Yet another aviation thread.

Quote: Pacomartin

Understandably Emirates wants a new engine option before placing any more orders.

I think Airbus would happily oblige, if Emirates either 1) Places 150 orders for the new type or 2) goes halfsies on financing the development of the A380neo (and by halfsies I mean they put up 75%, of course).

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I don't know who has all-Boeing fleets anymore

Ryanair.

Maybe Norwegian.

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I find that very hard to believe. Emirates plans to lease them for 12 years and then return them to the lessor. The lease companies are very concerned about resale value, but not Emirates.

It's what the article said. I suppose they own a few?

But then the lessor would be concerned about resale value, or further leasing contracts. As it is, you saw what happened with Singapore's retired A380s. I assume the lessor would want a higher monthly fee if odds are dismal for more leasing or resale after a dozen years.

Quote: Nareed

I assume the lessor would want a higher monthly fee if odds are dismal for more leasing or resale after a dozen years.

Naturally! Emirates signed a handsome contract so that the lessors can't really complain if they get nothing after 12 years.

Quote: Pacomartin

Naturally! Emirates signed a handsome contract so that the lessors can't really complain if they get nothing after 12 years.

You know it's hard to find out how much a lessor or an airline pays for a plane (no one pays the published list price), but an A380 can't go for less than $190-200 million. The cost may be higher if credit or other financing is required (as is almost certainly the case) due to fees and interest. So the question is how much profit is expected after a 12-year lease. And to make matters more complicated, how much of the lessor does Emirates own?

Any surprise finance gives me nose bleeds?

Quote: Nareed

You know it's hard to find out how much a lessor or an airline pays for a plane (no one pays the published list price), but an A380 can't go for less than $190-200 million.

I don't think they go for that cheap, even if you are buying 50 of them.

Retail price
A321neo: US$127.0M
A330-300: US$259.0M
A380: US$436.9M

I believe that many of the Emirates leases are owned by Amadeo. Amedeo is based in Ireland, and is one of two largest aircraft leasing companies. In turn enhanced equipment trust certificates (EETCs) are financed to pay for the planes.


I have read that the deals are set up so that the investors make a profit at the end of the 12 year lease. Obviously they are hoping the plane is resold or re-leased so they can make more money, but the end of the 12 years they are not in a money losing situation.

I know Singapore Airlines had 10 year leases. I don't know if the same can be said. I believe SA had stricter conditions about the condition of the plane if they chose to end the lease at 10 years.

Quote: Pacomartin

I don't think they go for that cheap, even if you are buying 50 of them.

Retail price
A321neo: US$127.0M
A330-300: US$259.0M
A380: US$436.9M

I assumed a 55% discount from list price as being the real price, prior to interiors being put in. this is base don a quoted price of $197 million paid by Singapore's lessor for the first A380, but I've no idea how accurate that info was.

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I have read that the deals are set up so that the investors make a profit at the end of the 12 year lease. Obviously they are hoping the plane is resold or re-leased so they can make more money, but the end of the 12 years they are not in a money losing situation.

Yes, but how big a profit? You have to offer competitive rates of return in order to attract investment. A wide body jet has a long lifespan. Barring accident, I'd expect a VLA to fly for no less than 25 years. A 12 year lease that recoups the investment and pays off is great, but only about 2/3 of what you can potentially make off the plane (assuming additional leases bring in less money).

I'm beginning to think the insurance companies make the most money off planes these days. what with risk of total loss being tiny and all.

BTW, your autocorrect/spellchecker contradicts the spelling in your image :)

Quote: Nareed

Yes, but how big a profit? You have to offer competitive rates of return in order to attract investment. A wide body jet has a long lifespan. Barring accident, I'd expect a VLA to fly for no less than 25 years. A 12 year lease that recoups the investment and pays off is great, but only about 2/3 of what you can potentially make off the plane (assuming additional leases bring in less money).

Understood. I am sure the profit is minimal. As you said it is a lot of money over a long time. But it seemed that no one would take the gamble if they weren't assured at least a break even.

On the balance it seems like purchasing large office buildings, resorts or casinos is a similar gamble.

If you look at Amedeo's website, it seems like basically one massive advertisement for the A380.
http://www.amedeo.aero/

Backlog of A380 (except Emirates)
20 : AMEDEO
10 : UNDISCLOSED
8 : QANTAS AIRWAYS
6 : VIRGIN ATLANTIC
5 : SINGAPORE AIRLINES
3 : All Nippon Airlines
3 : AIR ACCORD
2 : QATAR AIRWAYS
57

Quote: JUN 6, 2016 Forbes wrote an article called "Airbus A380: The Death Watch Begins"

In theory, there are another 67 A380 orders on backlog. But many of the remaining jets have little or no chance of being delivered. Qantas’s remaining eight planes have been deferred indefinitely. Ten “undisclosed customer” orders are basically dead. Virgin Atlantic’s ever-deferred order for six is basically dead too. Amedeo, a speculative and poorly conceived leasing venture, will not take any of its 20 orders.
All told, we can only identify 18 truly firm non-Emirates A380 orders on backlog.

Updating the number to this year, there seems to be only 10 truly firm non-Emirates A380 orders on backlog (5 Singapore Air, 3 to ANA, and 2 to Qatar)..

