When Emirates announced its latest purchase of 30+ more A380 aircraft, a lot of carriers took notice, particularly in Europe. The planned capacity increases that Emirates has put into place for the next 7 years is nothing short of baffling to most and it has made many airline CEOs wonder what they’re missing.
Emirates operates on a model of being “hubbed” in the perfect place from traffic between Europe and India, Asia and Australia. They compete with other international carriers on service and they compete with everyone with frequency and convenience. Currently, many of those flights from Europe to those destinations require a fuel stop and Emirates uses Dubai for that fuel stop which allows them a big advantage on X things: fuel is cheap, landing and taking off is cheap, Dubai is “on the way” to most of those destinations and isn’t much of a diversion for them, and they’re able to utilize their aircraft much more than some on a per day basis.
That’s a powerful advantage. Emirates has also kept many of the largest European governments (economies) from protesting much at all by being a huge customer of Airbus. It’s very difficult for those governments to bite the hand that feeds their aerospace industry. It’s notable that neither Canada nor the US have felt nearly as accomodating towards Emirates (and other UAE carriers) when it comes to access to their markets and in the case of the US, this is despite the fact that Emirates has also been a pretty good customer of Boeing’s.
All of that scares the hell out of European international carriers. Emirates also claims that these carriers are discovering that it takes an A380 to compete with an A380. And then they went all in with their latest A380 order. It’s very tough for those airlines to sit at the table and wonder if they can afford to go all in.
I don’t think it takes an A380 to compete with an A380. I think it takes an A380 to compete with an A380 on a few trunk routes and I think Emirates’ model crumbles with the 777LR, 787 and A350 for much of the destinations it serves.
Right now, I think there is an attraction to the A380 on those routes for 2 reasons. First, it’s the latest and greatest in long range aircraft. Second, it has the freshest service product installed as a function of it being introduced by airlines for only the past 2 years. Over time, the “newness” of the aircraft will go away (just as it did with other new aircraft introduced) and the service product will be matched by others on other aircraft.
Right now, a lot of those legacy international carriers that are so worried are trying to compete with Emirates using 20 year old 747-400 aircraft with a service product that is, in many cases, a generation out of date. If it isn’t a 747-400, it’s a 777-200/300 with a service product that was “copied” from the 747. See where I’m going here?
Since we don’t have much visibility into the real financial picture of Emirates, a lot of analysis of them is speculative. We don’t know where their financing comes from and at what terms. We don’t know what their fuel prices are and we don’t know what their labor costs are either.
That said, I don’t believe it is impossible to compete effectively with Emirates now and particularly in the future. I believe those long, high capacity trunk routes that Emirates works so well are going to fracture with the next generation of jets.
It’s already possible to use a 777LR to reach all of Asia from Europe and the 777-300ER will serve 90+% of Asia and do it point to point. While Europe has traditionally been the transit point between Africa and the Americas, that’s already changing. US airlines are now serving Africa more and more with smaller equipment that fits those long, thin routes pretty well. South American airlines are initiating services to several parts of Africa with similar equipment. and it only gets better as the 787 comes on line.
So Emirates may capture some traffic for a while from the US but it is unlikely to dominate particularly in the future. The magic routes to Singapore, Indonesia, Australia and New Zealand are likely to remain an Emirates strength but take note that those same international carriers in Europe who are freaked out right now are also now taking delivery of their own A380s. Air France has them, Lufthansa just took delivery of its first and British Airways has them on order. They will have the aircraft to compete with Emirates.
Frankly, I don’t understand why someone such as British Airways doesn’t explore setting up a Dubai base to compete directly with Emirates. Or any of the others, for that matter.
Regardless, this belief that huge trunk routes will remain is, in my opinion, false. Those trunk routes will fracture into more and more “point to point” routes that are longer and thinner than ever before and the airlines serving those will be the preferred airlines for that travel. People just don’t like connections when they can go non-stop. If they can’t go non-stop, they still prefer the fewest connections. It’s the time saver and saving time is why we fly.
Frankly, I can see Emirates becoming a bigger player in its region of the Middle East/India/Northern Africa/South East Asia but I see them contracting over the next 15 to 20 years on those trunk routes provided those other international carriers step up and get to work on their fleet and service planning.
There isn’t anything magical about Emirates and despite their potential advantages from being Dubai owned and based, that doesn’t make them the carrier that can’t be beat. It takes work, investment and planning but it can be done.
The last thing those airlines want is their own governments becoming more restrictive of access to markets. It’s a world where that game is tit for tat and that works to no one’s advantage. They can all survive and prosper with the right combination of leadership, management, planning and investment.
Continental Airlines has announced the second 787 route that it will initiate with the arrival of the Boeing 787. The first was from Houston to Auckland, NZ. This time, it’s Houston to Lagos, Nigeria and I’m seeing a trend here.
