India’s Hindustan Aeronautics Ltd (HAL) has announced plans to build yet another 70 to 90 seat Indian regional jet.  While we don’t have details on its configuration yet, it will likely be powered by a version of the Pratt & Whitney GTF engine (Geared Turbo Fan) and with that seating configuration, I expect a 2 x 2 seating configuration.

 

But does the world need yet another regional jet in that configuration?  Probably not.  Right now Embraer and Bombardier are both offering highly efficient regional jets in that seating configuration and Embraer’s family ranges from 70 to 110 seats and offers cross cockpit compatibility.  Bombardier of Canada has the CRJ700/900 at present and is close to flying its prototype CRJ1000.  Russia’s Sukhoi is hard at work producing their Sukhoi Super Jet, another regional jet in yet the same configuration as all the others.  China’s AVIC I is producing the ARJ21-900, a 5 across regional jet for China’s growing routes.  If you thought I was done, I’m not.  Japan’s Mitsubishi is also producing a very similar regional jet using the new Pratt & Whitney GTF.

 

While both Bombardier and Embraer have enormous backlogs for their aircraft, they also have a very credible track record in building aircraft.  They also have families of aircraft that allow airlines to right size their fleets to routes while at the same time keeping maintenance costs reasonable.  I question whether Mitsubishi, AVIC I or Sukhoi can offer airlines the same capability for some time to come.  I also question whether these airplanes offer the right economics for many airlines.

 

A similar turbo prop aircraft can offer similar seating, comfort and travel times for less than half the operating cost on stage length of 400 nm or less.  I continue to believe that there will be a shift to aircraft that offer both the operating economies and capital costs that make such routes go from marginal to profitable.  Indeed, many mainline legacy airlines have contracts with pilots that are far less restrictive when it comes to seating capacities on such aircraft.  For instance, American Airlines has contracts in place that disallow American Eagle (and other commuter airlines serving American Airlines) from flying these new, higher capacity jets.

 

Continental Airlines showed us the way to a new profitability when they introduced the Bombardier / De Haviland Q400 on routes in the northeast.  Horizon Airlines confirmed their future by choosing to eliminate their CRJ aircraft and older Dash 8-200 aircraft and now they are being replaced with new, modern Q400 airplanes. 

 

The world doesn’t need another new regional jet no matter who built it.  It needs high capacity turbo-props and 110 to 140 seat mainline aircraft.

 

 

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V Australia, a new subsidiary international airline of Virgin Blue is due to start new routes from Sydney to Los Angeles in December of 2008. They will be using new build Boeing 777-300ER aircraft configured in an economy, premium economy and business class setup. Many question the viability of successfully flying that route against the likes of QANTAS, Air New Zealand and United Airlines but I have a feeling these guys are approaching this route with more right sized equipment.

 

QANTAS and United Airlines both use 747-400 aircraft that typically have 343 and 374 seats respectively. V Australia’s 777-300 aircraft will have about 300 seats in their mix. However, V Australia will fly the most fuel efficient aircraft in its class and offer a brand new cabin whereas the QANTAS and United aircraft are older, less fuel efficient. In addition, with the coming fracturing of the US-Australia market, the 777 and 787 will fly those routes with lower seat costs and higher load factors than the 747 can offer.

 

QANTAS will be placing the A380 on that same route in the near future and while its seat costs will match the 777, the real question is whether or not they can fill the aircraft. The QANTAS A380 has 450 seats to fill every flight. The V Australia only has to fill 300. Allowing for similar departures and seat demands, the 777 makes money a lot earlier in the game.

 

Convetional wisdom is against V Australia and the 777. I remember that the only airline to participate in the design of the 777 and not buy it was QANTAS. There is a reason why the 777-300ER and 777-200ER have the range and efficiency that they have today. It was designed for those US-Australia routes. If V Australia keeps a good schedule and are able to manage their fuel costs well, they’ll likely succeed. Those routes could use a more economy minded competitor.

 

Here is the new V Australia 777 on the Microvolt / Paine Field website.

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United Airlines, an airline that has offered spotty-at-best service for more than 10 years, seems to have the 9 lives of a cat to most people.  Unfortunately, of all the legacy airlines, it is the one that should have melted away some time ago.   It emerged from bankruptcy in 2006 after spending 3 years and over $300 million reorganizaing itself to operate in a world with $50 / barrel oil without a realistic plan to deal with contingencies.

 

The problem is, oil was already at $60 / barrel when it started fresh.  Since 2006, United has been the one airline that always manages to arrive to the party in rumpled clothes and only a $5 bill to pay the door charge.   Those rumpled clothes are an aging fleet (although all of the truly old Boeing 737s are now being withdrawn from service to cut capacity) of aircraft that do not match the interior quality or service level of most of its competitors. 

