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March 8, 2012 on 4:40 pm | In Aircraft Development | No Comments
A number of analysts have noted that the real goal for Airbus this next year is to sell production slots that are open for current A320 aircraft up to and including EIS for the A320NEO aircraft. Both Boeing and Airbus need to find ways to preserve value on existing aircraft lines until their new generation aircraft enter into service as well.
It’s a delicate line they each walk. You want to satisfy airlines with new aircraft but some of those who buy aircraft are lessors and you don’t want to anger them by depreciating their assets they already hold. And a market glut of aircraft can result in depreciating demand for your new generation aircraft because the capital costs for current generation aircraft can become low enough to make sense for airlines to buy and use.
A good example of that last part is Delta buying more and more MD-90 aircraft. The capital costs are low compared to current Boeing aircraft and the airliner provides close to current Boeing efficiencies.
Both manufacturers know that their order books are soft. Both know that some who have ordered both current and next generation aircraft aren’t necessarily going to be around to take delivery on those aircraft 5 years from now. One great example is Lion Airways order from Boeing. The dirty secret about that order is that Lion isn’t an airline with significant risk both in operations and financially.
Airbus need to work hard getting their current production sold until their aircraft are in place but without depreciating values and without massive discounts to encourage orders. It’s a tall order and a difficult challenge for both manufacturers.
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February 1, 2012 on 12:20 pm | In Airline News | 3 Comments
Ryanair’s CEO Michael O’Leary has decided to express his disappointment in what they’ve seen of the 737MAX so far. He mentions that what they’ve seen from the A320NEO so far, they’re impressed but what they’ve seen of the 737MAX so far does not. O’Leary, not surprisingly offers that anybody buying aircraft right now is nuts given the prices.
But the world has changed. It’s not the late 1990’s or early 2000’s and manufacturers are not struggling to sell aircraft. To the contrary, they are struggling to meet demand based on orderbooks. Ryanair got stunning prices for their original massive orders. Enough so that they could buy them, operate them for a few years and sell them at a profit. Neither Boeing nor Airbus is interested in making such deals anymore and rightfully so.
Airlines put off buying large quantities of aircraft for quite a long time and now the legacy airlines not only want them, they need them. If O’Leary and Company wish to continue to operate a successful ULCC, they’ll be lining up to buy them as well because they do offer the kind of incremental gain in efficiency that is going to make the world’s legacy airlines much more competitive with ULCC’s like Ryanair.
The truth is, I think the Airbus A320NEO does fit Ryanair’s needs a bit better these days. But that would require a fleet change that would take years to accomplish and with A320NEO delivery positions reaching “unobtanium” levels for the next decade, the 737MAX probably does offer the best option given their position. One thing is sure, the COMAC 919 isn’t going to deliver what Ryanair needs and certainly not on time. Airbus can’t build more even faster to meet the demand on the A320NEO even with some airlines orders going away. So I’m not sure why O’Leary wants to make an enemy of Boeing.
The truth is, Boeing will be happy to sell to O’Leary and take his abuse while they do it. They’re just not going to give away aircraft anymore and it appears that it will take O’Leary a while longer to realize the position he and his airline are in.
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January 4, 2012 on 1:00 am | In Airline News | No Comments
2011 wasn’t the worst year for airlines and 2012 won’t be either. Instead, I think we’ll see more of the same in most respects.
Airlines will continue to constrain their capacity and that will show more discipine than I thought they had 3 years ago. They’ve proven me wrong and I think the results are too good for them to not to continue over the next 12 months.
Fuel costs will continue to be a difficult thing for airlines to manage. There will continue to be volatility but I don’t think we’ll see anything like 2008/2009. The financial crisis in Europe will reduce some demand on oil but I see no real economic growth in any part of the world that will drive demand either. The truth is that the emerging economies are largely dependent upon demand from both Europe and North America and neither of those economies will see high growth in 2012.
Airlines will continue to make large orders for more fuel efficient narrow body aircraft. This only makes sense as the gains are more than enough to justify the purchases and now is the time to gain an advantage in bargaining with both Boeing and Airbus. Furthermore, airlines need to hedge against their labor costs which will only grow over time.
Aircraft manufacturers have a much more sure path for the next 10 years now. Boeing will be biding its time on improvements to the 777 until it sees more definition of the A350-1000 and it will throw its resources into ramping up 787 production, 787-9 development and 737MAX development. It’s possible that we’ll see a real 787-10 announcement in 2012 but, if so, probably not until the latter part of the year.