Continental is clearly intending to make Houston much more of a international gateway city and that makes some sense to me. Houston Intercontinental Airport isn’t overcrowded, has excellent feed to it domestically and the new 787 makes a lot of long, thin routes not only possible but profitable.
It doesn’t hurt that there is a fair bit of oil business in Nigeria too.
This flight will be subject to a fair bit of regulatory approval and planning on the part of ContiUnited but it is both sensible and doable. It’s clear that the 787 will be used to expand opportunities rather than simply replace existing aircraft, at least by ContiUnited anyways.
It’s also further proof that very large aircraft flying hub to hub (hello A380 and B747) as a model for international travel is going to be reduced as these new, next generation widebody aircraft come online.
Two days ago, Emirates announced an additional $11 Billion order for 32 more A380 aircraft. If all of its orders are delivered, this means a fleet of 90 A380 aircraft by 2017 or just 7 years from now. It’s an impressive order and no airline enthusiast can deny that such a fleet is kind of exciting. But it doesn’t make sense. for either Emirates or Airbus.
This certainly allows Airbus to plunge ahead for a while longer manufacturing the A380 but it really doesn’t put them any further ahead on earning any real profit from the airliner when you consider the deferrals and (potential) cancellations from other airlines. In addition, this adds risk to their orderbook rather than reduces it because this indicates a growing dependency on just one airline for this aircraft.
Several airlines have the A380 and most indications are that while they can make money with it, it isn’t a game changer for the airlines. As the world of airline routes continues to fracture due to aircraft like the A330, 777 and now the 787 and A350, more and more flying is becoming “point to point” in the international world. There are a relatively few routes that can support the A380.
Even the largest 747 fleet operators such as British Airways and JAL have made moves to start replacing their largest aircraft with Boeing 777 aircraft on most routes. Yes, British Airways has orders for the A380 but one has to question how many they can support even on their busiest routes such as London-NYC or London-Australia.
If British Airways (at one time they had over 50 747 aircraft) can’t support a large fleet of 747s anymore, how can Emirates do so? Emirates doesn’t have magic working for it. They don’t know something that others don’t. They do have some cost advantages on fuel and labor but as time goes by, even those advantages narrow considerably. So how does Emirates justify a fleet of 90 A380 aircraft?
They don’t. A fleet of 90 A380s means ownership of that aircraft for the next 30 years at minimum. 30 years of operating such aircraft is a long time and let’s not lose sight of the fact that there isn’t exactly hot demand for used jumbos these days. Even relatively new(ish) 747s are now being retired into a life as cargo aircraft as 777s replace them.
Further, Airbus and Boeing aren’t a bunch of huckleberries when it comes to forecasting their markets. In fact, their forecasts tend to agree in most areas except the concept of the super Jumbo. Boeing doesn’t see that market growing and has chosen to focus on serving the fat middle section of the widebody market (220 to 350 seats) with their 787/777 family.
Perhaps Emirates will prove me (and others) wrong. But I’d bet large money against them at this point.
Continental Airlines announced their first route to use their soon to arrive 787 aircraft. It will be from Houston to Auckland, NZ and if nothing else, this is just fun to think about. Tentatively scheduled for November of 2011, it’s a long way off still and I would regard it as being subject to a lot of things going right such as the aircraft arriving in time.
This is exactly why I believe aircraft such as the A380 and 747-8 have a very limited role in the future of air travel. We now have aircraft that, in the broad scale, are medium sized but very long range capable. The 777-200LR was the first but even that aircraft is a touch big for some routes. Not so for the 787-8. The 787-8 is a 767/A330 sized aircraft capable of handling longer, thinner routes that, frankly, really don’t get flown today.
Houston to Auckland may strike many as a little weird but it really isn’t. It puts Auckland within range of the middle of the United States with a full load and margin for safety. Suddenly there are a whole lot of cities on the East Coast and in the Midwest that can enjoy 1 stop service to New Zealand. Previously those people had to fly to the West Coast and, in many cases, had to make 2 stops before arriving in LA. Even if they had to make one stop, this flight will mean less travel time “door to door” than ever experienced before.
Houston might seem an odd gateway to Auckland but it isn’t. Consider the hub cities the new ContiUnited will have. You can feed traffic from NYC, Philadelphia, Washington DC, Cleveland, Chicago and Houston to that flight. That’s probably not enough to fill a 747-800 but it’s plenty to fill a 787-8 aircraft and I suspect a lot of that traffic will tend towards a more premium customer.
The United part of the airline will continue to handle West Coast to Australia trips. Air New Zealand will probably keep their routes from New Zealand to the US but ContiUnited will now be the first to open up the eastern half of the US to Down Under. That’s huge and a bit of a blow to both Delta (SkyTeam) and American Airlines (Oneworld). This could potentially see Delta and/or AA opening up routes using the 787 to similar destinations Down Under.
