The US Export-Import bank has announced it will begin backing narrow body aircraft purchases with low cost loans for US domestic airlines. This means domestic airlines purchasing Boeing 737 can now access the same low cost loans that foreign airlines have been getting. Why?

Because the equivalent Canadian institution has decided to do the same for the Bombardier C-Series.

This is good news for airlines, particularly in the United States, because I think we’re going to see a storm of low cost loans made by various governments to support the purchase of new aircraft. No doubt the European governments will do the same to support Airbus. The gloves are off.

I don’t know if this is good for the airline industry, however. Newer, more efficient aircraft in the fleets is good but this kind of loan storm, if it happens, could also have the effect of encouraging airlines to stretch their finances to take advantage of this and airlines do not need to be stretching right now.

In addition, these kinds of loans can distort the aircraft marketplace long term. A buying binge can result in a drought later. I’ll take stability over a flurry of purchases any time. Droughts can stymie aircraft development and I would far rather see a new Boeing narrowbody rather than another 1000 Boeing 737s sold. It’s better for everyone all the way around.

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The National Labor Relations Board has found that Boeing was punitive when it placed the second 787 manufacturing line in South Carolina.   The International Association of Machinists and Aerospace Workers union District 751 filed the complaint with the support of its national union. 

It described this move as coerceive and retaliatory against the union after the union struck against Boeing shortly before that decision was made. 

I’ve no doubt that Boeing did make its decision based upon the effects of that strike in part.  Boeing needs stability and that strike put it at odds with its customers who publicly criticized Boeing during the strike.  However, just because Boeing was uncomfortable with having to make guarantees to the union doesn’t mean it was punitive or retaliatory either.  The truth is, Boeing has probably needed another manufacturing center for the last 10 years. Furthermore, there is nothing preventing union organization at the new manufacturing center.

Things work best when they are in balance.  Until recently, there has been a fairly anti-labor bias going on.  That bias seemed to exist primarily through the President Bush Administration.  With the beginning of the President Obama Administration, the bias seemed to shift rapidly to pro-labor, anti-business.  I’m OK with either shift in general but I have to say that I’m beginning to find the most recent shift going just a few steps over the line. 

Like I said, it’s about balance.  My perception is that we are now “rigging the game” in favor of labor.  Boeing should have the ability to be agile enough to build their aircraft competitively and that should include relocating production to another state if they find their present location and labor climate too difficult to deal with.  Likewise, labor should have the power and option to organize at the new locations and laws governing labor in those new locations.

A lot of labor goes into the cost of building an airliner.  When you start potentially changing the balance of power between labor and the company, you potentially turn a company like Boeing into a non-globally competitive entity. 

And that isn’t something you want to do to a company that can literally change your monthly world trade balance from negative to positive by delivering a few extra aircraft.

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One has to hand it to the Airbus PR machine and COO John Leahy.  Those guys could spin a strike as an innovative development for their aircraft line. 

One of  the latest claims from these fine folks is that the A320NEO is already the best selling commercial aircraft ever.   Not so fast.  While the NEO has racked up some good orders, much of what Airbus is counting as orders are actually just memorandums of understanding.   They are not firm orders in the sense of what Boeing would count as an order.  But it does have some good momentum and that’s great for that product.  It’s getting the kind of updates it really needs and that’s good for anyone operating the A320 series aircraft.

Yes, there is rampant speculation that the NEO could have 600 orders by this summer’s airshow in Paris but let’s see if that develops first before we proclaim world domination.

Mr. Leahy also puts forth the idea that because the NEO has the potential to last until 2030, Boeing will ultimately have to decide to do a 737 re-engine itself.  He also has decided that technology won’t be advanced enough for a new aircraft (Boeing or Airbus) until far past 2020, the date Boeing says it could come up with something to replace the 737.

Coming up with a better, more efficient airliner is a matter of engineering, not developing unknown technologies.  If there is a business case that funds the new aircraft development, then the aircraft can be built.  If anything, Airbus’ decision to do the NEO actually advances Boeing’s business case for doing a new development.  Why?  Because Airbus’ adoption of the CFM LEAP 56 and Pratt & Whitney GTF engines will encourage those companies to mature their products faster, not slower.  The faster those engines mature, the more ready they are for a newly developed 737 replacement.

Mr. Leahy thinks Boeing will re-engine.  I think Boeing will do a new development.  In fact, I think as the case for a new development gets stronger, Boeing may well pull in its date that it could be done by to as early as 2018 or just 7 years from now.  I think John Leahy desperately wants Boeing to keep the 737 because it allows the Airbus to remain competitive.  Most independent observers feel the Airbus A320NEO only manages to deliver trip costs that are equal to Boeing’s current 737, not exceed them.   If Boeing can deliver a 20%+ improvement on trip costs with a new family of aircraft in a timely manner, it clobbers Airbus’ product line right out of the door and Boeing won’t promise what it can’t deliver.

