Order-LOI-option

Date:         31 Mar 2000 22:25:17 
From:         Jens =?iso-8859-1?Q?L=FCke?= <lueke@grundbau.rwth-aachen.de>
Organization: Aachen University of Technology (RWTH)
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Could someone help me out with the exact definition of an "option" or
"letter of intent (LOI)" with reference to aircraft sales?

As I understand it, if an option is agreed upon, the manufacturer
reserves a time slot for production of the aircraft and is compensated
for this by a nonrefundable percentage of the total price for the
aircraft. Is this correct, and what percentage would that be typically?

Also, how often does it occur that options are not converted into
orders, and how far in advance of production do airlines ultimately have
to declare the option an order?

Just curious,

Jens