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clickhappy
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Skybus - Order Or Commitment?

Sat Oct 28, 2006 1:56 am

Is the Skybus news for 65 new planes an order, or a commitment?

Anyone know for sure?

Thanks
 
American777
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 2:02 am

Quoting Clickhappy (Thread starter):
Order Or Commitment?

It is an order. To verify Click Here

Regards,

JOE.  airplane 
 
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clickhappy
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 2:10 am

So, if they have 100 million behind them, how did they pay for 65 planes?

That link says a "firm contract" so I assume this is all orders and no options?

The Seattle PI says this order is worth $4.3 Billion at list prices, so lets call it $3 Billion for the sake of this conversation.

Don't airlines usually pay 1/3 upfront? If so, where did they get a Billion dollars?

And they are starting operations in 'early 2007?' Are there production slots open that early?
 
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scbriml
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 2:33 am

Quoting Clickhappy (Reply 2):
That link says a "firm contract" so I assume this is all orders and no options?

Indeed, all 65 are on firm order. Normally both Airbus and Boeing will use different wording for firm + options - airline X orders 10 firm plus 10 options, the press release would say "Airline X orders up to 20 blah blah blah".

Quoting Clickhappy (Reply 2):
Don't airlines usually pay 1/3 upfront?

One third up front sounds like a lot to me, and I suspect it varies from customer to customer. Not my area of expertise.
Time flies like an arrow. Fruit flies like a banana!
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DLPMMM
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:02 am

From my understanding, there is a progress payment schedule for each plane ordered where there is a small amount up front, a larger payment x months before delivery, another payment when the individual plane is started, and a final closing payment when the plane is delivered.

Or something of this sort.
 
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mariner
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:17 am

Quoting Clickhappy (Reply 2):
Don't airlines usually pay 1/3 upfront?

That seems onerously high. Maybe some airlines do, if they can or want to, but I think 10% is closer to the mark, at least for one airline with which I am familiar. In that case, we all wondered where the money was coming from at the time of their original order (one was "bought" by the Indo Suez Bank (?), another by Wells Fargo).

Because they are a desirable asset (as in easy to place elsewhere in a crisis) many banks and finance houses will buy the plane on behalf of the airline. The airline pays off the loan over X number of years - even up to the projected life of the aircraft.

Also there are all the leasing companies in play. The airline will order the aircraft, then negotiate with a leasing company who actually completes the purchase. Usually, they have some clear idea that the leasing companies will play ball before they sign the order, and, of course, the leasing company owns the aircraft.

It isn't about what money the airline has, it is about what credit they have available to them - as in don't use your own money if you can use someone else's. Disney owned a bunch of planes on behalf of some legacy carriers, and, in at least one case, tried to repossess at the time of the bankruptcy.

It is also how Arnold Schwarznegger owns a 747 that flies for SQ.  Smile

mariner
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clickhappy
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:21 am

Thank you for the info.

Even of being leased, wouldn't there need to be some money down? 10% of 3 billion is 300 million.....
 
beech19
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:30 am

Quoting Clickhappy (Reply 2):
So, if they have 100 million behind them, how did they pay for 65 planes?

I was wondering the same thing when everyone was talking about how Skybus had all this awesome backing. $100mil is a lot to each one of us but not to a company that just made a $multi billion$ order for aircraft. This just sounds very odd to me and i can't see how they are going to pull it off.

On a $3bil order even a 10% down would be $300mil. Heck 5% would be $150mil.

If they only had to put 3.5% down it would still cost them their full $100mil backing plus some loose change.  Wink

I think they are a little over ambitious and don't have enough backing. Maybe a few hundred million in backing would have done it. Maybe the $100mil is all they could muster cause everyone else thought it was a bad idea too?

Quoting Mariner (Reply 5):
It isn't about what money the airline has, it is about what credit they have available to them - as in don't use your own money if you can use someone else's.

yeah but when was the last time you got new credit without a job? The airline isn't even in business, may never be. Their credit can't be much if any at this point... could it?
KPAE via KBVY
 
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mariner
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:41 am

Quoting Clickhappy (Reply 6):
Even of being leased, wouldn't there need to be some money down? 10% of 3 billion is 300 million.....

Like all money, it is infinitely variable.

As a couple of others have suggested, there is a time schedule in play, but I don't know how long the planned delivery of all frames is - they may (stress "may") not need to put down 10% for the total number.

Some of them may be on a "holding deposit", which secures the production slot and which would give the airline time to find other money.

But, yes, I doubt Airbus (or Boeing) would even start negotiation unless there were clear and defined "sources of money" lined up.

I think there would be a few potential banks/finance houses/leasing companies behind Skybus, else they would have been shown the door.

If I had $40 million or so to spare, I'd probably buy one of 'em, being fairly sure that someone else would take the aircraft if there was trouble. The A319 is not hard to reassign, and even the place of that aircraft in the production line is an asset that can be sold.

Once the order is signed, and money paid, either of the big manufacturers know other banks (Indo-Suez, for example, a European bank) to help finance the purchase. Introducing money to money.

Starting the airline is one funding issue. Paying for the aircraft is a different - and may be quite separate - funding issue.

mariner
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CMHSRQ
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 3:52 am

Jetblue started with 100million, and had 50 orders with 50 options for 320's.

