Airbus has announced a provisional deal for Russian airline Transaero to buy its Airbus A380 aircraft.  The order is for 4 airplanes at a list value of about $1.5 Billion.

What’s impressive is Transaero’s plans to have these aircraft seat 700 people.  The Boeing 747-400 Domestic is capable of seating about 550 people in a high density layout.  The Transaero aircraft will be the rough equivalent of adding another 737 to a 747. 

Air Austral, another purchaser of the Airbus A380 has announced plans to fly its aircraft with seating for over 850 people.  That would be the equivalent of adding a 777-200 to a 747-400. 

Will it work for these airlines?  Time will only tell but it’s hard to find that many people who want to be crammed into that kind of airliner for a long haul flight at any price.  Current A380 operators are making money with their aircraft but only on extremely high density, high profit long haul routes. 

There are only so many routes in the world and, more importantly, there are only so many airports that can accomodate the A380.  In Russia, the only one is Domodedevo.

As much as I do not want to fly on such an aircraft, I have to admit that I would like to see what 800 seats on one aircraft looks like.

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China Southern received their first Airbus A380 and I learned something a bit surprising.

That was the 17th delivery of the year and the 58th Airbus A380 to be delivered.  For the record, I think that Airbus might have just got its act together on the A380 now.

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You have to admire these guys for their attention to detail.  Real turbine powered aircraft scaled and made to look like the real thing.  Enjoy!

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So, here is some interesting news.  According to the Sydney Morning Herald (Australia), QANTAS is finding its 4 times a week flights to the DFW area using a 747-400ER as both successful and profitable.  The airline began the flights just 3 months ago and is already seeing load factors in the 90% range (with about 80% of that load being leisure and 20% corporate/business.)

There have been a few diversions to South Pacific locations for refueling due to adverse headwinds but none recently.  There have also been a few complaints about luggage being delayed due to load limitations.  Both because the route is on the outer limits of the range offered by the 747-400ER. 

If the success is as good as claimed by Qantas NSW regional general manager Peter Collins says it is, I wouldn’t be surprised if QANTAS either changed the service to an A380 in the future or if it added 6 or 7 times a week frequencies.  QANTAS has already said that when its 787s become available, they’ll likely service the route with multiple daily frequencies. 

QANTAS has both 787-8 and 787-9 aircraft on order but I would expect that the aircraft they’ll want to use is the 787-9 (provided the range promised is delivered) and that means a long time from now.  In the meantime, the A380 can offer as much range with greater capacity as the 747-400ER for this flight when it can operate its aircraft with the uprated Rolls Royce Trent engines at full thrust again. 

In any case, it’s good to see QANTAS succeed with this route and I look forward to seeing it developed even more as time goes by.

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Am I the only one somewhat caught off guard by the fact that Airbus has now delivered 50 A380 aircraft?

Congratulations Airbus!

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An Emirates A380 on approach to London Heathrow airport was struck by lightning (and rather dramatically I might add) and it is captured on video.

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Ever wondered what happens when a larger aircraft clips a smaller aircraft with its wingtip?  Wonder no more:

The Air France A380 hit the tail of the Comair (Delta) CRJ-700 Monday evening and spun the CRJ-700 around by 90 degrees.  Listen to the ATC audio on this clip:

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

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

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

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

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

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

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

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

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

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

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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

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Next up:  World Alliances

There is never that much revolutionary change in alliances.  Last year, there was a fight over JAL between Oneworld and SkyTeam and Oneworld won but they really were destined to.  It made sense for JAL.  The alliances worked a bit to get better access to areas they were deficient in and to a large degree, they were successful.  I don’t expect much change, if any at all, this year.

The Middle East:

Emirates did what Emirates does:  it ordered more aircraft.  I did what I do:  failed to see how they’ll use all those A380s and 777s.  The financial scene in the Middle East and, in particular, the UAE continues to be weakish and while I suspect it will recover somewhat this year, I think the area no longer carries that gleam it once did.  I don’t see any failures in the near future but I don’t see any airlines really blooming either.  Success there is, as is true for most businesses there, fairly dependent upon oil prices.

India:

Nothing astonishing happened there but it was already pretty mucked up.  It remains mucked up and will likely stay mucked up this year.

