Right on the heels of Southwest terminating flights between Spokane and Seattle (due to low loads), Alaska Airlines / Horizon has announced that it will be filling that gap with Horizon flights.   Alaska already services that route but they are offering more flights and should be doing so with its Bombardier Q400 fleet which is ideally suited to that route and which will provide just as quick service but costing the airline far less than it costs Southwest to operate 737s.

This is why I believe that Southwest has to start looking at aircraft that can operate such fleets with less cost.  The 717 can’t offer the cost savings that a right size regional jet and/or Q400 can.  And, frankly, I think the Q400 could be operated *very* effectively by Southwest in its smaller markets. 

While Southwest says it doesn’t operate hubs (and it really doesn’t), it does operate focus cities that would benefit greatly with feed.  For example, imagine Wichita, KS flights to Kansas City, Oklahoma City, Tulsa and Denver.  Or flights from places such as Boise, Spokane, Salem or Salt Lake city to Portland and/or Seattle.

There are plenty of places where those aircraft could operate not only very efficiently but at no loss of schedule time either.  Think flights into focus cities such as Dallas, Houston, Chicago, Denver, Seattle, Phoenix, Atlanta, Baltimore, and several cities in Florida.

If Southwest is prepared to be a multi-type fleet, then the Q400 and Embraer E-170 series have something to offer them.

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As much as Boeing and Airbus would like to think so, they don’t.  If anything, I think they’ll promote the CSeries and I think they’ll encourage Embraer to go bigger. 

Look at the seat numbers on these aircraft.  The A319 and 737-700 seat roughly 135 or more passengers.  The A318 is a very poor candidate for the NEO and the 737-600 really isn’t offered anymore.  Neither works for mainline service very well because they’re heavy for the number of passengers they carry and their range just isn’t needed for routes requiring those passenger numbers.

Sub-130 seat routes aren’t going to be long and thin transcontinental routes.  To the contrary.  They’ll be the routes they are today and the routes we see developing even now.  They’ll be from Wichita, Kansas to St. Louis or Knoxville, TN to Chicago.  

And there is no airliner being offered that quite gets the airlines there. 

Airlines such as Southwest realize that a smaller airliner is probably necessary for growth now that they have the nation’s largest cities essentially covered.  Boeing and Airbus don’t make that airliner and they don’t plan to make that airliner.  But it’s needed.

And Bombardier is making the aircraft.  Embraer is considering what to do next when it comes to either re-engining its E series aircraft or building a new airliner (and I think they’ll build a stretched E195 with new engines, frankly.

An airliner series with practical passenger capacities ranging from 90 to 130 seats is just what these airlines need.  And legacy and SuperLegacy airlines will need them too if they don’t get their pilots to agree to revised scope clauses.

That leads us to another reason why that class of aircraft is needed.  Even if the legacy and SuperLegacy airlines get pilots to agree to new scope clauses that permit them to engage regional airlines for that 90 to 130 seat flying, somebody has to buy the aircraft and fly them. 

ERJ-140 and CRJ-200 aircraft are not going to be practical going forward.  They’ll hang on for a bit longer but they are going away because they are fuel inefficient and they’re getting old to boot.

Now that airlines know what is going to happen with both the Airbus A320 series and Boeing 737 series aircraft, they can start shopping for that next class of aircraft that permits entry into those smaller markets cost effectively.

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I wrote a long blog post early yesterday morning about American and the rumoured order it was about to make.  Then, later in the day, the rumours started flying that it would announce the order today (Wednesday).  And, boy, did they.

Let’s look at the details first:

• 460 aircraft on firm order with both Boeing and Airbus
• Boeing sells AA an additional 100 current 737NG aircraft.
• Boeing sells AA 100 737RE aircraft with the CFM LEAP engine.
• AA takes another 40 options for the 737NG and another 60 options for teh 737RE.

• Airbus sells AA 260 A320 Family Aircraft
• 130 are for current generation A320 family with the sharklets to be introduced in 2012.
• 130 are for A320NEO aircraft (with arrival in 2017 and so much for talk that the A320NEO line was sold out.)

The aircraft will begin arriving from both lines in 2013 and American Airlines thinks it will have one of the youngest fleets in about 5 years.

So what does it mean?  Well, for one, the cost to announce this order was tiny compared to a traditional order.  These aircraft will be on operational leases and it appears AA didn’t have to put much money down for these firms orders (if any.) 

This order will be of dramatic benefit for the airline when it comes to saving on fuel.  If AA had a fully modern fleet now, it’s likely it would not have lost money this past quarter.   The benefit in fuel savings on this order will take a while to be realized. 

This is the first official mention of a 737 re-engine and I think we’re going to see some gnashing of teeth on the part of some airlines over the idea that a fresh design is likely 10+ years away.  This might be good for AA, it isn’t good, necessarily for Southwest Airlines or Ryanair.

This is a big win for CFM and its LEAP56 engine and while the engine is only announced for the 737RE, it is almost certain that that engine will be chosen for the A320 family.

What this isn’t is a loss for Boeing.  The post I composed and just deleted talked about how having a single source for your aircraft wasn’t really practical for an airline of AA’s size and all other SuperLegacy and Legacy airlines operate mixed fleets already as a function of a merger.  What those airlines have learned is that neither Boeing nor Airbus has a supply chain that can meet all their needs all of the time and on time.  It wasn’t irrational for AA to go to Airbus.