There is one thing about Airbus that really annoys me and, in my opinion, causes trouble in the aviation world and that is its bombastic claims.  I get rather tired of tossing cold water at a company that is actually producing a great, competitive product simply because they cannot be content to be a world player in the aviation world and desire to continually proclaim themselves the World’s Greatest Ever.

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Pratty & Whitney has done pretty well this week.  First off, they’ve won the IndiGo order for the Airbus A320NEO and that is a big order over time.   150 aircraft is nothing to sneeze at.  P&W already is in development on this engine for Bombardier (CSeries) and Mitsubishi’s regional jet.  In addition, COMAC has now expressed interest in this engine for its 919 developement. 

At first glance, P&W appears to be getting interest from the little knowns but that’s simply because they’re the ones with new aircraft in development.  The Airbus A320NEO adds legitimacy and the order for IndiGo’s A320NEOs solidifies it.

It does strike me that airline industry appears attracted to the perceived greater promise of the GTF.  When does the GE/Snecma CFM LEAP 56 engine start gaining interest?  It’s noticeably silent in that area so far.

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Apparently Boeing is sounding out customers about the much talked about 787-10, a supersized version of the 787-8, for delivery to customers some time around 2016.  Such an aircraft would be roughly comparable to the current 777-200LR in size but a bit hamstrung in range by comparison. 

Airlines are interested.  Some have been interested in this paper aircraft for 4 years and its economics, at least in theory, are very attractive when compared to similar Airbus products in development. 

The aircraft clearly can grow in length and that’s good.  However, with a rough range of about 8000 statute miles, I suspect airlines will be slightly less enthusiastic.  This is an aircraft that will need an LR version capable of 8500+ nautical miles and that, I think, will mean a different wing and bigger, more powerful engines.

It’s certainly possible to fit a bigger wing to that aircraft.  It’s straight forward engineering.  For those of you who grimace, I’ll remind that that is exactly what happened with the 777 when the -200LR and -300ER were developed. 

Engines are purely speculative.  I suspect the GE GEnx engine has a bit of room to grow yet and the Rolls Royce Trent 1000 probably has some room as well.  However, any engine conceived from those two engine families would probably be at its upper limit.  If the weight for such an aircraft could be kept down, that would be fine. 

It’s unlikely that such an aircraft will be formally launched in 2011.  If Boeing goes anywhere with this, it’ll probably be formally offered some time in the first half of 2012.

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The Boeing replacement for the 737 may end up as the most hotly speculated about aircraft in history.   This aircraft was first delivered in 1967 as a 737-100 seating about 100 people.  In fact, it was an exceptionally slow seller for most of the 1970s.  It’s now nearly 45 years old and the largest of the currently family, the 737-900ER, can seat potentially as many people as 200.  The first 737s had a range of about 1600 miles and the current longest range 737 can fly about 3000 miles. 

This aircraft has doubled its size and range over its life in what has been really 3 model ranges over that lifespan:  The original -100/200 aircraft, the -300/400/500 and then the -600/700/800/900.   There are over 6000 of this type delivered with more than 2000 still on order and it possesses possibly one of the best records out there for reliability. 

Replacing this aircraft is no small task and Boeing gets one chance to do it right.

It’s all about efficiency and the low cost per available seat mile that can be obtained.  Airlines want to see a replacement that gives them not just a good gain upon delivery but which also affords them the best advantage over the life of ownership. 

Capacity:  Most likely we’ll see an airliner family that seats from 150 to 210 people.  Airlines are already seeing the value of switching from the -700 model to the -800 model because they can fill the seats without really any additional cost.  (This was the main reason why the -600 never really took off:  airlines could fly the -700 for about the same costs and enjoy more flexibility.)   In addition to a robust passenger range, I expect that we’ll see the lower cargo area designed to accomodate a bit more payload than the present airliner.   While this aircraft will never be an uber freight hauler, the present 737 has always been a bit constrained both in volume and payload weight.  An improvement in that area will be desired.

Fuselage:  Boeing has already expressed doubt that their approach with CFRP for the 787 won’t necessarily scale down to a 737 type replacement.  That’s probably true but that approach is already several years old and don’t rule out some sort of plastic airliner for this development.  New materials are developed every year and the big advantage to this approach for such an airliner is that it helps with maintenance.  There would be reduced corrosion over the life of the aircraft and reduced fatigue as well.  Whether it is a composite barrel or plastic panels on a metal skeleton, it’s liable to be plastic of some sort.  In addition to reduced maintenance, it will also lighten the airframe even a small amount and reduced weight translates into carrying more payload a farther distance.

