Odds and Ends at the Paris Air Show, Day 4
Our final Odds and Ends as we head back to Seattle Friday.
- Marc Birtel, one of the corp-com guys at Boeing, asked us what we were impressed by at the Air Show (this was Tuesday, before the Airbus landslide of NEO orders). We must be getting too jaded or too familiar with Air Shows, because we said, “nothing comes to mind.” On reflection, these impressed us: Boeing’s display of technology in the form of the two 747-8s, a 787, a 737-700 with the Sky Interior; the ever-impressive A380 flying display; the Breitling Constellation; the Bombardier “igloo” Pavilion (well, its contents, actually) was way-cool; and of course the impressive number of NEO orders.
- We were also impressed by the laid-back, almost shoulder-shrugging at attitude of Airbus CEO Thomas Enders. We interviewed him shortly after the press conference summarizing the best Airbus Air Show ever and the historic AirAsia order, the largest ever in commercial aviation. He seemed suitably excited in the press conference but afterward he could have been ordering a cup of coffee. (He did consent to a glass of champagne). The orders were all well and good, he said, but now Airbus had to produce and deliver them. Today’s news was already yesterday, for Enders; there were other things to be concerned about.
- We opined over at AirInsight about the increasing nasty battle shaping up between Airbus and Bombardier.
- See this story about John Leahy dancing to seal the AirAsia deal. CEO Tony Fernandes was very funny when telling it and words can’t do it justice. But Leahy dancing is not a vision we want to have. But it’s better than the story of his old boss, Jean Pierson, dropping his pants to seal a deal. Now that’s not a vision to go to bed with.
- The saying is “Paris in the springtime.” We can say, “Paris in June sucks.” It rained (sometimes heavily) for three of the four days at the air show. In 2009, it was two out of four.
Regarding Enders’ attitude, the two makers have booked so many orders over the past 5 years for narrowbodies that 700 or 800 orders will be just about a year and a half worth of production in the middle of the decade. It’s like the demand is insatiable.
Airbus, Boeing, and Bombardier all seem to have had a good to great show. I don’t recall any mentioning any orders for Embraier.
weather in Middle Europe in June makes you think why they call Seattle the “rainy city”, doesn’t it? Though, when I lived in Seattle it rained quite hard, but that was largely in Winter (however, I had the most beautiful spring ever in Seattle in 2005).
I actually think that some of NEO orders are “empty”, meaning there is only a slim chance that the airline takes them all. If Airbus is stupid, Air Asia does what Ryanair once did: get aircraft at funny prices and leasing them out to other airlines as soon as they are delivered.
Once again: can anyone tell me if airlines still pay 25% advance when doing the order?
Both Airbus and Boeing will suffer from airlines unable to take these aircraft. It’s obvious the airlines will be hoping to do a load of sale+leasebacks but the terms of these will not be favorable for the airlines going forward. There are already a steady stream of white tails / last minute owner changes already, particularly A320 family. (Air Berlin, Wizz Air etc.)
Ryanair never leased out any aircraft and always took delivery and operated them as scheduled. Where do you get this stuff from? That’s the benefit of having a robust balance sheet unlike most customers behind these recent massive orders (AirAsia, Indigo, Goair etc).
A few years ago a Kingfisher MoU contract was leaked. If you look at section 5.2 ‘Payment Terms’, you will see that the deposit, upon signature of the firm contract, makes up 1% (in two installments). I doubt that these type of terms are anything out of the ordinary in the industry.
“If Airbus is stupid, Air Asia does what Ryanair once did”
The two deals are not comparable.
No airline pays anywhere near 25% in advance. I doubt even privately placed (BBJ) aircraft come close to that number. I recently read that Airbus had taken deposits as low as $20k per A/C on A320’s.
Think about it… Air Asia just signed for 200 A320neo’s @ list prices approx. $90m X 25% = $22.5m per A/C.
$22.5m X 200 = $4.5 Billion… Now nobody pays list! (except me) So say they are getting them @ 50% of list? That’s still $2.25 Billion. Nobody would tie up that kind of money for an A/C that won’t even be delivered starting in 2016 thru 2025??
Typically airlines pay 1% upon ordering, and progress payments at specified intervals during production so that by the time the airplane is delivered 25%-30% of the purchase price has been paid.
But the OEM’s need to tie up much more money far further in advance to get to the place where they can sell and then produce these aircraft.
One reason why governments, I believe, are so involved in this industry segment.
It remains to be seen what the real world performance of the neo will be and whether all those neo orders firm up. By the way, it always rains for the Glastonbury Pop Festival which is not a million miles from France!