However, this is a pretty big loss for Boeing in the psychological warfare arena of aircraft sales.  This will be spun many ways but at the end of the day, Boeing got bruised and is not the aircraft manufacturer who gets to crow about success today.  Expect other SuperLegacy airlines to take a long, hard look at this deal and begin to negotiate for their own SuperDeals on aircraft with both manufacturers. 

Why did Airbus win more orders?  Because AA already has a large 737 fleet.  It didn’t need quite as many 737s.  This really is an order of equals practically speaking. 

I do think the A321NEO will be the 757-ish replacement and I do not think that AA will upsize aircraft to the 737-900ER down the line.  Therefore, I think the A320 family order will be either

A) A full mix of A319/320/321 aircraft with multiple bases or

B) A320/A321 aircraft with focused bases

I rather doubt that the A319 or the B737-700 will be ordered at all.  This order is about a marginal increase in capacity over time for most routes with the 757s leaving ever so slowly over time. 

And that points out a glaring gap that I haven’t seen anyone talk about yet.  Through this order and previous small orders, American Airlines will have upguaged their entire fleet and particularly so in the next 5 to 7 years.  Presently, the smallest aircraft in its fleet will be the 737-800 or A320 at roughly 160 seats.

What serves the 120 to 150 seat range?  The MD-80’s are departing and rightfully so.  American Eagle has CRJ-700s that are configured from 63 to 65 seats and AA is currently scope clause limited on how many of these aircraft it can fly.  Now, AA has also announced that it will spin off American Eagle soon and we’ll talk about that in a future post but that only means AA can (and will) access other regional airlines for its sub-100 seat flying.

What fills the gap?  If AA manages to get a new pilot agreement that allows AA to subcontract its sub 150 seat flying, I’ll be rather shocked.  I do not think the pilots are going to cede that territory under the current contract or whatever agreement is made for the near future. 

I realize that AA has been serving markets that might demand a 120 to 130 seat aircraft with higher frequency using smaller jets but it can’t do that forever.  Is there another order for aircraft lurking in the background here?  Maybe.  The Bombardier CSeries does fit that whole very nicely and does it in harmony with this announced order.  In fact, it presently is the only airliner that does.  Embraer gets close but it doesn’t quite get there.   If I were Bombardier, I would be knocking on American Airlines’ door with a most excellent finance package for its CSeries CS100 and CS300.

There is one more question lingering as well . . .

How will American Airlines paint its A320 family?  The aircraft cannot be polished like its 737 counterparts.  I strongly suspect we’ll see a metallic silver used with the current paint scheme over that.

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Boeing Commercial Aircraft President Jim Albaugh met with American Airlines executives, including CEO Gerard Arpey, a couple of days ago and I think, tentatively, this is a positive development with Boeing.  On the surface, it certainly signals that Boeing does consider American Airlines a very important customer.  It *might* signal that Boeing has started to realize that airlines really aren’t just poking at them over a new single aisle aircraft.

I say might because there is a tendency for Boeing to not always recognize that a customer really is at risk until the very last moment. 

Nevertheless, Boeing presidents don’t go calling on just every airline executive team on a whim.  It would be my hope that Boeing got an earful on what is needed and, more importantly, the timing for meeting that need.  For about a year, all we’ve heard is trade studies about re-engining vs new single aisle aircraft and that things tilt a bit towards an all new aircraft for 2019. 

I think airlines would like to hear about a new single aisle aircraft kicking off development asap with entry into service around 2017.  There is probably some wiggle room there but only after commitments have been made.

While news reports say Albaugh visited American Airlines, I do wonder if Southwest wasn’t visitied as well.  If not, I expect we’ll see another cannon shot across Boeing’s bow from SWA in the near future.

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Airbus has announced its plans for the A350-1000 and airlines have responded with yawns or, in the case of one airline, a bit of outrage.  Airbus can still change their minds about the final definition of this airliner but not without more delay or a commitment from an engine maker that would be pretty unrealistic.  So we know what the A350-1000 will look like, more or less.

And what is Boeing’s best response?  I’m not sure the timing is right for an all new widebody large capacity airliners to sit just above the 777-200ER to just below the 747-8i.  But I do think the timing is right to greatly improve the 777.   Imagine the pain Airbus feels with a 777 update that provides a better wing constructed of composites, a fuselage that is slightly lighter due to some composite use and engines that are bit more fuel efficient as a function of incorporating GEnx engine technology.   What if Boeing can offer a 777-250/777-350 that offers more seats, 500 to 1000nm range improvement and/or a slight upgrade in payload capacity?

That little squeak you heard is Airbus salesmen contemplating that scenario.  I can see a strong business case for such aircraft and I think you would hear a lot of airlines bark out loud “sold!” if it was announced.   Does it get announced this year? No. Boeing has got to figure out the 737 replacement family, finalize the 787-9 production, get the 787-10 kicked off and then contemplate the 777’s future.  I wouldn’t expect anything developing on the 777 until 2014.

But it’s fun to think about the possibilities.

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Last Thursday, there were a number of reports (mostly based on a Bloomberg report) that said that American Airlines was in discussions with Airbus to buy 100 A320 class airliners. 

As you can imagine, this spurred quite a bit of speculation.

