How does it work when airlines purchase planes?

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14 years 3 months

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Can anyone shed any light on this. I've never really understood it, but how does it work when airline x decides to buy, say, 50 Boeing 737-800s with an option for a further 50? Where does the money come from - just banks or syndicates? And how does the airline pay? Every month (is it just like having, say, a leased car)?
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14 years 11 months

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If an airline orders direct from the manufacturer they will own the plane, though if they lease them from a leasing company (eg GECAS) it will be like having a leased car as you say
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16 years 3 months

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i can give you my understanding of part of it.... an airline can pay in a number of ways. if they are a public company, i.e. one where you or I can own shares in the company, airline x can ask the shareholders for money. this is called share capital. an airline can pay for aircraft using loans from the banks - loan capital. these loans are usually going to be quite large, so a bank isn't going to give huge amounts of money, even to a large, successful airline, without some 'security' on the loan. security is what the banks, and airlines i suppose, use as a back up if, the airline suddenly goes bad. in most cases, the stuff (or assets) that the airline purchases with the loan is the security. so the brand new fleet of aircraft bought with the loan is the security. if the airline goes bust, or if the airline suddenly stops loan repayments becuase they simply run out of money, the bank can seize the security i.e. the aircraft, and sell them in order to try and get back their money. an airline can loan an aircraft or their entire fleet from leasing companies - i.e. gecas and ilfc. in this case, a leasing company buys aircraft, and leases them to airlines, usually for very long periods of time - 20 years perhaps. in some cases, an airline can buy a fleet of brand new aircraft direct from the manufacturer, and then immediately sell them. this is what easyjet did with its fleet of new A319s. easy bought aircraft from airbus, and then sold them to a leasing company. easyjet then leased the aircraft it had just sold to the leasing company on long term leases. easyjet doesn't actually own that many aircraft. hope that helps. i could try and answer other q's if u have em thanks
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having read your questions again cdnnl77, i don't think i answered any of them. lol. sorry.
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16 years 3 months

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when actually purchasing an aircraft from a manufacturer, every deal made between manu. and airline is different. something to do with MoU (morandum of understanding - i think) and LoI - letters of Intent, which i think is a nice letter written to the manuf. from the airline, saying we intent to buy some of your aircraft. that letter, or whatever it really is, isn't saying 'we are going to buy, and this is a firm conformation that we are making an order with you' - its just a letter of intention - making the manuf. aware. then, i think, airlines enter a period of negiotation with the manuf. to get the best deal. every deal is different. an airline can make a firm order (we will buy x aircraft now) and on top of that, they can purchase options - a part in the contract where the airline has the right to but extra aircraft on the same contract (i think thats what it is). sometimes an airline can get price protection on the options - i.e. if we buy options later on, we'll pay todays price - so if the list price of the aircraft goes up in the future for whatever reason, the airline will pay the amount for each unit (aircraft) that they paid when making the original order. they can also put into the contract (after a bit of negiotation) to convert options into other aircraft. easyjet for example has the oppotunity to convert some of its options for the A319 into larger aircraft. so, they can choose to buy the larger A320 or even the large A321 in the future, on the options contract. then some more stuff happens, the airline will choose interior options, engine options (as well as actually buying the engines from the engine manufacturer etc) and sorting out maintenance contracts for the aircraft for the future, if like easyjet, you contract out aircraft maintenance to save costs. delivery schedules are sorted out, and finally, aircraft begin to be delivered (after, usually, a couple years of waiting). i think the airline pays the manufacturer upon delivery, although i think this can alter between contracts. i may have said a load of rubbish up there, so if i have then sorry, and someone with better knowledge can explain properly. thanks
Profile picture for user LGKR

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19 years 9 months

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when actually purchasing an aircraft from a manufacturer, every deal made between manu. and airline is different. something to do with MoU (morandum of understanding - i think)
Memorandum i think.