What price lists of aircraft manufacturers say
Toronto - Every year aircraft manufacturers present new price lists. But nobody pays these prices. So why are there list prices?
At the beginning of each year, the same game is repeated. The aircraft manufacturers present their prices for the new year. For example, Airbus has raised list prices for 2018 by 2 percent. An A380 will cost $445.6 million instead of $436.9 million. Boeing has raised the list prices by 4.1 percent.
But the fact is, nobody pays the list prices. Aircraft manufacturers sometimes grant buyers huge discounts. But how exactly is that?
Here supply and demand play an important role. Manufacturers can sell their models that are in high demand with higher prices. On the other hand, offering remarkable discounts for less selling models is a good strategy to increase demand.
The bargaining power of the buyer is also an important factor. Who buys a lot or buys again, gets better prices than a casual buyer. However, even a new customer can get high discounts, if it has the intention to buy regularly in the future.
The overall discount rates vary by the factors mentioned above. The aircraft manufacturers sometimes grant buyers up to 50 percent price reduction, sometimes even higher, for the models like the A380 and the Boeing 747-8, which are more difficult to sell. However, popular models like the A320 Neo or the Boeing 737 Max are sold at a 40 percent discount maximum.
The discount rates have not always been the same. They got bigger over time. They have climbed from an average of 25 to 50 percent in the last 30 years because of the brutal competition.
So, why are there still list prices? The answer is easy. Like in retail, customers feel good when they make a bargain. If an aircraft buyer has a 50 percent discount, it has the feeling that it had it very cheaply, and it comes back again for another deal. It also helps manufacturers that the airlines do not know what their competitors exactly pay. On the one hand, the price lists show roughly the price differences between models from one manufacturer to another. They help to compare them and estimate the discounted prices of the aircraft.