Will it happen? I think so but it does have a certain fairy tale quality to it. I remember Aviation.Net members discussing such fantasy routes as far back as 2005 I think and when such things get fantasized on Aviation.Net, I tend to believe they’re too good to be true. However, I believe this has a better than 50% chance of happening because it fits well within how Continental is run, the Star Alliance network and its what a SuperLegacy network airline should be flying when it comes to long haul destinations.
On April 16th, Republic Airways will unveil its choice of brand going forward to use on both Midwest and Frontier Airlines flights. Does anyone here think it won’t be Frontier?
On another note, here is a video shot from inside a QANTAS A380 showing a tire blowout and subsequent fire during a landing in Australia.
Now that the 787 has entered into flight testing and has shown itself to be what was predicted and, possibly, even better, eyes are turning towards what happens next. With entries into the market by Bombardier and Embraer with aircraft that isn’t quite a regional jet and almost a mainliner of today, new pressure is on Boeing and Airbus to start defining the future.
New Boeing 737 and Airbus A320 replacements were expected to be announced by now originally and airlines were disappointed when both manufacturers stated in 2008/2009 that such aircraft won’t arrive before 2020 or beyond. Airlines have asked that the next generation of aircraft have 20 to 30% better efficiency than the current aircraft or even more. In the past, those kinds of gains were actually possible.
Since both airlines feel that that date is so far in the distance, there has been new talk of re-engining both aircraft lines with new, more modern engines from Pratt & Whitney (GTF) or CFM (Leap-56). Unlike many conversations, this isn’t about offering these engines on existing aircraft but about offering these engines on new build aircraft for the future.
Everyone anticipated a CFRP Boeing being announced just 2 years ago. Another blogger and journalist, Flightblogger, wrote this entry HERE about comments made by Boeing’s new Commercial Aircraft CEO, Jim Albaugh, about the difficulties in “scaling down” CFRP for smaller aircraft. CFRP current requirements make it ideal for medium to large aircraft but present difficulties in making a smaller aircraft because you cannot “thin” the material as much.
Both Boeing and Airbus are studying re-engine concepts at present and the Airbus A320 line is actually a better candidate for this since it stands a bit taller off the ground and is able to accommodate a new engine without necessarily re-designing landing gear, etc to fit a larger engine underneath the wing.
I actually think we will hear about a new 737 replacement sooner than what Boeing has indicated. It’s clear they’ve become more comfortable with the emerging engine technologies or they wouldn’t be talking about a re-engine effort. They’ve also come a long way in using CFRP and learning about its properties and challenges than they were just 2 years ago as well.
The truth is, there won’t be a 40 to 50% gain in efficiency in the next models. Those kinds of gains were attained at a time when jet engine technology, wing technology and aerodynamics were still in their infancy relatively speaking. With the passing of nearly 30 years since that phase, we’ve seen great gains in efficiency but nothing approaching what we saw prior to 1980 or so.
I suspect that Boeing will identify what is straightforward engineering and what needs to be developed to bring an aircraft online sooner than later and may well make the investment. Timing is everything on these efforts and the company is poised to complete two long, challenging projects in the near future (747-8 and 787). What remains are derivative developments of the 787 (definitely a -9 and probably a -10) which will be reasonably easy jobs compared to the last 6 years. Now there is room to work on the next big thing.
Many have speculated that the next big thing is another widebody. But with Boeing poised to continue to reap benefits from the 777 as it appears it will continue to outperform the A350 in many missions, a 737 replacement suddenly looks more logical. More to the point, it’s a response that Airbus cannot afford to make at present given its heavy commitments to the A380 (can’t scale production up adequately), A350 (barely defined as the -900 and with almost no real definition for the -1000) and A400 (way over budget and potentially diminishing orders as they enter into flight test) development projects.
I don’t think we’ll see this announcement this year or next. I do think 2012 might be the year we begin to hear Boeing make noise about a new aircraft vs the Airbus A320.
According to USA Today, QANTAS is eliminating their First Class sections on all but the Airbus A380 aircraft in their fleet. Going foward, QANTAS will be selling Economy, Economy Plus and Business Class seating. Certainly this strikes me as pretty smart. It’s expensive and difficult to chase after first class passengers and those first class passengers are few and far between these days.
Notably, the airlines that have made their business class sections their top offerings are also the airlines that have captured a great deal of lucrative business traffic. Business class *is* first class if we’re in 1995. It’s way better than what we called first class in the late 1970’s / early 1980’s.
I’ll also point out that one of QANTAS’ best competitors, Air New Zealand has pursued this strategy for years quite successfully. Continental Airlines has a very loyal group of passengers and has done quite well with it too.
The number of people who might be upset at there being no First Class offerings on an aircraft can be counted on one hand and certainly don’t offer a very good return on investment when one considers the cost to create the offering on the aircraft and then pursue the customer.
Why are they keeping First Class on the A380’s? I suspect its for a couple of reasons. One, they can probably capture some first class traffic on those “capital” routes. Two, the product is brand new on the A380s and they likely don’t want to have to go through the expense of refitting those aircraft. Three, the A380 isn’t exactly demanding more space for business class customers right now anyway. Will it go away? Probably but only when a refurbishment of the aircraft is called for.