 

The management team, most importantly CEO Glenn Tilton, has spent more than 2 years maneuvering to merge this airline with another and, yet, has been rebuffed by all potential candidates such as Continental, Delta and US Airways.  Indeed, they took a particularly condescending attitude towards US Airways’ offer to explore mergers when Glenn Tilton implied that he and his team would remain in place and “mentor” the US Airways management team including Doug Parker. 

 

Say what you will about US Airways but it isn’t the company we knew in the 90’s or even 3 years ago.  Doug Parker and team are really America West and they’ve been better at executing to plan than virtually any other management team at a legacy airline.  If anything, Mr. Tilton would be well served by Mr. Parker’s mentorship. 

 

Now the marriage dance in airline mergers is essentially over.  Delta and Northwest are walking down the aisle, Continental has chosen to stand alone (wisely in my opinion) and American Airlines has decided to pursue trans-atlantic partnerships with British Airways and Iberia Airlines.  There is no one else left for United to pursue a merger of equals and they lack the cash and operating plan to purchase a smaller airline as well.  Indeed, Continental Airlines is joining the Star Alliance (of which United is a founding member) and that may benefit United but if they think they will remain the shining star in the US market for that alliance, they are sadly mistaken.

 

Continental’s management team is stable, smart and agile in this market.  They are uniformly the choice of airline among business travelers (and that is who pays the bills) and possess a young, modern, harmonized fleet of aircraft that serve the routes efficiently.  Continental has hubs that will serve that alliance well in both NYC, Houston and Cleveland and offer Star Alliance members excellent codeshare options throughout the United States.

 

United Airlines has a fleet of 747s that are some of the oldest -400 models and by all passenger accounts they are in desperate need of refurbishment (unplanned for 3 years and not recognized for another 2 years while United showed its legs to potential suitors).  They possess a large 777 fleet which, on the surface, would imply some modernity there.  However, about half of that fleet are early model “A” market 777s powered by the less powerful and efficient Pratt & Whitney engines.  No lip gloss found there.  The other half are 777-200ER models that would at first glance appear to be more modern intercontinental aircraft.  They aren’t, really.  They’re what Boeing originally referred to as “B” market 777s and, once again, they are powered by the less reliable and efficient Pratt & Whitney PW4000 series engines.  I would point out that every other operator of this aircraft in the US is using the more powerful and efficient Rolls Royce Trent or GE90 engines (American Airlines, Delta Airlines and Continental Airlines.)

 

Their 767 fleet, a large one comprised of 767-300ER models, shows the same flaws as their 777 fleet.  While some were built as recently as 2001, they are all powered, once again, by the less fuel efficient Pratt & Whitney engines.  I’m sure a theme is beginning to reveal itself here. 

 

The same also remains true for their 757 fleet in that they are powered by the lesser Pratt & Whitney engines while other airlines are utilizing the real rocket of that type, the Rolls Royce RB211 powered 757 that, with winglets, is capable of ETOPS trans-atlantic operations.

 

Ignoring the soon to be gone 737 fleet (which is old and dingy but not powered by Pratt & Whitney for once), the remaining aircraft are various Airbus A320 types.  While they are not old by airline standard, most are more than 10 years old and some are approaching 15 year of age now. 

 

An old airplane is not an unsafe one but, in United’s case, it is an uncomfortable one.  While other airlines have paid attention to maintenance, comfort and even tuning engines, United has spent its time navigating bankruptcy and its management team has bet their golden parachutes on a merger.  With no other really suitable partners, they are now faced with operating an airline that by most standards, is not competitive.  What’s worse, they have lost 2 years time that could have been spent executing a service plan that might work.

 

If the cost pressures airlines are facing continue for another year, they (United) will be faced with another potential bankruptcy and, this time, it should be a liquidation.  There is no argument for this airline continuing its operations under the present regime nor is there an argument for it continuing to operate simply to support air transportation in the United States or abroad.  There are plenty of air carriers that can take up the slack and operate more coherently than United.   In fact, the only part of United ceasingly to exist that I find distasteful is that it potentially offers American Airlines an even greater lock on Chicago’s O’Hare airport.  Since I experience that kind of fortress here in the DFW area, I know just how expensive that can be for a consumer.

 

Successful airlines share a few qualities that I’ve noticed over the years.  They generally possess a young, fuel efficient and harmonized fleet.  They buy the airplanes configured for performance on a variety of routes.  They have leadership rather than just executive management.  They focus on a clean, comfortable flight experienced that is defined by the service provided by its employees.  Such an airline also carefully watches its money and nurtures its finances to avoid running cash short on the wrong day.  It takes care of its employees not by offering the best salaries but by offering a living wage, a hospitable workplace and with fair treatment in both hard times and good.

