When Lan of Chile and TAM of Brazil decided to merge and form the LATAM group of airlines, they were told to pick one alliance to be a member of by regulators. Those reading tea leaves gave the nod to Oneworld and mostly because Lan is really the “leader” of that merger.
I thought so too but I couldn’t prevent that nagging feeling that the Star Alliance might choose to pull a rabbit out of the hat with incentives. These days, you never know. Think back to when JAL was considering defection from Oneworld. Delta Airlines made an offer that seemed almost certain to pull off the unthinkable and bring that airline into Skyteam.
But American Airlines and Gerard Arpey and Oneworld sweetened their deal with JAL and everyone breathed a sigh of relief.
I’m fairly sure that American Airlines went to work with LATAM too. It’s an essential component to the current success that AA enjoys in South America. With this decision completed, it’s time for someone to get busy on finding a better China partner and it wouldn’t hurt to figure out how to bring QANTAS back into alignment with the interests of Oneworld either.
Maybe Tom Horton can work that for Doug Parker over the next year.
I found a blog entry on an Australian airline blog called Plane Talking that, I think, has found an important discrepancy in Boeing’s PR campaign for the 787. As someone who actually works for an Aerospace Company, I wanted to explore things a bit more. Boeing’s Commercial Aircraft President Ray Conner has been saying “Boeing has compiled 200,000 hours of analysis and testing on what might have gone wrong and how to prevent it from happening again.”
A significant portion of my own job is to manage resources on engineering efforts. 200,000 hours of engineering effort would translate into an effort that would ordinarily executed over 2 to 4 years and by roughly 30 to 40 engineers. That is a non-trivial effort. Let me re-state the facts: 200,000 hours of engineering time would translate into a project of about 3 years consuming from 30 to 40 engineers.
So, how did Boeing accomplish all of this in just about 1 month? Let’s assume that engineers worked 7 day weeks and 12 hour days for about 1 month. That would mean about 560 to 580 engineers attacked this problem over the course of a month to find, analyze and suggest a strong interim fix with testing behind it in just one month.
Sorry but there is no way that Boeing stood up between 500 and 600 engineers virtually overnight to attack that problem and have a solution. It would take Boeing a weeks of meetings to allocate that many engineers to such an effort. So either 200,000 engineering hours haven’t gone into solving this problem or, if they have, they started a long time ago long before the battery problem was highlighted by two incidents days apart.
Each time two airlines merge, there are Great Debates on competition in the marketplace among airlines and those debates usually start in Congress and among pundits for the airline industry. It’s a valid concern but there is something that gets ignored in the debate.
Airlines are presumed to be competing openly in perfectly competitive markets throughout their business structure. They are assumed to be gaining some advantage through ownership of fortress hubs but we know that such fortress hubs are not always as “fortress-like” as we might believe.
With so much emphasis on airline competition, I do wonder when we focus on another part of the competition equation in the airline industry. That would be airports.
We do very little foster competition at most airports even when there is a demonstrated desire by an airline to enter a marketplace and lower fares. In fact, many airports simply do not cooperate nor do they ask for cooperation on the part of existing airlines to bring in new airlines except when that airport is a ghost town (think Pittsburgh).
American Airlines has more than 80% of the traffic in and out of DFW airport these days and will be approaching 90% after its merger with US Airways. This airport won’t get scrutinized by regulators because there is nominally some gate space available for airlines to use.
Consider this: American Airlines effectively controls 4/5ths of DFW airport today. It has full control of 3 very large terminals (A, B and C) and effective control of Terminal D. The only terminal it doesn’t control is Terminal E, the least optimal terminal for an airline to operate into and out of. And by far the terminal most in need of a refresh (it’s getting that now and that is long overdue.)
But what if an airline would like to start substantial operations at DFW? Is there space today? Not really. It would be possible to find two or three gates at best and that doesn’t not exactly invite airlines to enter the market. If airlines want to share space, they can but it’s up to them to figure out how to do it.
Will DFW build a new terminal for new entrants? No, not without a very substantial commitment from an airline to help pay for those facilities. Yet, without new space and flexibility, DFW can’t begin to hope to add new airlines except on a small, ad-hoc basis.
That new terminal space is exactly what would attract more competition into this airport. People wonder why Southwest doesn’t give in and use DFW but this is one very big reason why: DFW actually can’t provide adequate gate space for a substantial operation run by Southwest . Consider that for a few minutes. . .