Many have the incorrect idea that AA is contractually committed to buying Boeing only.  They are not.  There is a gentleman’s agreement that has been followed since the 1990’s that has had AA getting preferred aircraft pricing and early slots  in return for remaining an all Boeing customer.  There is no financial penalty for walking away from this except what AA might not get in preferred positions and pricing.

And I’m not even sure that exists.  The truth is, AA is big enough to get preferred pricing and early slots regardless.  They wield enough buying power to make any aircraft manufacturer sit up and pay attention.  So it doesn’t hurt for AA to talk to Airbus.

Is the Airbus A320/A321 the right aircraft?  Quite possibly.  The A321 will do a better job of fitting AA’s requirements for a Boeing 757 replacement compared to the equivalent 737-900ER.  It will fit almost all of the missions the 757 is currently serving (except for trans-Atlantic flights) and it will do it with pretty good efficiency compared to what Boeing is offering right now.

Are they serious?  Well, I wouldn’t be surprised if this was both a warning shot over the bow to Boeing as well as a serious discussion.  American Airlines really does need a better fleet going forward and it cannot afford to wait until 2019/2020 to get started.  The 737-800 is a good fit as a MD-80 replacement but not as a 757 replacement.  Boeing’s 737-900ER has worked well for Continental but I don’t think it would work too well for American because of range and payload.

American needs better seat mile costs on its routes and it can achieve those because it can fill its aircraft with business passengers.  Diversifying between manufacturers isn’t a bad idea anyway as it makes things just a bit more competitive and the airlines probably gains from that.

This may well be the “major network carrier” that Airbus COO John Leahy has spoken of with respect to the A320NEO.  If it is and if there is an order, it will be a major blow to Boeing.  Not because Airbus invaded the United States (they’ve already done that) but because AA would be regarded as one of Boeing’s most solid customers.

I wouldn’t say this is a done deal but I would say that we now have reason 998 why Boeing should, you know, get with the program.

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On the one hand, Airbus COO John Leahy gets to make good on his prediction of 500+ committments to the A320NEO by the Paris Air Show.  He even gets to land a traditional Boeing customer (Garuda International) but at the risk of sounding anti-Airbus and pro-Boeing, there is a bit more to this story in my opinion.

First, Garuda is hardly a critical Boeing network carrier.  It stings a bit for Boeing but . . . when you have a competitive environment, customers change from time to time.  That said, we aren’t hearing about Airbus customers switching to Boeing either. 

Second, Airbus landed committments for 500+ aircraft.  Not firm orders.  Some of these committments are Memorandums of Understanding, some are Letters of Intent and some are orders.  Boeing plays a bit more fair in this area in that it doesn’t “count” something as a committment until it is a firm order. 

Third, when you look at who these committments come from, it isn’t game changing.  They are almost all from existing Airbus customers and from customers in areas where Airbus and France have heavy influence.  There is no radical shift in the landscape.   If you’re an Airbus customer and you need a single aisle airliner, you’re pretty much going to order the NEO.  That’s what has happened so far.

All of that said, Boeing is in danger of becoming a bit too secretive of its plans.  It’s clear that major Boeing customers want to see something on the table.  Moreover, I suspect that they would like to be let in on the discussions about what an airline *wants* in a new single aisle airliner / 737 replacement / 737 re-engine.  If I were a Boeing customer, I would imagine that my attitude towards Boeing at this point would be quite similar to SWA’s CEO Gary Kelly’s.  In a word:  terse.

With the announcement made on the A350-1000 (which would appear to more or less bring that aircraft into competitive range of the 777-300ER but not exceed its capability), it’s time for Boeing to bet again.  They have a firm handle on the 787-9 development and I think they’ll find it within themselves to repeat that on the 787-10.  (Although one does wonder if they’re considering enough range / payload for the 787-10 given that airlines clearly enjoy the performance of late model 777-200ER/LR aircraft. 

Boeing can’t afford to dither around much longer.  It’s time for a decision and enough time has passed to make that decision.  If they’re confident they can make a new airliner that is 20%+ better, make the bet and get going on it.

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American Airlines has ordered a 6th 777-300ER now and indicates more may be on the horizon.  One does have to wonder about the piecemeal orders they’ve made so far.  Why not order in blocks rather than an aircraft every few months?

Analysts aren’t so high on these purchases believing that it raises AA’s cash burn.  AA counters that the economics are excellent and will allow American to earn more and that’s probably true.

It’s a good aircraft and most airlines are migrating from -200s to -300s because if you can fill the aircraft, you do make more profit.  American has a number of routes that could benefit both across the Pacific and Atlantic oceans as well as potentially to South America.  It may well be a better way to grow capacity as well.

But I think analysts (and me as well) are wondering just when American is going to address other problems that are causing high cash burns.  That would be the failure to come to an agreement on new labor contracts with their staff that would permit the airline to get on with focusing on profitable operation of the airline.

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Airtran has had Skywest flying 6 routes for it out of Milwaukee and one of Southwest’s first moves is to dissolve that codeshare and start flying routes on its own.  New routes will include flights to Des Moines, Akron-Canton and St. Louis. 

As you can imagine, SWA pilots are thrilled.  This goes to a central principle with Southwest, namely flying its own routes and flying routes that are profitable on their own. 