The Far East:

China did kind of force their airlines into agreeing to buy Chinese aircraft as I predicted.  In fact, Chinese aviation is suddenly acting very Chinese in that it is being required to toe a more obedient line.  Face is everything there and I don’t like it when airline businesses are operating on the basis of “face” rather than good decisions.  It’s notable that in the launch orders for the COMAC C919 aircraft, each airline took up just 5 aircraft orders each.  They don’t want that airliner any more than anyone else.

JAL has done OK for the year.  They’ve made progress with their finances and they did make some hard choices.   They did have to file for bankruptcy protection and no one should have been surprised about that.  The new CEO, Kazuo Inamori, and President, Masaru Onishi, are succeeding and making hard choices.  Frankly, more so than is characteristic of a Japanese company and they deserve credit and support.  This airline isn’t fixed yet but it is on its way.

Oceania:

QANTAS got hit pretty bad by the Rolls Royce failure on its A380.  United Airlines is still on the US-Australia routes but badly needs to upgrade its product and it doesn’t appear positioned very well to do so.  Perhaps Jeff Smisek & Company will address that better this year.  Delta and V Australia didn’t get to form an alliance and they’re trying again.  Someone has to give in this area and it will be either in the form of a codeshare alliance between Delta and V Australia or in the form of an airline withdrawing from the market (United or V Australia).

South America:

LAN, in fact, did continue to succeed in South America.  So much so, they bought TAM to create LATAM and then bought AIRES (a Colombian airline)covering both the east and west coasts of South America.  LAN is, in my opinion, now a SuperLegacy of South America and that’s a bit dangerous for them.  South American governments are more protective of their countries airlines that is the custom in other parts of the world.  

Curiously, LATAM is now operating airlines in two different alliances:  Oneworld and Star Alliance.  While there is speculation that they’ll continue this with LAN brands in Oneworld and TAM brands in Star, I think they’ll have to pick one and this may well mean a big battle among all three alliances.   This is an area where SkyTeam could do well for itself by gearing up for battle now.

Aerolineas Argentinas:  Well, what can I say?   Well, I’ll say exactly the same I did last year. 

This disaster is much like the country itself.  It won’t go away but it won’t perform either.  No outside airline will consider taking it over after what happened with Grupo Marsans’ ownership.   They lack an appropriate fleet for their flying, a strategic plan for stabilizing their revenues and no clear plan for future growth.  But the Argentinian government also won’t let them go away.  It is a matter of national pride.

LAN Argentina is growing in Argentina but somehow I remain skeptical that it will be allowed to succeed too well.  Why?  For one reason, the government of Argentina owns Aerolineas Argentinas and it has a vested interest in that airline earning money.  For another reason, LAN Argentina is owned by the LAN Group of Chile.  Look up how Chileans and Argentinians feel about each other.

Colombia / Central America: 

Avianca TACA is doing fine and I look forward to seeing how they’ll compete against LAN. 

Venezuela:  Bah!

Europe:

British Airways accomplished a few things.  They got into a royal battle with their flight crew that remains unresolved today in part by being petty.  Their flight crew union, Unite, furthered that argument by being petty.  BA did get their merger with Iberia accomplished and after many, many years they have their anti-trust agreement for trans-Atlantic flights between its European Oneworld partners.

Look for the BA/IB union to do OK in its first year and they may even start looking for another partner as soon as possible.  The anti-trust agreement between Oneworld partners should also add to the bottom line.  However, it’s time to settle this fight with Unite and it’s time for Unite to get real.

Lufthansa is moving along and did do something with their BMI purchase.  I don’t think it did them any good when its CEO, Wolfgang Mayrhuber, started complaining about its ability to compete with the likes of Emirates.  Whether or not he had a real point (and he probably did), it also did signal just how hard a job they’re having with the task of competing with the Middle Eastern airlines.

They also still have their A340s and their plans to add the 747-8i.  They got their first A380 and all I see is fat, fuel consuming airplanes.  This is going to be a problem for them if oil prices rise much more and when you consider that much of their competition is flying fuel efficient A330s and 777s, it makes you wonder about their long term strategy.

KLM/Air France:  More of the same.  I think this airline will need to make an order for new widebody aircraft soon.  Because it remains, essentially, a French airline, I see a large order for A350s and a small order for 777s.  I do not see the 787 in Air France’s future.

Airlines will earn profits and even earn great profits throughout the world.  Many will be “record breaking” but as much from inflation as a recovery.  Those profits will soon start to burn a hole in someone pocket and that is when I think we see capacity growth.  I think that capacity growth will start with the Middle East airlines pursuing more revenue lucrative traffic from Europe and North America.  But we’ll see it happen in the United States, too. 

