New York: The Indian government and US plane maker Boeing are squabbling over compensation for the late delivery of the company’s 787 Dreamliner to Air India. Boeing was in a feisty mood on Wednesday and burst India’s bubble about receiving $500 million in compensation.
Prashant Sukul, joint secretary at the Ministry of Civil Aviation, told reporters at the Hyderabad air show on Wednesday that “two weeks back Boeing agreed to pay a little over $500 million.” He said that Air India previously asked for $840 million and it has since asked for more because of further delays.
“I think if we settled for $500 million, somebody would have told me,” Jim Albaugh, president of Boeing’s commercial aircraft unit, said on Wednesday at the JPMorgan Chase & Co aviation, transportation and defense conference in New York.
“We don’t comment on deals that we’ve done, but I can tell you that we’re not writing anybody a check for $500 million,” added Albaugh, challenging India’s claim.
India’s demand for compensation is not unreasonable as airlines sign up for delivery slots when they place orders, and Boeing faces penalties for late planes such as the 787 Dreamliner. Boeing’s delivery of the Dreamliner to Air India is almost three years behind schedule.
The roomy, wide-body Dreamliner is a light-weight, carbon-composite airplane that promises significant fuel savings to operators and new comforts for passengers: comfy seats, better cabin climate, less airsickness, reduced jet lag. Development of the Dreamliner has been delayed repeatedly, because of snags in the complex global supply chain.
Analysts say Dreamliner buyers are likely to be compensated through “store credit.” Compensation would most likely be provided to customers as price reductions on 737 or 777 aircraft, which would protect the profitability of the programme but not of Boeing’s overall business.
“If deliveries slip, compensation to customers should rise,” Doug Harned, with Bernstein Research, noted earlier in the year.
Instead of store credit, financially troubled Air India would naturally prefer a large dollop of cash. According to reports, at one stage Air India had been seeking nearly $1 billion in compensation after placing an order for 27 of the 787 aircraft in 2005, worth $5.2 billion at list prices.
Air India has now decided to sell and leaseback the first seven of the 27 planes it has ordered and is looking for bridge financing worth $230 million. A leaseback arrangement, will allow Air India to sell the planes to a buyer who will lease them back to it. This will free up cash for the Indian carrier.
Air India will get its first 787 Dreamliner in May, Sukul told reporters at the three-day India Aviation-2012 expo in Hyderabad where Boeing’s wide-body jet was on display in the carrier’s colors.
The first Dreamliner was finally delivered to Japan’s All Nippon Airways, the launch customer, in September 2011, ending three years of delays. According to reports, All Nippon Airways received some compensation, although the details are unknown.
The Dreamliner has been a winner for Boeing, the world’s second-largest plane-maker after its European rival Airbus. Since 2004, Boeing has received 870 orders for the Dreamliner and is eager to cut its delivery backlog.
Last month, United Continental Holdings, parent of United Airlines, said in a regulatory filing that it is in talks with Boeing over potential compensation related to delays in 787 deliveries.
source: http://www.firstpost.com/business/were-not-writing-anybody-a-check-for-500-million-boeing-244699.html
Prashant Sukul, joint secretary at the Ministry of Civil Aviation, told reporters at the Hyderabad air show on Wednesday that “two weeks back Boeing agreed to pay a little over $500 million.” He said that Air India previously asked for $840 million and it has since asked for more because of further delays.
“I think if we settled for $500 million, somebody would have told me,” Jim Albaugh, president of Boeing’s commercial aircraft unit, said on Wednesday at the JPMorgan Chase & Co aviation, transportation and defense conference in New York.
“We don’t comment on deals that we’ve done, but I can tell you that we’re not writing anybody a check for $500 million,” added Albaugh, challenging India’s claim.
India’s demand for compensation is not unreasonable as airlines sign up for delivery slots when they place orders, and Boeing faces penalties for late planes such as the 787 Dreamliner. Boeing’s delivery of the Dreamliner to Air India is almost three years behind schedule.
The roomy, wide-body Dreamliner is a light-weight, carbon-composite airplane that promises significant fuel savings to operators and new comforts for passengers: comfy seats, better cabin climate, less airsickness, reduced jet lag. Development of the Dreamliner has been delayed repeatedly, because of snags in the complex global supply chain.
Technicians check the newly-inducted Boeing 787-8 series Dreamliner aircraft at a static dispaly during the opening day of the India Aviation-2012 show at Begumpet airport in Hyderabad. AFP
“If deliveries slip, compensation to customers should rise,” Doug Harned, with Bernstein Research, noted earlier in the year.
Instead of store credit, financially troubled Air India would naturally prefer a large dollop of cash. According to reports, at one stage Air India had been seeking nearly $1 billion in compensation after placing an order for 27 of the 787 aircraft in 2005, worth $5.2 billion at list prices.
Air India has now decided to sell and leaseback the first seven of the 27 planes it has ordered and is looking for bridge financing worth $230 million. A leaseback arrangement, will allow Air India to sell the planes to a buyer who will lease them back to it. This will free up cash for the Indian carrier.
Air India will get its first 787 Dreamliner in May, Sukul told reporters at the three-day India Aviation-2012 expo in Hyderabad where Boeing’s wide-body jet was on display in the carrier’s colors.
The first Dreamliner was finally delivered to Japan’s All Nippon Airways, the launch customer, in September 2011, ending three years of delays. According to reports, All Nippon Airways received some compensation, although the details are unknown.
The Dreamliner has been a winner for Boeing, the world’s second-largest plane-maker after its European rival Airbus. Since 2004, Boeing has received 870 orders for the Dreamliner and is eager to cut its delivery backlog.
Last month, United Continental Holdings, parent of United Airlines, said in a regulatory filing that it is in talks with Boeing over potential compensation related to delays in 787 deliveries.
source: http://www.firstpost.com/business/were-not-writing-anybody-a-check-for-500-million-boeing-244699.html
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