Airbus has to get its act together on the A350 and try very, very hard to prevent too much schedule slip. Despite its efforts, I think we’ll see more schedule slip and it won’t reveal the entire picture as that unfolds. While I don’t expect quite the same delay as the 787 saw, it will be a significant delay and it will impact Airbus. They’ll also try to flog the A380 as much as possible and may even succeed with small orders in parts of the world it hasn’t penetrated much to date. I do not see any US based orders for the A380. Furthermore, Airbus made some big promises for the A320NEO and it’s got to work hard to deliver on those. They’ve made it out like the A320NEO is a no-brainer for development and while it is an incremental improvement, the engineering to deliver is non-trivial.
Bombardier will work its tail off to sell more of the CSeries and I think it may even succeed. The sweet spot its lineup offers will become more attractive to airlines once they see Bombardier actually perform in the development and test of this aircraft. The CS100 isn’t the attractive aircraft but its the one that will fly and deliver first. Once the performance of that aircraft is established, I think we’ll see orders from US and European airlines come in large numbers.
Embraer has got a nice grip on the regional airliner business but it also has a problem in that, right now, there is no growth path into a larger plane for purchasers. It has plans to work on re-engining the E-Series but I think they’ll concede the need to develop a larger airliner as well. The Bombardier CSeries presents just a touch too much threat in the future.
I don’t think we’ll see much from the other regional airliners being developed. The Mitsubishi MRJ doesn’t feel quite right for airlines to me and doesn’t offer a growth path into a larger airliner. The orders its racked up so far are fairly paltry and at risk, in my opinion.
The Sukhoi SuperJet, on the other hand, has a real chance, I think. It’s Westernized, it’s flying and it does feel like its the right size. The real challenge in this aircraft is ensuring support and with Boeing as a consultant, it may well have some help in that arena. If it does succeed, that success will begin in Europe as well as for airlines of lesser developed areas such as the Middle East, India and the Far East. If any orders come from the US, it will be years in the making.
If anything stirs in the US airline industry, I think it will be in the LCC arena and I think it will be small(ish) if anything. I do not think we’ll see any legacy consolidation despite wishful thinkers for a US Airways / AA merger. Something like that becomes much more likely in 2013.
I think American Airlines will plod through its bankruptcy in 2012 with a bit of scandal here and there. I think its labor force is about to take a beating on wages and benefits and I think the resulting bitterness will last for years. I also think that United and Delta will be growing a bit more concerned about AA late in 2012 once they have a picture of what AA’s cost structures are likely to be.
2011 was largely a “rebuilding” year for the airline industry. 2012 will be largely so as well. Until the world economies recover, the best the industry can hope to do is manage its problems and earn a bit of money. That’s eminently possible for them to do.
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December 5, 2011 on 12:37 pm | In Airline Fleets | 1 Comment
Airbus COO John Leahy is opining that United Airlines will ultimately add the A380 to its fleet because, in his opinion, it is the only way to be competitive in the Asia Pacific markets United serves.
I would suppose that anything is possible but I would also offer that I think this is highly unlikely for the near term. By that, I mean you shouldn’t go looking for a United announcement about this over the next 5 years.
United already struggles to figure out what to do with its 747 aircraft (as do most US based airlines) and that’s based on the fact that people here in the United States are looking for direct, non-stop flights rather than trips that require a flight to a “hub” city first.
The A380 might ultimately fit into the Asia Pacific strategies for both United and Delta but I don’t see it right now. Other than the ability to “concentrate” more passengers onto a single flight, the A380 doesn’t offer these airlines anything more than what they already have in their current and planned fleets. The idea that people *want* an A380 because it is an A380 is a bit foolish at best.
What people want is market competitive inflight service and the best available travel time. That can be accomplished profitably with the 777 and 787 fleets that these airlines will have.
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November 29, 2011 on 1:00 am | In Airline Fleets | No Comments
Now we see some rumour developing that United Airlines is in talks to make a 200 aircraft single aisle purchase. This has credence due to the fact that United has about 200 aircraft that are some of the oldest around (these are 757s and 737s mostly from the original United Airlines) and those aircraft are likely having a real impact on the bottom line as a result of fuel costs and maintenance.
I think we’ll see an order and I suspect that order may well go all to Boeing. It may be named United but it is run by Continental executives now and those executives have found ways to effectively use the 737 on their routes. Furthermore, I think Boeing may be able to offer earlier delivery positions than Airbus can.