There is a huge battle taking place over who gets to have Japan Air Lines (JAL) business. The financially struggling airline has suddenly become a hot property and American Airlines (OneWorld) and Delta Airlines (SkyTeam) are fighting over JAL like it’s a supermodel. Both airlines are offering hugely attractive financial packages to JAL and I suspect the poor airline has no idea of who to nod their head towards.
Ultimately, I think JAL will stay in Oneworld. There is more at stake here than what is offered as a financial rescue package. Japan is still a very nationalistic country and keeping the identify of what is, for most purposes, its flag carrier will be important. It has a solid relationship with Oneworld and American Airlines and compared to the risk of joining with SkyTeam and the possibility of being a second tier player in that relationship, JAL has a safer bet with Oneworld.
In addition, I don’t think JAL can afford to wait for anti-trust immunity to act with airline partners and it won’t have to by staying with Oneworld.
The Middle East:
I continue to think that the major international airlines (Emirates, Qatar, Etihad) of the Middle East are more at risk than they claim. Yes, they’ve experienced phenomal growth and, yes, they continue to purchase aircraft like a 5 year old buys candy but what’s next for them and their route systems?
The Middle East doesn’t offer a good connecting point for North or South America. Airlines in North America can reach their markets non-stop with existing aircraft and why would a passenger choose to connect via an airport in the UAE (United Arab Emirates) when they can fly non-stop at a competitive price. Better service product won’t attract these customers.
There is very little business between South America and Africa, India, The Middle East or Southeast Asia and, so, South America isn’t a place that could serve as a growth area for those airlines.
Emirates, Qatar and Etihad have succeeded by offering a hub between Europe and the Middle East, India, Southeast Asia and (to some extent) Australia/New Zealand. However, even European airlines are adding longer range aircraft and are able to reach each of those destinations non-stop more and more with the exception of Australia and New Zealand.
In addition, each of those airlines is bankrolled to some extent with oil profits and the uncertainty of those profits and the uncertainty of other investments in the Middle East has to raise the risk for that continued bankrolling. I don’t see any of these airlines failing in the next year but I do see them perhaps deferring orders and re-organising their fleets.
India:
What a catastrophe! No airline in India will do well for now and there has to be some consolidation in this market in the near future. Kingfisher and Jet Airways are both excellent candidates for takeovers and, perhaps, they are excellent candidates for each other. Kingfisher bet on Airbus by ordering A330 and A340 aircraft first. Their A330 fleet doesn’t quite have the range it really needs to expand outside of its current markets and the A340 was a terrible choice for long range flights. So much so, it got rid of the aircraft on order.
Now, Kingfisher has a few A350 and a few A380 aircraft on order for deliveries starting in 2014. While it could desperately stand to have the A350 now, I don’t see how it can wait until 2014 for the aircraft. I also seriously doubt it will ever take up the A380 both because of cost and an inability to fill the aircraft enough for regular flights.
Jet Airways also has a great service product but bought too big of an aircraft for the routes it needed to compete on. Jet Airways purchased the 777-300ER when it really needed the 777-200ER/LR for the international routes it proposed to serve. Now 4 of the aircraft are leased to Turkish Airlines and 3 are going to Royal Brunei leaving just 3 for Jet Airways.
Both Kingfisher and Jet Airways have a great service product and good networks across India and neighboring countries. They would be better served by merging and using one brand for their national service and another for their international services. Kingfisher for India and Jet Airways for international service.
The Far East:
China has a lot of problems coming to roost with the inevitable decline in their economy which is heavily dependent on North America and Europe. Look for some consolidation in this market. I do think that Chinese airlines face potential issues from government mandates to purchase indignenous aircraft being developed now. There is little chance that the aircraft being built will be competitive internally or externally. At least for this first round of development.
While JAL is suffering and ANA (All Nippon Airlines) isn’t performing that great at present, I see no major changes in the Japanese markets. This is an area that will bounce back but only after a long fight. The same is true for Korea.
Oceania:
Australia will be interesting to watch. I’m tempted to guess that the status quo will remain in most cases. The competition between the US and Australia only continues to grow more fierce and something has to give. I still think that United Airlines may well be the airline to withdraw from this market and only because of the rather unique market relationship formed between Delta and V Australia (and Virgin Blue).
QANTAS will continue to own a large piece of all air travel from its home nation and they could be helped along with some deliveries of the 787. At some point, QANTAS must grow and growth means a lot of long and thin routes to be added.
South America:
I don’t think there will be any major news from this continent over the next year. LAN will continue to succeed by operating smart and honest. Brazilian airlines will continue to fight things out but there is enough international business for each of them and their real threat comes from Azul on a domestic basis.
