The public posting of a sale and leaseback request for proposal (RFP) by Air India has provided a glimpse of the carrier's transaction for its Boeing 787s. It confirms the low prices the backlog was built on and raises questions about the timing of its deliveries.
With the carrier paying $109.6-$111.1 million for each of its first seven 787s, including engines, the prices underscore the steep discounts Boeing offered customers on several hundred of its 787-8s.
The deliveries, according to the filing, are 85% covered by financing by Ex-Im Bank of the USA and the balance by commercial financing sources.
Excluding the General Electric GEnx-1B engines, listed as costing $16 million each, Air India is paying about the $76 million average price per airframe assigned to the first 330-500 aircraft.
Also, the final sale price includes contractual escalation and inflation, those familiar with Boeing's contract structure said, rising on increased commodity prices from the contract signed in December 2005 for 27 787s. Based on inflation of the US dollar alone, the 2005 sale price would be about $94 million.
The low 787 pricing when combined with the extended development and rising cost of the type means it will not be until 2015 at least that the cost of building each 787 falls below its purchase price.
This expectation is based on reaching 120 deliveries a year in 2014, building at a rate of 10 a month 23 months from now. Boeing should break even on its total 787 investment after delivering 1,100 aircraft.
For Air India, however, there remains the issue of obtaining its 787s. The RFP features specific delivery dates for the 787s and there are questions as to whether they will be ready in time.
The sale and leaseback offer posted on the airline's website states that VT-ANH, registered to Airplane 35, will be delivered at the end of January.
However, that target and the rest of its schedule appears unlikely to be realised with certification of the GEnx-1B powerplants yet to be completed.
Airplane 29 (VT-AND) will follow in March, Airplane 25 (-ANA) in April and Airplanes 26 (-ANB), 28 (-ANC), 30 (-ANE) and 32 (-ANG) in May and June. The readiness of many of these aircraft also remains in doubt as each requires significant post-certification re-work to prepare for delivery.