I’ve found no information on what equipment will be used but my guess is that we’ll see 717s and 737-500s re-deployed as Southwest rationalizes services out of cities that both SWA and Airtran serve.  The best candidate for those new routes are 717s as they have the right capacity and they’re all in reach with a 717. 

The merger will allow SWA to find those new routes that many cities have been clamoring for.  For the first time, Southwest has real depth when it comes to finding the route aircraft for the right route.  Look for more routes developing both in the Rust Belt, Midwest and the South as time goes by.  All three areas are places where SWA has had good luck and with the route overlap that exists in focus cities such as Milwaukee and Baltimore as well as in Florida, I think we’ll see a number of new routes and re-deployments of aircraft as time goes by.

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French parliamentarians went a bit crazy and became furious with Air France’s decision to accept bids from both Boeing and Airbus for 100 mid-sized widebody jets.

Boeing’s 787 and Airbus’ A350 are in the running and Air France officials have said that it is likely to be a split purchase.

France continues to own a stake in Air France and is also one of two major stakeholders in Airbus.

I find this ironic since Air France has found it very economical to use Boeing’s 777-200/300 aircraft and owns 60 at present.  The 787 fits nicely into their plans since the transition from a 777 to a 787 is short and easily accomplished.  The transition from an A340/330 aircraft to the A350 is sure to be similarly easy. 

Politics in the airline world inside France is always nationalistic but this move is just a bit too overt for our taste.

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Jon Ostrower has written about a conversation he had with Southwest Airlines VP Operations Coordination Jeff Martin.   Mr. Martin says they need an efficient replacement aircraft for their 200+ 737 Classic aircraft and they need it sooner than 2019/2020 and, no, a re-engined 737 Next Gen does not meet the criteria they have for such a replacement.

Actually, Southwest has two subfleets to think about.  The 737-300/500 fleet and the 717 fleet.  The former because it is just aging and aging quickly and the latter because it isn’t sustainable as a fleet over time since it isn’t being made anymore and obtaining additional aircraft would be difficult at best.

Would Southwest consider another aircraft maker?  Absolutely.  This idea that Southwest wants one fleet type is somewhat silly.  This is an airline with over 500 aircraft and one aircraft type doesn’t fit all situations as well as 2 or 3 fleet types.

I’ll also point out that since Gary Kelly has taken over as CEO, Southwest has embraced a lot of change and they’ve succeeded despite predictions to the contrary.

In addition, I recall Southwest getting a bit lathered up over what they saw regarding the Frontier Q400 fleet when doing their due diligence almost two years ago.  If there is one thing Southwest likes to do, it’s save money.

I think Bombardier products will get a strong look.  I think the CSeries and the Q400 might get looked at quite closely.  Dispatch reliability is going to be a key point, however.  But there are at least 2 cities that SWA operates from in which a fleet of Q400 aircraft could make very profitable bases:  Chicago and Dallas. 

In addition, I think Embraer will have a shot at pitching their aircraft (current and future) and I think Airbus will get its feet in the door as well over the A320NEO.  Thing is, the very fact that it is the A320NEO that Airbus has to offer is what, in my opinion, makes them an unlikely player at SWA.  Southwest doesn’t want a warmed over design to tide them over.  They want revolution over evolution when it comes to efficiency.

Revolution is potentially the CSeries with both enough capacity and range to fill almost all of Southwest’s requirements.  They also have enough seating range to make it an effective aircraft in both the 110 and 130 seat range.  That is going to be a sweet spot for Southwest for some time to come.  Yes, they need an aircraft that will seat 145 to 170 as well (and that aircraft will also need continental range as well) but they’ve got that in a fairly new fleet of 737-700/800 aircraft.   The nice advantage to the CSeries / Boeing approach is being able to have a range of sub-types across a two type fleet.  You get effective 4 needs met with two basic types and doesn’t that approach sound frugal?

Boeing needs to wake up just a bit and get a little more aggressive.  To believe that SWA is a Boeing customer now and for the future ignores a great deal of change when it comes to SWA and its needs.

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Evidently, there are rumours that British Airways may be giving the 747-8i a second (third?) look suddenly.   The airline made orders for the A-380 and 777-300ERs instead a few years ago but now there is strong speculation that they are revisiting their fleet plans for the future.

At the time, the A-380 made sense and even today it still does to some degree.  It’s a strong airliner and a proven earner now that we’ve seen several in a variety of fleets.  But British Airways circumstances have changed and I think that might be what is driving these rumours.

British Airways has now “merged” with Iberia and they also have their trans-Atlantic partnership going on with American Airlines and other Oneworld partners as well as a strengthening partnership in Oneworld to the Far East and Australia.  So why does the 747-8i make more sense?

Seats.  The A-380 has an advantage *if* you can fill its seats.  That’s a tougher prospect today.   Even more difficult is the fact that the A-380 doesn’t offer a lot of flexibility on routes it can be deployed on.  In fact, with the new Oneworld frequencies between JFK and London Heathrow, it doesn’t make sense. 

At the same time, nor does the 777-300ER quite fill all the needs either.  It is perfectly adequate for filling the role of older 747 routes but it isn’t quite up to the challenge of providing enough seats (in BA’s configuration anyway) one some of those routes where BA/IB/AA are partnering.  The 747-8i offers enough seats and the promise of a high load factor that makes it potentially more cost efficient to fly.