 

That is the antithesis of United Airlines and, so, they go on the Death Watch.

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In the 1970’s, Japan was experiencing fantastic economic growth and both ANA (All Nippon Airlines) and Japan Airlines needed more lift for their internal domestic routes.  They approached Boeing and inquired about using the 747 for these high cycle, short duration flights.  After investigating the possibilities, Boeing discovered that relatively minor changes (landing gear for instance), they could produce an aircraft that met their needs.

 

By eliminating 3 classes of service, galleys and other long range accomodations, the Boeing 747SR was born and able to carry as many as 525 passengers in this new domestic configuration.  Later, those same aircraft were replaced with 747-400 Domestics capable of carrying over 560 passengers.

 

That was the first 500+ passenger commercial aircraft but now the new Airbus A380 may be capable of carrying as many as 800 passengers in a similar domestic configuration.  There is some debate that such an airplane would be of use since the logistics of carrying an additional 300 passengers becomes almost unsolvable for existing airport configurations.  No doubt Airbus would happily build the airplane if there is, indeed, a market for it.

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In 1966, American Airlines released a set of specifications for a new kind of an airplane, an “air bus”.  This plane was to carry 250 to 300 people in a wide body configuration using two new, more powerful fan jets and it would be able to operate short to medium trunk routes such as Denver – Los Angeles or New York – Chicago.  Many enthusiasts will recognize that both McDonnel Douglas and Lockheed responded to this with the DC-10 and L1011 aircraft and both were to become rather legendary.

 

But while the DC-10 experienced great commercial success and the L1011 became the pilot’s airplane (reportedly one of the easiest planes to fly ever built), it was Airbus that got it right with their A300.  Both the DC-10 and L1011 were “compromise” aircraft in that they had 3, instead of two, engines to meet a specification that United Airlines issued:  the ability to take off with a full load from Denver’s mile high airport.

 

Airbus was originally formed between Aerospatiale and Deutch Aerospace with Spain’s CASA and England’s BAC joining later.  Their original aircraft utilized 2 GE CF-6 engines and had a range of about 1500 nm.  The A300 would later grow in both range and payload ultimately culminating in the A300-600R which was capable of carrying more than 260 passengers and a full cargo load for more than 4000 nautical miles.

 

At one point in the mid 1970’s, Airbus A300 sales were so bad that they had to just keep manufacturing airplanes in order to keep the assembly line open while betting that times would change and their aircraft might be adopted by others.  One landmark change in sales for Airbus was Eastern Airlines.  Frank Borman, President and CEO of Eastern, was searching for a replacement for Eastern’s Boeing 727-200 aircraft that would carry more passengers with better operating efficiencies on Eastern’s high density, East Coast routes. 

 

Borman, the former NASA astronaut, was a tough negotiator and ultimately got 4 Airbus A300s to try out for terms that amounted to the cost to operate the aircraft.  Eastern discovered that the aircraft was a huge moneymaker for those routes since it consumed 30% less fuel than the competing Lockheed L1011 that they also owned.

 

Ultimately, Boeing responded with the 767, also a twin engined aircraft, originally designed for much the same mission as the A300.  However, in many ways the two aircraft evolved to serve different missions.  The A300 thrived as a trunk airliner that could carry a massive amount of cargo easily (because its fuselage was designed to accomodate 2 side-by-side industry standard LD3 containers) and operate on high density routes with both speed and low seat costs.  While it was certified for ETOPS(Extended Twin Engine Operations over water or “Engines Turning Or Passengers Swimming) and was even ultimately used on over-water transatlantic routes, its specialty remained its original mission.

 

The Boeing 767 was built with a narrower fuselage that could not accomodate those same LD3 cargo containers two abreast but it did find its own mission in the transatlantic arena as it gained both range and capacity.  To use the similarly sized 767 on the same routes as the A300 was to set oneself up for failure.  The A300 was just too good at what it did.

 

American Airlines owns a number of A300 aircraft and while they were always used primarily for those same routes that Eastern once flew (NYC to Miami and the Caribbean), they also used the aircraft for transatlantic routes such as NYC to London. 

 

To date, there is no other better aircraft for that short to medium haul, high density mission that the A300 has served so perfectly.  Since many A300s are aging now, they are being withdrawn from service but there exists no true replacement for this marvel either.  Boeing 757/767 aircraft cannot carry either the same passengers or cargo efficiently and while the A330/340 aircraft use essentially the same fuselage, they only begin to show true efficiency on 4000nm or greater missions. 

