead with the order without allowing Airbus to bid. This is not a case of FR where Airbus is on record saying they aren't interested in bidding for potential orders to be used again to extract lower pricing. They are keen to speak to IAG about their potential fleet needs and this was not given to them and was on record to state this. Had Walsh gone ahead with the order you suspect there may have been some qualms from shareholders on why they didn't go ahead with a competition to extract the absolute best price. You cannot claim the Boeing price was better than what Airbus would have offered without giving Airbus the chance.

So that is why a lot of posters were saying the LOI was a publicity stunt. It just never made sense for IAG to sign an order without asking Airbus to bid at least.
 
oschkosch
Posts: 687
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Re: B737MAX Still considered for IAGs future fleet

Sat Sep 25, 2021 2:49 pm

enzo011 wrote:
Revelation wrote:
I think the newsy part of the post is that IAG is still talking to Boeing about narrow bodies i.e. 737, regardless of the status of a 2+ years old LOI.


I think it is interesting that an airline that signed a LOI to order one aircraft has now seemingly opened that order up again. I would be more worried about what it says about the LOI and the aircraft it covered than the silver lining that Boeing is still in the running for an order that they had the inside lane in only 2 years ago.


Revelation wrote:
It's funny people argued earlier that the LOI wasn't an order, now they argue it was. It never was an order, and clearly the longer it stayed in 'intent' state, the weaker the 'intent' was.


Pick a lane. People were treating the LOI as an order in the initial thread. You yourself said, "Because WW himself told us that BA will operate 737s from LGW."

viewtopic.php?f=3&t=1425047&start=100#p21447151

Now that people seem to agree with you, you tell them they were wrong to listen to you in that thread. That is an interesting stance to take.

Revelation wrote:
If they clearly intended to order MAX, they would have just gone ahead and ordered MAX, just like WN and FR did.

IAG clearly intended to send the signal that they intended to order MAX IMO to get Airbus to become more responsive to its current and future needs, and really did not intend to order MAX.

I personally doubt WW and IAG would go through the process of doing a LOI if it was mainly to help raise Boeing's stature during a crisis, there's nothing in it for them.

If they truly wanted to order MAXes there was nothing stopping them from doing that, instead they pulled up short of that.

None of that is by accident.


I am wondering what the liability of management would have been had they gone ahead with the order without allowing Airbus to bid. This is not a case of FR where Airbus is on record saying they aren't interested in bidding for potential orders to be used again to extract lower pricing. They are keen to speak to IAG about their potential fleet needs and this was not given to them and was on record to state this. Had Walsh gone ahead with the order you suspect there may have been some qualms from shareholders on why they didn't go ahead with a competition to extract the absolute best price. You cannot claim the Boeing price was better than what Airbus would have offered without giving Airbus the chance.

So that is why a lot of posters were saying the LOI was a publicity stunt. It just never made sense for IAG to sign an order without asking Airbus to bid at least.
Interesting post you've made!

Gesendet von meinem SM-G950F mit Tapatalk
 
astuteman
Posts: 7439
Joined: Mon Jan 24, 2005 7:50 pm

Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Sat Sep 25, 2021 3:39 pm

lightsaber wrote:
B777LRF wrote:
I must applaud Lightsaber for the mental gymnastics which leads to the conclusion, that the prices are better now (when Boeing have started to amass Max orders again, to the point they flatly refused Ryanair's "offer") than they were in 2020 when Boeing hadn't received a single Max order for almost a year, but instead had to book upwards of 1.000 cancellations. I would dearly like to know how that conclusion was reached, and I don't for one second buy the idea that the engines - or the maintenance thereof - have suddenly become cheaper. Why would they, when CFM have exclusivity on the Max and are selling the Leap in record numbers.

Let me check explain why we are going into a buyers market and that always hurts pricing. Recall the LOI was in June 2019 before all the Covid19 lockdowns:
https://simpleflying.com/iag-airbus-captivity/

Please compare resale values of aircraft
viewtopic.php?t=1460947

viewtopic.php?t=1422705

All prices in millions
738 dropped from 9 to 46.5 down to 6.8 to 35.5 (a harsh drop, probably supported, ironically, by MAX grounding)
no spring 2019 MAX pricing, but -8 at 33.7 to 45.8 (cheaper than a new 737-800 when the LOI was signed).

A320 dropped from 2 to 44.8 (bottom scrap pricing) down to 2.5 (better scrap values, probably engines) to 33.5. (harsh drop for last off the line).

A320NEO was 42 to 50 now 41.5 to 56 (or NEOs held pricing with inflation, maybe a little better).

So no mental gymnastics. -8 MAXes new now sell for less than a new 737-800 did back then, despite inflation, instead of a premium. Airbus will try to play a spoiler role. IAG should rebid.

There is only one winner, IAG.