It’s also a bit more flexibile on what airports it can fly to than the A-380 as well as the fact that it is just plain cheaper to buy and potentially cheaper to maintain.  In the modern airline world, that’s real money to be saved.

Will they re-visit the idea of buying the 747-8i?  I suspect they will at least take another long look at it internally and now is the right time.  The 747-8i is quickly compiling hard data for airlines to look at and the airline will have some hard route data of its own in the near future.   How seriously it will be considered is anyone’s guess. 

Right now, BA is looking at operating the 787 soon, it has the 777-200ER, 777-300ER, 747-400 and orders for the A-380.  That’s a lot of widebodies of varying types and styles.  To add the 747-8i to the mix really, in my mind, requires thinning out that mix by one type. 

So, yes, I wouldn’t be surprised if they took a long, hard look at it internally.  I would, however, be surprised if there was an order in the next 12 to 18 months.  Downright shocked, actually.

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At first glance, integrating Airtran’s fleet into Southwest’s operations would appear to be easy and straight forward.  In fact, it isn’t.  Airtran operates a different floor plan and a two class cabin.  All of this affects things like weight and balance of the aircraft as well as using the floor plan on Southwest flights.

So Southwest will begin slowly converting Airtran fleet over to the Southwest model one by one.  Southwest will add these aircraft and, over time, take over Airtran routes.  Airtran will slowly reduce in size by fleet and route at the same time until both are on the same single operating certificate and the aircraft are homogenized into the fleet. 

Expect this to take longer than a year.  Even converting the 737-700s is fairly straight forward but now Southwest has to decide upon how it will configure the Airtran 717 aircraft for all coach seating before it begins that integration.  Since Southwest generally executes these kind of changes when aircraft already require service and maintenance, the two airline operations could co-exist for a longer than usual period of time until this work is complete.

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A local friend made a comment to me about Delta Airlines and their mish-mash of a fleet vs Southwest Airlines and their one aircraft type fleet.  His comment was aimed at the success difference between the two.

Well, not so fast.  When you consider airlines 30 years ago and airlines of today, there is one thing that stands out.  Fleet size.  Today’s airlines such as Airtran and JetBlue would be behemoths in the market place in 1980 with 138 and 163 aircraft respectively. 

Let’s take a look at what truly large airlines have in fleet size.  Southwest Airlines, the 800lbs gorilla of LCC carriers, has 547 aircraft of which all are 737s, yes, but which is actually comprised of the 122 passenger -500 and the 137 passenger -300/-700. 

United Airlines and Delta Airlines both have over 700 aircraft and American Airlines presently has about 620 aircraft.  Each of those three carriers have a broad range of aircraft types, seating capacities and range capabilities.

A one type fleet works well for the smaller airlines because, yes, it does allow them to save money on maintenance and it keeps things simple when negotiating with unions about how much one is paid to fly what type for what distance.

But as you grow larger, it really is better to have some flexibility.  Even Southwest acknowledges that the Boeing 717 aircraft they’ll gain from Airtran (number over 80) should help quite a bit in matching the right aircraft to the right route.  They’ve gone farther than that, though, by ordering the 737-800, a larger aircraft than they’ve ever operated before. 

If Southwest expects to continue to grow, they’ll have to move into both larger and smaller markets than they have customarily entered in the first 40 years of their life.  The fleet types aren’t what will make their lives complex when it comes to the cost(s) of maintaining them.  What they will have to contend with is the idea that a pilot of a smaller aircraft should earn less than the pilot of a larger aircraft.  They’ll have to deal with scheduling flight attendant crews of two different sizes and that’s something they’ve never had to do before.  Fortunately, the range in size between the 717 and the 737-800 is not so great that they can’t argue that all their pilots should be paid the same (and I would agree.)  The truth is, while their fleet may be different, the missions aren’t that different in terms of distance, turnaround, etc. 

Delta is succeeding with a broad range of aircraft in ways not seen before.  Yes, they have added complexity but an airline big enough to operate more than 700 aircraft should be complex.  Could they simplify?  Certainly.  Should they?  I’m not so sure.  There can be disadvantages to dealing with one aircraft manufacturer instead of two in terms of the bulk of a fleet. 

Neither Boeing nor Airbus can really supply enough aircraft to Delta on a timeline that would make sense to replace, for instance, Delta’s 563 single aisle aircraft.   It would take 40 aircraft a year to replace that fleet over nearly 15 years.  Those manufacturers have to supply a number of other airlines as well. 

Boeing and Airbus can deliver about 32 to 38 aircraft a year in their 737/A320 families.  A Delta replacement order would conceivably consume more than one month’s production capacity in a calendar year and there are a whole lot more airlines out there of size than just Delta. 

By using both manufacturers, Delta would get more flexibility in deliveries and more reliability as well.  This is true for any airline of size.  In addition, by making each manufacturer compete for those orders, the airline is liable to receive a better price on each aircraft and when you are talking about 500+ aircraft, that could well mean savings reaching into the hundreds of millions of dollars.

The days of ordering “just Boeing” or “just Airbus” may well be over for any airline of significant size.  This may be true even for Southwest in the distant future.  Boeing and Airbus are unlikely to remain in the 100 to 130 seat category and will probably cede that to the next generation manufacturers such as Embraer and Bombardier.  That doesn’t mean an airline, even an LCC doesn’t need those aircraft, it does. 