 

In most markets where the A300 has been withdrawn, that capability has been replaced with greater frequency with airlines using B737-800/900 aircraft and A320/321 aircraft.  The Boeing 787 derivative 300 series does, at first glance, meet that mission profile carrying a great number of passengers (280 to 310) on routes as long as 3000 nm.  However, the only airlines to order the 787 are Japanese carriers ANA and Japan Airlines.   Many speculate that the 787-300, designed to replace the 767 and A300 on regional routes, will either have to grow in range (4500nm) or face being a Japan only aircraft.  Indeed, Boeing announced last year that the 787-300 won’t be certiied for use in the US although it could be done very easily should Boeing decide that there is a market in the US for such an airplane.

 

Sadly, Airbus does not have a new replacement on deck.  Their focus has been on the giant A380 and developing their new A350 series aircraft.  Sales of their A330 aircraft have been brisk still and Airbus will likely turn its focus to an A320 replacement aircraft once they have both time and resources. 

 

I have no doubt that Airbus will once more “get it right”.

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The Dallas Morning News reported that American Airlines will be both accelerating 737 deliveries as well as taking up new orders for the Boeing product.

 

As they replace MD-80 aircraft (The Boeing 737-800 is as much as 20% to 25% more fuel efficient than the equivalent MD-82/83), your chances of a middle seat go from 1 in 5 to 1 in 3.  That said, I still find the prospect of flying newer 737s more attractive than the alternative.

 

I remain completely puzzled that American Airlines and United Airlines have not ordered 787 aircraft.  The 787 fits into their fleet and routes very well and offers just that kind of gain in fuel and maintenance efficiency that both airlines desperately need.  Currently, only Northwest Airlines and Continental Airlines have the B787 on order among the legacy carriers although US Airways does have some A350 aircraft ordered.  Indeed, the A350 ordered by US Airways seems a bit too large for their needs even when the purchase is justified with the cross-cockpit qualifications that the Airbus product offers with US Airways existing A320/A330 products.

 

The new DeltaNorthWest Airlines will have Northwest’s B787 orders and will continue to take deliveries on the B777-200LR it already has ordered.  Those two aircraft come very close to each other in performance and seat-mile costs in the ultra-long haul market but the 777 has the advantage when it comes to cargo-carrying capabilities.

 

I cannot believe that for the foreseeable future, there will be no true 757/767 replacement and it is even more difficult to believe that airlines continue to make plans to retain most of those aircraft for the foreseeable future.  Both the 757 and 767 have AviationPartnersBoeing winglet programs in place now resulting in fuel efficiency gains as much as 6% on the 767 but they still remain older aircraft with ever increasing maintenance needs.

 

 

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The Milwaukee Journal Sentinel has this story today.

 

Northwest Airlines has disclosed that it has written off its $213 million investment in the partnership with TPG Capital (Texas Pacific Group) that owns Midwest Airlines. Not only does it reflect Northwest’s view on the survival of Midwest Airlines, such a move also likely influences other investors views of both Midwest and the airline industry.

 

Texas Pacific Group is not in the habit of investing in companies and letting them fail but without new leadership and a new strategy for attracting traffic, Midwest has a very poor outlook. TPG does have leadership that is famliar with the airline industry such as David Bonderman (founder) who acquired Continental Airlines in 1993 and who was instrumental in bringing Gordon Bethune into the company from Boeing (trivia: Gordon Bethune worked for Braniff as VP of Maintenance at the same time my father was EVP of Marketing.)

 

However, at this point TPG would have to look seriously at acquiring another airline and merging it with Midwest. That would difficult given Midwest’s fleet (Boeing 717 and now grounded MD-80), its hubs (Milwaukee and Kansas City) and its expensive labor force (as much as 40% more expensive than industry average.)

 

Midwest has been unable to define itself as either a premium service or low cost airline and its struggle to be all things to all people is bleeding it of cash and opportunity. It would have been much better off merging with Airtran when that airline began making offers in December of 2006. Airtran already operates a large fleet of Boeing 717s and Boeing 737 aircraft and could have brought more long haul routes to Milwaukee and increased traffic at Kansas City as well. Even Midwests strategy of Signature and Saver service (effectively a 4 abreast business class and 5 abreast coach service) mates very naturally to AirTran’s own service product.  In fact, it continues to defeat me why Midwest so ardently defended against the merger in favor of TPG and Northwest except that, perhaps, the senior executive staff saw a chance to remain in power.

 

At present, there are no other airlines that make for an attractive partner with Midwest except AirTran and AirTran is now expanding its presence at Milwaukee with both short and long haul flights on its own.  In short, AirTran doesn’t need Midwest anymore and the only business case for acquiring them is to shrink capacity on Milwaukee routes its either operating or plans to operate.  Indeed, AirTran operates on a business model that fits nicely inside the MKE Airports strategy of being Chicago’s 3rd Airport by offering high value, low cost service to a wide variety of destinations.