What might we see? I would look for a sizeable portion to be 737-900ER aircraft with some 737-800s. In addition, I think we may well see a follow on order for the 737MAX aircraft again in the -800/-900 configurations.
The current fleet of Airbus A319s are “good enough” and while some of the A320 aircraft are getting older now, they aren’t quite old enought to start planning retirement of until those older 737-500 and 757-200 aircraft are replaced. About 1/3 of the A320s were delivered in the mid 1990s with the balance showing up from around 2000 and on. Almost all of the A319s arrived in the early 2000s. There is maneuvering room left with those fleets.
Airbus will want to keep United but I think they’ll struggle to offering the delivery positions that United will need. Those positions are needed now and over the next 7 to 10 years. Airbus has sold most of those positions. The only way to offer early positions is to increase production even more.
And both Boeing and Airbus are struggling to figure out how to increase their production beyond their plans for production rates that will already be historic for commercial airliners. It would require another production line and even more suppliers for airliners that are now fairly obsolete in light of the A320NEO and 737MAX.
Look for an order announcement in the next 1 to 3 months and my bet is on a 200 to 250 aircraft order of 737s with about 100 of those coming from the 737MAX line.
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November 24, 2011 on 1:00 am | In Airline Fleets | No Comments
American Airlines has chosen to receive Airbus A319 aircraft and A321 aircraft in its first round of deliveries from Airbus as a result of this summer’s order. So far, it isn’t know how many of each will be received.
The A319 choice surprised me somewhat. Some speculated it would be ordered as a gap filler between AA’s 160 seat 737-800 and its largest regional jet, the CRJ-700 which has about 65 seats. AA’s MD-80 aircraft are configured with 140 seats. The A319, in American Airlines configuration, should have about 126 seats based on my research into how other SuperLegacy airlines are using the aircraft. Delta has 126 seats on its A319s, United has 120 seats (but with Economy Plus in the mix) and US Airways has 124 seats. I expect American to meet or beat Delta’s seat count.
I myself didn’t expect the A319 to be selected because it is heavier aircraft and the costs to operate it are similar to the A320 much as what has developed between the 737-700 and the -800 on the Boeing side. I actually thought that something such as the CSeries might get considered as that gap filler. The A319 offers a bit more flexibility on payload and range but the CSeries would offer better trip costs most likely.
Unlike many, I don’t regard the CSeries as a program that will fail.
The A321 was the no-brainer. It will fill the 757-200 role nicely on most domestic routes. I would expect these to be configured with about 185 seats on anything but specially configured international aircraft. US Airways has 183 seats on its A321 aircraft but, again, I expect American Airlines to beat that number by a few seats. Current American Airlines 757-200 aircraft have 182 or 189 seats depending on the mission its configured for. I expect we’ll see something close to 189 seats for AA’s A321s with the remaining 757-200s to be reconfigured for those long, thin trans-continental and trans-Atlantic flights.
But here is the real surprise for me: The A319s will have CFM engines and the A321s will have IAE V2500 engines. While you can choose from either manufacturer on both airframes, American has decided that commonality is trumped by mission performance evidently. Again, I would have expected American to probably go with CFM on both airframes if only because they do have some experience with the engines as a function of owning the 737-800.
However, the IAE is reportedly the better performer for longer duration flights and it would appear that the planners at American would prefer to optimize performance of the aircraft according to its expected mission as opposed to reduce costs by having a common engine family. Contrary to what some may think, I think that’s the right decision. SuperLegacy airlines will own enough of an aircraft/engine family to enjoy economies of scale and it is no longer necessary to try to maximize cost benefits by sticking to one aircraft type and one engine.
In other words, buy the aircraft and engine that best fits the expected mission should be the purchase strategy we’ll see not only from American Airlines but other SuperLegacy airlines as well.
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November 15, 2011 on 1:00 am | In Aircraft Development, Airline Fleets, Airline History | 2 Comments
(Flickr)
I got asked what I thought of the A340 last week by a reader of FlyingColors and decided to give some thought to that subject and write a post.
The truth is, the A340 was probably the first Airbus aircraft that I really liked visually. I liked the slender appearance of the widebody fuselage and I liked the four engines and how they were hung on the wing in a proportion that just seemed a bit sexier than other 4 engine aircraft.
I liked Airbus’ approach to the A340/A330, too. I’ve always been fond of the parts bin approach to creating value for a customer and the A330/A340 development was certainly that.