It’s notable that JetBlue already has a two fleet strategy as well as Airtran and Frontier.  Southwest effectively has a two fleet strategy and probably needs 3 different sizes to work with going forward. 

Flexibility is the key.  Routes change over time.  Some routes yield more and more passengers while others are best demoted to smaller aircraft over time.   Southwest wouldn’t be flying 737s to places like Lubbock, Texas if it didn’t need a one-stop location to continue that flight to a larger city from the Dallas area.  Southwest flights to Lubbock and El Paso on 737s continue on to other cities such as Las Vegas, Phoenix and Los Angeles. 

But when the Wright Amendment goes away, the need to fly those one-stop flights goes away.  I actually look for Southwest to start evaluating aircraft such as the Embraer E170/190 series or Bombardier C900/1000 or CS Series in the next 5 to 8 years. 

You’ll find that the one fleet strategy is effective today only for airlines requiring a fleet to fly between mainline destinations.  Once they enter into smaller markets and larger markets, two or more types are not only required but justified.

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It has always surprised me that Lufthansa didn’t embrace the 777.  Yes, they’re a German airline and, yes, the German government, who is a stakeholder in Airbus, does want its airlines buying local but they’re not nearly so insistent on it as France might be.  Frankly, the A320 series fits the Lufthansa mission in Europe better, in my opinion.   And the A330 is a good aircraft for Lufthansa as well. 

But I never understood holding on to the A340s and I never understood holding onto the 747-400s.  To me, the 777 family was the solution for these aircraft and a much more fuel efficient one at that.   Now, strangely, Lufthansa is buying some 777s.  They’re buying them as freighters. 

Huh?  Those 747-400s will make fine freighters.  Seriously great freighters.  But I fail to see how a 777-200 Freighter is sensible for Lufthansa when it comes to cargo and the 777-200LR/-300ER isn’t sensible when it comes to its long haul passenger missions.   Lufthansa is in the enviable position of being located such that they don’t really require 4 Engines 4 Long Haul and the 777 would satisfy their needs with respect to every true long haul destination they have. 

With fuel consumption being a prime driver in fleets these days, one would think that the older A340-300s as well as the A340-600s would have been been better replaced by now with the 777.  The only good reason not to is the fact that there just isn’t much of a market for used A340 aircraft and as frugal as this airline is, that does make sense. 

Even their main competitor, Air France, has found the 777 to be the right aircraft for the very same missions.  So it leaves me wondering what their next choice in long haul will be.  The 777 or are they awaiting the A350-1000 definition to make that choice?  It’s notable that neither Air France nor Lufthansa currently hold orders for that aircraft. 

So, is the 777 Freighter an anomaly for Lufthansa or a try-out?

Filed under: Airline Fleets by ajax
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The perceived momentum that the A320NEO has is the subject of  a lot of speculation for the past month.  One comment getting repeated early and often by Airbus is that airlines don’t necessarily have a right to convert existing orders for 1st generation A320 class aircraft over to the A320NEO targeted for delivery sometime in 2016. 

Indeed, the orders it has garnered so far has been part of a larger orders for a mix between the 1st generation and NEO versions.   There are a few things worth remembering here.  First of all, 2016 is far enough in the future that airlines are only just approaching the time in which they would consider such purchases in most cases.  Second, Airbus’ really firm order for this aircraft is, so far, only from Virgin America.  Other orders are under a Memorandum of Understanding (MoU) which can remain quite fluid in terms of details.

Airbus needs the NEO to be successful right out of the gate.  Their stumbling around on the A350 is still firm in the minds of many airlines and what they’re proposing in the NEO is actually quite similar in approach to their first proposals for the A350.  If they garner enough orders, legitimacy ensues and they avoid criticism.  They also don’t want to kill their momentum on the A320 either.  The development for that 1st generation of aircraft is paid for and every aircraft they push out the door and into the hands of a customer embodies a lot of profit. 

It’s a delicate dance they have to perform for the next 12 to 18 months and keeping customers entrenched in the 1st generation A320 allows them to earn profit to pay for their other programs in development such as the A400 and A350 as well as keep face over the A380 which, at this point, appears doomed to be an unprofitable airliner. 

Speaking of the A380, one of those recent A320NEO orders includes the cancellation of 10 A380 aircraft as well.  ILFC has decided to pass on that airliner and stock up on A320 aircraft instead.  That is a smart decision for the lessor. 

If anyone believes that airlines will be forced into making new orders if they want the NEO version, they’re kidding themselves.  Airlines transfer orders from one aircraft type to another all of the time and neither Airbus nor Boeing would ever want to appear to not being cooperative with the airlines.  Keeping airlines in their camp is extremely important and not being flexibile is one way to encourage a customer to look at a competitors offerings.

John Leahy of Airbus predicts as many as 500 firm orders by this year’s Paris air show.  It is possible but I think we’ll see maybe orders for 200 to 300 aircraft and perhaps less than firm orders for another 300 by that time.  500 firm orders would be pretty impressive and I suspect it would drive Boeing crazy as well.