Range:  The base range for the next replacement will be, at the least, somewhere between 3000 and 3500 nautical miles.  In other words, expect North American transcontinental range at minimum.  Will it be designed to fly a 757 style mission across the Atlantic to Europe?  That’s anybody’s guess but I think probably not.  I don’t see a 5000nm range being designed into this aircraft as it really pushes the weight of the airframe in directions that designers are unlikely to want go in.   The 757 was an anomaly in aircraft design because engines available for that aircraft during its design were uncharacteristically robust.  Generally speaking, engines have to be pushed to meet such requirements.

Engines:  I don’t see a twin tail, open rotor design.  Instead, I see a relatively conventional layout with engines on the wings.  I do, however, expect two engine choices on the next design.  Why?  Because so many will be ordered that two engine manufacturers can enjoy good economies of scale and buyers like choice when it comes to engines.  

I think we’ll see engine thrusts starting somewhere between 20,000lbs to 22,000 lbs and ranging upwards to somewhere around 30,000lbs to 32,000lbs with bypass ratios in excess of 6 .0.  These engines will have big fans and they will drive the aircraft to be higher off the ground.  That’s OK because the typical airline using this aircraft today is nothing like the typical airline who used it originally.  Airports and airlines are better equipped and while loading will require equipment by default, it will still be easy to turn around this aircraft.  I expect we’ll see some cargo hold innovation to speed loading and unloading in this aircraft.

I believe the engine suppliers will be CFM(or, perhaps, just GE) and Pratt & Whitney.  Rolls Royce has never played well in the single aisle market and their basic Trent 3-spool design just appears to be too cumbersome to scale down for this aircrafts needs.  A Rolls engine in that approach would be heavier and less optimal for the typical flights.  In addition, Rolls Royce has done very little innovative work for these kinds of engine requirements. 

Wings:  Boeing has always done a good job of giving its aircraft enough wing for growth.  That won’t be any different here and this is where I think we’ll see some real gains in fuel efficiency.  Wing design has come along way at Boeing and they’ll push their technology quite a bit in this area.  I think we’ll see raked wing tips rather than winglets in the next aircraft.  They’ll likely resemble the 787 more than anything else although without quite the gull-like appearance in flight due to being shorter.   I think they’ll be largely plastic and I think they’ll retain good short airfield performance to keep the LCC airlines happy since they have a habit of flying into smalller, more obscure airports as a rule.

Twin Aisles:  I doubt it.  It’s a concept that has received attention but, at the end of the day, a wider fuselage to accomodate two aisles translates into a wider fuselage.  A wider fuselage translates into more drag and that means more fuel to power it through the air.  What I do expect is an ever so slightly wider fuselage that is likely more “round” a la Airbus. 

What I do think we might see is some sort of innovative approach to making it possible for the airline to load and unload from front and rear doors on a regular basis.  LCC’s like their fast turn-arounds and offering the ability to do this in a more self-contained, efficient manner will only make them happier. 

Passenger cabins:  I expect Boeing will certainly work hard to design an open and pleasant passenger environment that resembles their approaches with the 777/787/747 as well as their new signature Sky Interior.   We might even finally see some suggested seating innovation but no one owns this domain very well.  Boeing works with outside suppliers on behalf of its customers rather than supplying the seating themselves. 

When:  I expect a target for initial entry into service of 2019 to 2020.  Anything past that offers Airbus too much opportunity to steal customers.   It can be done and it is going to require quite a few resources.  That’s OK because this kind of effort should be flawless in meeting both requirements as well as in its execution.  This is potentially an airliner that sells in excess of 10,000 aircraft.  You can’t let Airbus continue to fill needs for customers (especially customers who have blended Boeing fleets a la United and Delta) while you dither around waiting for the perfect opportunity.  Once another guy’s airliner is purchased, it can take from 15 to 25 years to have another opportunity to fill that need. 

It will be a more revolutionary aircraft than evolutionary certainly but expect it to not look entirely different from what it does today.

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Congratulations on the KC-46A win.

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Boeing has received a tremendous amount of criticism for how it managed outsourcing construction of the 787.  Hindsight is 20/20 but that doesn’t change the fact that it would appear that Boeing hadn’t fully considered the implications behind their decisions in this area.

This was about lowering risk and saving money in the development of the aircraft.  After everything is said and done, Boeing will have likely spent as much or more than if it had done this work itself.   In the early 2000’s, Boeing was ( and to some degree still is) under control of former McDonnel Douglas executives rather than Boeing management and McDonnel Douglas had spent the previous 20 years outsourcing work to save money.  How these executives came to be in control of Boeing still defies my imagination given the business track record McDonnel Douglas had enjoyed prior to being swallowed up by Boeing.