A fuselage that got borrowed from its first twin-aisle aircraft and CFM engines that were derived from the A320 aircraft. Need a medium range hauler? Use our A330. Need a long range widebody? Try our A340. Going trans-Atlantic? Use our A330 and if you’ve got trans-Pacific routes, we have this lovely 4 engine aircraft for you.
And you got to have pilots that could fly both.
It was a beautiful approach and a real answer to what was needed at the time. It was way better than McDonnell Douglas’s offering in the MD-11 and Boeing really didn’t have an aircraft that even fit the needs at all.
ETOPS was changing the game at the same time, however. So was engine development.
The MD-11 was a bit flawed in that it really needed a truly new wing and better engines to achieve its mission. But the ever frugal derivative player, McDonnell Douglas, played things just a bit too frugal.
The 747 was simply a different class of aircraft. The 767 was too small and too short ranged to fit the gap.
Airbus did a great job with those aircraft in offering a sweet spot solution for both capacity and range and then made a strong business case for both of them by making them as common as possible. You cannot blame any airline who went that route. It was, in the context of the times, the perfect solution.
What we didn’t really count on was engine manufacturers being willing to truly make game changer engines and ETOPS going far past anything anyone could envision. The 777 was born and it was an even bigger game changer. First an aircraft that solved the A330 problem just a little bit better. Not fantastically better but it offered just a touch more capacity and bit more cargo capacity and it did it with engines that were more revolution than evolution.
The A330 has survived because of its improved derivatives and any airline using them makes great money.
The A340 got hampered by a few things. It needed a bit better wing and better engines (and finally got both in the A340-500/600). The CFM engines were a great choice going in but the Rolls Royce Trents were the answer to a question that got asked a bit too late.
Airbus bet on 4 engines being preferred for long haul, trans-oceanic routes and given the dominance of the 747 in that market, it wasn’t a bad bet. Their mistake was in underestimating Boeing’s ability to look forward. Boeing saw the possibilities in ETOPS and extra high by-pass engines that were more reliable than anyone could have conceived of a generation earlier. And it should have given its customer base at the time.
Airbus was hampered by a bit of McD disease and by multi-government ownership at the time. It didn’t have enough capital to go “all in” on designs and knew it had to make its business case on flexibility which meant derivatives. In fact, it often only got capital for new investment if that investment benefitted its owners in the form of jobs programs for their citizens.
While thinking about this post, it occured to me that Airbus even produced a 747-SP. The A340-500 derivative. It could fly fantastic distances but without enough passengers to make it cost effective. Then the 777-200LR came along and was capable of doing *that* mission better and cheaper.
The 777-200ER and 777-300ER killed the A340 in all forms (And EADS CFO just admitted it in the press). It could haul more passengers and cargo for the same or longer distances for less money. It was that simple. Boeing made the business case on trip costs and won.
Even if hindsight is 20/20, you can’t say that Airbus made a mistake with the A340. The A340 killed the MD-11 and exposed the weaknesses of owning 747s. It did its job very well but it arrived just a little bit too late to enjoy its success for very long. Timing is everything.
I would criticize Airbus for the A380. Yes, it has made a few airlines some good money. It also ignores the model(s) for long haul travel over the broad spectrum in favor of trunk routes. It will never enjoy the numbers or prevalence of the 747. On the other hand, neither will the 747-8i.
I’m not sure the A350 is the answer either. I don’t think it fits long, thin routes as well as the 787 and its planned derivatives. I don’t think it fits the long, large capacity routes quite as well as the 777 either. Its smallest derivative is an A330 replacement at best and I question whether or not it will ever get built. Its largest derivative so far doesn’t respond to the 777-300 as a game changer either. They are free to prove me wrong.
It’s not that I think the A350 won’t sell. It will. But I think it’s destined to be a player among a fairly small core group of airlines. Much as the A380 is and will be. Boeing took a page from the Airbus playbook and built the 787 to fit a nice, broad piece of medium and long haul routes and positioned itself to answer the largest A350 with a next gen 777 or next gen new build large capacity, widebody aircraft.
Boeing one ups Airbus over the next 20 years with its product line up and does it in a way that has the gaps covered in distance, capacity and service.
With all of that said, I still think the A340 is one hell of an elegant and pretty airliner. It lends itself to the great airliner liveries of the world. Just look at these:
(All images from Flickr under their Creative Commons License)
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November 9, 2011 on 1:00 am | In Airline News | 2 Comments
Ryanair says that it may buy or lease used aircraft to fill its gaps until the COMAC C919 arrives in 2018 with a 200 seat aircraft.