Lightsaber



I think you may have made a mistake here.
In the thread you have linked, the values you have quoted for the A320NEO are actually for the A321NEO.
The A320NEO values this year were quoted as $30.7M to $48M
Still means the top value for an A320NEO is $2.2M higher than the top price for a 737-8 which I think still supports your point.

Not germane to the thread..
The rise in the top value of an A321NEO from $50M to $56M in the period you have selected is a bit eye-watering.
Strong evidence of the types appeal in the market, if we needed any.

Rgds
 
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Revelation
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Re: B737MAX Still considered for IAGs future fleet

Sat Sep 25, 2021 4:02 pm

enzo011 wrote:
Revelation wrote:
It's funny people argued earlier that the LOI wasn't an order, now they argue it was. It never was an order, and clearly the longer it stayed in 'intent' state, the weaker the 'intent' was.

Pick a lane. People were treating the LOI as an order in the initial thread. You yourself said, "Because WW himself told us that BA will operate 737s from LGW."

viewtopic.php?f=3&t=1425047&start=100#p21447151

Now that people seem to agree with you, you tell them they were wrong to listen to you in that thread. That is an interesting stance to take.

The fact that it was never an order is undeniable, regardless of anything you, I or anyone else wrote.

The LGW comment was in the context of people saying an order for the IAG group was not feasible due to lack of container support, whereas I was pointing out that if they acquired 737s they would operate from LGW so the T5 issue was moot.

Looking back at the thread, I was more willing to view the LOI as leading to an order earlier in the thread as it happened just as Jet Airways was collapsing and leaving Boeing with a big hole in its production schedule, and as mentioned earlier in this thread it was happening as most of the world believed the grounding would be over in a few weeks rather than several months as it turned out to be.

Later in the process (#375), I'm viewing it as a move for IAG to show Airbus its displeasure on delivery performance, based on info that came out later in the process:

Should we also acknowledge that IAG was so unhappy with Airbus's inability to deliver when promised that they were happy to sign a LOI with Boeing even knowing the MAX RTS date was not set so they could pressure Airbus to improve delivery performance?

Ref: viewtopic.php?f=3&t=1425047&start=350#p22145761

Other stuff was coming out by then to show it really was about keeping Airbus honest.

IAG's letter of intent to take 200 Boeing 737 Max jets will help prevent it from becoming a captive customer of Airbus's when it comes to the short-haul fleet, in the view of chief executive Willie Walsh.

During a webcasted panel session at the ACI Europe annual congress in the Cypriot city of Limassol on 26 June, Walsh noted that there had been "concern" within the airline group for some time that it was becoming too reliant on the European airframer.

"That's unhealthy," says Walsh.

Ref: https://www.flightglobal.com/strategy/7 ... 50.article

enzo011 wrote:
I am wondering what the liability of management would have been had they gone ahead with the order without allowing Airbus to bid. This is not a case of FR where Airbus is on record saying they aren't interested in bidding for potential orders to be used again to extract lower pricing. They are keen to speak to IAG about their potential fleet needs and this was not given to them and was on record to state this. Had Walsh gone ahead with the order you suspect there may have been some qualms from shareholders on why they didn't go ahead with a competition to extract the absolute best price. You cannot claim the Boeing price was better than what Airbus would have offered without giving Airbus the chance.

So that is why a lot of posters were saying the LOI was a publicity stunt. It just never made sense for IAG to sign an order without asking Airbus to bid at least.

I'm not sure there would be a legal issue had it gone to an order. WN just ordered tranches of MAX7s without letting Airbus make a formal proposal on A220. WN management basically said it was clear to them MAX was the better choice and it wasn't worth the time and energy to go through with bidding. If the shareholders qualms led to legal action, would Airbus share the info needed to make the case that they were willing to match or beat the Boeing offer? Almost certainly not, they would say it was proprietary, sensitive trade information they weren't obligated to share. Even then, management could poke holes in whatever info Airbus would be willing to share, could make a case that fleet diversity had become important and added intangible value, and/or could present info damaging to Airbus showing shortcomings in delivery time and/or quality. Bottom line: it would not be in Airbus's interest to support a public squabble with a major customer and would certainly resist releasing the kind of information needed to support such a squabble.
 
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scbriml
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Re: Updated: IAG has reopened a fresh competition for narrowbody jets

Sat Sep 25, 2021 11:10 pm

Revelation wrote:
If they clearly intended to order MAX, they would have just gone ahead and ordered MAX, just like WN and FR did.


Well, that's what the I in LOI is for! :wink2:

If Walsh was using Boeing in a stalking horse strategy, it seems odd he didn't invite Airbus to participate. I honestly think the intent t buy MAX was there but the combination of the length of the grounding and Covid-19 has completely changed the landscape. Throw in a change of BA management and you now have a completely new scenario.

But I'm sure everyone wants to interpret events their own way.

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