There is nothing wrong with outsourcing.  However, given the complexity of the job involved with designing and building an airliner such as the 787, there was a key ingredient left out of the mix:  close and frequent cooperation.  To be fair, Boeing had never done this kind of thing on a global scale and its primary outsourcing (prior to 787 kickoff) was with Japanese firms.  Firms that, today, are still doing their job with precision and care. 

A better approach would have been to insist that these various firms co-locate with Boeing in the Washington area and to insist that these partners work cooperatively with Boeing workers both on the design and initial production phases.   Other companies more closely associated with global production such as Ford and Volkswagen have already learned that it is important to keep partners close by in the manufacturing process.   Ford’s newest assembly plant in Brazil sees a variety of partners actually co-located in the manufacturing facility working literally right alongside Ford employees. 

Outsourcing doesn’t mean inviting your partners to do what they want when they want.

If anything, outsourcing requires these partners not only to be in close communication with Boeing but also with each other.  Each major sub-assembly that is shipped to Boeing is being made by another partner and in all cases they need to fit together and work together with the same levels of quality.   When you work with global partners, they aren’t just far from you.  They are potentially even farther from the other partners producing items that must fit and work properly with each other’s work. 

Did outsourcing go too far?  In terms of execution, yes.  In terms of risk sharing, perhaps not.  The original Boeing 707 prototype, the Dash 80, cost about $16 million to develop and was an exceptional risk for Boeing to take on.  Today, some are projecting the total costs to Boeing for the 787 nearing $16 billion (with a “B”) and collecting together that kind of cash on one’s own is difficult to do no matter what company you are. 

Going forward, outsourcing for Boeing will have to be done a different model.  Not just to reduce execution risk for Boeing but to also ameliorate the effects that one partner’s tardiness or poor quality might have on another partner.  While a few partners have performed poorly, that effect isn’t just on Boeing.  Every partner with Boeing that is performing well is being affected by the slow development and certification process.  They planned to be selling their parts in high quantities by now and instead they are enjoying the high costs of slow and even sporadic production while they wait for Boeing to get the aircraft going.

Those companies are being severely impacted today and they’ll want better performance on the next Boeing project to realize the fruits of their success earlier.

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

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

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

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

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

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Airbus is reaping big orders and a renewed interest in its A330 since Boeing has been unable to deliver the 787 even remotely on time and that is going to hurt Boeing in a few ways.

Delayed by 3 years now and with only some hope of commencing deliveries later this year, Boeing is paying penalty payments for its poor performance and those payments are being walked across the street to Airbus, not Boeing. 

Boeing is being hurt since it hasn’t been able to offer a substitute aircraft to the airlines that the airlines want.  It’s cheaper to build an airplane at cost than it is to pay big dollars in penalty payments that go to the competition. 

What’s worse, Airbus is attracting a long look from traditional Boeing customers who now have little hope of obtaining a 787 any time in the next 5 or 6 years.  That’s great for Airbus but it is a warning to Boeing as well.  A stubborn resistence to the idea that bringing even more control of the 787 supplier network under Boeing’s wings is creating problems that some customers will have to question if they’ll ever be resolved.

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The next round in the subsidy fight between Boeing and Airbus is heating up with each company’s interpretation of WTO findings with respect to Boeing while we await “official translations” of the WTO ruling.  Airbus, of course, says Boeing got tons of subsidides and hurt Airbus by as much as $45 Billion.  Boeing says the ruling is relatively benign and just $2 Billion in subisidies will be noted.

As is usually the case, I expect that neither is exactly right.

However, in my opinion, it will be very difficult for the WTO to find that Boeing has been as competitively advanced by subsidies as Airbus.  At the end of the day, Boeing is a commercial enterprise with real shareholders operating in a country that expects it to commercially succeed.  Airbus?  Well, they would be the opposite of that. 

Like it or not, the world at least accepts and tacitly endorses companies that are competing and being responsible to shareholders to return a profit on investment.  That effort might be helped by subsidies but it’s still a commercially competitive enterprise.  Airbus is competitive but at the cost of inefficiencies as a result of it being a jobs program and a military/aerospace program for France and Germany.  If you removed subisidies from both airlines’ schemes, Boeing still has more than adequate opportunities to succeed whereas Airbus doesn’t. 