I say that that statement is Ryanair standing up and yelling “Look at me! Look at me!” to Boeing and Airbus. ]
While Ryanair says its dead serious about this aircraft, they conveniently do not rule out striking a deal with Boeing or Airbus on their aircraft and I would point out that China has yet to produce a viable commercial aircraft . . . ever. They are getting closer and I do believe that China will one day manage to succeed.
However, their ARJ21 is a non-starter since it is heavy and, you know, no one has really ordered it except Chinese airlines who were told to order it. Building a first time, competitive single aisle mainline aircraft requirese a body of experience that China doesn’t have. Brazil has it. Arguably Japan has it. Canada even has it.
China doesn’t.
So why should Boeing or Airbus feel threatened by Ryanair’s moves? They shouldn’t. Sooner or later, Ryanair will have to make a move on a next generation 737MAX or A320NEO. And they will get a good deal but gone are the days of getting a deal where you can buy a 737-800 and sell it in 3 years to *make* money on the sale. Neither manufacturer are, in the least, that desperate.
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November 3, 2011 on 1:00 am | In Airline Fleets | 1 Comment
Airbus has announced a provisional deal for Russian airline Transaero to buy its Airbus A380 aircraft. The order is for 4 airplanes at a list value of about $1.5 Billion.
What’s impressive is Transaero’s plans to have these aircraft seat 700 people. The Boeing 747-400 Domestic is capable of seating about 550 people in a high density layout. The Transaero aircraft will be the rough equivalent of adding another 737 to a 747.
Air Austral, another purchaser of the Airbus A380 has announced plans to fly its aircraft with seating for over 850 people. That would be the equivalent of adding a 777-200 to a 747-400.
Will it work for these airlines? Time will only tell but it’s hard to find that many people who want to be crammed into that kind of airliner for a long haul flight at any price. Current A380 operators are making money with their aircraft but only on extremely high density, high profit long haul routes.
There are only so many routes in the world and, more importantly, there are only so many airports that can accomodate the A380. In Russia, the only one is Domodedevo.
As much as I do not want to fly on such an aircraft, I have to admit that I would like to see what 800 seats on one aircraft looks like.
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October 28, 2011 on 1:00 am | In Airline Fleets | No Comments
Richard Aboulafia of the Teal Group has criticized Boeing and Airbus plans to ramp up production on their single aisle airliners and the man has a strong point. Current demand isn’t from growth, it’s simply from the need to replace aging airliners and the thoughts of ramping up production to 50+ per month does smack of hubris.
Some airlines do desperately need newer, more economical airliners. American Airlines is a great example and they’ve made their order. However, what makes sense for AA doesn’t necessarily make sense for another airline. Take Delta, for instance. Delta has a fairly mixed fleet with both Boeing and Airbus products. What it doesn’t really have anymore is that 70’s/80’s fleet of aircraft with really inefficient engines a la MD-80s and what it does have in that category, it’s getting rid of fast.
But what about the MD-90s, you ask? Check out what engine is on that aircraft. It’s an IAE V2500, the same that is sold today on the Airbus A320 series. What Delta is keeping isn’t nearly as old and inefficient as you think and the aircraft are far less capital expensive than new aircraft are. Simply put, Delta is replacing exactly what needs replacement and not buying one aircraft more than necessary.
Other airlines are evaluating the options for what they need in the next 15 to 20 years. Southwest has a fairly new, fairly efficient fleet of 737s and it will want to keep buying new aircraft, too. But what does it need? Right now, it needs the 737-800 and it needs it now rather than later. It needs replacement aircraft for the remaining 737-300/500 aircraft in the fleet and that is being achieved with 737-800s (which replace 737-700s which then replace 737-300/500 aircraft.) But does it need the 737-MAX?
Well, yes and no. It needs the MAX but the airline also is put into an odd position in that it is likely faced with the following scenario: It will maintain a large fleet of NextGen 737s for the next 10 years or more. If it buys the 737-MAX, it will need to hold onto those aircraft for about 20 years. Assuming it can take deliveries in 2017, that means the MAX stays in the fleet for as long as 2037 or longer. However, Southwest knows that a new single aisle airliner will be available around 2025. That’s the airliner that it really needs to go deep on. So, at best, the MAX is an interim solution for airines like Southwest (and Ryanair and others) and you don’t go deep on interim solutions.