Competition isn’t just controlled by airlines, it’s controlled by those operating the airports. Those airport boards feel very beholding to large incumbents and often do not accommodate anyone else due to unspoken (and sometimes not so unspoken) threats by those owning the fortress hub.
Take a look at how United (Continental) Airlines treated Houston after it allowed Southwest to build a 6 gate international terminal at Houston Hobby. It was unseemly and unwarranted.
If you want more competition, you have to make it possible for new entrants to gain a foothold in a market and you have to make it possible for them to grow a little too. I realize (and so does everyone else) that there are a few airports where that has to be governed a bit differently such as NYC’s La Guardia and JFK and Newark Airports. In fact, those are about the only places where it has to be done a bit differently. Everywhere else things could be done more attractively and more efficiently than is the case today.
The Dallas Morning News Aviation Blog has a story about new Southwest Airlines CFO Tammy Romo indicating that Southwest would be looking to tighten up restrictions on the Wanna Get Away Fares that are Southwest’s most affordable. This occurred at the JP Morgan Chase Transportation & Defense Conference and one questioner indicated his own experience with these fares and the fact that he was asked for no additional money to change a ticket. Surprise was expressed that there was money being left on the table as he was ready to pay a change fee and found there was none.
Now we are getting into dangerous territory for SWA in my opinion. First, while there is no “fee” to change a ticket, it’s often misunderstood that a change in the ticket results in no extra cost. That’s not true. The user has to pay the difference in fares and that often can be considerable.
Second, change fees for such tickets will never be a big revenue driver but they can be a huge discriminator when it comes to adding customers. It’s like the bag fee thing only better. If I were Southwest, I would advertise the hell out of this and drive more traffic my way.
Third, Southwest perhaps should look at every time it has in place today but that doesn’t mean it should change every item in place either. Should Wanna Get Away Fares be restricted? Probably to some degree. I would say that charging a $25 fee to change a ticket would be of no real impact to Southwest but at the same time add incremental revenue where it would be appropriate to add incremental revenue.
But I would also be very careful of letting analysts drive my focus in these areas. Analysts are paid to find anomalies in data and point them out. They are not paid to quantify intangibles. Southwest’s success is based a great deal on the intangibles that the airline offers and I would be very careful not to corrupt that perception. Furthermore, just because a very well paid people earning considerable 6 figure salaries are willing to pay change fees does not mean the consumer of Southwest’s services is willing to pay these.
Southwest’s advantage is in delivering a high value experience. Every fee is potentially an item that diminishes that value.
Consider this market landscape that we should see, in fact, by the end of this year:
Delta Airlines
United Airlines
American/US Airways
Southwest Airlines
Those 4 airlines will carry about 85 to 90% of airline traffic in the domestic United States airline market. Of the 4, 3 of those airlines will use regional airlines for “feed” to their hubs. The bulk of those regional airlines will still be using many 50 seat regional jets (CRJ200/ERJ-145 aircraft) for those regional jet routes.
The original regional jets were built and meant for routes that were spokes to a hub from a region. For instance, those regional jets might serve cities such as Waco, Abilene and even Midland/Odessa from DFW airport. They still do today.
For those short, simple flights, there cannot be much quarrel with the airliner being used. (Well, there can but that’s a blog post for another day.)
But regional jets get used for routes that go far beyond a “region”. I remember that when I flew Continental from Dallas to Milwaukee, I had to take an ERJ-145 from DFW to Cleveland and then another from Cleveland to Milwaukee. It was a total trip time of 5+ hours in the air and that’s a bit much in those airliners.
Many believe that the new 70 to 100 seat regional jets are taking over such routes. Here and there, that’s true. There are presently 50 seat (or less) regional jets also flying routes such as OKC to EWR (Oklahoma City to Newark, NJ and 1325nm long) or Milwaukee to DFW (853nm) or Portland, OR to Ontario (Los Angeles), CA (838nm). Try Cleveland to Miami at nearly 1100nm.
It’s the Long and Thin syndrome. We can fill 40 seats a day on this aircraft and fly it for over 3 and sometimes 4 hours and earn money by feeding people into a hub that is as much as halfway across the country.
But just because we can, doesn’t mean we should. Those routes add incremental revenue but they are rarely stand-alone profitable for an airline. In fact, the one airline who is getting away from that mentality is Delta. A route gets evaluated for its ability to stand on its own two feet at that airline, more often than not.