Even the Boeing ruling hurts Airbus with its timing.  This expected ruling once again, highlights even more egregious behaviours on Airbus’ part and that is concentrated into arguments against its parent company, EADS, in the KC-X tanker competition.  It’s a right line that EADS has to walk because, politically, they can’t afford to be seen as a fully subsidized effort to win business from the US government that inherently does take away both jobs as well as economic development from these shores.  On the other hand, EADS need to be a player in this kind of competition at some point or its political masters will find less and less incentive to advance its causes. 

The DoD continually refuses to make allowances for subsidies.  In fact, it almost gleefully rubs its hands over the idea that EADS might “buy” its way into the program which does yield savings for the DoD but also comes at a huge political cost on both sides of the aisle.  At the same time, no politician can quite afford to be seen making Boeing a sole source for this either. 

It’s a mess with no great solution.  One solution promoted is a split buy.  Politically, this makes sense.  Operationally, the only good choice is the Boeing in that it allows the military to project force in the way only the US Air Force can manage to do. 

I think this latest round makes the KC-X tanker competition even more toxic and I fully expect further delays in its award while DoD masters wait for things to settle enough to determine the political winds.

Note:  This writer works for a major US aerospace company that is a full partner on both programs.

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Trans States Holdings,  a regional airline holding company operating the Compass Airlines (newly acquired), GoJet Airlines and Trans States Airlines, has firmed up its order for 50 Mitsubishi MRJ regional jet aircraft and has options for another 50 aircraft.  This is a huge order for Mitsubishi who has just one other order from ANA for just 10 aircraft (15 options).

In fact, one has to wonder about the viability of the MRJ if it doesn’t soon gain a few more orders.  The 70-90 seat aircraft promises everything else that other new regional jets are promising.  This aircraft is using the Pratt & Whitney GTF engine for meeting its performance goals as well.

This aircraft has risk in it.  This is the first Japanese developed airliner since the YS-11 in the 1960’s and while Japan does have a nice aerospace industry serving Boeing (and Airbus to a lesser degree), it has little experience in building whole aircraft on its own.  In addition, the Pratty & Whitney GTF engine is still an unproven engine in the eyes of most people.  It may well perform as promised.  Then again, it may prove to be a maintenance nightmare too.

Trans States order is a bit of a vote of confidence but I also wonder at their plans for these aircraft.  They’ll obviously be used for 70 seat flying on behalf of a variety of airlines but that only becomes possible if more airlines’ pilots unions permit more 70 seat regional jet flying.  Ask United how that is working out with the Continental pilots.  American is doing no better with American Eagle either. 

It’s a gamble for both parties and both need a win in this deal.  If this airliner doesn’t work out, Trans States may well be finished as a company.  If Trans States is unable to deploy these aircraft into flying for various airlines, Trans States may well be finished as a company.  If Mitsubishi doesn’t land more customers soon, there may not be a business case to continue developing this airliner. 

I’m not sure the MRJ is big enough.  It seems to me that the right size airliner might be more along the lines of the Embraer 190/195 and CRJ900/1000 as it would attract airlines who need a smaller aircraft for mainline flying.  There is a lot of uncertainty among regional airlines in the US at present because there are fewer customers to fly for and those customers are squeezing their partners even more today.

How many new regional jets do we need?  With Russia, Japan and China all working on similar aircraft to compete with two other companies who have a mature product (Bombardier andEmbraer), it would appear all of these new aircraft are, at the least, somewhat at risk.  Russia’s Sukhoi SuperJet actually looks more “right” for customers than the MRJ since it has more lift and range.  China’s effort is an exercise in learning how to build a plane more than a real commercial effort to succeed.

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Boeing’s CEO, James McNerney, reiterated Boeing’s view that re-engining the 737 even in light of Airbus’ A320NEO announcement is not the pathway to success for Boeing.  They continue to believe that if a new 737 replacement is forthcoming in the 2019/2020  timeframe, customers will wait.  I agree.

However, if customers are asked to wait until 2025, I’m not so sure.  There is only so much more additional performance that Boeing can get from either the airframe or the engine on the 737.  Let’s not forget that, in many respects, the current 737 lineup continued to perform well against the A320 in part because of the development of the winglets and the evolving refinement of the CFM engine.  Additional gains are going to be increasingly difficult to find.

Also of concern is McNerney’s announcement that research and development will be going down over the next couple of years and that they intend to cut back on some of their engineering resources which are extraordinarily high (say McNerney) at present while retaining their core capability.   While I understand the cravings for normalcy, this worries me. 

To really get a 737 replacement out in the 2019/2020 timeframe, it’s time to get started now.  You have effectively just 8 years to redesign another technically innovative aircraft that will compete for 20 years or more.  Schedule is more critical in accomplishing this than budget is.  It takes time to design innovative technology and implement it into a product that must be 99% reliable “out of the box”.   Boeing’s schedule for doing so is, in some respects, already eroding.