Filed under: Airline Fleets, Airline News by ajax
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Last week, Delta announced that it had agreed to buy 9 Boeing (McDonnell Douglas) MD-90 aircraft from JAL.   After these aircraft are refurbished, they’ll start entering Delta’s fleet next January.  Delta’s President, Ed Bastian, refers to these aircraft as “capital efficient” for Delta and it does simply add to Delta’s existing fleet of 19 aircraft.  In fact, Delta now plans to add a total of 39 MD-90 aircraft going forward.  These will primarily replace aging and inefficient DC-9-50 aircraft.

Capital efficient means that the cost to acquire these aircraft combined with the remaining lifecycle costs including fuel makes them worth operating for Delta.  In addition, these aren’t your grandfather’s DC-9s.  These aircraft have current generation IAE V2500 engines that are fairly fuel efficient compared to brand new aircraft presently.  They also replace fuel guzzlers and represent a net gain going forward as long as fuel prices remain somewhat stable (and by stable I mean out of the $4/gallon territory.)

Delta has so far pursued a strategy of making do with what it has and employing older aircraft longer and this is somewhat in conflict with most other airlines’ strategies.  As fuel has climbed in price over the past 4 years, airlines have, if anything, accelerated their purchases of newer, more efficient aircraft.

Is this the right strategy for Delta?  Well, as an interim strategy, it works.  These aircraft are good for a variety of routes that can largely transit 3 timezones out of 4 in the continental United States.  There are a finite number of them available (only a bit over 100 were ever built) and in the near future I suspect that many won’t be worth buying when considered against a new Boeing or Airbus aircraft.  From a financial standpoint, these are good buys for Delta and should work for them well over the next 4 to 8 years.

Delta’s fleet is pretty varied since its merger with Northwest Airlines a few years ago and while they have made an excellent show of managing this fleet, there are a number of types that could be pared down over time.  Reducing the number of fleet types would allow Delta to be even more flexible with its crew resources and more cost efficient when it comes to maintenance needs.  Remember that every fleet type requires an inventory of parts and employees trained to service that fleet type.

This doesn’t mean that I advocate that Delta buy Boeing only or any other manufacturer exclusively either.  With its fleet size, it could quite rationally settle on both the Airbus A320 and Boeing 737 aircraft and operate them simultaneously.  The same is true for long haul aircraft.   It could probably employ both Embraer and Bombardier regional jets as well.   However, for each category (regional jets / single aisle / medium to long haul aircraft), there should be at most two basic fleet types. 

In fact, by working with multiple manufacturers, it can speed deliveries, fit the most perfect aircraft to a variety of routes and maintain efficiencies in maintenance and repair at the same time.  What I don’t see happening is Delta operating Boeing and Bombardier CSeries as mainline aircraft.  I think Delta will play it smart and use the manufacturers that have proven products in each category. 

I think that over time, we’ll see Delta order Airbus A320NEO aircraft to replace existing aging Airbus A320s.  I think we’ll see an order for Boeing 737 replacement when and if Boeing offers a replacement officially.  I think we’ll see Bombardier CRJ900/1000 aircraft come online to replace older CRJ700/900 aircraft and I think we may well see Embraer E170/190 jets for other areas of the country such as shuttle-like operations.  In the long haul category, it’s not inconceivable to see 787 orders pulled forward again but for a mix of both 787-8 and -9 aircraft.  I think we’ll see them pick either Airbus A350s or 777s for their larger trunk and long haul routes.  I might give the 777 an advantage here to become a single type for that category as Delta could very efficiently operate both 777-200LRs and 777-300ERs in a nice mix.  They’ve already got very new 777-200LRs (and ERs) that are using the same GE engines the -300ER would use.  I’m not sure the Airbus A350 quite fits in as well as one would like it to when it comes to the trunk route / long haul category.   I do believe firmly that the 747s will ultimately go away and not be replaced.

Look for Delta to be making more and more announcements about its fleet over the next 2 years.  I believe its strategy will be incremental rather than huge orders for a particular family of aircraft and it will be done with strong emphasis on preserving its capital going forward into the next few years.

Filed under: Airline Fleets by ajax
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Later today, I’m flying from Dallas to Chicago and this time I’m trying out Southwest Airlines’ service from Love Field to Midway Airport.  Both airports are the quintessential second airports for their respective cities and both have a strong Southwest history. 

Why this airline and these airports?  I’ve long advocated that you can enjoy a better, less expensive flight on Southwest that is essentially the same time elapsed “door to door” as a flight on a carrier such as American Airlines. 

So, I’ll be making a much quicker drive to Love Field airport where I’ll make a much quicker transit  through security to my gate.  I did pay the $10 Southwest Fee to early check in to improve my seating options (and it’s a fee that, for Southwest customers, does provide extra value).  My flight, however, is not non-stop.  I’ll be on a one-stop Southwest flight that pauses briefly in St. Louis.  Total programmed flight time?  2 hours, 55 minutes.

I paid $408 for this trip last Saturday compared to American Airlines fare for similar departure times on the same days of $659 and that does not include the fees for one checked bag that I’ll have to take with me.  All in, AA would have cost me (or, rather, my client) over $700. 

If I had taken AA, I would have had a much longer drive to DFW airport and a much more expensive one as well.  (One takes a tollway to DFW if one expects to get to DFW in a reasonable amount of time from where I live.)  The difference in time to get to each airport for me on a day where there are no traffic jams?  About 20 minutes less to access Love Field.