The same is true of the A320NEO. For most airlines, going deep on the A320NEO is the wrong decision. Well, for the committed Airbus customer, going deep on the A320NEO isn’t quite as foolish because it is fairly obvious that Airbus *won’t* have a replacement for the A320NEO as soon as 2025. More likely, Airbus wouldn’t roll such an aircraft out until 2030. This is why you’re seeing fairly strong orders for the NEO from existing Airbus customers.
Right now, both manufacturers have deep, deep order lists. They want to extract as much value from those right now as possible because they know that as soon as they do introduce new airliners, those orders will change quickly. The market will become flooded with cheap, relatively new “classic” single aisle airliners with a new single aisle airliner introduction. When the market is flooded with those aircraft, the manufacturers have a much harder time selling customers into their newest and best. So they want to slim those lists down as much as possible right now.
The folly is that ramping up production comes with fairly high costs and the only way to justify those costs is to be able to show that you’ll have an order list that will sustain those high production rates. The manufacturers think the NEO and the MAX will garner enough orders to justify those production rates. That’s the part that is suspect. Yes, initial orders are high(ish) but consider this: Annual production of the 737 and A320 already exceeds 800 aircraft a year. That’s a lot of aircraft and it wasn’t that long ago when Boeing and Airbus could hardly find a buyer for the planes they were producing. I’m talking about 2002/2003 time periods which were a result of September 11, 2001 attacks that reduced air traffic dramatically and killed the finances of airlines around the world.
So, is a growth to 40 aircraft plus or minus a month justified? Probably. Almost certainly. Is growth to 50 or more per month justified? No and I don’t think the manufacturers are going to commit to that presently. Right now, Boeing can reach to the high 40’s without too much trouble. Airbus would struggle with that without making a much larger investment in a new line (such as in the United States.)
The A320NEO and 737MAX aircraft are interim solutions. That’s it. Initial orders will reflect some pent up demand to replace aircraft but it’s unlikely that the pace will continue in a sustained manner. In fact, airlines are being much more prudent in their orders by ordering a few here and a few there to just keep pace with their conservative needs. We won’t see a need for production rates at 50 or more per month until a manufacturer gets off its duff and builds a new single aisle aircraft.
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October 14, 2011 on 1:00 pm | In Airline Fleets | No Comments
China Southern received their first Airbus A380 and I learned something a bit surprising.
That was the 17th delivery of the year and the 58th Airbus A380 to be delivered. For the record, I think that Airbus might have just got its act together on the A380 now.
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August 20, 2011 on 1:00 am | In Airline Fleets | 1 Comment
Delta has decided to stick with its plans to order up to 200 aircraft in 2011 says CEO Richard Anderson. This despite the sudden economic turbulence and it’s the right move.
Delta has some right old aircraft on its hands. It’s fleet average age is 12 years which isn’t as bad as American Airlines but it doesn’t tell quite the story either. Much of its mainstay narrow body aircraft is *old*. And they’ll only get older while Delta waits for deliveries to start.
What comes in this order? My guess is that we won’t see any game changer orders for any 2nd tier manufacturer such as Bombardier or Embraer. This will be about replacing older A320s, 757s and MD-88/90 aircraft. Those are the aircraft with older, less modern and less powerful engines that are costing big dollars in fuel bills.
I do not see this being about 767s or regional jet aircraft. Nor do I see Boeing 737 replacements coming on line either. It’s unlikely that we see 747s retired in favor of others in this round.
So who are the players? Airbus and Boeing, of course. I’m not sure I see this as either company’s advantage either. Airbus will be pitching the A320/A321 NEOs and Boeing will be pitching the 737s (new and old) and it will be tough to call this one. I think who comes out on top in this order will be determined by who has slots for earlier deliveries of the more re-engined aircraft. If Airbus has slots, it will get orders. We know that Boeing has slots but order delivery dates are somewhat murky, in my opinion.
I do not look for Bombardier CSeries or Embraer E190/195 aircraft to be ordered in this. They’re smaller and Delta has that seat range covered right now.
My best guess? I tilt towards this being Boeing’s order. I think it might be won on price and an opportunity to get re-engined aircraft just a tad earlier than Airbus. However, I do not think that means that Airbus is out of the game on future orders whatsoever. I just think that it may come in the form of a follow on order in the next year and may well include Airbus medium to long range twin aisle aircraft as well.
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August 18, 2011 on 1:00 am | In Airline News | No Comments
Various media reports point to Boeing leaning heavily towards a “minimum” investment strategy in defining what the new Boeing 737 Re Engine would look like.