I would dearly like to see the 787 enter into service with someone and I think we will see it do so.  But Boeing has got to get a rein on itself.  The failures in the 787 program are as much about poor management as they are about stretching technology.  There is too much accountancy going on there and not enough visionary leading.  It’s time for them to start winning and they could do so by winning the KC-X tanker program once and for all.  But it is also time to start talking about what’s next. 

The demands of the 787 program *will* decrease as will the demands from the 747-8 program.  Will it be talk of a 737 replacement or an improvement to the 777?  I think the airlines would like to talk about the 737 replacement and that seems sensible.  Rather than play cautiously, reach again, I say.  Push engine manufacturers to come up with something to raise the game and push technologies again.   It’s also time to talk about the 787-10 and I think there are more than a few airlines who would like to be a part of those discussions.

Airbus is going to muddle along denying any real problems with the A350 until the end of this year.  Then we’ll hear about something delaying the entry into service date by a considerable amount.  John Leahy will insult Boeing and claim the A350 will put the 787 to death but it won’t.   Airbus might well buy the KC-X tanker program but I question the wisdom of this in light of their ongoing A380/A400/A350 problems as well as their announcement development of a new engine option for the A320 series.  When do they earn money the proper business way?

It would be nice to see Embraer make a move into the 130 seat market and I think those guys could do it very well.  Bombardier gets bashed by everyone but I still think they have something with their CS series and I think it will be taken up by another airline soon.

I think we’re going to see another round of fees.  Just as soon as airlines can identify what other parts of their service they can de-couple from the basic flight.  I think we’re going to see airlines put a price on early boarding and we’ll probably see fuel surcharges amounting to tens of dollars.

But let’s hope we see an interesting and prosperous year in the airline industry.

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United Airlines CEO Jeff Smisek says that there are too many seats chasing passengers on routes between the United States and Australia presently.  United has had a presence for over 25 years on those routes and its staying power comes from its corporate contracts and loyalty program but it is being challenged presently by lower fares from new entrants on those routes (Delta and V Australia) as well by the fact that its 747 aircraft have a less attractive IFE solution than others.

One of the great ironies for long haul routes such as these is that they have, for the last 40 years, been largely dominated by large widebody aircraft.  Most commonly, the 747.  Filling those aircraft day in and day out is a challenge and one reason why really only two airlines have traditionally succeeded on those routes.  New entrants or weak players usually leave the market because there really are too many seats chasing too few passengers, particularly in hard times.

Right now, QANTAS and United have 747s and A380s on that route.  Delta is using a 777-200LR and V Australia has 777-300s working the route.  Delta is probably right sized but they’ll have to remain committed to the market as a long term investment in order to succeed.  I understand why they want to cooperate with V Australia and I’m not sure that’s a bad thing for either airline but it appears that is going to take some time to work out.

United and QANTAS both are the dominant players but I wonder if they’ll remain so over the long term if Delta and V Australia hold their ground.  It’s anybody’s guess.  It does occur to me that we are about to see aircraft that would allow new entrants to make money on that route and, at the same time, be right sized for the route.  That would be the 787 and A350 aircraft. 

If those two aircraft permit the same profit margins that the larger aircraft offer, not only will those new entrants stick around but we might see more.  Delta isn’t going to have the 787 for 10 years or more.  United will have some and QANTAS should receive some too. 

Right now, the most practical approach is for airlines to depart the west coast of the United States using large widebody long haul aircraft.  What if United was able to start flying from the interior of the United States using 787s (which they are due to receive relatively soon)?  It’s doable and it might be practical. 

This is another great example of why larger and bigger isn’t always better.  The 787 and A350 are going to offer possibilities for long, thinner routes that will ultimately fracture those large capacity trunk routes flown by the 747 and A380 right now.

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With the QANTAS A380 fleet being grounded for several days, one thing was clear when it comes to this aircraft.

When one of these aircraft becomes unavailable, there can be a huge number of people needing to be cared for.   QANTAS’ A380 carries as much as 450 passengers and their typical equivalent 747 carries just 307 passengers.   For most routes that the A380 would fly, you would require generally 2 other long haul aircraft to deal with the extra burden.  By 2 extra, I mean you would need two 747-400s to get passengers cared for on a LA-Sydney route or two 777-300’s or at least two 777-200s.