I think there is more time to consider options for the 777 line than there is for the 737 replacement.  Enough airlines and, in particular, 737 customers have signaled the very strong desire for a better airplane. To act as if you have all the time in the world or even little competition for these people is a bad idea.  Even Southwest acknowledges that they can handle transitioning to a new type and they don’t mean just transitioning to a new Boeing. 

There are 3 SuperLegacy airlines who’ll be shopping in the next 1 to 2 years for fleet replacement and 2 LCC carriers who need to find new efficiency gains in their fleet (Southwest and Ryanair) who could literally place enough orders to pay for the 737 replacement.   Having something that will significantly beat the A320NEO in the stated time frame that also provides for future efficiency and a product line capable of lasting 20 years is almost a necessity rather than something to study for another 2 years.

The 737 replacement won’t be an evolution of the 737.  It will be much more a revolution for single aisle aircraft much as the 787 is for medium capacity, twin aisle aircraft.   Furthermore, I think you would want to have that program on firm footing and about to produce new aircraft as you begin to enter into engaging on a 777 evolution or replacement later in the decade.

So what’s the hold up?

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Remember THIS post from just a few days ago?

Well, Mexico’s low cost carrier, Interjet, has just ordered 15 of the long range Superjet 100 with options for 5 more.  This really is a big deal for Superjet as I believe this is their first Western Hemisphere order.

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I have wondered for some time now why the Sukhoi Superjet 100 hasn’t gotten more attention both in the media as well as from western airlines.  This really isn’t your father’s Soviet airliner.  It isn’t your father’s regional jet either.  This is a regional jet that has gone through design and development and through test with some delays but without too much drama and it’s soon going to fly with an airline.  Aeroflot gets to be the first.

Maybe there is stigma from being a Russian design and maybe there is stigma from being an airliner going into service with a Russian airline first.  There shouldn’t be.  Aeroflot wants just as much efficiency as any other airline in the world. 

At first glance, this airliner might be a touch small for the markets it is entering.  I’m not sure that’s the case.  So far, the Superjet is on target to be about 6% more efficient than the equivalent Embraer and that is no small achievement given that the Embraer E170/190 airliner is pretty new itself.  The Sukhoi actually hits a bit of a sweet spot for US airlines in that it can serve as a regional jet (not a regional jet doing mainline long thin routes) and do it with competitive efficiency. 

One area that this program has suffered problems is in the engine.  The PowerJet SaM146 is a partnership between SNECMA and Saturn NPO.  Most of the engine comes from SNECMA who has ample experience in building a well designed engine.  However, production problems at the Saturn NPO plant have slowed deliveries.  This is not anything that hasn’t been experienced by virtually all engine programs.  The real measure is in whether or not they get the problems ironed out and start producing engines that are satisfactorily reliable and in sufficient quantities to meet production demand.

At the least, I think airlines should be taking a strong look at this aircraft.  There are a few detractions or unknowns with this airliner.  If you’re going to bring an airline type into your fleet, its efficiency is certain a big factor and so is size but there are other components not talked about enough.  An airline wants to know that the manufacturer can support the aircraft with maintenance and parts and it wants to know that it can do it where the airline is using that aircraft.  I haven’t been able to find out much about what Sukhoi and its partners are willing to provide in this area but it certainly shouldn’t be too difficult to meet those needs on the European continent initially.  With Boeing as a consultant on this project, I wonder if Boeing couldn’t be engaged to support the aircraft in the western hemisphere.

Another component is reliability.  So far, we know this jet has done pretty well in testing and it was designed to meet all western standards for certification.  That does mean both Europe and the United States.  But how that aircraft actually performs when in use by an airline day in and day out is still unknown.  If it turns out to have a poor dispatch reliability rate, no one in the west will be interested.  Sukhoi and its partners get one, perhaps two, chances to prove this airliner’s ability to perform day in and day out. 

To persist in the idea that a Russian designed airliner would be inherently wrong to choose is bad.  The Russians have been designing and building strong, reliable jet aircraft for nearly as long as the west.  They have excellent engineers and aeronautical skills.  They do already know how to build a big jet and they are, after all, the only other country with a space program as long and as technically successful as the United States.  In short, they do have a great body of aerospace knowledge and skills.  It’s an aircraft to watch over the next 2 to 3 years.

It’s an airliner that can actually deliver on its promises and be of real use to a variety of airlines.  This stands in stark contrast to those airliners being designed presently in China, the COMAC 919 and ACAC ARJ21.

