Taking ownership of your jumbo jet

[elbow]

I once read a passage in a book about how a major airline goes about picking up it's new jumbo jet. Acquiring ownership. It was a long and mysterious process that involved everyone leaving with the planes builders pilot flying, they would then fly out into international airspace ( to avoid taxes, I think) they would then get on the phone with the bank who would confirm tranfer of funds (Millions I think) by way of secret code numbers. Then after the money transfer had been confirmed the plane would be handed off to the pilot of the purchasing airline (also on board). The book implied that this process was very secrective and was about to be changed. Apparently it's harder to repossess a jumbo jet than you might think, so surrendering ownership had become this very clandestine operation involving 2 pilots and numerous bankers sometimes located in many far flung locations simultaneously. How about it, is any of this true? Has it been changed or is it still done this way? Does anyone have any information about this they'd like to share with the group?

[ellis555]

sheesh! when i got mine, all i had to do was point a gun at the pilot's head and say "now let's just act nice and calm here and everything will be all right..."

[According to Pliny]

Sounds plausable. When my folks bought an RV off the lot near LA, the dealer had one of his people drive it to the Nevada border, 300 miles away, followed by my parents in their own car. When they got to Nevada they spent about 5 minutes signing papers and officially took delivery. Then they all drove the 300 miles back to LA!

This saved them thousands of dollars in sales tax.

[pluto]

Oh c'mon!

Although I work for Boeing I don't have any connection with the commercial aircraft side nor with any of the financial matters. So I don't have any inside information but IMO the whole scenario described is so far-fetched that it defies belief.

This is definitely an instance where extraordinary claims require extraordinary proof. Before I would be willing to believe that anyone goes through this arcane process to deliver an airplane I'd have to have more proof than a passage in an unnamed book. International airspace and secret codes? To hide a transaction as big as a purchase of a jet? Do you think the government would ignore such an obvious ploy to avoid taxes? And, of course, the whole thing hinges on its being secret which it obviously is not. Sales are announced well before delivery, they (occsionally) have big ceremonies at delivery, etc.

Nah! It's just someone trying to add mystery to an ordinary business transaction.

p.s. I doubt it is difficult to repossess a jumbo jet. There is a HUGE support network (air traffic control, for example) required to get a commercial airliner into the sky. There are too many opportunities for a legal injunction against an owner that could keep an airplane grounded.


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"non sunt multiplicanda entia praeter necessitatem"

[According to Pliny]

Actually, I can see the state and federal governments facilitating such a loophole. They're far more concerned about job creation when it comes to aircraft makers then they are tax revenue.

I agree with Pluto about the secrecy aspect of the story, though. It may be something that the parties involved don't like to talk about, but there's no way it could be kept secret, even if needed to be.

[jayron 32]

Actually, I can see the state and federal governments facilitating such a loophole.
They're far more concerned about job creation when it comes to aircraft makers then
they are tax revenue.

Actually, in government at all levels, personal level taxes are paltry compared to coroporate level ones. The government, financially speaking, could give a damn about the jobs created by an endeavour (since this is a minor source of financial income) and are more concerned with the corporate taxes involved. Hate to be so pragmatic about it, but the fact remains that the poor are only taxed in this country so we can justify taxing the rich, from where we get our REAL source of governmental moneys.

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Jason R Remy

"No amount of legislation can solve America's problems."
-- Jimmy Carter (1980)

[elbow]

Actually reposessing a jumbo is almost impossible which is why transfering ownship is so important. Think about it, the owner may be in Saudi, the plane may be midair between Tokyo and Bangkok, it may touch down for only a couple of hours. Into who's courts do you wade to address your problem?
As for the loophole, it's not really it's just a reality of a very international industry. They simply take advantage of it, I think.
The book I read this in was called 'Pacific Rising' and was a very informative book generally.

[Nickrz]

Man, I love a good toad-crusher end of the thread reply like Chuck's.

[Doctor Jackson]

From what video did you get that line, Nickrz?

[Nickrz]

I admire a good comeback even more!

[AuraSeer]

Sure, he sounds impressive. But how far can you trust a guy who works for a company that sounds like a spring?

[Sam Stone]

Jumbo Jets aren't 'purchased', they are ordered and built to spec. Almost every large jet that comes off the assembly line is unique, having been built directly to the customer's requirements. They have different avionics, different numbers of seats, different paint schemes, different interior trim levels, etc. ad nauseum. The final delivery is just the icing on the cake.