But my larger point is that when you fly this aircraft, a cancellation can inconvenience from about 450 to 550 passengers with just one flight cancellation.  That’s a lot of people to take care of and airlines had best have a contingency plan to deal with such an eventuality because it is not like a single 737-800 cancelling.  It’s not even remotely like a 767 or 777 cancelling.  

It doesn’t appear that QANTAS has had much of a handle on dealing with their customers problems either.  To be fair, it’s not easy to ground those aircraft and then dispatch 747s to outlying destinations to take care of passengers.  The flight time alone between Sydney and LA is generally well in excess of 14 hours.  And it’s not easy to keep a spare A380 laying around either.  It’s not even easy to keep a used 747 lying around for backup. 

Then  again, it’s not like there will ever really be a huge fleet of A380s in the world either.  Unless Emirates defies all predictions and really does take delivery on all of their orders.

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The first order for the Airbus A380 in Japan is being announced and isn’t an order from All Nippon Airlines or Japan Air Lines.  Instead, it comes from tiny Skymark Airlines who operates the 737-800 (although they did operate the 767-300 for a while) and who is hubbed at Tokyo’s Haneda airport with an additional focus on Kobe.

The order is for 4 aircraft with options for an additional 2.  Delivery dates are unknown and this order still has to be “firmed up” within the next few months. 

It’s difficult for me to call this a vanity order or a political one for that matter.  This airline is too small for either condition.  With the order book for the A380 essentially covering the next several years, this is like an order that will be scheduled far in the future. 

But it doesn’t make sense.  This airline doesn’t have a network to feed an A-380 and using the A-380 for domestic flights essentially abuses it capabilities.  It would be much easier and offer more flexibility to use 2 767-300s or 777-200/300s for domestic use than it would be to use one A-380.  Supposedly Skymark will use these for international flights but, if so, I have to ask where they’re going to use them and just what kind of network do they plan to have to feed these animals day in and day out?

Filling a 500 passenger aircraft for international flights every day is no trivial task and given Skymark’s business model, they may well be thinking of well in excess of 500 seats per flight.  Yes, on a theoretically full flight, your flights would be incredibly profitable.  The problem is, it’s unrealistic to plan for “full” year round. 

This may be just a fancilful pursuit that will never be realized and I wouldn’t be surprised if we find that out in another 3 to 4 years.

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It was disappointing to hear of the rather dramatic engine failure on the QANTAS A380 yesterday morning but it also caused me to ponder what the real implications are.

First, QANTAS’ grounding of this aircraft is likely unnecessary and way premature in light of the service history of the aircraft so far.  At least with respect to technical reasons for doing so.  However, QANTAS’ grounding is probably a wise choice with respect to public relations.  This company has a long standing reputation for no lives lost in a jet aircraft incident and rightly so.  Preserving this image is particularly important to an airline that by definition is frequently traveling over oceans to reach their destinations.  In other words, don’t presume the grounding as an indictment against the aircraft or even the aircraft engines.

Second, after viewing a number of pictures of this incident, it is striking in that it was an uncontained failure.  However, it also shows just how robust and just how much safer jet airliners of today are versus those of the 1960’s and 1970’s.  An uncontained failure shouldn’t happen but even when it did, things were fairly non-eventful with respect to keeping the aircraft under control and getting it back on the ground.

Third, an uncontained failure in this Rolls Royce Trent engine is somewhat distressing.  Even an engine with modest design mistakes typically will not reveal these problems for a long, long time.  The pictures are dramatic and the amount of debris from this engine is also a bit impressive.  This engine deserves rigorous investigation at this point.

The bottom line is that the aircraft remains safe.  In fact, more Airbus A380s are actually flying with a different engine, the Engine Alliance engine from GE and Pratt & Whitney.  Take the media drama and even the QANTAS dramatic reaction with a large grain of salt for now.  One event does not make a trend.

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The Seattle Times is reporting that Turkish Airlines has indicated its interest in both the Boeing 747-8i and Airbus A380.  CEO Hamdi Topçu apparently has said they’ll decide before the year end on this order. 

Such an order strikes me as hubris for this airline.  Yes, they’ve done pretty well for the past few years and they aren’t a tiny airline but they aren’t so big that their network could possibly justify such a large aircraft in its fleet.   Despite their entrance into the Star Alliance, they’re still a 2nd tier player at best.  Even additional 777-300ER aircraft would cause me to raise my eyebrows questioning this. 