Look for Azul to consider adding a larger aircraft to its fleet and don’t count Boeing out on that deal. It would be easier for David Neeleman to add the Boeing 737 to his fleet in Brazil because he could outsource maintenance more easily.
Aerolineas Argentinas: Well, what can I say? 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 and Venezuela:
Avianca Airlines has joined hands with Grupo Taca and I suspect that will be a good thing for both airlines. Avianca could benefit by the exellent managment of Grupo Taca and Grupo Taca could benefit from greater access to South American markets. Its almost certain that the two will harmonize their fleets and service products for greater economies while maintaing the two identies for greater acceptance throughout Central and South America.
Venezuela: All airlines erode further due to the increasing interference of the Venezuelan government and, more specifically, Hugo Chavez. I lost hope for Venezuela’s airline industry when they forced Conviasa (in partnerhsip with Iran Air and originally using an Iran Air 747-SP) into a route between Caracas and Tehran with an intermediate stop in Damascus. This is the ultimate in “this route makes no sense.” If the government can do that, then they’ll do other things to damage the industry.
Europe:
The European continent’s airlines are hunkered down just as much as the US based airlines. There isn’t much to be expected in Europe for the next 12 months but let’s look at it anyway.
British Airways is kind of the American Airlines of the UK. They’ll always somehow manage to survive and generally pretty well. They have their own labour troubles but, again, they seem to be capable winning these for now. British Airways needs to cut costs a bit more so I wouldn’t be surprised at some order deferrals and/or hastening the exit of the 747-400.
The one airline I continue to wonder about in Europe is Lufthansa. While they have a good service product and an excellent reputation, they also seem to have some weaknesses. Lufthansa continues to purchase weaker sisters in Europe such as SWISS, Brussels Airlines, Austrian Airlines, Lauda Air and, now, BMI.
20 years ago, this would seem reasonable in that European countries were pretty nationalistic. Now, not so much. Yes, there are some pockets of nationalism that exist but I wonder at maintaining so many different brands, fleets and networks now. It would seem that the brands could be pared down to 2 or 3 mainline airlines and 3 to 5 regional airlines. BMI wasn’t an airline that was succeeding in any great way and what does Lufthansa get for their purchase? I see little of value. I don’t know that BMI gets Lufthansa an entry into the UK that is of any more value than the Lufthansa brand itself.
I also wonder about their fleet. They have a large fleet of A340 aircraft serving medium to long haul routes and that cannot be very efficient or profit enhancing. Yet, Lufthansa has made no real move to correct this problem. Their one major aircraft order in the past several years was for the four engined 747-8i. They have no orders for the 787 (although Boeing would no doubt happily accomodate them with early delivery positions) nor the A350 (and I’m certain Airbus ould love to add them to the order book as well.)
This puts Lufthansa into competition with British Airways who has moved towards operating more twin engine, long haul aircraft (777 and 787) as well as KLM/Air France (777). Yes, they do own some A330 aircraft but their true long haul equipment is the A340 and 747.
KLM / Air France: Not much here. I don’t see an order for aircraft coming from them unless Airbus magically announces a GE engine for the A350-1000. Otherwise, I seem them holding their cards close to their vest and waiting to see what happens in Europe.
The BA/Iberia merger: I never saw the attraction myself. It’s a low rent copy of the KLM/Air France union and I suspect there are many issues to resolve before the two really combine. Personally, I think the odds of this merger actually taking place is, at best, 50/50.
Their alliance with AA over the Atlantic will continue to be a strong issue for the US Justice Department. The BA/AA strength on the US/UK routes and the the IB/AA strenght on the US/Spain routes is really a bit too much. I think the DoT/FAA is willing to let this alliance go forward but I think the DoJ is going to speak loudly and force a request for concessions. Concessions that I think, this time, BA and AA may meet with some negotiation.
For more than 10 years, much has been made of the “launch aid” given to EADS/Airbus for producing new aircraft. A recent preliminary WTO (World Trade Organization) ruling has said that the aid given for launching and producing the A330 was illegal.
Europe/Airbus has prosecuted a counter-claim to Boeing stating that the tax incentives given by both states and the federal government as well as defense industry contracts illegally aids Boeing.
To a lot of people, it seems as if both sides have a point. To Louis Gallois, CEO of EADS/Airbus, it certainly seems that way. He’s actively pursued independent negotiations to settle the issues away from the WTO. Boeing, on the other hand, has remained steadfast.
Like a lot of conflicts such as these, there are valid points on both sides. I think the best way to look at the issue(s) is to test them according to a standard of transparency and economic competitiveness.
Airbus actively competes with Boeing around the world and does a fine job of it as well. There is no doubt that their aircraft are world class and quite capable of competing in the marketplace against Boeing’s products. An airline who buys Airbus isn’t putting itself at a disadvantage.