[ChuckSki]

Delivery plans are set at the time of contract for purchase. Some customers opt to pick up the jets at our Renton plant, and some ask that they be delivered to a specific airport, hub, or the company's support facility (such as Kansas City for TWA). The subterfuge suggested has not been a part of the commercial or military delivery process since I've been in the industry for the past 18 years.
As for military aircraft (even though you didn't ask), it depends on the customer, again. For domestic customers (USN, USAF, USMC), the service's pilot will visit our St. Louis facility and fly his or her aircraft back to the squadron. For International customers, we deliver to the foreing country, sometimes flying directly to the customer's base, and sometimes flying to the nearest U.S facility. Did you know that all FMS (foreing military sales) are handled through a U.S. government organization? We actually sell F-15s to the USAF, who, in turn transfer ownership to the Israeli A.F.

All in all, the sales and delivery processes are above board and highly visible. And trackable. And tracked. And controlled. There are few other businesses where the customer tells you how much you're allowed to make on the sale of your own product.


Chuck L.
Boeing

[elbow]

And I quote:
" At this point a Boeing captain is at the controls. He is there for one very simple reason: in law the plane belongs to Boeing, and it's ownership will not change until one small detail has be definitively settled, to everyone's satisfaction. The money....the spot which is fixed on the globe at longitude129* West of Greenwich and latitiude 50* North of the Line...some few score miles off the coast of Canada and 200 miles away from the frontier of the United States. Two hundred miles EXACTLY....For reasons that are a complex mixture of geographic accident, national politics and economic necessity....At this point sits a great, invisible sale-yard where Boeing sells many of its jumbo jets to the world. ...the spot in the sky where you hand over your cash and in return are given a triple set of keys to your brand new plane. There is a very sound economic reason why many new aeroplanes are sold this way - on the wing, as it were rather than on the ground. The customer has so far paid about 30 per cent - a quarter down, with progress payments made during the years the craft has taken to assemble. Give or take the odd hundred thousand, there is around $89,675,000 left to pay. Boeing wants that money before it will part with the plane, but the customer wants to hand over only at the very last moment, interest rates on that kind of cash costing something in the region of thirty dollars a minute....the navigator calling out the coordinates from is inertial navigation system screen,'Steady on 50 north, one twenty-eight, thirty, west, then it is 129 west, then 129 + 20'...on coordinates. Two hundred miles out. Steady as we go!' And suddenly eveyone gets very interested. A complicated high-frequency radio circuit is opened: from the plane to the Boeing Company, from the plane to the customer's lawyers in Washington, to the customers bankers in New York and, crucially to the Boeing lawyers. A series of code numbers is read out-the customer's instructions to pay over the $89 million...all transactions have to be done in mid-mornig, Seattle time, before the Manhattan banks, three hours ahead, close shop for the day...Boeing sends up its final instruction: 'Okay Captain. We no longer own the plane, hand over the controls please. The deal is complete.'...The plane now belongs to the customer, and the directors back in the cabin open the first of their many bottles of Krug....Why not an office...beyond the 200-mile limit no American tax-state, federal or municipal-can be levied on any commercial transactions....So the buyers, with Boeing's help...conspiring to save themselves rather more than $4 million.'

He claims to have been on one of these flights, and it sounds like he knows what he's on about.

I just hate to reopen a topic you have so thoroughly snuffed out with scepticism.

What say ye now flyboys?

[According to Pliny]

Who's toad is being crushed now?

[John Bredin]

This issue can be resolved quite easily. PBS did a documentary series on the Boeing 777, and one episode depicted in detail the actual "closing" process. The series is entitled (I believe) "777: 21st Century Jet."

If one could obtain a copy of the relevant episode, I believe the question would be answered. If nothing else, allowing PBS cameras to film the process disposes neatly of the "secrecy" issue. As if the highly-publicized announcements in the business newspapers of every sales contract ("ABC Aircraft to sell 100 planes to XYZ Airlines") don't answer it already.

[DSYoungEsq]

Elbows, me bucko, do you actually believe everything you read? My goodness, next thing you know, you will believe the world is round, and that Nessie dates Sasquatch regularly, but not last month when she caught him in a fling with a Yeti.

[ChuckSki]

That's very nice. From whom is the quote?

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"The intellectuals' chief cause of anguish are one another's works."
Jacques Barzun
Cheers! CAL

[elbow]

'Pacific Rising', by Simon Winchester.

No, I don't believe everything I read, by the way. And the author admits this system was due to be changed.

