No, the difference is that the laws of business apply to the local grocer PDQ, but with several years lead time to the aircraft manufacturer.

But you knew that.

But eventually they do apply.

Dave

Well, economically it's even worse with such a lead time! You need to come up for material and labour way before you get some compensation.
It only works with a rolling chain and a flat order/output curve. Otherwise it's a nightmare for a business.
That is exactly what the AB beancounter is bringing up and why a shutdown is considered.

But you knew that.

Glofish

Industry practice is that customers pay deposits when placing aircraft orders and then stage payments prior to and during the manufacture of their aircraft. So the aircraft manufacturer could be in a cash neutral situation, even with very long lead times before aircraft delivery, depending upon the payment terms of each order.

Quite different to the local grocery store...and perhaps only becomes an issue if the aircraft manufacturer commits building aircraft without orders (and so without deposits & stage payments). But that would be foolhardy.

Zen

Agree, i started on a simple business principle. Sure enough the airline industry is more complex. But the core issue is demand and supply and right now there is very little demand for this product.
My message was: That's when mom and pop stores go bust.

However, you made the absolutely correct statement for the 380 right now:

I guess in the actual situation any even tiny order would have the airline in a very good position as to not go into big intermediate payments.
If one side is desperate to sell or buy, the other party will take full advantage.

The perspective of the 380 situation therefore is quite different if you are CEO, he wants orders, or CFO, he wants at least a balanced sheet.
Thus the different echoes from Airbus managers.

In the end the CFO will win, if the European taxpayer does not sweeten his sheets.

The reality is that the purchaser generally negotiates payment terms which are favourable (i.e cash positive) to themselves. Given how competitive the aircraft manufacturing industry is, I can't see that Airbus would be in a position to demand staged payments that would give them positive cashflow.

AW&ST (Behind firewall)

Rolls-Royce, Airbus Near A380neo Agreement

Airbus is accelerating its studies of an upgraded A380 and, after talks held last month with engine makers in Toulouse, appears to be closing on an initial agreement with Rolls-Royce.

The engine manufacturer is strongly supporting plans for both the A380neo and the potential A380-900 stretch. According to industry sources, Rolls-Royce is discussing a variety of all-new engine options ranging from derivatives of the A350’s XWB-84/97 to the future Advance project unveiled earlier this year. Until recently, it was widely believed that Rolls-Royce may be in the pole position for a possible slot on the upgraded A380 because of its victory on the A330neo with the Trent 7000, an engine rated similarly to the current unit. This engine is due to debut on the Airbus twin in late 2017 and is derived from the "TEN" version of the Trent 1000, now under final development for the Boeing 787. However, sources say the proposed A380neo project will require more power than the Trent 7000, which is rated at 68,000-72,000 lb. for the A330-800neo and -900neo.

Although Rolls-Royce declines to comment on the A380 situation, the transition to an engine with potentially greater thrust could provide for higher gross weights or presage the long-anticipated development of the A380-900 stretch. The development cost for the baseline A380neo is estimated at around $2.5 billion, primarily because of the structural revisions required for the wing, and is expected to take around four years, based on previous experiences such as the A340-500/600.

The U.K. manufacturer competes for the A380 with the Trent 900 against the joint General Electric-Pratt & Whitney Engine Alliance GP7200 but is eager to build on its relationship with Airbus where it has exclusive engine deals on the new A350 family and recently launched Trent 7000-powered A330neo. The parent companies of the GP7200, on the other hand, cite an uncertain business case for the upgraded A380 and appear reluctant to make the substantial investment such a venture would require, despite holding more than 50% of the existing market.

The Engine Alliance has outlined upgrade plans that could produce near-term fuel savings of 0.5-1% but still well below the 10-12% thought to have been outlined by the Airbus requirement. Even more comprehensive upgrades for the GP7200, including a larger fan and an additional low-pressure turbine stage, would gain only around 5% and be “cost-prohibitive” in the absence of a compelling business case, says the Engine Alliance. The difference between an incremental upgrade and an all-new engine therefore represents a financial gulf across which neither GE nor Pratt appears to be willing to step.

“If you ask me if the business case closes for us to drop the GP [GP7200] and put a new engine up under the A380, I would tell you we can't make that business case close," GE Aviation President David Joyce tells Aviation Week. "We just can't; there's just not enough incremental sales around the world that would make that case close.” GE is developing the Leap narrowbody engine with Snecma and finalizing the design of the GE9X for Boeing’s 777X twinjet. “Today if someone came to me with a proposal to put a brand new engine underneath that wing—I just don't see that as being a priority for us,” adds Joyce.

Pratt, like GE, is also deeply mired in the development of the PW1000G geared turbofan family and says it can ill afford an additional commitment. United Technologies Corp. CEO Greg Hayes says Pratt is unlikely to support the development of a new widebody engine for some time. Commenting at an investor conference, Hayes says the company "cannot continue to afford to invest at these levels.”