It’s how Airbus got there that rankles most. Originally a state financed consortium of aerospace manufacturers, Airbus received open funding from national governments to produce aircraft. Ordinarily, this tends to be a bad idea since the product produced is often not market competitive. That certainly wasn’t the case with Airbus’ products. They sell on features and capability. The A320 series can be considered the equal of the Boeing 737 series. The same is true across the line.
It was important to Europe to find a way to continue building airliners and there is a good argument that the rise of Airbus has kept Boeing (and, previously, McDonnell Douglas) honest. I would certainly agree with that. Indeed, one could say that the demise of McDonnell Douglas’ commercial aircraft business was due, in part, to the rise of Airbus since MD found it very difficult to compete against Airbus’ aggressive pricing strategies in markets where McDonnell Douglas was the legacy supplier (Europe and parts of Asia as well as the United States.)
The line was crossed when Airbus didn’t transition to a self financing entity as the A330/A340 aircraft were being developed. Airbus didn’t have to go to the market to borrow money, they went back to the respective European governments for more “aid”. And the biggest part of the problem is that the aid wasn’t exactly required to be paid back. The conditions were that *if* Airbus sold that line into profitability, the governments would start receiving a portion of those profits.
That’s a big if. Indeed, the current Airbus A380 program points to the problem with such a murky requirements. This is an aircraft that, at best, has an extremely limited market and continues to struggle even with low volume production. Deliveries are massively delayed and Airbus continues to depend on orders from a relatively few airlines to support the production. At the same time, there is no pressure from the financial markets and/or shareholders to justify the production with potential profits. Lacking that pressure, Airbus continues with a program that could never last in the United States.
The same was true for the A330/A340 program. While the A330 is an unqualified success, the A340 never was. The problem with this program is that the A330 succeeded not just on capability but price. Airbus didn’t have to pay the rent on the money it borrowed to develop and sell the aircraft and was able to offer a capable aircraft at a price competitive with the Boeing 767. It’s notable that, in many respects, it should have been competing on price with the Boeing 777 instead.
In the United States, it’s true that we do support our manufacturing base with certain tax incentives. However, it is notable that while Boeing might not have kept its production in Washington state, its laughable to believe it would have traveled outside of the United States. Those tax incentives merely kept production where it was inside the US and even those incentives no longer seem to be enough. Witness Boeing setting up a second production line for the 787 in South Carolina.
When Boeing needs to raise money to launch such a venture, it has to go to the international capital markets and borrow money. Boeing must pay market interest rates for that money and, most importantly, it must make a solid case for the product they want to produce and its potential profitability. I assure you that capital markets are an unforgiving place and without justification for their request for money, no one would loan it to them.
Boeing does receive research and development funds for defense work that does contribute to its body of knowledge for building commercial aircraft. Boeing’s capability in manufacturing CFRP (Carbon Fibre Reinforced Plastic) derives from such defense programs. However, there is a difference in how Boeing gets those funds.
Boeing must compete with a number of aerospace companies for those funds and justify its ability to deliver. Those aerospace companies are largely US based but also include companies from Europe such as BAE, Airbus and others. In order to receive that funding, the companies must make a financial case for them being the best to receive funding and if those companies prove incapable of delivering results on a funded program, it usually is terminated by the government. The US Defense Department doesn’t just continue to fund a program for the sake of funding it.
The difference in these arguments about illegal funding between Boeing and Airbus is really about transparency and competitiveness. Boeing must be transparent and routinely demonstrate to the markets and the US government that it is not only doing what it said it would do but also succeeding in the world market place. Airbus, on the other hand, answers to governments whose prime interest is in supporting an aerospace industry and has yet to have to justify itself to the world marketplace.
I suspect that if the European governments involved in Airbus had adopted a hands off approach with the A380 program, the US government and Boeing would have declined to pursue a WTO case against Airbus. I think some sort of arrangement would have still been possible if Airbus had justified their new A350 program in the world marketplace but they once again gratuitously accepted launch aid from governments who brazenly offered it in spite of their pledge to be fair participants within the WTO.
Both France and Germany have been particularly bad in their behaviour on all things Airbus. National leaders of both governments have been known to fly to countries where Airbus is competing for a sale and nakedly pitch the Airbus product as a national interest priority and make the sale with inducements such as defense sales and other side trade agreements. The United States has been known to flirt with this but never has engaged in such open pimping of their own industries.
The KC-X tanker program is the next battlefield. Pitched against the DoD’s desire to have a real competition for the program (there are only two remaining manufacturers in the world capable of producing the aircraft: Boeing and Airbus) and the fact supported case that the Airbus A330 derived tanker was and continues to receive state sponsored support and aid.*
What happens? The United States has a decision to make in the next 2 to 3 years. It either aggressively stops the unfair trade practices of the European governments (primarily France and Germany) or it must decide to fight fire with fire. Wisely, the US government wants to avoid having to resort to the same tactics to support the US aerospace industry because they know the consequences are potentially very bad. Competitiveness in our aerospace industry is, quite literally, what has kept us on the top of the hill when its comes to our nation’s defense.