Much of their success has been witnessed over the past 3 years and, on the outside, that would appear to make them attractive going forward.  The truth is, as competition with European and Middle East carriers heats up, I think this erodes their growth.  Furthermore, Turkey’s current political climate makes it somewhat less certain as a place to do business for the near future. 

Bottom line:  I don’t think they’ll actually order the aircraft and, if they do order such large aircraft, I don’t think they’ll actually take delivery.

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It’s become more and more clear that airlines are going to likely have 3 or 4 basic categories of aircraft.  First, the 100 to 135 seat category with a range that isn’t transcontinental but which allows a full load fly 3 to 3.5 hours maximum. 

Second, the 150 to 210 category with a range that will include trans-continental routes.  This was previously served by the 757 and 767 but has seen today’s 737 and Airbus 320 families take over. 

Third, the 220 to 280 seat arena which includes flights ranging from trans-continental to trans-oceanic including both the Pacific and Atlantic oceans.  We’ve seen the Airbus A330 and 767 and even the 777 in this area and that’ll continue for a bit longer too.  But it will be owned by the 787, 777 and A350 soon enough.

Finally, the very large aircraft on trunk routes that demand high capacity and high-ish frequency.  The 777-300ER, 747 (-400 and -8i) and A380 are the players here.  In the future, we’ll see more of the 777-300ER and A380 than the 747-8i and I think Boeing will have to come up with an aircraft that fits this area better both in economies as well as seat range. 

Nothing much has changed except that the models from Boeing and Airbus are getting freshened or replaced and their ceding the 100 to 135 seat market to Bombardier and Embraer.  The regional jet manufacturers are invading Boeing and Airbus territory and that’s brought along an interesting development. 

We can ignore the Comac efforts to date.  Their plans for a 150+ seat aircraft are just that, in my opinion, plans.  You don’t enter that arena without a lot of experience building something smaller and generally without experience being a partner on similar efforts for a while.  Those aircraft won’t fly, pun intended.

With a couple of exceptions, regional airlines are bringing those new 100 to 135 seat aircraft with them instead of that flying remaining with the majors.  Scope clauses continue to get revised to include larger aircraft and instead of major airlines adopting new equipment to serve those routes, they’re ceding that area largely to their regional airline partners.

The why involves what it always involves:  labor costs.  They can have it flown cheaper by someone else and earn more money.  As that scope increases, however, I do wonder why you would continue to contract that out to an independent airline instead of owning it and its revenue stream.  Why wouldn’t you want to vertically integrate and own that lower cost structure as well as control the service product?

Instead, we see SuperLegacies prepared to sell off their regional airlines and pretty cheaply at that.  Even new-ish ones with pretty low labor costs. 

At some point, these regional airlines are going to see that they can operate their own networks and while they may choose to remain partnered with majors, they’ll also see they can take on more of the risk and much more of the profit available. 

Yes, it’s been tried already a couple of times and while those efforts sputtered at the 50 seat jet level, they won’t necessarily sputter using 90 to 110 seat jets that are coming on line.  Republic may be the first to do it successfully by buying brands and working to build an integrated network while continuing to service partnerships with major airlines, time will tell.  If they are successful, will they one day leave their partnerships with the majors and become a force to content with on their own?

And where does that leave the SuperLegacies in the future?  Will they continue to walk away from the bottom end of flying when it comes to capacity?  Will they continue to cede that work to partner airlines while working to build their long haul flying?  Can they afford to cede that much control on what, today, feeds their networks for that long haul flying?

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I’m still a bit in awe deep down inside that an aircraft of this size can take flight.  Not only take flight but fly as many as 500 people for as much as 8000 miles.  It really is a wonder.  Here are some videos about the A380:

A380 Crosswind Landing in Iceland

The A380 Brake Test (laboratory)

The A380 lands hard in Oshkosh, Wisconsin

The A380 lands at JFK airport the first time.

First A380 landing at LAX airport.

And the first landing of the A380 at London Heathrow airport.

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A few days ago, I found THIS little news story about Thomson Airways and what they may choose to do with their 787 aircraft as they come online into their fleet.  Briefly, Thomson says they may choose to introduce a direct, non-stop flight from the United Kingdom to Hawaii.  Thomson is the third largest UK airline and focuses primarily on the leisure market. 