Tim Clark, President of Emirates, told Bloomberg that not only had discussions on a new re-engined A380neo version of Airbus’s 525-seat jet “kind of lapsed,” but that his “main concern is that they stop producing the plane.”

What is the cost to get a build slot? IE How much does it cost when an order is deferred or cancelled altogether?

Quote: Aussie

What is the cost to get a build slot? IE How much does it cost when an order is deferred or cancelled altogether?

That is a good question, and my guess would be it depends.

(example 1) Emirates was slated to be A350-XWB's launch customer, Emirates had placed orders for 70 units in 2007 with deliveries to begin in 2019 9at an estimated $11 billion). The A350-XWB was initially slated to enter service in 2010, but owing to some key alterations, this got postponed to 2013.

There could be yet another reason for potential 777 orders by Emirates. In July, the airline operator confirmed orders for 150 777X aircraft at $56 billion list prices together with options for 50 more. The duo first announced the deal at the Dubai air show last November. Boeing will start producing the 777X planes in 2017 and begin deliveries from 2020. As the aero major makes the transition from 777 to 777X, it's likely Emirates can get a deal for the current generation planes at attractive rates.

Who was at fault for this decision? What kind of penalty did Emirates pay (if any)? Can Airbus afford to tick off the biggest purchaser of widebody aircraft in the world?

(example 2) On 15 December 2000 Virgin Atlantic announced that they would be purchasing 6 A380s for entry into service in 2015. They were the 6th firm order and the one that broke the minimum entry level to start the program. While no one believes that VA is going to take that order, I am not sure if there will be a financial penalty.

Virgin Atlantic is scheduled to get a dozen Airbus A350-1000 with deliveries begin 2019. It is possible that Airbus will insist they purchase six more to replace the inevitable cancellation of the A380 order.


(example 3) On 29 November 2000 Qantas placed an order for 12 A380s which were delivered
19. Sep. 2008
15. Dec. 2008
27. Dec. 2008
22. Aug. 2009
19. Dec. 2009
7. Jan. 2010
16. Dec. 2010
13. Jan. 2011
31. Jan. 2011
8. Apr. 2011
25. Nov. 2011
15. Dec. 2011

But in 2006 it ordered an addition 8 A380s. But by 2011 the airline was bordering on bankruptcy. It has no interest in those 8 A380s. Qantas is primarily investing in Boeing as they have 82 Boeing jets to 40 Airbus, and all future orders are Boeing. Will Airbus expect an additional purchase to make up for the 8 cancellations?
12 * [44][45]
15 December 2000 26 April 2001 Virgin Atlantic 2015 6 6 * [46][47]
16 January 2001 12 July 2002 FedEx Express 2010 10 10 * [48][49][50]
27 February 2001 9 December 2003 Qatar Airways 2014 2 2 TBA [19][51][52]
4 November 2001 4 November 2001 Emirates 2008 15 5 * [32]
6 December 2001 20 December 2001 Lufthansa 2010 15 5 * [53][54]
10 January 2003 11 December 2003 Malaysia Airlines 2012 6 * [55][56][57]
16 June 2003 16 June 2003 Emirates 2008 21 -10 * [58]
18 June 2003 23 October 2003 Korean Air 2011 5 3 * [59][60][61]
20 July 2004 20 December 2004 Etihad Airways 2014 4 * [62]
27 August 2004 28 December 2004 Thai Airways International 2012 6 * [63][64]
11 January 2005 13 December 2005 UPS Airlines 2012 10 10 * [65][66][67]
28 January 2005 21 April 2005 China Southern Airlines 2011 5 * [68][69]
15 June 2005 15 June 2005 Kingfisher Airlines 2016 5 5 NA [70]
[71]
April 2006 May 2006 Emirates 2008 2 -2 * [72]
21 July 2006 20 December 2006 Singapore Airlines 2007 9 -9 * [73][74][75][76][77]
29 October 2006 21 December 2006 Qantas 2008 8

Quote: Aussie

What is the cost to get a build slot? IE How much does it cost when an order is deferred or cancelled altogether?

I can't say of my own knowledge, but it would make sense to assume such details are negotiated when orders are placed. Large scale purchases are often carried out through contracts. So when Fly Airways "orders" 66 planes from AirBoing, for example, what happens is both parties sign a contract with tons of clauses, details and prices, among other things.

I assume airlines try to protect their interests and manufacturers do the same. Cancelled orders are big. So are delays for deliveries or entry into service. When AirBoing says they'll deliver ten A7360s to Fly Airways per month between January and June 2016, but they actually begin deliveries in September 2018, shouldn't there be a penalty? Fly Airways has to make do in the meantime somehow, perhaps by extending leases, extending the lives of older planes, buying used planes, wet-leasing, etc.

Other things the contracts should cover would include performance figures, especially as regards fuel, durability, wear, maintenance, spare parts, etc.

Quote: Pacomartin

Understood. I am sure the profit is minimal. As you said it is a lot of money over a long time. But it seemed that no one would take the gamble if they weren't assured at least a break even.

I'd take a minimal return, but not a break even position. Just leaving a few millions in a savings account would do better than break even :)

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On the balance it seems like purchasing large office buildings, resorts or casinos is a similar gamble.

Oh, that's complicated.