Options
In the context of aviation, 'Options' refers to the contractual agreements between aircraft manufacturers and airlines or leasing companies. These agreements give the buyer the right, but not the obligation, to purchase additional aircraft at a predetermined price and within a specified time frame. Options are often used as a risk management tool, allowing airlines to secure future fleet expansion without committing to immediate purchases. They provide flexibility in response to market conditions, such as changes in passenger demand, fuel prices, or regulatory environments. Options can also be used to secure early production slots for new aircraft models, giving airlines a competitive advantage. The terms of an option agreement, including the price and the number of aircraft, are typically negotiated between the buyer and the manufacturer. The buyer pays a premium for this right, which is forfeited if the option is not exercised.
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