Will there still be regional jets? Yes. Will there still be 50 seat jets? Yes. For the foreseeable future the 50 seat regional jet will be used. It will be used less and less and you won’t find another newer, more efficient 50 seat jet showing up to replace it either. Airlines will continue to use them if for no other reason than the fact that capital costs of a 50 seat jet will approach unheard of low levels as time goes by. If you can acquire a used 50 seat jet cheap enough, you can still make money.
And those aircraft are getting cheaper every month.
I think we’ll see them around for another 7 to 10 years but then I think we’ll see them replaced more and more with either larger mainline style regional jets or smaller turbo-prop regional aircraft.
There won’t be any such thing as a replacement for those first generation aircraft.
Back in November 2012, I wrote a blog entry titled The City of Dallas Hates Love Field, a story about one party trying to re-use the Braniff International Maintenance Building and the City of Dallas trying to tear it down so it could continue with its plan to make Love Field a non-airport.
Since that time, there have been many people leading a fight to get the Braniff Maintenance Center listed for eligibility into the National Historical Register for preservation. In fact, I’m delinquent in writing a follow up to encourage people to contact The Texas Historical Commission to urge them to find the building worthy of preservation.
Frankly, with what I know about Dallas politics, I didn’t have much hope for saving this building. When Dallas politics decides it wants something, it usually finds a way to have it regardless of who objects. We’re not a corrupt city but we’re a cold blooded one when it comes to business.
But, hey, guess what?
Those guys did it. The Texas Historical Commission has issued the Determination for Braniff OMB 7701 Lemmon Avenue and the building has been deemed eligible for inclusion into the National Historic Register. Now there is a year long process called a Section 106 review that is performed to actually put the building into the National Register. The real mountain, apparently, was getting it deemed eligible.
Congratulations to the group who went to work on making this happen. You have managed a very rare victory in my opinion.
And that sound of something being unwrapped? That would be the Airport Director getting out some antacid tablets because his deal to turn Love Field Airport into a non-airport just suffered a major setback.
Brian Lusk of Southwest Airlines’ own blog has passed away. I didn’t know him and I had to find out on the Cranky Flier website but I wanted to make my own mention of it because Lusk really did some great Flashback Friday blog entries for the Southwest Blog over the years. They never once failed to suck me into their time capsule and take me on a cool trip through aviation history.
My sympathies to his family and to his Southwest Family.
Curiously, Lusk’s last entry had recently drew me in (again) because it had the covers of various SWA corporate annual reports. I have some about 15 year’s worth of Braniff’s.
Just as Boeing pursues an interim solution to the 787 battery problem, battery maker Yuasa publicly disagrees with the issue behind the battery failures.
Nice.
Boeing believes their interim solution solves a battery failure problem. That is, they believe by containing the battery, they solve the safety of flight issue. This does suggest a belief that the battery design may be at fault.
Yuasa, on the other hand, believes that the batteries it has examined show clear signs of an over-charge which pushes fault outside the battery itself and onto the control system(s). Boeing says that their quadruple redudant systems would prevent such a thing from happening.
My thoughts: If this were a fundamental battery design flaw, I think we would have seen more battery problems much earlier in this program. The charging system and other power systems are complex and reportedly do cause some pain to the operators.
Why would a charging system fail now as opposed to during test flights? Conditions. Operating aircraft will be subjected to greater loads, real world power consumption profiles, etc.
The greater issue is this: The battery maker and airframe maker are disagreeing in public. Goodbye interim solution, in my opinion.
There is an anti-trust hearing on the US Airways / American Airlines merger and, as is common, Congressmen are voicing loud concerns about air fares rising and loss of hubs. This does, at first glance, make them seem For The People but . . . are they?
I’m not a free market capitalist. In fact, I’m pretty moderate in my views on business in general and regulation. I think some regulation is extremely important. I think the financial meltdown of 2008 is the most evidence that anyone needs for a decade or two.
It is ironic that I find this merger more satisfying on what is going on with this merger. In previous mergers, it really was clear that certain hubs would be downgraded to focus cities at best. For instance, the close proximity of hubs in Memphis, Cincinatti and Atlanta made it pretty certain that Memphis and Cincinatti would be sacrificed for Atlanta no matter what Richard Anderson told Congressional committees. I think the same ultimate outcome is quite likely for Cleveland in the United / Continental merger.
