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Last Updated: Tuesday, 18 July 2006, 09:54 GMT 10:54 UK
How can I buy an airliner?
The Magazine answers...

Airbus A320
Want one? It could cost you $65m

The air industry's biennial jamboree at Farnborough is the scene for many a major deal, but how exactly does one go about buying an airliner?

Airliners cost millions of dollars and everything to do with them, whether it is manufacture or financing seems to be governed by Byzantine complexity.

The two main manufacturers globally are Boeing and Airbus. If you wanted a 747-400, an updated version of the legendary jumbo, it comes with a $216-$247m list price. Of course, this is only a starting point for negotiation. If you're a major airline and you were thinking of switching permanently and publicly from Airbus to Boeing or vice versa, then you might be able to get yourself some bargain wings.

Down to the smaller planes of the short-haul market, and you are looking at a list price of $54-$64m for a Boeing 737-700 - the workhorse of the budget airlines - or anything up to $65m for an Airbus A320.

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Your first move would be an approach to either Airbus or Boeing expressing an interest. The firms would be looking to rapidly establish your credentials and ability to pay, and would then set about working out a schedule for delivery and the nitty-gritty of the financing. If you are buying just one airliner, it could be three years before you get your hands on it.

Like the purchase of a new car there are a number of routes for financing any deal.

The first port of call for any company making a significant order might be an export credit agency such as the UK's Export Credits Guarantee Department or Coface in France. These agencies act as guarantors for the financing of goods being sold abroad. Their participation in any deal allows a lower interest rate for the buyer, and the agency has done its bit to stimulate industry as well as making itself some money.

Another option is some kind of leasing arrangement. Typically a company like Airbus might sell to a commercial lessor such as a bank or specialist firm, who will then lease the aircraft to the airline.

Boeing 737-700
Boeing's 737-700 is a popular choice

Then there is the option of a commercial loan which, as Martin Webb, head of aviation at Alliance and Leicester, says it is "very much as you would get a mortgage on a house".

The last option is cash. If you've got a few million knocking around in the bank, why bother with a costly loan. Alasdair Whyte, group editor at Airfinance Journal, said as many as 20% of airliners sold are bought with cash. Fastidiously run airlines such as Southwest in the US and Singapore Airlines are among those who often go down this avenue.

And Airbus executive vice-president of marketing Dr Kiran Rao said there are certain planes such as their luxury corporate jets, adapted A319s custom-fitted to resemble a five star hotel and with a list price of $60m, that are usually bought outright.

Dr Rao will not reveal how many airliners Airbus has sold at Farnborough but says by the end of the show, the consortium will have at least half a dozen new customers. Of all the planes sold, between 20-30% will be financed with the help of an export credit agency, and 20-30% will pass through the hands of lessors, with the rest being bought with commercial loans or cash.

Anybody who has stumped up their $60m should also remember the pilots, cabin crew, landing fees, baggage handling charges, insurance, regulation costs, maintenance and the price of fuel. Oh, and a snazzy logo.


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