Those same European aerospace industries supporting Airbus, also participate in the US defense contracts and have become essential to the US defense. Companies such as BAE Systems are now prime contractors producing for the US and to ban them from competition is both bad for the US as well as the US industries. Such is the web a global marketplace produces.
My guess is that the US will seek to defend its ground by offering even more support to businesses and governments around the world in the form of low cost or no cost financing. US Trade Representatives will be empowered to offer better and better terms to facilitate those sales and its hard to compete with the financial might of the US government.
Until the US starts to aggressively combat EADS/Airbus and their supporting governments, the practices won’t stop. Those governments have always pursued such policies and have never stopped engaging them until it became unprofitable to do so. There is no historical precedent for them to play “fair” with, possibly, the exception of the UK.
* Nominally the KC-X tanker program is a competition between Boeing and Northrup Grumman. However, Northrup Grumman essentially is the “front” for Airbus where Airbus will produce the base airframe and Northrup Grumman will do the conversion modifications in Alabama. NG and Airbus have promised to ultimately produce the A330 in Alabama after the first 20 or so airframes are built. However, the A330 airframe isn’t that much younger than the 767 and the market for the aircraft is already quickly diminishing with the rise of the 787, A350 and even the 777. The idea that a single tanker program could justify setting up such an assembly line without commercial demand is far fetched at best. It’s a promise that is easily taken back after production started.
At the first of the year, I wrote 3 blog posts shown HERE, HERE and HERE. It was really just my random speculation on what to expect over the next 12 months. Well, now it’s December of 2009. Let’s see how I did.
Boeing 787: I guessed at an April 2009 first flight. It still hasn’t flown although speculation has it flying this month either by December 14th or December 22nd.
Airbus A380: I guessed they would make their goal of producing 21 aircraft this year. As of November 30th, 2009, Airbus says they have delivered 7 A380 aircraft this year. Ouch. This is a program that is in financial trouble. No, I don’t think it will be cancelled. Not yet but please don’t try to tell me this program will make a profit.
My deathwatch had Midwest Airlines going away most likely by a sale. That did happen and while the airline has essentially evaporated (from its original form), it does remain as a brand being run by Republic Airways.
I speculated that Frontier Airlines would be bought out of bankruptcy but I guessed that jetBlue would be the buyer. In fact, Southwest Airlines and Republic Airways were the suitors and Republic won.
I thought that United Airlines and US Airways would announce a new merger with Continental a dark horse candidate for buying United. In fact, Continental became a member of the Star Alliance and firmed its relationship up with United but wisely kept its distance otherwise.
I said that Southwest Airlines would maintain its status quo but that Gary Kelly would be under fire from both employees and outsiders and he was. However, that view is already being reversed again by Southwest’s resurgent strength in the business.
I thought that the Middle Eastern airlines such as Emirates, Etihad and Qatar wouldn’t see a bankruptcy or merger but would slow their growth and aircraft deliveries. That, in fact, has happened and now we see Emirates working hard to distance itself from Dubai World’s financial woes.
China: I said deferred orders. Pretty much what happened.
The Far East: I said airlines from that region would maintain their status quo, probably would not defer orders and might make new orders to replace existing equipment for greater effiency. Again, pretty much what happened.
Australia: I saw QANTAS slowing growth, deferring some orders and fighting hard against new entrants. Again, that’s pretty much what happened. I also saw two weak competitors on the US-Australia routes: United and V Australia. That is pretty much what is happening although V Australia has been pretty smart in working into a relationship with Delta where it appears the two airlines will cooperate with codeshares. United remains alone and with weakening demand.
South America: I said the Argentine government would take Aerolineas Argentinas back from Grupo Marsans and the airline itself would muddle along or contract rather severely in some areas. Bingo. Exactly what happened. I also predicted Azul would become the jetBlue of Brazil and its not hard to guess that that airline is pummeling its competitors. A future prediction was for the airline to fly internationally in 2014 with Airbus equipment. We’ll see.
Africa: I saw Delta continuing to pursue flights to major African cities (true) and SAA (South African Airways) issuing a small RFP for 777 aircraft to replace its rather inefficient A340 aircraft (didn’t happen.)
India: I thought Jet Airways and Kingfisher might merge with the name Jet Airways being retained. In fact, both airlines continue to exist but both are suffering severe financial problems, deferring aircraft deliveries and generally flailing about trying to find a way to continue. One of these airlines will still ultimately have to exit the market and I continue to think it will be Kingfisher. They have the wrong aircraft and the wrong aircraft on order. However, Jet Airways is suffering badly from labor actions among its employees.
United States: I picked United to fail. It hasn’t happened and while they continue to live, their cash holdings are being reduced, they still have severe labor issues, their service product continues to suffer and I still think they should be the ones to disappear. I also thought Glenn Tilton would be ousted and, possibly, replaced by Doug Steenland. That didn’t happen but John Tague has been groomed as Tilton’s replacement. I still think Tilton should go if United can’t fail.