 

Fans of Midwest Airlines celebrate its cookies and high quality service.  Unfortunately, what Milwaukee really requires is a low cost airline that connects to a variety of destinations important to Milwaukee businesses. 

 

AirTran has the fuel efficient equipment to operate the soon to be discontinued Midwest routes of MKE-SFO, MKE-SEA, MKE-LAX and MKE-Florida.  In fact, it already operates flights into all of those areas and has the ability to feed far more traffic into those routes than Midwest was able to do with its relatively small network.

 

Look for Midwest to continue to be squeezed by both AirTran and Northwest in the next few months with little space to maneuver.

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Etihad, Emirates and Qatar all have massive orders for massive aircraft.  Each is betting on the UAE (United Arab Emirates) becoming *the* international hub for global travel.   It is certain that each of these airlines is well funded largely from oil profits.  Nothing wrong with that.

 

But what happens when that funding gets tight?  Further, can these airlines really sustain themselves on what is really a global hub model given that most markets are fracturing into point-to-point missions?

 

Aircraft no longer need to fly one-stop between the US and India, for instance.  The 777-200LR makes it possible for an airline to fly a full passenger and cargo load between these two countries.   Why is it better to connect in the UAE when traveling to Australia as opposed to Singapore?  And what happens when we really do have aircraft capable of flying London-Sydney non-stop?

 

These airlines are clearly attempting to build a global network but how does that serve someone in Europe, North America and South America when we can already fly direct in most cases and fly on airlines that reward us with frequent flier perks for doing so?

 

So far, each of these airlines has not really embraced the alliance model either.  How will Emirates, for instance, ensure that they can fill A380 aircraft daily flights from JFK to Dubai without having some assurances of feed from the US domestic market? 

 

I smell a market crash coming one day. 

 

It seems the next step in airline network strategies is to further embrace the major alliances.  The three major alliances have worked diligently to craft networks that are global in reach.  With anti-trust immunity, they can begin to cooperate more closely on schedule and pricing too.  At what point do these alliances become a new kind of airline? 

 

It seems that the Big 3 in alliances could one day become the Big 3 airlines in all but official name.  It may  be possible that even airline identities will be blended into the alliance identity rather than the participating airline.   What I’m suggesting is that we may one day see OneWorld 777s and Star Alliance A330s instead of AA / BA 777s and Lufthansa A330s. 

 

It seems that closer ties and participation in each other’s planning might just result in these kinds of identities.

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Driving to work today, I spotted an AA MD-82.  There just isn’t an uglier livery than AA’s.  What happens when the next generation of aircraft are introduced into their fleet?  Will they just paint them all grey and be done with it? 

 

A lot of US Airlines don’t have the greatest livery.  Northwest, in my opinion, is the exception.  I think their colours and design are fantastic.  It will be a shame to see that scheme go. 

 

I like Continental and Delta’s tail designs but I’m just not much for the Bland Fuselage look.

 

 

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The competition that exists between Boeing and Airbus has to be one of the fiercest fights ever seen in commercial aviation.  Among aviation enthusiasts, most are dedicated only to one or the other and just visit an aviation enthusiasts discussion website and you’ll discover debate that is even more heated than what exists between Airbus and Boeing.

 

Family and friends have, from time to time, asked me whose airplanes I like the most.  I probably lean towards Boeing more than anyone but for different reasons than many have.  Before going further, I should say that I think Airbus builds a modern, competitive airliner and is in no way materially inferior.

 

I like Boeing’s approach to an aircraft.  I think they value customer experience just a bit more whereas I think Airbus tends to value an airline just a bit more.  One example is the difference between the 737 and the A320 aircraft.  Both are made for the identitical market and both are modern, fuel efficient jets.  Both have had rough spots over the years and both companies work incredibly hard to sell these jets to all kinds of airlines.

 

I should say that I admire how well Airbus has done at making their aircraft families cross-compatible when it comes to flight crews.  A pilot for an A320 can upgrade to an A330/A340 with a lot less training than a similar upgrade from a B737 to B767/B777.  Airbus makes owning their entire aircraft family highly beneficial *if* their aircraft family can fill all of your missions. 

 

However, I do find the 737 just a hair more comfortable.  I’m a rather tall and big person with longish legs.  Having flown numerous examples of both aircraft, I find the aisle seat experience roughly similar and the window seat experience very different.  The A320’s fuselage is more “circular” and therefore curves inward more at the shoulder to head height of most people.  At the window, my perception is that my head must lean away from the fuselage and that feels uncomfortable.  The 737’s fuselage is more ovoid and that same curve is more gradual and starts more above the passenger than next to him. 