It interests me because it is more evidence of the direction I think airlines will take as they bring into their fleets aircraft that are more and more capable of long, thin routes.  The Boeing 787 and Airbus A350 will be those aircraft primarily although this new direction really started with the 777-200LR. 

It is also why I think ultra-large, long range aircraft have a limited market going forward.  Aircraft such as the A380 and 747-8i have the capacity to carry 400+ people over distances as long as 8000 nautical miles.  However, what has never been fully acknowledged is that previous large capacity aircraft, primarily the 747-400, were used as much for the range, if not more, than their total capacity. 

As airlines begin to explore more and more direct routes that by-pass traditional hubs, the efficacy of using an aircraft to transport 400+ people from hub to hub begins to wane.  Airlines such as Delta Airlines are already using the 777-200LR to fly routes such as Atlanta-South Africa and American Airlines (and others) are using the 777-200ER to fly routes from North America to India direct.  Those routes previously had stops in Europe or North Africa.   Emirates, the largest user of the A380 and who will by far have the largest fleet of A380s, has a model based on their mega-hub in Dubai.  The question is, is it better for a North American passenger to fly to Chicago, New York City or Atlanta and then take a direct flight to their destination or is it better to fly to Emirates’ hub and then onward on another long haul flight to their destination.

I think the former is the more likely model, particularly for the United States and Europe.  Witness the announcement that Continental plans to fly their first 787s to Auckland, New Zealand and Africa from Houston.  Routes that previously never existed and which previously required a stop in Los Angeles or New York or a European hub. 

That doesn’t mean the A380 and/or the 747-8i doesn’t have a place in the market place.  To the contrary, I think we’ll see aircraft such those on extremely dense routes of medium distance that are hub to hub as well as capital city to capital city.  The first, most logical route is NYC to London but there are others as well.  For instance, California to Japan is another great use for them.  Australia to the United States is another logical use as long as the competitors on those routes remain relatively few.  That could change as more airlines obtain the 787. 

At the end of the day, both the Airbus A350 and 787 (and the 777 for some time to come) will be the real players in long haul fleets over the next 20 years.  It’s notable that the 787 is the first long haul widebody aircraft that has the flexibility and economics to become attractive to forming a Low Cost Carrier that flies international routes.

Filed under: Airline News by ajax
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Since the widely known WTO ruling on Airbus and it’s launch aid from member countries came out, there has been a lot of speculation on its implications for the airliner market, Boeing, the KC-X tanker and what the WTO might rule against Boeing on in its counter-claim.  Conventional wisdom is that both parties will get slapped heartily and that might end up being somewhat true although I suspect that far less will be found against Boeing. 

The difference is in the business models.  In many respects, Airbus/EADS has been run much like a state owned entity and its financing has largely derived from loans from member countries or with member countries’ backing.  Boeing, on the other hand, operates much more as a commercial entity and while it does benefit from things like tax breaks (on a state and local community level) as well as from participating in research and development efforts on the part of the government, it’s primary method of financing its commercial product line is from the financial markets.

When Boeing needs money, it goes to the markets and obtains market rate financing in the form of loans, bonds or through stock sales.  That’s the key difference between Airbus and Boeing.   Boeing follows a traditional and, more importantly, acceptable model for its financing.  A model that makes it difficult to show harm to Airbus/EADS. 

I think both parties will have to modify their behaviour going forward but I think Airbus’ compliance will have far greater and far more long lasting effects on its business model than anything Boeing will have to do.  I also think that Airbus/EADS remains tied to answering to its member countries on things like exports and employment and that makes it much more difficult to outsource (a la Boeing) and/or manufacture their aircraft in other countries. 

In the long run, Airbus’ compliance will make them a stronger and more competitive business because they’ll retain the advantage of selling to their member nations but they’ll also understand how to respond to their financial needs as well as their customer markets. 

In the short run, it just got a lot more difficult for Airbus/EADS to launch new models because they’ll likely have to “pay back” that launch aid and obtain commercial rate financing.  In addition, their commitments to the A380, A350 and A400 projects make it very tough for them to obtain financing for and launch a new project such as an A320 replacement or a model that competes more effectively with the bottom end of the 787 model lineup. 

For Boeing, it probably means forgoing or even paying back tax incentives and it will mean Boeing having to examine where it builds its aircraft much more closely in the future.  Don’t be surprised if more of their production moves out of Washington State over the next 20 years.

Filed under: Aircraft Development by ajax
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