My Southwest flight time will be 2 hours, 55 minutes (if they’re on time) and a similar choice with American Airlines would be 2 hours, 30 minutes.  With the difference in drive time alone, I’ve just made up 20 minutes of a 25 minute difference.  When you account for the fact that I can arrive at Love Field with a bare minimum amount of time for passing through vs DFW airport where I would arrive about 15 minutes before my one hour deadline prior to flight time (because checking bags and passing through security at DFW can be easy or it can be real lengthy), I’ve just gained another 10 minutes. 

Since I”m arriving at Chicago Midway Airport, I’ll have a drive to my hotel in downtown Chicago that is nominally 6 miles shorter in distance and about 20 minutes quicker than if I arrived at Chicago O’Hare.  I’m now up by 30 minutes using Southwest.

At least in theory.

But let’s take a look at the contrasts in experiences I’m liable to enjoy between the two airlines.  On Southwest, I paid the $10 Early Bird Check-In fee so I’ll have a very high likelihood of obtaining a good, front of cabin seat on a 737-700.  It will be a fairly new aircraft and possibly a brand new aircraft.  It won’t be old and it won’t have old, worn out seats either.  I’ll enjoy 32″ to 33″ of seat pitch, most likely a friend flight attendant and no charge for a beverage.  Because of the nature of my trip, I have to check a bag and that comes free and on an airline with a good reputation for baggage handling and security.

If I had taken American Airlines on similar flight time, I would have enjoyed a 20+ year old MD-82.  Since I would have bought AA’s best economy price, I would have likely been at the back of the aircraft and sitting in old, worn out seating with 31″ of seat pitch.  My flight attendants would have most likely been cranky, older crew who have a reputation of taking out their job dissatisfaction on their customers.  (AA flight attendants can be good but in my experience the DFW and Chicago based crews are frequently hostile to customers.) 

My bag would be handled by an airline who had a less than positive reputation for baggage handling (and strangely I’ve had many bags delayed over the years on the DFW-ORD route) and only for a $25 fee each way.   If I had paid AA’s fee for priority boarding, I’d get earlier access to overhead bins but no options to sit in a preferred seat up front and an economy passenger on an AA MD-80 flight is going to have the options of “bad” and “worse” when it comes to seat assignments.

Savings in dollars:  About $300

Savings in time:  About 30 minutes door to door (if this works out as I expect).

What do I give up?  I don’t get frequent flier points on American Airlines.  Let me point out that my dollar savings alone just bought me a “free trip” if I wanted it.  Which would you rather have?  about 1600 frequent flier point or $300 in savings?  Which would you rather fly on?  An old MD-80 with old seats and a hostile flight crew or on a fairly new 737 with new seats and a friendly flight crew?

Once I complete this trip, I’ll write up what actually happened.

Filed under: Airline Fees, Airline Fleets, Airline Seating, Airline Service, Airports, Frequent Flier, Travel Hints by ajax
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I was amused last week by a comment originating from Airbus that they believed that Boeing would actually re-engine the 737 rather than proceed with the new build replacement so frequently talked about lately at Boeing.  Amused because while I do think the Airbus decision was right (in that it did offer good gains and it was what they could do between now and the middle of the next decade) but also because the 737 is reaching a level of maturity in efficiency that the Airbus A320 hasn’t come close to yet. 

I always kind of marvel out how just a 1 or 2 percent increase in efficiency can yield such huge savings for airlines.  Not because I don’t understand but because it takes such determination to find these savings.  Engineers at Boeing have been doing this for a long time on the 737.  It wasn’t just adding winglets but lots of tiny things adding up to small percentages of efficiency gains that net big dollars in costs savings.   The driver for this initially was to compete better with the A320 but the truth is that a good aircraft manufacturer always pursues these incremental gains over the product lifespan. 

But as time goes by, there are diminishing returns for the effort (read: work) that has to go into finding these gains.  The latest generation of Boeing aircraft have seen those pursuits for nearly 15 years and they (Boeing) have been relentless in their pusuit.   Finding those gains going forward for the next 10 years is going to cost a lot more for a lot less gain. 

There are always outside new developments.  Just last week we learned that easyJet is painting their aircraft (Airbus A320) with a new paint technology that is much thinner than previous paint techniques.  Provided the paint proves to be durable over an appropriate lifespan, easyJet expects to see efficiency gains of 1 to 2 percent due to less weight an and an aerodyamically smoother surface across the aircraft.  Provided the process isn’t terribly more expensive and it is as durable, this could save countless airlines a great deal of money over the ownership of an airplane.

No matter what each manufacturer does in its product line of significant note such as re-engining or designing new aircraft, the relentless pursuit of small incremental gains in efficiency will always go on and never more so than for the kind of airliners that the A320 and B737 represent.

Filed under: Aircraft Development, Airline Fleets by ajax
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Lately, it seems like QANTAS has all kinds of engine failures all over its fleet.  Is it because they’re not maintaining them?  I seriously doubt that.  You have to consider how QANTAS uses its 747 and A380 fleets. 

QANTAS is somewhat unique in that many of the routes it flies are not just exceptionally long but also exceptionally full.  This means the aircraft are being operated at their maximum performance far more often than virtually any other airline is required to do.  These aircraft are fully loaded with people and fuel and then must use maximum take-off performance in order to loft themselves into the sky for flights that have durations inexcess of 14 hours. 

That puts a lot of wear on engines that other airlines just don’t suffer.

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