In this merger . . . I can’t see hubs going away. Assumptions being made about Miami being superior, potentially, to Charlotte causes me to laugh. Charlotte is a far more strategically important hub on the domestic front. Miami is and will remain a gateway city for all destinations south. If I question anything, I question how things will work out between Phoenix and Los Angeles. While I believe both will remain much as they are in many respects, I’ll concede that things are murkier their. I think Los Angeles becomes a gateway city and Phoenix becomes a domestic hub. Much the same is true between Philadelphia, New York City and Washington D.C.
But, bottom line, I don’t see hubs getting reduced in this merger.
As for air fares rising? Well, they may well go up some. They may well not. Here is the critical question in my mind: Why are air fares that prevent airlines from earning a return on investment that is great enough to cover the cost of capital something we don’t want? In other words, why might it be desirable for airlines to be market limited to air fares that don’t earn them enough profit to be a viable business over the long term?
Consolidation in the marketplace is largely due to the fact that we deregulated the market side of the airline industry but never deregulated the labor side of the industry. Airlines needed more market power and then finally figured out how to do it effectively.
Let’s not bash airlines for raising air fares when the industry has lost Billions (with a “B”) of Dollars over the past decade. Our response, ordinarily, would be if you’re losing money and your cost competitive, you need to raise your prices.
Air fares have gone up in areas where they were unprofitable. Unprofitable city pair have moved into profitable territory in many cases. That is as it should be. Bargain basement fares designed to win market share instead of profit are probably gone for a long, long time. It was nice while it was here but let’s not kid ourselves into believing that those kind of fares are what we deserve.
However, there are many markets and city-pairs that were earning excessive profits which are now experiencing real competition for the first time as a result of these mergers. Those fares are going down as they should be. One great example is American Airlines “owning” the DFW/NYC city pair and now . . . not so much. They have some competition, fares have gone down and it is far more reasonable to fly that route than it has been in a long, long time.
Were I to respond to Congress about claims of higher air fares, I would say something like this:
“Absolutely air fares are going up as a result of this merger . . . in some markets. And they should go up because we are not earning a business appropriate profit in those markets.
However, air fares are absolutely going down in other markets because you now are going to have very big, very powerful airlines that will need to compete hard on routes in order to support business growth. We will experience more competition on more routes over time and higher yielding fares will go down as a result.
Businesses are in business to earn a fair and reasonable profit and let’s not vilify that intent.”
And let’s be cognizant of that last statement. There are a lot of businesses who earn an unfair and unreasonable profit and even do so with massive government subsidies. The oil industry is one that comes to mind with some companies earning profits that are greater than the GDP of some small nations.
The airline industry, on the other hand, really not only isn’t subsidized but is probably overtaxed in many ways. In fact, I would seek to start a dialogue on the fact that despite economic benefit accruing to entire communities, only users are taxed and heavily so. Airports, for instance, are public infrastructure that offer benefits yet we seek to fund them with taxes only on users. Highways are public infrastructure too but we tax everyone, not just users, for them because the benefits accrue in many ways.
But the airline industry is most inept at making such arguments and generally resorts to a “crouch” position when dealing with most things. When they do bow their backs at government, they often overplay their hands as well. It’s an industry that could learn something from the oil business. . . or corn growers.
A Chinese Communist Party and mining manager missed his flight in China not once but twice. The second time was because he and his family were eating breakfast in the airport and missed the calls for departure. What did he do? He went nuts and violently dismantled the check in area.
Boeing has made a proposal to the FAA that would provide an interim fix to its 787 battery and wants the FAA to approve the idea and allow recertification testing of the solution to start. The NTSB is not due to issue its own report until late March but it is reported that Boeing wants to get the aircraft flying again by April.
I have mixed feelings about this proposal for the simple reason that an interim fix is comprised mainly of “toughening up” the battery with additional steps taken to prevent and/or contain thermal runaway. No one has said why these batteries are being challenged more than they should be.
On the other hand, it’s notable that the 787 aircraft built today comprise 50 aircraft plus a rather substantial test fleet that managed to fly many cycles and many different profiles before two successive battery events. This doesn’t mean there isn’t a problem but it does cast doubt, in my opinion, on the problem being the actual battery.
Even if it isn’t the battery itself that is the problem, extra containment strikes me as wise.
