ESCALATION ADJUSTMENT
AIRFRAME AND OPTIONAL FEATURES
between
THE BOEING COMPANY
and
America Trans Air, inc.
Supplemental Exhibit AE1 to Purchase Agreement Number 2262
(For Model 717-200, 737-600, 737-700, 737-800 and
737-900 the Airframe Price Includes the Engine Price at
its basic thrust level.)
1. Formula.
-------
Airframe and Optional Features price adjustments (Airframe Price
Adjustment) are used to allow prices to be stated in current year dollars at the
signing of this Purchase Agreement and to adjust the amount to be paid by
Customer at delivery for the effects of economic fluctuation. The Airframe Price
Adjustment will be determined at the time of Aircraft delivery in accordance
with the following formula:
Pa = (P+B)(L + M) - P
Where:
Pa = Airframe Price Adjustment. (For Model
717-200, 737-600, 737-700, 737-800 and
737-900, the Airframe Price includes the
Engine Price at its basic thrust level.)
L = .65 x ( ECI
-----
ECIb )where ECIb is the base
year index (as set forth in
Table 1 of this Purchase
Agreement)
M = .35 x ( ICI
-----
ICIb )where ICIb is the base year index
(as set forth in Table 1 of this
Purchase Agreement)
P = Airframe Price plus Optional Features Price
(as set forth in Table 1 of this Purchase Agreement).
B = 0.005 x (N/12) x (P) where N is the calendar month
and year of scheduled Aircraft
delivery minus the calendar
month and year of the Base
Price Year, both as shown in
Table 1 of this Purchase
Agreement.
ECI is a value determined using the U.S. Department of
Labor, Bureau of Labor Statistics "Employment Cost Index
for workers in aerospace manufacturing - Wages and
Salaries" (ECI code 3721W), calculated by establishing a
three-month arithmetic average value (expressed as a
decimal and rounded to the nearest tenth) using the values
for the fifth, sixth and seventh months prior to the month
of scheduled delivery of the applicable Aircraft. As the
Employment Cost Index values are only released on a
quarterly basis, the value released for the month of March
will be used for the months of January and February; the
value for June used for April and May; the value for
September used for July and August; and the value for
December used for October and November.
ICI is a value determined using the U.S. Department of
Labor, Bureau of Labor Statistics "Producer Prices and
Price Index - Industrial Commodities Index ", calculated
as a 3-month arithmetic average of the released monthly
values (expressed as a decimal and rounded to the nearest
tenth) using the values for the 5th, 6th and 7th months
prior to the month of scheduled delivery of the applicable
Aircraft.
As an example, for an Aircraft scheduled to be delivered
in the month of January, the months June, July and August
of the preceding year will be utilized in determining the
value of ECI and ICI.
Note: i. In determining the values of L and M, all calculations and
resulting values will be expressed as a decimal rounded to the nearest
ten-thousandth.
ii. .65 is the numeric ratio attributed to labor in the Airframe Price
Adjustment formula.
iii. .35 is the numeric ratio attributed to materials in the Airframe Price
Adjustment formula.
Iv. The denominators (base year indices) are the actual average values
reported by the U.S. Department of Labor, Bureau of Labor Statistics (base year
June 1989 = 100). The applicable base year and corresponding denominator is
provided by Boeing in Table 1 of this Purchase Agreement.
iv. The final value of Pa will be rounded to the nearest dollar.
vi. The Airframe Price Adjustment will not be made if it will result in a
decrease in the Aircraft Basic Price.
2. Values to be Utilized in the Event of Unavailability.
-----------------------------------------------------
2.1 If the Bureau of Labor Statistics substantially revises the
methodology used for the determination of the values to be used to determine the
ECI and ICI values (in contrast to benchmark adjustments or other corrections of
previously released values), or for any reason has not released values needed to
determine the applicable Airframe Price Adjustment, the parties will, prior to
the delivery of any such Aircraft, select a substitute from other Bureau of
Labor Statistics data or similar data reported by non-governmental
organizations. Such substitute will result in the same adjustment, insofar as
possible, as would have been calculated utilizing the original values adjusted
for fluctuation during the applicable time period. However, if within 24 months
after delivery of the Aircraft, the Bureau of Labor Statistics should resume
releasing values for the months needed to determine the Airframe Price
Adjustment, such values will be used to determine any increase or decrease in
the Airframe Price Adjustment for the Aircraft from that determined at the time
of delivery of the Aircraft.
2.2 Notwithstanding Article 2.1 above, if prior to the scheduled
delivery month of an Aircraft the Bureau of Labor Statistics changes the base
year for determination of the ECI and ICI values as defined above, such re-based
values will be incorporated in the Airframe Price Adjustment calculation.
2.3 In the event escalation provisions are made non-enforceable or
otherwise rendered void by any agency of the United States Government, the
parties agree, to the extent they may lawfully do so, to equitably adjust the
Aircraft Price of any affected Aircraft to reflect an allowance for increases or
decreases in labor compensation and material costs occurring since February of
the price base year shown in the Purchase Agreement which is consistent with the
applicable provisions of paragraph 1 of this Supplemental Exhibit AE1.
2.4 If within 12 months of Aircraft delivery, the published index
values are revised due to an acknowledged error by the Bureau of Labor
Statistics, the Airframe Price Adjustment will be re-calculated using the
revised index values (this does not include those values noted as preliminary by
the Bureau of Labor Statistics). A credit memorandum or supplemental invoice
will be issued for the Airframe Price Adjustment difference. Interest charges
will not apply for the period of original invoice to issuance of credit
memorandum or supplemental invoice.
Note: i. The values released by the Bureau of Labor Statistics and
available to Boeing 30 days prior to the scheduled delivery month
of an Aircraft will be used to determine the ECI and ICI values for
the applicable months (including those noted as preliminary by the
Bureau of Labor Statistics) to calculate the Airframe Price
Adjustment for the Aircraft invoice at the time of delivery. The
values will be considered final and no Aircraft Price Adjustments
will be made after Aircraft delivery for any subsequent changes in
published Index values, subject always to paragraph 2.4 above.
ii. The maximum number of digits to the right of the decimal after
rounding utilized in any part of the Airframe Price Adjustment
equation will be 4, where rounding of the fourth digit will be
increased to the next highest digit when the 5th digit is equal to
5 or greater.