That means an aircraft that receives enough modifications to handle the heavier CFM Leap56 engine with a reduced fan diameter which should make the 737 models roughly equivalent to the Airbus A320NEO with about 2% cost efficiency advantages over the A320NEO.
My problem with this is that it simply confirms the Airbus A320NEO as the right move and offers Boeing little advantage over the next 10 to 15 years and possibly puts it at a disadvantage over that time frame since there are fewer areas to incrementally improve performance of that airframe over time. One example is that the 737 already has winglets (aka “sharklets” on the A320).
In addition, this is the creeping incrementalism that we saw at McDonnell Douglas over nearly a 2 decade time period that led to their ultimate demise. Aircraft manufacturers don’t win over the long term with derivatives and I’ll point out that there have been a total of 9 major derivatives of the 737 with several sub-derivatives of those as aircraft as well. That’s an aircraft that has run its course without something game changing.
If it were to be a Re Engine strategy, it would have been far more encouraging to see Boeing design a new wing or a modification to the wing to bring additional gains. It would have also been more encouraging to see a modification to the nose gear to permit a full on adoption of the CFM Leap56 and, possibly, even the addition of a 2nd engine choice (Pratt & Whitney GTF). Yes, that begins to look like a new airliner but it puts Boeing firmly ahead in the narrow body game.
My own preference was to see Boeing make a move for an entirely new aircraft with introduction into service in 2018. It would have been a difficult challenge but it is one that Boeing is in position to achieve. It’s learning curve with new materials and design approaches has peaked.
Offering that you couldn’t figure out how to immediately ramp up production to 40 to 60 aircraft a month is a somewhat lame excuse for backing away. If you can build if efficiently at current production rates (in the mid 30’s per month), you can figure out how to build it at a 60+ aircraft rate when that time comes.
This, in some ways, smells like Boeing trying to maintain the older airliner to use as an replacement for aging military aircraft such as what they’ve done with the 737 in creating the Boeing P-8A Poseidon (replacement for the venerable P-3). It’s notable that even that aircraft got a better wing in the form of having raked wingtips a la 767-400ER for longer duration, efficient flying.
My greater point is that you don’t win and you don’t grow as a company by playing “keep up” and playing it safe. Airbus managed a coup by forcing Boeing’s hand and scaring them away from a new design. Somehow, I severely doubt that a Boeing led by someone such as Alan Mulally would have adopted such a strategy.
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August 8, 2011 on 8:49 am | In Uncategorized | No Comments
Airbus has racked up over 780 firm orders for the A320NEO since announcing its availability and even I have to say that I’m quite surprised at how fast that happened. It would appear that airlines vocalized a desire for a new aircraft and ordered the re-engine like it was the best thing to happen since the Concorde.
There is absolutely, positively, no question that Boeing needs to get back in the game ASAP. Theoretically, they did with the American Airlines order but . . . both Boeing and all other airlines have largely been silent on the 737RE since that order.
I was certain that we would hear other airlines grumble about being kept out of the loop or shout with joy that they, too, wanted to order the aircraft. Instead, we learn at Southwest Airlines’ earnings call that they were kept in the loop and . . .
Nothing. They were kept in the loop and they endorse the aircraft but no other talk of an order.
The 737RE doesn’t have board approval to offer . . . yet . However, in this particular case this really is a formality. The lack of any other orders even getting mentioned as rumours tells us just how fast the AA deal was put together. No one else is any farther along.
I repeat, Boeing really needs to get back into the game. Numbers are perception and Boeing knows how well it did when it was running up the 787 numbers in the early days. Perception is as important as facts when it comes to whether or not an airline views your aircraft as leading edge.
Right now, we don’t even know what the 737-RE will be called and that’s kind of bad.
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July 28, 2011 on 1:00 am | In Airline Fleets | No Comments
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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July 24, 2011 on 1:00 am | In Trivia | No Comments
American Airlines has had a pretty curious fleet at times and they’ve tried out more than one dud in their fleet as well. Two such examples are the Convair CV-990 and the MD-11. Neither really worked out that well for AA.
American has also owned a variety of foreign aircraft over the years and has just announced it’s buying foreign again in the form of the Airbus A320 family.
Can you name the 4 foreign aircraft families American has previously owned? The answer after the fold: (more…)
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July 21, 2011 on 1:00 am | In Airline Fleets, Airline News | No Comments
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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July 14, 2011 on 1:00 am | In Airline Fleets | 1 Comment
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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July 13, 2011 on 1:00 am | In Airline News | 15 Comments
One consequence of the A321NEO is that everyone is talking about it being a Boeing 757 replacement. Everyone talks about how the 757 fleet needs to be replaced and I think quite a few people are missing the point on the 757.