 

The seats should be roughly the same but my perception is, again, different.  This simply may be a function of what US airlnes are using for a seat on the Airbus vs the Boeing.  My perception is that the A320 class of aircraft typically have a seat that is a touch thinner, a touch harder and therefore a touch less comfortable on flight durations of 2+ hours.  I have felt it on America West aircraft, US Air aircraft, United Airlines aircraft and Northwest Airlines aircraft.

 

I once had a chance to fly from PDX (Portland) to DFW (Dallas / Fort Worth)  via DEN(Denver).  My flight from PDX to DEN was on a United Airlines A320 that appeared to be older but not “old”.  Within 1 hour, I found myself fidgeting and since I was in Economy Plus next to a window, I expected to feel more comfortable.  I didn’t.  The next segment was on a United Airlines 757 (not a 737 but it does have the same fuselage dimensions and uses the same seats) in plain old Economy rather than Economy Plus.  I was simply more comfortable.  The window seat felt more accomodating and I was finally able to relax enough to nap despite less legroom. 

 

Each aircraft manufacturer tries hard to find the right niche for aircraft and I would argue that as a result of this competition, they actually are more complimentary these days than directly competitive.  An airline could be well served by both Airbus and Boeing without sacrificing efficiency. 

 

If I were to pick a fleet for the upcoming Delta / Northwest merger, I would center on using the 737 family for domestic service (using a combination of 737-700 and 737-800 aircraft, the 767 (or 787-3)  for domestic transcontinental and Hawaii service, the A330 for trans-atlantic (Europe and Africa) and South American service, the 787 for South American / Southeast Asia and trans-pacific service and the 777-200LR and 777-300ER for long haul, high density international traffic from hubs like ATL (Atlanta), MSP (Minneapolis / St. Paul), DTW (Detroit), JFK (New York City) and LAX (Los Angeles). 

 

It’s hard to say where the new Airbus A350-XWB will fit in “mission-wise” when it comes to such an airline.  While it’s passenger economies may be a tad better than the 777, it won’t haul nearly as much cargo.   At present, it cannot quite adequately fill the 777 mission role and it might just be a tad too big to compete directly with a 787-9/10 either. 

 

One thing I admire about Boeing is that they tend to “right size” their aircraft for various markets.  Often people directly compare Boeing and Airbus aircraft on the criteria that one aircraft can carry more people on the same mission than another.  Occasionally, that’s valid.  More often, not.

 

An airline needs aircraft that “fit” the passenger and cargo demand of various routes.  Boeing has 40 years of experience helping airlines plan their fleet on these needs and does it well.  The 787 was never intended to be a 767 or 777 replacement.  It was developed to fit an emerging demand that really fell in between those two aircraft. 

 

The next replacement for the 737/757 series will fall somewhere new as well and probably will not fill a need below the 737-700 and probably will not fill a role that exceeds the 757-300.  That’s a 2 class aircraft that will probably have a family range accomodating from 150 passengers to 220 passengers.  Real aircraft range will probably include transcontinental capability for all variants at about 3500 to 4000 nm (nautical mile) max range.  Airbus will likely target a similar set of criteria with the next generation aircraft.

 

The discriminators in the next battle between Airbus and Boeing will be things like the best operating efficiency, dispatch rates and passenger comfort.   I would give the edge to Boeing when it comes to efficiency and dispatch rates and it is anyone’s guess on passenger comfort.  I’m certain that both companies will sell an amazing amount of the next generation single aisle aircraft and I’m equally certain that airlines will praise both.

 

 

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Today I found this Time Magazine story.  From 1966, it describes Harding Lawrence’s 1st year of tenure as CEO of Braniff International.  Now, I know I have put quite a bit of Braniff into this blog so far but that should wind down soon.

 

Harding Lawrence is often reviled as a man who “wrecked” Braniff.  Fact says differently and this story gives a great hint or two as to his genius in operating an airline.  For one, Lawrence took his experiences operating jets at Continental and severely raised the utilization rate at Braniff.   Even in modern days that would be sharp.

 

He also introduced color and life into flying.  He brought a hint of romance and a dash of allure to flying that, until that time, had not been expressed his way. 

 

I’m in possession of annual financial reports on Braniff from 1968 to 1980. If profit is the best metric for measuring Braniff’s decisions and choices, let’s look at the facts. Since the 1968 report has a 5 year review in it going back to 1964. Harding Lawrence and his changes began in 1965.
 