It seems that if Boeing wants to come out of this latest problem with any credibility, it really should be prepared to indicate exactly what the problem is and what not only the interim fix is but what the final fix will be. When you have both pieces of information, that’s when you ask for an interim fix. Right now, it is unclear if anyone understands the exact root cause of the problems.
I’ve had it suggested to me that Boeing must understand the root cause given their application for an interim fix. If it were 10 years ago, I would agree with you. Today, I think Boeing and, in particular, it’s executive leadership, have not held to Boeing principles on finding solutions to problems. In light of that and as much as it pains me, I think it wiser to wait until the root cause is understood before approving a fix to the lithium batteries.
A better alternative interim fix, in my opinion, would be installation of a safer battery technology. I’m sure Boeing doesn’t want to engage in this because it would require other changes to other systems. If Boeing hasn’t made this their Plan B yet, it really shakes my confidence in their ability to solve problems.
A comment found on Executive Travel’s website and made about the A380:
“Actually, there’s no difference between flying 30 passengers and 526,” says Harald Tschira, a Lufthansa first officer.
The main differences really center on what you have to learn about the systems of the aircraft. On a larger aircraft, there are more systems to learn than, say, on an Embraer ERJ-140. But the flying and, most specifically, the act of preparing for departure, flying a route and landing, is pretty much the same from one aircraft to another.
The idea that a larger aircraft is more difficult to fly is also specious. It’s not. In fact, large aircraft can often be easier to fly than smaller aircraft.
Upgrading into larger aircraft is often a large benefit for pilots because it means they’re flying flights with more hours / flight which means they have to fly fewer flights overall each month.
Nominally, you are putting more experienced pilots into cockpits of aircraft carrying more people and that might mean you have fewer accidents where there are a large number of casualties. But I really don’t think that is substantiated by statistics. When aircraft crash, they’re of all makes and models. The Air France Airbus A330 disaster was a total loss of life, for instance. Theoretically, that aircraft was staffed by very experienced pilots who all did the wrong things to recover the aircraft.
Is there a huge difference between the aircraft of size and regional jets? No, not really. A qualified pilot could fly either with the existing training. Is there a reason to have the most qualified pilots on the largest aircraft? No, not really.
So why do we do it? Because that’s the way it’s been done since before airlines were profitable. There was a correlation between an experienced pilot and his ability to fly a larger aircraft when airplanes were not automated. Today, aircraft are all much more automated and have far better instrumentation which levels the playing ground.
A couple of days ago, US Airways CEO Doug Parker and US Airways EVP Elise Eberwein went to go talk to a join meeting of the Allied Pilots Association (AA pilots) and US Allied Pilots Association (US Airways pilots). They attempted to address concerns and foster a new relationship that would see a smoother merger get executed.
Let’s take a moment and think about this. The soon to be CEO of American Airlines Group and a trusted US Airways executive in charge of People traveled to answer questions and address concerns to unions that will be involved with the new company.
Do you think that move would have been made by an American Airlines team? For instance, do you think anyone bothered to go talk to TWA unions when AA bought them as an asset sale? Do you suppose that Don Carty went and talked to the Reno Air people when they got bought?
You didn’t even see these kind of overtures being made when American Airlines needed a deal to stay out of bankruptcy just a little over a year ago. I would imagine that the pilots from American Airlines may have had a slightly stunned look on their face.
I saw today’s Cranky Flier mentioning a pretty disturbing incident experienced by Matthew of Live and Let’s Fly Blog. This isn’t a case of United beating the stuffing out of a guitar or American Airlines picking a fight with an actor. This is, in some ways, worse.
Because it wasn’t a mistake. It was abuse of a passenger.
I’ve witnessed this kind of bullying. While I’m unaware of the exact flight attendant or captain, it’s symptomatic of what is a general trend in the airplane these days. Control by bullying.
This passenger presents a potential challenge for me because he’s knowledgeable about what he can and cannot do and he’s willing to question my authority on certain issues. Off he goes by any means possible. Captains are now very reticent to tell flight crew to grow up and act like adults because there is a bit of a culture of protection that exists among flight crew that can result in blow back on him.
I believe the blogger and while the Captain and Flight Attendant in this situation might have a different viewpoint of sorts in all of this, they don’t really have an excuse, do they?
This wasn’t done to this gentleman out of an abundance of caution. It was done to punish and control and it was an abuse of authority. Is that what we pay for when we buy a ticket to travel somewhere?
