United Seeking Damages For Delayed 787s

Discussion in 'United Airlines | MileagePlus' started by sobore, Feb 24, 2012.  |  Print Topic

  1. sobore
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    sobore Gold Member

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    http://www.aviationweek.com/aw/gene...dline=United Seeking Damages For Delayed 787s

    United Continental Holdings for the first time confirms it is seeking damages from Boeing for 787 delivery delays.

    The operator has 50 firm orders for the 787, a legacy of the Continental Airlines-United Airlines merger in 2010. The first batch of aircraft are 787-8s from Continental’s order, which originally had expected to add its first 787 in March 2009 before Boeing initiated a series of program delays.

    The latest delay hit United in October, when sources confirmed to Aviation Week that Boeing was having issues completing 787s rolling off the production line. That problem forced United to revise its 2012 delivery expectation down from six 787s throughout the year to just five, all to be delivered in the second half of the year.
     
  2. mht_flyer
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    Financially ailing Air India is also seeking damages as well.
     
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  3. Lufthansa Flyer
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    Boeing just has to say it was weather related and therefore is not required to compensate anyone.....
     
  4. EWR764
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    Boeing screwed the pooch with the 787 and will pay dearly for it, especially amidst rumors of an upcoming major order from United and precedent established by previously-exclusive Boeing customers shifting to a two-supplier fleet strategy. Can you say leverage?
     
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  5. Captain Oveur
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    What are the rumors of another UA order with Boeing?
     
  6. Stephen
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    Stephen Gold Member

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    Large narrowbody order.
     
  7. Captain Oveur
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    737s? Any word on quantity, how many?
     
  8. Lufthansa Flyer
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    Boeing has 55 aircraft that have the shim issue. thats going to sting the balance sheet somewhere.
     
  9. EWR764
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    737Max, A320 Neo, MRJ, C-series... everyone and everything is in play. I expect at least 100 frames, probably more.
     
  10. Pizzaman
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    This strikes me as a bit odd. My first impression is that damages would be detailed in the contract, especially for a purchase of this size. But, let's say they're not. How the heck do you determine damages for a plane you haven't flown yet? How do you estimate how much profit you would have made from those flights?

    I'd like to be a fly on the wall for these discussions.
     
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  11. Wandering Aramean
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    The part that strikes me as odd is that someone published an article about it. There is no actual news here at all.
     
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  12. HaveMilesWillTravel
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    They seem to be saying that UA/CO for the first time publicly stated that they are seeking damages.

    "Now United, in its 2011 10-K report filed late Wednesday with the U.S. Securities and Exchange Commission, reaffirms its 2012 delivery schedule of 19 Boeing 737-900ERs and five 787s. But for the first time the airline also says it is seeking damages for the delays."

    Is that incorrect?​
    Of course, it really shouldn't come as a surprise. ​
     
  13. Wandering Aramean
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    Maybe this is the first time it has been published in a 10-K. It certainly isn't the first time that such negotiations have been reported.
     
  14. HaveMilesWillTravel
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    In which case it would indeed be a rather... pointless article.
     
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  15. Seacarl
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    Interestingly this may give Boeing the upper hand in a new order. Boeing will probably be willing to pay much more in compensation for 787 delivery delays in the form of price discounts on new aircraft orders than pure compensation, and the airline has a lot of 757s and A320s that will need replacing, so it certainly creates the opportunity for a large discounted 737Max order as compensation for the delays.
     
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  16. Wandering Aramean
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    Lose money on every unit but make it up in volume??? ;)
     
  17. Seacarl
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    There's always a huge gap between the marginal direct costs of building a plane, and the fully allocated costs. So the plane can still be profitable on a marginal cost basis. If Boeing's got to pay compensation for 787's, you can bet they'd rather discount a future order than pay out cash now
     
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  18. Anglo Large Clawed Otter
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    Has anyone published the details of the contract that would be relevant, such as a liquidated damages clause?
     
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  19. genemk2

    genemk2 Gold Member

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    I would think that would be highly guarded.
     
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  20. Anglo Large Clawed Otter
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    It won't be for long if UA decides to file suit over it.
     
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  21. Wandering Aramean
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    I'm sure that both parties will try to have the courts seal it as trade secrets or some such.
     
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  22. Anglo Large Clawed Otter
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    I doubt it would be possible to proceed to judgment in a court (as opposed to an arbitral forum, which may be the case here) based on a liquidated damages penalty that forms part of your cause of action/damages model. It is sometimes possible to file civil complaints under seal (like Federal False Claims Act cases), or with leave of the court on agreement of the parties (often where confidentiality agreements are concerned). However, I don't think it would be possible to avoid disclosure of the liquidated damages clause indefinitely, especially if part of a judgment is expected to be rendered by reference to that clause.

    FWIW, Air India has already gone on record stating that it is owed $145 million pursuant to the liquidated damages clause in its contract with Boeing.
     
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  23. genemk2

    genemk2 Gold Member

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    I imagine there is an arbitration clause in these agreements -- I would be very surprised if there is not. That doesn't prevent United from pulling an Air India disclosure though, but it may be considered bad form.
     

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