The one very confidential piece of information in the world of aviation is the price paid by an airline to an airframer for an aircraft. Along with announcments of orders, at best, the value of the order at list prices is revealed.
A few days back, thanks to a minor mistake, this veil of secrecy has been penetrated. We now know that an Airbus A380-800 superjumbo costs Emirates airline US$ 234 million (Rs. 1,220 crore).On October 14th, a subsiadiary of Nimrod Capital LLC, Doric Nimrod Air Two Limited made an announcement (in WSJ, in StockMarketWire) which disclosed the financial information about the first of three Airbus A380-800 superjumbos it has bought, and will be leasing to Dubai based Emirates airline for 12 years. This aircraft MSN077 (manufacturer’s serial number 077), will be the 16th A380 to join the carrier’s fleet, the first to be delivered by Airbus to Emirates in 2011, and is registered with the tail number A6-EDP.
Doric Nimrod Air Two Limited (the “Company”) is pleased to announce that its wholly owned subsidiary, MSN 077 Limited (the “Subsidiary”), has today acquired an Airbus A380-800 aircraft bearing manufacturer’s serial number 077 (the “Aircraft”) for the sum of US$234,000,000. The Aircraft was delivered to the Subsidiary today at the Airbus delivery centre in Hamburg, Germany.
In connection with the acquisition of the Aircraft, the Subsidiary drew down senior debt financing in accordance with a Loan Agreement entered into with a syndicate of lenders (led by Westpac Banking Corporation and Commerzbank Aktiengesellschaft) in the amount of US$151,047,509.
Upon delivery, the Subsidiary also entered into an Aircraft Operating Lease with Emirates airline (“Emirates”) pursuant to which the Aircraft has been leased to Emirates for an initial term of 12 years, with fixed lease rentals for the duration. The debt portion of the funding, which has been advanced under the same interest rate fixing methodology, will fully amortise over the 12 year term of the Lease, leaving the aircraft unencumbered at the conclusion of the Lease.
The list price for an A380 currently is about $375.3 million and this disclosure shows that the largest A380 operator in the world is getting about a 37.65% discount which, while more or less in line with industry norms, does appear on the lower side keeping in view the size of the 90+ aircraft order of the carrier, which also constitutes almost 50% of the total A380 order book at Airbus.
Having said that, it is important to keep in mind, the “list prices” are an average indication. As Boeing puts it
[the list prices] reflect an average price reflecting a range of available options and configurations for each model. Configurations and options that may affect price include performance capability, interiors, avionics, fuel capacity, etc
Emirates’ A380s undergo an elaborate interior cabin customisation, including installation of a state of the art in-flight entertainment (IFE) system, and the only on-board shower facility on a commercially scheduled airline.
The $234 mn price would most likely include the costs of these upgrades which may not be factored in to the regular list price and therefore the quantum of discount the carrier is getting is actually greater.
All said and done, this announcement does help give perspective on the actual revenues realised by airframers like Airbus, Boeing, and others, on orders, as well as lease rental costs paid by carriers.