Net income:
1965: $9.5 Million
1966: $17.8 Million
1967: $4.7 Million
1968: $10.4 Million
1969: $6.2 Million
1970: ($2.6 Million) Loss
1971: $0.46 Million
1972: $17.1 Million
1973: $23.1 Million
1974: $26.1 Million
1975: $16.0 Million
1976: $26.3 Million
1977: $36.4 Million
1978: $45.2 Million
1979: ($.04 Million) Loss
1980: ($.13 Million) Loss

 

I would point out that some of those numbers would be a credit to many airlines today.

 

Some other interesting facts are:
 

1) Going from #8 in ontime peformance in 1965 to #1 in 1969.
 

 

2) When Braniff (by Harding Lawrence’s decision) originally ordered the 747, they ordered 2. However, in light of the economic downturn as delivery neared, Braniff (Lawrence) took delivery of one (N601BN) and sold the second (originally N602BN and painted green). That one 747’s utilization was a highly profitable 15 hours per day.

3) Fleet composition in 1964 was 52 planes of which there were 6 different types and of which only 2 types were jets. In 1969, there were 72 airplanes of which there were 6 different types and all were jets. In 1975, There were 81 planes of which 69 were B727’s, 1 a 747 and 11 were DC-8’s.

4) The Braniff route system in 1965 was largely a north-south system with some extensions east-west. In 1975, the route system was balanced with routes traveling from east coast to west coast and from the south to the northeast, northern midwest and even the northwest.

 

5) In 1974 and 1975, Braniff experienced domestic traffic growth rates of 10.9% and 6.6% respectively compared to industry metrics of 2.4% and 1.5% percent. In those same years, Braniff’s fleet utilization rate exceeded the industry standard by a full hour / day.

 

6) Some examples of routes applied for and received by Braniff post 1978 deregulation: DFW–LAX, ATL–MIA, DFW–LAS, DFW–LGW.

 

7) 1979 Trans-Pac routes were instituted with some examples being Los Angeles to Guam and Seoul with follow on services to Hong Kong and Singapore.

 

8. 1979 Trans-Atlantic routes were instituted with some examples being DFW to London, Amsterdam, Brussels, Frankfurt and Paris and similar Boston routes to Amsterdam, Brussels, Frankfort and Paris.

 

Now, I realize that, unlike many opinions on Braniff decisions, I’m actually encumbered with facts. The facts I’ve given do not portray an orgy of poor decision making and egotistical fluff. They actually portray a profitable, growth oriented airline focused on service, right sized fleets and a route system that even today would be enviable.

Further, just the net income figures for Braniff serve to paint a much more fair picture of Harding Lawrence. It certainly disabuses a person of the idea that Braniff management was a bunch of huckleberries flailing around. In fact, it paints of picture of profit, growth and sound financial management for most of Lawrence’s tenure (almost 15 years) and it certainly is a credit to management and their decisions
 

That said, he gambled on deregulation (no more so than many others) and he lost.  The odds were probably in his favor but odds aren’t a guarantee.  He was definitely a man of contradictions at times and definitely was possessed of some idiosyncracies too.  All told, though, I consider him the forgotten titan of the airline industry.

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The Runway Girl blog just posted this report on SAAB, Embaer and China with respect to the growing demand for turboprops. 

 

It’s *very* interesting to me that Embraer has begun studies on a new family of turboprop aircraft.  This is an industry they cut their teeth on and many may still remember their small commuter aircraft from the 80’s and early 90’s. 

 

The report takes note that most demand for turboprop aircraft is currently in Europe and Asia.  However, it seems like there will be rising demand here in the US over the next 2 years.  Horizon Airlines, the commuter feeder for Alaska Airlines is phasing out its older DH-8-200 aircraft in favor of an all Q400 (really a DH-8-400 Quiet) fleet.   Also, Continental now owns several Q400 aircraft (and has orders for more) that are operating out of Newark with great success. 

 

The real demand will begin when legacy airlines who contract with regionals (Mesa, Pinnacle, ASA, ExpressJet, Air Wisconsin, etc) ask for turboprops and better revenue.  My guess is that Delta/Northwest will lead here but it might be Continental.  American Airlines and United will be followers, not leaders in this if I’m guessing right.

 

The economics of operating these aircraft on short hops and commuter routes is just too good to ignore and even if oil does drop below $100, it will never be $30 a barrel again. 

 

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Not you, the consumer. Oh, we know your type these days. You buy on price and frequency. Next is loyalty to your frequent flyer plan (and some of you even buy based upon gathering your FF miles ahead of price.) You aren’t going to change. You never really have and you never really will. You are the girlfriend/boyfriend who promised to change and never did.

 

It’s time for airlines to fly smart. No, really, it is.

 

Southwest Airlines pioneered the modern strategy that most airlines try to emulate in one form or another. They have a single type of aircraft (Boeing 737) and trade high load factors for high utilization of aircraft and crews. It’s a model that works for them and even for some others. Legacy airlines have adopted a modified model that included narrowing the fleet types which allows not only fewer costs in equipment but also permits airlines to use their staff across a broader range of aircraft.

