The ‘Boeing fee’ – another effort to solve the dispute

Behind the scenes the fight is continuing. It will have to end either in a knockout or a compromise. There is no way to tell what the outcome will be.

In a nutshell, Boeing is charging a fee for every aircraft that is converted by the Bedek division of Israel Aerospace Industries (IAI) from passenger to cargo configurations.

The dispute is not new. The “Boeing fee” has been charged since 2009 but IAI’s efforts, to avoid it or decrease it, have failed.

Israeli sources say that because of the recession, still affecting the air cargo market, clients are more price sensitive and the “Boeing fee” increases the final price by $250,000.

The “Boeing fee” is charged to allow the owner of the converted aircraft access to all the technical documentation of the aircraft.

The fee, according to Boeing, is a type of royalty as the conversion changes the original airframe design.

The “Boeing fee” is a heavy burden on IAI, especially when the market is in not-so-good condition.

After impressive growth in its cargo conversions activity last year, the Bedek division expects a more moderate conversions market in the short term, but the forecast for 2013 is for further growth.

Bedek expects more growth in 2012 but points to the fact that there is not enough availability of Boeing 767-300s in the market for conversions. The 767 and the 747 are the main types that are being converted.

With plans to go into the conversion of the 777,  the “Boeing fee” dispute has to be settled very soon.

Both sides present a firm stance but there are signs that they understand that the circumstances dictate some sort of solution.

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