The airline will start with 3 leased A319's until delivery begins in 2008.
The voice of moderation
 
BoomBoom
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 4:02 am

Quoting Mariner (Reply 8):
But, yes, I doubt Airbus (or Boeing) would even start negotiation unless there were clear and defined "sources of money" lined up.

Boeing no, Airbus yes:

Quote:
"It's hilarious," countered Richard Aboulafia, vice president of analysis for the Teal Group, an aviation industry consulting firm in Fairfax, Va. He said Airbus appears to be on a "fishing expedition" as it tries to close the order gap with Boeing, which has 773 net orders this year. Boeing added 20 more 737 sales to its total Thursday.

"The days of a low-cost airline sticking a branch in the ground and hoping it grows into a tree are over," Aboulafia said of Skybus.

That view was echoed by Mike Boyd of the Boyd Group, an aviation consulting group in Colorado.

"The last two things in the world that have a chance of survival are a snowball in Hades and 65 new Airbus jets in Columbus, Ohio," Boyd said.

It is not clear how hard Boeing competed for the Skybus order.

Boeing has won more than 1,000 orders for its 737 this year and last year. Production is sold out for several years.

"The last thing Boeing needs is a fruitcake order like this," Boyd said of the Skybus deal with Airbus.

http://seattlepi.nwsource.com/business/290184_airbus27.html
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mariner
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 4:06 am

Quoting BoomBoom (Reply 10):
Boeing no, Airbus yes:

I love revisionist history.

Boeing was porepared to talk to Frontier, but at exhorbitant rates, when they first went to 'em. They even took an ad in Frontier's mag.

Airbus was inclined to show Frontier the door when they first went to 'em.

mariner
aeternum nauta
 
beech19
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 4:06 am

Quoting BoomBoom (Reply 10):

Thanks for that BoomBoom. I needed a good laugh.  Smile

I agree with all points made by the PI article... (for once i agree with the PI?! lol)
KPAE via KBVY
 
PVD757
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 4:08 am

Quoting Clickhappy (Reply 2):
And they are starting operations in 'early 2007?' Are there production slots open that early?

Skybus intends to lease 319s and will start to recieve new 319s from Airbus in 2008. It's on the PR in thier website www.skybus.com
 
FutureFO
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 10:35 am

But yet Skybus has not even been opened for business yet. No official launch date, no hiring for any type of employee and the thought of 150 pax on a 319!!!! That will really suck.
I Don't know where I am anymore
 
JetJock22
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 10:40 am

Quoting CMHSRQ (Reply 9):
The airline will start with 3 leased A319's until delivery begins in 2008.

IF it ever gets off the ground. As most others on this board think, I'll believe it when I see it. And if I see it, I don't plan on seeing it very long.
 
TL925
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 11:16 am

It's typical to put a nominal amount (about 1%) when signing a contract for new aircraft orders. The progressive payments in the industry are known as Pre-Delivery Payments, and usually start about 24 months before delivery. Usually in increments of 5% at 24, 18, 12, 6, etc months prior to delivery. While the total amount of Pre-Delivery Payments varies per manufacturer and customer, a general rule of them is about 25% of to List Price of the aircraft (i.e. pay 25% of the $65-$70 Mio rather than actual price which might be closer to $35-$40 Mio).

Unlikely that Skybus can or will finance all its Pre-Delivery Payments internally, and likely will go to the finance market for them. Likely the airline will do Sale-Leasebacks on its initial deliveries, in which case the buyer often takes responsibility of the Pre-Delivery Payments.
 
LGA777
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 1:11 pm

Since the website is Orange and Purple can we assume this may be their livery colors ? Also a friend who works at CMH told me they are quickly aquiring and renevating facilities in the CMH terminal !

Cheers

LGA777
 
A340Spotter
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RE: Skybus - Order Or Commitment?

Sat Oct 28, 2006 2:07 pm

Quoting LGA777 (Reply 17):
Since the website is Orange and Purple can we assume this may be their livery colors ? Also a friend who works at CMH told me they are quickly aquiring and renevating facilities in the CMH terminal !

They used to have a 737-800 in a very colorful paint scheme on their website, obviously before the Airbus announcement. The word white was not in the description!
"Irregardless, it's a Cat III airplane, we don't need an alternate!"
 
CYatUK
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RE: Skybus - Order Or Commitment?

Sun Oct 29, 2006 6:54 am

Quoting JetJock22 (Reply 15):
IF it ever gets off the ground. As most others on this board think, I'll believe it when I see it. And if I see it, I don't plan on seeing it very long.

Extremely Interesting!
It seems that the owners/shareholders of the airline and their advisors do not really know what they are doing  Yeah sure
 
akjetBlue
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RE: Skybus - Order Or Commitment?

Sun Oct 29, 2006 11:56 am

Isn't it obvious? (i'll get flamed for opening this can of worms) flamed 

But aren't they getting free planes like we did at Jetblue?  duck 

(which i might remind some of you nay-sayers we just sold 5 planes, so how does a company sell a plane that they didn't own or pay for...hmmm...?)

Go on SkyBust! Enjoy the adventure!
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kanebear
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RE: Skybus - Order Or Commitment?

Sun Oct 29, 2006 12:04 pm

Skybus and NK should merge. Skybus Spirit!  Wink

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