Economic Price Adjustment

[KyFlyer]

After having a deposit on an FX-3 for over 18 months, I am just learning of the Economic Price Adjustment language in the purchase agreement which could significantly increase the cost of my FX-3. For existing CC owners, was this part of your agreement? The agreement seems to indicate the price increase will continue beyond when I pay for the plane up to delivery.

[Brad Damm]

After having a deposit on an FX-3 for over 18 months, I am just learning of the Economic Price Adjustment language in the purchase agreement which could significantly increase the cost of my FX-3. For existing CC owners, was this part of your agreement? The agreement seems to indicate the price increase will continue beyond when I pay for the plane up to delivery.

Great question, there has been a lot of confusion on this. The economic price adjustment clause has been in every CubCrafters Purchase Agreement since 2018. It's purpose it to protect both parties, the customer and CubCrafters, against inflationary pressures.

CubCrafters has always guaranteed the price of every new aircraft purchased for one year from the date of deposit. When lead times are longer than one year, CubCrafters guarantees that same price all the way to delivery as long as inflation is at or under 3% annually. If inflation rises above 3% annually, CubCrafters has the option in the Purchase Agreement of billing the customer for only that percentage of inflation that is above above the 3% threshold. No. it doesn't go beyond the final billing for the aircraft, and to keep everything fair and transparent for both parties, the contract clause is tied to a producer price index for civil aircraft manufacturing published by the US Bureau of Labor Statistics (anyone can go look at it online and do the math).

For example, if the lead time was 18 months and inflation during that time was 4.5% per the index, the CubCrafters would have the option of billing the customer an extra 1.5%, which would be the inflationary amount above 3%.

How does this protect the customer? Other OEM's typically won't quote a final price, and the customer is just expected to pay full MSRP at the time of delivery, whatever the OEM decides that should be, without any price protection for the consumer whatsoever. CubCrafters guarantees the price as much as is reasonably possible for any manufacturer. Right now, we are taking deposits for aircraft deliveries in 2025. We simply can't control what steel and aluminum and engines and avionics are going to cost in 2025, and it is not possible to purchase those items that far ahead.

As a responsible manufacturer we plan for some inflation, but we can't predict things like global pandemics and European wars, or even how US monetary policy will effect supply chains and the cost of those items. We have tried to handle those things in a way that is both fair and transparent to our customers. Without the Economic Price Adjustment clause, we'd simply be forced to drop all consumer price protections in our Purchase Agreements.

I hope that helps, feel free to contact me directly if you'd like to discuss it further. (509) 961-2313 and sometimes a text will work better and I will call back. Thanks!