And if this kind of thing happens to high mileage frequent fliers who write blogs, what is happening to economy passengers that is going unreported?
People who lie to control their own customers are abominable and should suffer consequences within this company. People who don’t exhibit courage enough to arbitrate a situation involving a customer that clearly has not gone out of control are abhorrent and should be retrained in leadership before being permitted to command an airliner again.
Over the past 2 or 3 weeks, mainstream media has often made statements that the merger between American Airlines and US Airways was going to lead to less competition and higher prices. A number of generic talking heads make it sound as if this is a no brainer.
Is it? I’m not so sure.
Fares are up over the past 4 years, without any doubt. Are these fare increases due to less competition? I think that argument is rather simplistic. I think that, among the airlines, capacity discipline has resulted in higher air fares far more than reduced competition. There is a new generation of leadership among the airlines who rightly identified that grabbing all market share was insanity and focusing your business on routes that provide a real return on investment was far wiser.
And it’s worked. Richard Anderson of Delta, Jeff Smisek of United, Doug Parker of US airways and even Gary Kelly of Southwest Airlines have all focused intensely on managing capacity of their airliners. If capacity needed to be increased, it was done by upscaling the airliner serving the route slightly rather than by adding an entire new flight to a route. These men have managed capacity growth at their airlines with great discipline.
In many cases, fleets have contracted in count but maintained neutral or ever so slight positive capacity growth with upscaling. An example of this has been Southwest adopting the 737-800. They are growing capacity, where needed, by introducing the 737-800 to routes with that demand. They are replacing seats on the 737-700 to grow that capacity from 137 seats / aircraft to 143 seats without impacting seat pitch. This is wise, conservative capacity discipline and it has led to significantly increased ability to raise fares.
Airlines have also been far less reticent to enter markets that have been dominated by legacy airlines in the past. Virgin America identified opportunities on routes to and from Dallas and Chicago, for instance. They’re squarely aiming themselves at American Airlines and United Airlines and just a few years ago they would expect a capacity fight from those legacy airlines. Today, those same legacy airlines aren’t fighting back by dumping capacity and below cost fares onto the routes. (Or at least not nearly as they once did.)
Delta has been quite willing to start routes against airlines such as American Airlines (NYC to DFW, for instance) when there has always been a unspoken agreement that AA owned that route and no one would bother them over it. Just as Delta had Atlanta to NYC and Northwest had Minneapolis/St. Paul to NYC.
The competition is there and it’s not only putting pressure on prices, it’s putting pressure on the right prices. Those routes previously dominated by a single airline who was charging fantastical prices even for economy seats are now being challenged by equal airlines which are lowering high fares.
No, low fares aren’t being made lower. Yes, in many cases low fares have gone up significantly. They should have gone up as they reflect a very marginal business case. Under the new rules, those routes must independently earn a return on investment or they aren’t worth it. The choice at that point is to raise a fare or quit the route.
And because costs are now more or less aligned across the industry, all need to raise fares and there is a harmony in that. Those costs will, over time, start to diverge some and when they do, the advantage will go to those with lowest costs. Right now, the advantage goes to those who are most productive within the cost structure.
Southwest, for instance, is most productive despite the fact that they have some of the highest costs of any airline in the US now. It’s their advantage and as long as they maintain it, they’ll succeed well. It allows them to stay on parity with their competition and it allows them to cooperate with fare increases.
It’s daunting when an airfare goes up $100 to fly somewhere. On a personal level, I feel that pain too. I fly far less today than I did just 5 years ago for just that reason. But . . . costs have gone up everywhere. We, as individuals, see significant increases in our costs on a daily basis. Gasoline is far higher today and so are things such as milk and even meats. Electricity costs more and so do things like car tires. We shouldn’t be surprised that costs are higher at airlines requiring more money to exist.
Aviation and airline consultant, Richard Aboulafia, has written about re-thinking his position about Boeing after many years of seeing Boeing as a stronger company. This is no small thing, in my opinion.
Aboulafia makes several good points about how each company has evolved over the past decade or more. Airbus has built a stronger and stronger company both on profits but also on making the right business case. While I think Airbus has gaps in its products, I also think that Airbus has also been the leader in arguments for and against aircraft for the past 15 years.
Boeing has been been reacting to Airbus on many different levels since the mid-1990’s. The last leadership Boeing has displayed on aircraft is the 777 and, let’s face it, that aircraft had the benefit of being last to market in the contest between Boeing, McDonnell Douglas and Airbus.