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With the announcement of Asiana Airlines purchasing (6) Airbus A380 aircraft, I began to wonder about the success of this aircraft as a whole.  So far, it appears that Boeing was right about the demand for very large aircraft although it lost all of that demand (practically speaking) upon the arrival of the A380.  My biggest concern about this program is the airlines it is dependent upon.

Just one airline, Emirates, is responsible for 37% of the A380 orders and just one region, the Middle East is responsible for 44 % of all the A380 orders.  That is a stunning amount of eggs in one basket for a region that is volatile and largely dependent on wealth generated from one commodity.  Think about that, roughly 1 of 3 A380 orders comes from a small handful of airlines who are based in a tiny area that is highly interdependent.

The next largest region responsible for orders, Oceania/India/Southwest Asia, is responsible for 23% of A380 orders with most of those placed by two airlines:  QANTAS and Singapore Airlines.  Now, I would bet on those two airlines.  QANTAS because of their rather unique position in their markets and Singapore because of their ability, day in and day out, to fill their aircraft.  But the remaining orders from airlines in that area such as Malaysia Airlines, Thai Airlines and Kingfisher, are suspect at best.  I question their ability to use and fill those aircraft regularly and I wonder if some of those orders won’t ultimately be converted to A350 orders with deliveries farther into the future.

Europe accounts for about 20% of the orders and almost all of those airlines do possess the ability to use the aircraft based on their current business.  However, their traffic is being impacted more and more by those Middle East airlines who’ve also bought the A380 but who also enjoy dramatically lower costs.  In addition, at least two of those airlines were, at least in part, driven to make their orders by their political leaders in Germany and France.  Any political influence in orders for such an aircraft bring some risk into the picture.  Ultimately, those airlines have to earn a profit from those very expensive assets and filling 500 seats daily is a difficult thing to do day in and day out.

The only region with orders that seem credible is the Far East (China, Korea, etc).  Those locations have the numbers to fill those aircraft and their orders are small and cautious, not big and grandiose, at 9% of all A380 orders.

Is it a success?  Well, when your order book is so heavily depedent one so few, it doesn’t speak well of your ability to drive future orders and ultimately have a program that at least breaks even.   Do you really believe that the Middle East and, in particular, Emirates, can continue to drive that order book up to the point that Airbus can earn a profit?  I don’t.  I also don’t think Europe or the Far East can do it either.  In the case of the former, routes are fracturing into ever more longer and thinner routes.  In the case of the latter, the number of people who can travel is very dependent upon what are, in some cases, still 3rd world economies. 

So, no, the A380 isn’t succeeding financially and it isn’t likely to succeed financially.  40 years ago, a vanity project could be tolerated but if Airbus was run as a real business, this is a program that would be getting the axe, not promoted by the likes of John Leahy.

Airline           A380 Orders

Filed under: Aircraft Development, Airline Fleets, Airline News by ajax
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There have been some truly disappointing revelations about the 787 and its development over the past 2 months.  We have learned that more than 300 aircraft were priced at or below $76 million excluding engines.  A startingly low price for this class of aircraft no matter what it is made of.  We’ve seen just how bad the vendor management has been for this global product and it is highlighted by Boeing buying these facilities to run them themselves to achieve better production rates and quality control.  Finally, we’ve learned that many of the technological approaches involved in this aircraft are going to require a longer period to mature than was originally expected as well.

Richard Aboulafia has referred to this program as a disastrously executed, brilliant vision and that strikes me as real truth at this point in the program.  He also speculates that the 787-8 may well be the “interim” aircraft while the -9 actually ends up meeting the performance needs of airlines in the long run.  That, too, strikes me as real truth.

What hasn’t been considered yet is where the ultimate solutions found for the 787 influence future production.  I continue to believe that Boeing hasn’t laid a complete egg with this aircraft.  I think it will prove to be, in many respects, a legendary airplane over time.  I think it will have a long production run and favorable reviews through its lifetime. 

Once these solutions are found and that oh so necessary experience is, well, experienced, it will have a positive influence on future aircraft development.  Boeing may no longer be poised to earn scads of profit on the 787 but it is well positioned to use its body of knowledge to earn scads of profit on other aircraft it needs to build.  They will have gone through all the pain necessary to know how to apply these new technologies to a 737 replacement or a 777 replacement/enhancement and that will serve them well in the future provided they don’t let lose all those people involved in this program.

The 737 replacement may not use these exact approaches such as CFRP or an all electric architecture but it will use some variation on a theme for that technology and they’ll know how to do it better.  They’ll be past the hump, so to speak.  This speaks well for Boeing in the latter half of the next decade.  Right now, they’re hurting.

But also consider that Airbus hasn’t pushed the envelope nearly so much and they have a great deal of learning to go through still.  And as tough a road as Airbus has in front of them with existing programs, that forecasts still more pain in the future.