Did it not sound credible to you? I too was skeptical that would be exactly the reason I asked.

[ChuckSki]

I have just sent an email to (Name withheld until permission to post received) from our Commercial Contracts and Pricing unit, including the relevant posts from this thread. I will admit that there are things that go on here to which I am not privy. I have spoken with the editors of our local and company-wide daily news mails, and both agree that they have never heard of such a practice. That is not to say that there may never have been a specific transaction where Boeing/McDonnell Douglas felt the necessity to be extra careful with an aircraft. No one will (yet) say that it has NEVER happened, just that it certainly is not standard procedure nor an event in their memory. As soon as I get return mail from the C&P person, I will post it here (with his permission). I have spoken with half a dozen marketing folks, too, who have no recollection of such events taking place.

Chuck L.
Boeing

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"The intellectuals' chief cause of anguish are one another's works."
Jacques Barzun
Cheers! CAL

[Nickrz]

Aye, me buckos - I can just feel the excitement in the cockpit as the Boeing pilot calls out "Steady as we go!" and he fights to control the violently pitching and bucking 100-ton aircraft at the same time avoiding the 3 other Jumbo jets which are approaching from different points of the compass at a closing (heh) speeds of 900+ knots.

"Avast there! Three points to starboard, ye scurvy dog!"

[ChuckSki]

OK, Nickrz, sit quietly here next to me while I spin The Straight Dope (gosh, I've always wanted to say that!)

Seems that Elbows has more than a wing and a prayer to stand on. According to Contracts and Pricing personnel (there are three, a manager, his director, and his VP) who all confirm that the Simon Winchester account quoted by Elbows did, in fact, happen!!
This is called an 'Over-water Delivery'(OWD) and is rare. In the late 80's (when the Winchester event took place) it was becoming even more rare. The practice was most widely used when Boeing was delivering the earliest of transoceanic aircraft and the Asean customers were new to Boeing. I was, indeed, a money and tax thing. Not a tax thing for Boeing, but for the international customer. I am uinformed that Uncle Sam has always gotten his due. The request for an OWD was initiated by the customer's legal advisors. Boeing has not been the initiator of an OWD request.
I tried to pin them down. How many OWDs have occurred? More than 10, fewer than 100, most in the 50s, 60s, and 70s. A few in the 80s. When was the last one? Lots of mumbles and no recollection. Well, when was the last one you remember? More mumbles and a 'late 80s, I think' answer. Sheesh. I'd remember something like that. What high intrigue!
Anyway, it seems the practice has been overcome by laws, spurred by increased trade with the Pacific Rim countries, that closed the loopholes. As for the cost of money issue, Boeing routinely accepts payment for product early, banks it, and pays the customers an agreed upon amount of interest, calculated to the minute that the transfer of ownership actually takes place. As I siad in my original post, it is standard for customers to take posession of their aircraft at either the Renton or Everett facility, depending on which model they bought.
One other reason for OWD was mentioned, and I report it just because I heard it, is that in the early days (their words, not mine) some Asean pilots were type qualified (that is, knew how to fly the plane and licensed to do so in their native country), but did not meet the requirements for flight inside US air boundaries. I know there are certain FAA requirements (like speaking in English) that are imposed, so this has a logical ring to it, too.

Sooooooooooooo, OWD was done. It could still be done today, but the raison d'etre is gone. You want it, come get it. It's parked right over there.

Chuck L.
Boeing snoop.

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"The intellectuals' chief cause of anguish are one another's works."
Jacques Barzun
Cheers! CAL

[elbow]

Jacques, you wonderful fellow, may heavens finest blessings shower down upon you, today and always!

That's some straight dope!

[Nickrz]

ARRRR! Hoist that dog from the yardarm!

Wow. No shit. Now that's some classic snooping there, pal. Our hearty thanks and a YO HO HO for a job well done!

[pluto]

I hereby admit I was wrong.

First time ever.

Never again.



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"non sunt multiplicanda entia praeter necessitatem"

[cmkeller]

Mousetrap.

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Chaim Mattis Keller
ckeller@schicktech.com

"Sherlock Holmes once said that once you have eliminated the
impossible, whatever remains, however improbable, must be
the answer. I, however, do not like to eliminate the impossible.
The impossible often has a kind of integrity to it that the merely improbable lacks."
-- Douglas Adams's Dirk Gently, Holistic Detective

[cmkeller]

Oops! I meant to post this elsewhere. Ignore the above!

Chaim Mattis Keller