Boeing created the 737 Next Generation aircraft line in response to the Airbus A320 series line and while Boeing made a business case for its 737NG, it was based essentially on being a legacy aircraft that was cheaper to operate. It wasn’t based on being the better aircraft. There is a reason why Airbus has made so many inroads in the United States over the past 15 years and it isn’t because they have an inferior, more costly product for operation.
Not only did Airbus suck demand away from the Boeing 767 line, it managed to eat away at 777-200 sales as well and did it all with the A330-200/300 series aircraft. The A330 not only was a better response to the 767, it also was more “right sized” for almost all of the routes being served by 777-200 aircraft. It offers excellent fuel economy, excellent operating economics and continues to not feel old or dated. That’s no small achievement in a business where you get to create a new product for a demand maybe every 20 years or so.
While I think the A380 is an ego project with a future that is far more limited than what Airbus / Emirates believes, they’ve got the aircraft flying and doing so very reliably. They also killed most of the remaining demand for the Boeing 747. The 747-8i is not going to be more than an ultra-niche aircraft. It might be a little more in demand than the 747-SP and it might attract cargo companies for a few more years but it very, very clear that the A380 killed the 747 pretty effectively. If nothing else, Boeing no longer has the massive profit generator that the 747 once was and that’s significant.
What has Boeing done in the last 15 years or so? It got the 717 and killed it in the hopes that it could sell more of the 737-600. That didn’t work out so good and it’s notable that the 717 continued to be a very effective money-maker for those who have owned it.
It’s provided winglets and PIPs (performance improvement package) to the 737 series which have kept it in the game against the A320 but only just so. And when Airbus defined the airlines needs with the A320NEO, Boeing stumbled around for a year and gave us the 737MAX when it could have forced Airbus to abandon the NEO by announcing an all new 737 replacement.
The 767 is sold in tiny quantities still but mostly it was kept around to win the KC-46 tanker program. Boeing is selling the United States a bargain tanker replacement but one that is based on an airframe that is about 30 years old. Think about that. Now think about how long the Air Force kept the KC-135 tankers so far.
The 787 . . . well, this aircraft has plagued Boeing with some pretty bad PR to date. It’s yielded some good PR, too, but it’s really exposed Boeing for what it has become: A committee managing an aircraft business on the basis of extracting the last bit of value possible from tired products. The committee decided it could let everyone else do its job and design its next airplane and that hasn’t worked out so well.
The 747-8i? Niche aircraft, old design, not attractive to most airlines and compared to the 777-300ER, just not up to the job as much as airlines seem to want.
The 777-200/300 is 20 years old and the Boeing Committee’s plan is to push away doing anything with it for another 7 years. This despite the fact that airlines have directly and positively responded to a refreshed, stretched design. Airlines are entirely willing to have a re-winged, stretched airframe with enhanced engines. Not only willing but nearly clamoring for it. Boeing’s response? Yeah, yeah. When we get to it.
The 787-9 is being built now but too slowly. The 787-10 hasn’t really been aggressively pursued despite the clear encroachment of the A350 series into this territory.
My point is that Boeing is slowly and methodically ceding strengths to Airbus. While Airbus may not be the best governed, best run aircraft manufacturer, it is at least making every effort to to execute with excellence. That excellence is embodied by good engineering, good value and modern technology.
So, yeah, I agree. Boeing just isn’t the company that it was and should be. It lacks visionary leadership. It lacks engineering leadership and it lacks self-honesty at this point. It can continue as a company for many years to come but it isn’t going to be the Boeing we remember. It isn’t going to be the Boeing we keep willing it to be. It’s going to be that company that makes things but which slowly lets its lifeblood ooze out to others. Or at least that’s where I think it will go if it doesn’t acknowledge the need for improved leadership and more risk taking.
Some would say that Boeing took too much risk with the 787. I would respond that they farmed out all their big risk to others and looked to cash in with everyone else sharing that burden. They now have realized a great deal of risk, yes but how much of that could have been avoided altogether if Boeing had just built the damn thing as it had with previous airframes? And how hard would it be to answer tough questions about a battery and charging system if you had designed the thing yourself?
And how many more times is James McNerney (chairman and CEO of Boeing) going to declare publicly that his company is a great company and his 787 is a great airplane without acknowledging the very real problems that sit on his doorstep?
