Airbus has shed light on one of the aviation industries biggest secrets… just how much do airlines pay for their planes? Turns out, far less than list price.
Airbus has revealed the true value of their aircraft order book… significantly less than what they claimed to have made off airlines, roughly by about 50%.
What are the details?
Last week, Airbus held its yearly press conference to discuss the state of their company and their aircraft. There was plenty of shocking announcements, like the retirement of the A380 program. However, another big aviation secret was also slipped, just how much airlines pay for their Airbus aircraft.
Thanks to new tax regulations, Airbus has to reveal to the public the net value of their orders. Specifically, how much they actually got paid, rather than sold for, in 2018.
Their order book is valued at around $460 Billion EUR ($520 Billion USD), which compared to their claim of $997 Billion EUR in sold aircraft in 2017 is around 50%.
If Boeing is to remain competitive against these prices, it is likely that they also sell their aircraft for around 40-60% of the list price.
|Aircraft||List Price ($m)||Market Value ($m)||Discount|
Why have list prices?
So why have list prices if the aircraft manufacturer is going to sell the aircraft for significantly cheaper anyway?
One of the reasons is to beat inflation. Because airlines can buy an aircraft up to a decade before they hit the market, manufacturers need a way to ensure that the value of their aircraft remains the same. For example, an aircraft in 2010 might only cost $50 million, but by 2020 it’s price has risen to $75 million. If it was listed for $100 million, Airbus and Boeing can ensure that they will always make a profit and slowly increase the offered price accordingly.
Airbus and Boeing also need to account for currency fluctuations. Boeing sells their aircraft in USD and Airbus sells in EUR. If the EUR is worth more than the USD, then Airbus aircraft are actually more expensive (and they need to discount more) and vise versa. This list price flexibility means that these rivals can remain competitive despite the fluxation of the global market.
Additionally, if the aircraft’s performance turns out to be better than expected (such as a new technology being implemented such composite hulls) they can now adjust the price without making a big scene to the market or their competitors.
Lastly, it also allows these manfactures to offer discounts if airlines purchase mutiple aircraft. In fact, it encourages them.
The nature of aircraft buying and selling if very confidential and this reveal has shown that aircraft are far cheaper than expected. Aircraft manufacturers have been accused of offering crazy discounts (such as Bombardier almost got banned from selling their A220 to USA due to selling them to Delta at cost), but this price structure shows that its not a low discount, but a hight list price that is to blame.
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