Canceling Jet Orders

JeffMSU

JeffMSU

New Member
Does anyone have insight on how a company can just cancel its jet order it made a couple of years ago? Is this option build into the contract since it takes a few years to get the plane delivered?

Citigroup is canceling its order which it placed two years ago of a new Dassault Falcon 7X which supposedly cost $50 million. By canceling the order it may cost Citigroup $4 million unless it can find a buyer.

Cessna has a backlog of $14.5 billion at the end of 2008, it will be interesting to see how these backlogs come through for all of the aircraft companies in the next few years.
 
I may be wrong, but to get on the waiting list, or to have a delivery slot, you have to give a deposit. A $4 million deposit would probably be close for a $50 million plane. If before you take delivery you decide you do not want, need, can afford, or are forced by Obama to not take delivery, you have a couple of options.

The best option would be to sell your delivery slot. This would be where someone else reimburses you for your deposit (or since it has been two years you could possibly sell it for more than your deposit although it is unlikely in this economy). The other option would be to lose your deposit money and Desault gets to keep it.
 
From what I understand dc3flyer is right.
In "normal" sales contracts there is either a deposit or hold on the plane and contracts often stipulate at what point the buyer can still jump without enduring financial penalties. Once certain amounts are exceeded to many people/ banks & companies suffer from a pooper.

I would say Boeing has much more complicated contracts spelling out word for word what has to happen to release it's "customer" from a certain deal. The problem with Boeing & Airbus seems to be that due to the worldwide economic crisis the loss of a few airplanes can have tremendous impact on how smooth business is.

Looks like Citi is maybe paying a contract penalty, but plane and whichever services where sold with it, will likely still find a owner, ready to slap down the money for a much shorter wait. If that someone is lucky he/ she/ it even gets to choose paint & interior options ala carte.
 
dc3flyer said:
I may be wrong, but to get on the waiting list, or to have a delivery slot, you have to give a deposit. A $4 million deposit would probably be close for a $50 million plane. If before you take delivery you decide you do not want, need, can afford, or are forced by Obama to not take delivery, you have a couple of options.

The best option would be to sell your delivery slot. This would be where someone else reimburses you for your deposit (or since it has been two years you could possibly sell it for more than your deposit although it is unlikely in this economy). The other option would be to lose your deposit money and Desault gets to keep it.
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Many of the OEMs won't allow you to sell a delivery slot. However, many companys get around this by forming a seperate company, which holds the delivery slot, and then sell that company.

When I worked for a PC-12 dealer, a deposit was usually around 300K, on a 3.5-3.7 million dollar airplane. That deposit was non-refundable. We occasionally had a buyer back out after the deposit was made. 300K in the company's pocket, but then you had to go find another buyer, which with the PC-12, wasn't usually very hard to do.
 
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