Questions and Answers

While Boeing and Airbus list their “list” prices, airlines invariably get better deals. yet, it seems airlines go through great lengths to keep the actual prices confidential.

Not sure why this is? First, isn’t it anti-competitive? And second, as publicly traded companies, wouldn’t they be required to publish costs of acquisitions?

Hi Adi, if you can get your equipment cheaper than a competitor that would be a competitive advantage. So I’m not surprised that airlines want to keep this confidential. Airplane manufacturers obviously have no incentive to disclose. I’m also assuming that there are confidentiality agreements involved.

[QUOTE=”Adi_T, post: 63513″]While Boeing and Airbus list their “list” prices, airlines invariably get better deals. yet, it seems airlines go through great lengths to keep the actual prices confidential.

Not sure why this is? First, isn’t it anti-competitive? And second, as publicly traded companies, wouldn’t they be required to publish costs of acquisitions?[/QUOTE]

First, many of these contracts may have “most favored nation” clauses, meaning that if you (buyer) have enough clout to include this clause, Boeing and Airbus will want it to be hush-hush. MFN clauses means that the buyer gets the best price – Boeing or Airbus will not sell to anyone else (perhaps with exceptions of governments or military) at a lower price. If they do, and buyer finds out, the seller is in breach. So both parties want to keep it quiet.

Second – I am NOT a securities lawyer, but I doubt that publicly traded companies would have to disclose the price per plane. Rather, they would disclose “XYZ Corp spent $5b on CapEx in the last fiscal year.” Just my guess.

makes sense! thanks.

I can understand why not disclosing prices may be advantageous to Boeing and to the MFN buyer, but it wouldn’t necessarily help others. For example, what if Boeing sold planes at a 30% discount to American, but then was offering the same model to United at only 20%. if United knew that someone else was getting a better deal they’d be in a better position to ask for the same.

Also I know this is a private transaction so there’s no requirement to charge the same price to all customers, but what are the reasons behind charging different prices?
Size of order I can see as a big one. What other factors?

[QUOTE=”Adi, post: 63541, member: 278″] Size of order I can see as a big one. What other factors?[/QUOTE]

Delivery windows may be as big a factor in the total cost as is the size of the order.

One more comment – MFN clauses typically are used to make sure you (buyer) are getting the best price – not necessarily the lowest. So if AA has a MFN clause in an order with Boeing for 777Xs at 30% below list, and UA comes in an negotiates a MFN clause also at 30% discount, no problem. But if UA got 35% [B]and[/B] AA found out, Boeing could be on the hook for damages.

I’m so fascinated by the MFN clause- had never heard of it until this discussion, but have been reading about it endlessly. I guess it is a kind of price matching guarantee. Can anyone request/ insert a MFN into a contract, I wonder? For example, if I buy a new car tomorrow, can I put in a MFN to ensure that I am getting the lowest price and that if the price were to drop further I would be protected?

That said, it seems, going back to my original question that the MFN clause, and not disclosing prices more generally, can be anticompetitive in some cases.