Monday, June 29, 2009

Boeing Feels New Pressure to Placate Its 787 Buyers

By PETER SANDERS and DANIEL MICHAELS The latest delay to hit Boeing Co.'s 787 Dreamliner has complicated an intricate set of negotiations, giving airlines a chance to wrangle concessions from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 plane maker on delivery dates, installment payments and even cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 final purchase price. Already nearly two years behind schedule, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Dreamliner was cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 fastest selling commercial airplane in Boeing history -- at one point over 900 orders were on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 books. After a spate of cancellations that number is now closer to 850. Last Tuesday, Chicago-based Boeing said a structural flaw detected during ground tests required additional reinforcement on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Dreamliner, a problem that will delay cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 plane's first test flight, possibly for months. Delivery delays can wreak havoc on an airline's ability to plan its routes and schedules. But cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y also can provide an opening to renegotiate complicated contracts that govern airplane purchases. Boeing is coming under pressure from its customers to offer fresh concessions. Industry officials say that Boeing has recently stopped discussing compensation terms for delays to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 787 and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y speculate cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company is waiting until its actual delivery schedule is clear. "We want to discuss compensation, but Boeing hasn't opened cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 books," said an official at one Dreamliner customer. Already, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 delays have cost Boeing millions of dollars in penalties and concessions to customers. "Our focus is always on our customers and as we've done throughout cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 development program, we will work closely with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365m regarding cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 program and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 impact of this issue," says a Boeing spokesman. Even before cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent delays, some airlines were getting frustrated with Boeing's frequent schedule changes. Akbar Al Baker, chief executive of Qatar Airways, threatened to cancel orders for both 787s and larger 777s, which are now in production, because of disruption caused by problems at Boeing. "Boeing doesn't realize how much cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y're hurting cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir customers' plans," Mr. Al Baker said at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent Paris Air Show. Qatar Airways has firm orders for 30 787s and options for 30 more. The first were due for delivery in 2011 but that arrival date is now uncertain. Boeing says its delivery timetable for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 aircraft hasn't been updated. A Boeing spokesman said cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 company was trying to work with Qatar Airways to resolve problems. Airlines world-wide are struggling with rising oil prices and falling passenger revenue. Fitch Ratings recently downgraded cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 corporate ratings of UAL Corp. and Delta Air Lines Inc. Actual cancellations are rare, but last week Australia's Qantas Airways Ltd. said it scratched orders for 15 787s and delayed deliveries on 15 ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365rs slated to arrive in 2014-15. Qantas -- which remains cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 largest Dreamliner airline customer with 50 planes still on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 books -- had some leverage to cancel because of its large number of orders, industry observers say. Qantas also retained options to buy dozens more of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 planes. Qantas executives cited a global economy that is far different today than it was when it placed cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 order in 2005. It said it had been in discussions with Boeing for months. For Boeing, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 cancellations have a silver lining. The jet maker now has a little more breathing room it can use to fill remaining orders more quickly, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365reby avoiding some penalties. "From Boeing's perspective, that's not necessarily bad news when you have a rollout going this poorly," says Peter Barlow, an aviation attorney with Smith, Gambrell & Russell LLP. "The way purchase agreements are drafted, a savvy purchaser will obtain daily damages, and if a plane isn't delivered on time, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 customer receives a daily penalty [from cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 manufacturer] that can be a very big number." Though cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 787's list price is roughly $178 million, customers typically receive discounts. The price negotiated at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 time of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 order is rarely cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 price paid when cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 plane is delivered years later. Typically, customers make "pre-delivery payments" every six months, beginning about 18 months prior to delivery, that amount to around 30% of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 total purchase price. Payments often escalate as cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 delivery date approaches, says Mr. Barlow. Everything in that process is negotiable, Mr. Barlow says. Several carriers, including Air New Zealand Ltd., British Airways PLC and Virgin Atlantic Airways Ltd., are coping with 787 delays by ordering current-model planes from eicá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r Boeing or Airbus, a unit of European Aeronautic Defence & Space Co. Virgin, for example, last Monday announced an order for 10 Airbus A330s, which are slightly larger than Dreamliners and not as cutting-edge, but are available next year and in 2011. "We weren't prepared to have six years of no new aircraft being delivered," said Virgin spokesman Paul Charles. He said Virgin is still talking to Boeing about compensation. "We would like to see cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 compensation reflect cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 ongoing delays," Mr. Charles said. Ethiopian Airlines, one of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 first airlines to order 787s, has kept its order even after bank-financing that it had arranged fell apart, according to a banker familiar with cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 situation. The airline will instead initially finance its purchase with its own cash, this person said. Officials at Ethiopian Airlines didn't respond to requests for comment. —Susan Carey and Stefania Bianchi contributed to this article Write to Peter Sanders at peter.sanders@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

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