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Dominick Gates from the Seattle Times has an interesting story on Boeing’s 787 woes and, frankly, describes them as being in a worse state than I think is generally known.

Read the ARTICLE.

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All Nippon Airlines (ANA) is lamenting the new delay on Boeing delivering the Dreamliner to one of its launch customers and I don’t blame them.  I don’t think anybody regrets ordering the 787 even at this point but I do marvel somewhat at the patience being displayed by several of the customers.  This was an aircraft that Boeing arguably needed in its product lineup several years ago.

These delays have added up to something well past 2 years now and we don’t know what else may show up causing further delays.  The most disturbing part of these delays, to me, are that many have been caused by quality control issues with manufacturing partners and with problems centered on systems that arguably should have been robustly tested and matured at this point. 

It begs the question as to what the hell were these partners doing during the long delays involving fasteners for instance.  Engines could have been tested more.  There was no high rate production impeding Alenia’s abilty to ensure strict quality control.  Even power panels could have been tested much more in a integrated systems environment.  

Additional testing would have greatly reduced risk in delivering this aircraft and I just don’t get the sense that there was a financial commitment to this.  Certainly quality control problems on horizontal stabilizers shouldn’t have been discovered after so many airframes had already been built. 

This smells like a former aerospace company that used to be based here in the United States:  McDonnell Douglas.  It’s notable that it is former MD people who are largely running the business today and the truly successfuly Boeing people are now elsewhere.   What Boeing needs is an Alan Mullaly and at this point, I don’t think one exists at Boeing anymore.  If he/she does, they’re being kept hidden well. 

Blaming these delays because this airliner is on “the bleeding edge” of technology really doesn’t quite pass the sniff test anymore.  That was OK in 2007 and 2008.  It was even somewhat acceptable in 2009.  But this 2010 and it is about to be 2011.  Agressive and thorough testing should have eliminated most of the risks that are being realized at this moment and that is very disappointing.

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It’s been noted that fines levied against airlines by the FAA have risen sharply over the past 2 years and they show no signs of leveling off either.  USA Today in the Sky reports that Airtran was fined $20,000 for advertising $39 fares instead of the $44 they actually were.  Delta was fined for improperly displaying taxes and fees on some fares.  Other airlines are now getting fined for blatantly violating their own policies on lost luggage or for treating handicapped people inappropriately. 

Many see these fines as draconian and I see them as an example of what largely has been wrong w/ the Federal Aviation Administration for decades.  They are just way too close to the industry that they are supposed to regulate and govern.  That doesn’t mean that I advocate an adversarial position on the part of the FAA  towards airlines.  And it doesn’t mean that the FAA needs to make hay with the public by portraying itself as “tough” either. 

It means that the FAA lost its objectivity long ago and while I do applaud the reversal of that direction in many cases, I”m unhappy to suddenly seeing the FAA treat airlines like they are rats now.  The truth is, we, the people, created the monster (FAA) and we, the people, allowed the airline industry to grossly influence that agency for far too long.  Of course the airlines used all the influence they could to move the agency that governs their operations in the direction they preferred.  It’s an exercise in self preservation and no one should be surprised by it.

What we do need is a reorganization of that federal agency so that it can become less political and less influence by airlines.  While airlines *should* have some input on regulations that will govern them, they should not get to write the rules and hand them over to the FAA.  The FAA shouldn’t be bobbing and weaving to the political tunes written by Congress and/or the Executive either. 

It really should be operating much more independently like the Federal Reserve.  It needs to be a bit more above the fray and a independent enough to hold airlines to a tough standard when it comes to safety and fair play.  In fact, the FAA has been so unduly influenced and, at many times, unaccountable for its decisions and actions, we’ve exacerbate the problem by demanding more accountability via Congress and the Secretary of the Department of Transportation.  The FAA now simply reacts.

But the FAA needs to plan.  It needs to plan for the long term and it needs to be able to meet demands for qualified staff and it needs to govern airlines independently, fairly and appropriate to the times.  By operating independently, I also mean that its budget needs to come out from under Congressional whimsy (at least its administrative budget) and it needs to become stable and self-supporting for the long term. 

It needs to focus on providing better systems and great excellence when it comes to air traffic control.  We, as a country, are woefully behind the curve when it comes to these systems and we’re following, not leading.  This isn’t a corrupt government agency but it’s one that is pulled in too many directions all too often and it is far too frequently subject to conflicting influences and opinions.  It is an agency that needs to be a bit more above the fray and able to do the right thing.

Filed under: Air Traffic Control, Aircraft Development, Airline Service, Airports by ajax
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