What are the commercials terms for deals like this?
I'd image United pays some portion upfront in exchange for a discount and being amung the first to have the plane. Boom gets some cash flow without dilution and validation from an airline.
If United is paying a portion upfront, is there risk factored in if Boom can't deliver?
I don't know any specifics, but I'd guess that united's up-front payment is near $0, and the main benefit for boom is not the immediate cash flow but the ability to take united's order to a bank and use it to secure a loan.
They won't even be able to take it to a bank, but it'll enhance their credibility with VCs. United get a bit of PR, and if Boom does work out they're at the front of the queue and have probably influenced the design a bit by the time it comes to deciding whether to actually pay.
Agreed. These types of agreements, this early, tend to be Letters of Intent that aren’t legally binding OR a contract stating that “if Boom produces planes to agreed upon spec by 2029, United will purchase 15...” plus a bunch of out clauses.
Yes the terms are usually like that. The upfront payment is probably fairly small and not material to United. If Boom fails to deliver then United will become one more unsecured creditor in the bankruptcy case.
I'd image United pays some portion upfront in exchange for a discount and being amung the first to have the plane. Boom gets some cash flow without dilution and validation from an airline.
If United is paying a portion upfront, is there risk factored in if Boom can't deliver?