It’s an aircraft conceived of in a regulated era, born in a deregulated era and an airplane that has never really been part of a family of aircraft. It’s a red headed step child that despite its status, airlines found a use for it. It was built with too much range, too much power and for an airline model that didn’t include hubs and frequency.
Everyone talks about airlines needing to replace their 757 fleets and its true that these airliners are now old by any standard and will need replacement in the fleet. But the one thing we shouldn’t do is assume that the mission being served by the 757 is the mission that airlines want to use their next aircraft for.
I’m not sure there needs to be a 757 replacement. I’m also not sure that we don’t need a 757 replacement. The original missions that Boeing conceived of for the 757 are not the missions that airliner served primarily. It would be a mistake to assume that airlines want to replace 1000 757s that are serving long, thin trans-Atlantic routes or trans-continental routes. They don’t. Airlines simply found that they could use that expensive asset on those routes and earn money.
But airlines may well have already identified how they want to serve that mission in the future and it may well not resemble anything close to the current 757.
Boeing is right to let the airlines define the missions. The next Boeing 757-like airliner to come from Boeing will be from a family of aircraft and it never really was the 737-900ER even though that airliner can serve in place of the 757 on most domestic routes.
I don’t think we’ll ever see such a hybrid airliner made again. Can you imagine Boeing or Airbus sizing an aircraft to fit a smallish market and then providing it with over-powered engines? I can’t. Building a family of airliners is about tailoring the aircraft to fit the missions very well and todays missions are very different than they were even in the 757s heyday.
Don’t expect the A321NEO to be a 757 replacement. Expect it to be an excellent coast to coast airliner for longer, thinner routes between those cities. I don’t think it will be used for Hawaiian and trans-Atlantic routes in great numbers although it may get employed on a few of those missions if it can work and make an airline money.
Who says airlines want to fly such an aircraft to all kinds of cities in Europe? I don’t. In fact, I think that airlines aren’t that interested in such routes (they may be profitable but only just so) being served by such small aircraft. Such routes don’t yield a very attractive number of dollars on a daily basis and they do come with risks to that profit that airlines don’t enjoy (fuel stops, for instance).
I would also point out that the engines needed for a “true” 757-like replacement don’t exist today. There are no new next generation engines in those thrust ranges at this time and I’m unaware of any real plans or needs for such in the next ten years either.
But if airlines want a 190 seat trans-Atlantic capable airliner that is efficient and reliable, they’ll communicate that to Boeing and Airbus. The fact that Airbus and Boeing aren’t running around and chatting up such an idea kind of indicates to me that that requirement really isn’t in the top 5 airline mission requirements being talked about today.
The next generation of single aisle airliners will be different than the current generations because those missions evolve. Airlines will be asking for something different than just a better 737-700 replacement. They’ll be asking for a range that will serve their current and projected future needs and that will define airliner families that look very different from the Boeing 737 and Airbus A320 series.
If anything, I think the mistake Airbus made with its NEO development is that it is only offering better engines, not a better aircraft. It won’t have a better cockpit, better seat layout and it won’t be lighter or more durable or more reliable. That’s where Boeing can really zing Airbus and where it should.
However, for Boeing to do so, they have to, you know, announce the damn project and get on with it.
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July 11, 2011 on 3:17 pm | In Airline News | No Comments
American Airlines apparently is playing the Ryanair game with both Boeing and Airbus by using a 250 aircraft orders as both a carrot and a stick. And now we know why John Leahy was hinting at Boeing losing a major network carrier.
Make no mistake, this really would be a very big loss for Boeing. The question is whether or not Boeing is taking American seriously in this. Some might be tempted to think it’s a bluff, I do not think it is anything resembling a bluff. The A320NEO is something that American needs more than most network airlines.
Instead, this is a “put up or shut up” move to Boeing and I’ll wager that it won’t be the last. Airlines want to know what Boeing is going to do and waiting very much longer is likely going to result in either more orders for Airbus or renegade orders to Bombardier and Embraer.
And Boeing can’t be just a medium to large aircraft builder. It needs this single aisle market for many reasons and the airlines are dissatisfied with Boeing’s tentative approach to what it plans to offers airlines next. To be fair, even the 737NG is getting a bit long in the tooth and promising incremental improvements isn’t going to satisfy airlines anymore. Much like the new and improved A330 that Airbus tried to sell many years ago didn’t fly either.
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