 

But it appears (to me at least) that that strategy in the current economic climate is going to prove flawed. The truth is, the airline industry tends to have to re-invent itself every 30 years or so. That reinvention has taken the form of a revolutionary change in aircraft or, in the case of the 70’s, a new regulatory climate. Traditionally, it’s aircraft.

 

One of the criticisms of the proposed Delta / Northwest merger is the mish-mash of fleet types they’ll have. The CEO’s of both Delta and Northwest have responded that it in fact appears to be a big advantage in the merger because it will permit them to “right-size” each city pair with the proper aircraft. What this means is that with different fleet types comprimised of aircraft capable of varying efficiencies and loads allows them to fit the right aircraft to the right flight.

 

For example, a flight from Atlanta to Nashville might typically carry an average of 90 passengers per flight and Delta might be using a Boeing 737 for the flight segment that carries about 130 passengers. That means their using a new (high capitol costs but more fuel efficient) airplane to fly the route with an average load factor of 69%. It’s a short flight segment so the fuel efficient engines of the 737 don’t play as big a role in savings as they would on a longer flight. Post Merger, Delta may put a Northwest DC-9-40 on the segment that carries about 110 passengers. Suddenly the capital costs are extremely low (the airplanes were paid for years and years ago and the costs to operate it are maintenance and periodic refurbishment), the load factor is now 81% and flight has about similar fuel and labor costs. What’s more, that 737 can now fly on flight segments with average loads that are much closer to its capacity and which provide greater revenue yields as well.

 

More airlines in the US need to re-examine their fleet strategies. Almost all flights being flown by regional jets of 50 seats or less *lose* money now. Particularly when they are used for “long and thin” routes such as DFW / CLE (Cleveland). An airline of real size (US Legacy carriers but also LCC carriers such as SWA, Jet Blue and Airtran) can benefit from a diversified fleet.

 

There are countless “shuttle” type routes that could yield far more profit by using new, advanced turbo-prop aircraft such as the Bombardier Q400 and ATR-72. There is no rational justification to use regional jets on short segment routes when compared to these advanced turbo-props for instance.

 

An airline could, for instance, fly a Q400 on flights between Dallas and Austin offering 70 seats per flight and make money by filling only half of them per flight. Time flying between cities would be virtually the same as Southwest Airlines’ Boeing 737 and seating would be about as comfortable. The capital costs, maintenance, fuel and labor costs for that aircraft are all significiantly less than the 737 but offer about the same comfort and convenience.

 

Reduced fleet types made sense in the 80’s and 90’s because airlines were focused on the hub and spoke model. It allowed an airline to use aircraft interchangeably and since fuel costs were extraordinarily low, load factors could be as low as 60% and an airline could still make money.

 

Today, airlines need aircraft that are more pin-point appropriate for their routes. Short segment shuttles should be flown by Q400’s while longer segments with greater density should be handled by 737s and A320s. Large trunk routes should be served by Boeing 757s, Airbus A320/321s and even smaller widebody aircraft such as the Boeing 767 and Airbus A330. Longer, thin routes should be served by the upcoming Boeing 787 and A350-900 aircraft while long, high density routes will be better served by the Boeing 777, Airbus A350-1000, Boeing 747-800 and Airbus A380.

 

There will be increased demand for a new kind of aircraft. One that is a re-birth of the original DC-9 and Boeing 737. A 100 to 120 seat aircraft that can fly 25% more efficiently over route segments of 500 to 1000 nautical miles. Bombardier (Canada), Embraer (Brazil), Mitsubishi (Japan), AVIC (China) and Sukhoi (Russia) are all working on such aircraft or already have such aircraft available for order. Boeing and Airbus don’t.

 

The days of flying a regional jet such as an Embraer ERJ-145 or Bombardier CRJ-200 are over. They cannot fly profitably short or long, thin routes anymore as they offer, at best, only 50 seats and a product that is quite unpleasant for trip durations over 1 hour.

 

Legacy airlines no longer can afford to “sit” on routes to protect them for use at later date. All of the capacity cuts made so far are squarely aimed at routes that do not generate sufficient revenue to justify their existence. To serve those routes in the future, they’ll require an aircraft whose economics ENSURE profit.

 

That means airlines will seek to merge and become bigger because size permits greater fleet diversity and fleet diversity means more revenue per passenger. Even airlines such as Southwest, Airtran and Frontier will have to begin considering the value of “right sizing” their fleet to their customers. To some degree, Airtran does that with their mixed fleet of Boeing 717/737 aircraft.

 

Greg

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