Size of aircraft orders
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Size of aircraft orders
I see the 787-10 has been launched with BA taking a dozen, a traditional UK quantity, and all the other customers taking multiples of 10.
Do airlines really just order a nice round number of planes, or do they work out as best they can what they actually are going to need?
Do airlines really just order a nice round number of planes, or do they work out as best they can what they actually are going to need?
Do airlines really just order a nice round number of planes, or do they work out as best they can what they actually are going to need?
No airline knows exactly what routes and frequencies it's going to be operating in 5+ years' time, but BA will have a pretty good idea of what its annual ASK output will be by then, and therefore roughly how many aircraft of which types it's going to need.
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And if an airline has calculated a requirement of 9 airplanes, and AirBoeing responds with a "special deal" if they take 10, the airline might rework their numbers and order ten.
But don't tell anyone.
But don't tell anyone.
c52
That's because sales people are much the same whatever they are selling , "make it ten mate and I'll knock a few quid off for yer' (and make me more commission). Seriously though its a good question and having worked in another industry where purchases were often made in units with very big numbers and long lead times it is rather an imprecise science because no one actually knows what will happen. as a result negotiations often look at a range of figures , say BA thought somewhere between 10 and 15m 787-1000s might be needed -this gets fine tuned as the real price be paid comes into focus and hen some sort of compromise on price and delivery as seen by buyer and seller results in a number.
Same thing for Easy jet looking at 130 A320s , they have no idea whether its really going to be 115 or 145 but the iterative process brings it down to a compromise number that's sensible and within budget at a good unit price.
An oversimplification of course but the key issue is the lead time, they may get the first aircraft in an order in two years time but the last one might be three years after that. And, as yet no one can predict the future with 100% accuracy especially the poor old airlines which have to deal with theoretically predictable variations , oil price global economy etc and unpredictable events, 9-11, volcanos etc
That's because sales people are much the same whatever they are selling , "make it ten mate and I'll knock a few quid off for yer' (and make me more commission). Seriously though its a good question and having worked in another industry where purchases were often made in units with very big numbers and long lead times it is rather an imprecise science because no one actually knows what will happen. as a result negotiations often look at a range of figures , say BA thought somewhere between 10 and 15m 787-1000s might be needed -this gets fine tuned as the real price be paid comes into focus and hen some sort of compromise on price and delivery as seen by buyer and seller results in a number.
Same thing for Easy jet looking at 130 A320s , they have no idea whether its really going to be 115 or 145 but the iterative process brings it down to a compromise number that's sensible and within budget at a good unit price.
An oversimplification of course but the key issue is the lead time, they may get the first aircraft in an order in two years time but the last one might be three years after that. And, as yet no one can predict the future with 100% accuracy especially the poor old airlines which have to deal with theoretically predictable variations , oil price global economy etc and unpredictable events, 9-11, volcanos etc
Orders vs Options
How does the ratio between orders and options is calculated? Do you take a number to meet your needs in the forseeable (?) future and take option they might activate if demand is higher than baseline?
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My guess:
Desired fleet size (for projected routes within some time period) = X
Fleet size judged affordable by banks and beancounters = Y
Therefore: Firm orders = Y
and Options = (X - Y)
Of course, there are up-front costs for options, which must also be considered.
Desired fleet size (for projected routes within some time period) = X
Fleet size judged affordable by banks and beancounters = Y
Therefore: Firm orders = Y
and Options = (X - Y)
Of course, there are up-front costs for options, which must also be considered.
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Oversize order quantity
Once upon a time, an airline-in-the-black might actually order more aircraft than it foresees a need for, as a speculative deal - if the price is right.
The airline is then betting that as time comes closer to a big financial commitment (a.k.a progress payments), there will be other carriers caught shorthanded with a too-long lead-time to obtain needed equipment. The excess orders can then change hands at a profit.
I'm not sure if this is still an accepted practice.
The airline is then betting that as time comes closer to a big financial commitment (a.k.a progress payments), there will be other carriers caught shorthanded with a too-long lead-time to obtain needed equipment. The excess orders can then change hands at a profit.
I'm not sure if this is still an accepted practice.
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Of course, the answer to the original observation could be that BA is still struggling to come to terms with decimalisation.
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@barit1 of course that is still the case, and not only for airlines in the black as well. For example we currently take delivery of 737s ordered around eight years ago and though we do need them we still dry lease them out to other operators and dry lease in airbus aircraft that are available at very low lease rates. Equates to around 40.000$ gain per airframe and month. Since we operate both A320 family and B737/8 fleets we are flexible which one to take on.
Selling or leasing out aircraft is actually one of the bigger profit centers in the company, in many airlines to be honest.
Selling or leasing out aircraft is actually one of the bigger profit centers in the company, in many airlines to be honest.