Europe: I thought we would hear of a surprise from Lufthansa. I didn’t like their purchase of SWISS and I didn’t like their flying the A340 in competition against the 777 being flown by many of their direct competitors. They’re still here, still making money and they bought BMI. I still think we’ll here of misfortune from them but apparently it will take a while longer.
Random Speculations:
I thought Southwest might add another aircraft type. It didn’t happen but I think their interest got perked up when they looked at buying Frontier and saw the economics on the Q400.
I thought Delta might order more Airbus A330 aircraft. Instead, Delta is parking them in the desert for the winter season.
I speculated that both China and Japan would defer or drop their regional jet programs. That didn’t happen but the Chinese jet program appears to be a bad aircraft and unlikely to be used by anyone except Chinese airlines forced to buy it.
I thought Bombardier would see a major order (20+) for their Q400 series aircraft from a US customer. Horizon Airlines did up their orders for 10 more but there were no other significant orders.
Airtran to form a small midwestern hub. Yup, that happened. In Milwaukee where they’ve taken over from Midwest Airlines and now face Midwest (brand owned by Republic) and Southwest Airlines entry into the market. I think Airtran will hold on here and continue to develop business.
Last, I hoped that jetBlue or Virgin America would enter the DFW market. Virgin’s CEO, David Cush (formerly of American Airlines) did recently speculate about adding flights to either DFW or Austin. I suspect they’ll choose Austin and DFW will remain a fortress for AA.
That’ s it for my 2009 predictions. I’ll make more at the start of 2010. On the whole, I probably did as well as anyone in making predictions in this business.
Air France just received their first A-380 and Lufthansa is right behind them. Lufthansa is unusual in that it has orders for both a considerable number of A-380 aircraft as well as the new Boeing 747-8i.
You can view a rather great video on Lufthansa’s new A-380 HERE. It’s actually one of the better videos of an A-380 that I’ve seen.
The Cranky Flier had a post today discussing Continental’s new moves in LAX which include new flights to Hawaii. Continental will have an all 737 base in the Los Angeles area with two 737’s serving new flights from Orange County to Hawaii. It made me think.
Back in the pre-regulatory days, flights from the mainland US to Hawaii were served by large aircraft such as the 707, DC-8 and, later, the 747, DC-10, L-1011 and even the 767. The routes allowed airlines to serve huge numbers of customers with large aircraft and make money. Braniff International had the franchise for Dallas to Honolulu in the 1970’s and served it with a 747 and an amazing 16 hours per day utilization.
Then deregulation came and airlines slowly began to develop new routes. It was no longer necessary to fly to a “gateway” city to catch a flight to Hawaii. More and more cities found themselves being served with those routes to Hawaii. Again, Braniff International, at one time, had a 747 flight from Portland, OR to Hawaii. (It carried little traffic, however.)
There was some consolidation after airlines learned that not everyone in a particular city was dying to fly to Hawaii. But the big change for Hawaii has been ETOPS or twin engine flights overseas. This allowed airlines to serve smaller markets with aircraft both capable of the loads as well as the distance. The truth is, when the airlines don’t have to feed 150 passengers a day to a gateway city but can fly them directly, they make more money. 20 years ago, I would have chuckled if someone told me that 737-700 aircraft would fly to Hawaii from the mainland.
Boeing and Airbus have different views for the roles of widebody, large capacity aircraft. 10 years ago, Boeing forecast that the market would continue to fracture with more and more direct routes being employed as opposed to large capacity hub to hub flying. Airbus, however, believed that the crowded skies would force more large capacity hub to hub flying onto the airlines. It turns out that Boeing was more right.
The markets drive these changes and when an airlines can make more pure profit using right sized aircraft flying direct, they will. Yes, the legacy airlines of the US (and other parts of the world) continue to follow a hub and spoke model primarily but they’re all learning that more direct flying where the loads fully justify it is a good and profitable thing.
Accordingly, this is where I think Boeing continues to have a winning strategy with its 787/777 product line. Yes, there are a few airlines capable of filling an A-380 and those airlines will make money from using that aircraft. But as more and more nations open up their skies to more competition, that is going to change. Having the right aircraft for the right route will be key to a manufacturer’s success and Boeing seems to have a better feel for the world market whereas Airbus seems more plugged into the Euro/Middle East markets they already do so well in.
I’m no longer sure there is a real place for the new 747-8 aircraft. Boeing’s 777-300 is just as capable in almost every case and carries a massive number of passengers without being so big that it adds risk during seasonal low periods. The same is true for the 777-200.
And what happens when aircraft such as the 787 family begin flying? This family is roughly 767-sized in capacity but its range is far greater and that means even more markets can be accessed via long haul direct flying. An international airline can probably make more money (through passengers *and* cargo) using the 787 and 777 families for more direct flying with aircraft that are “right sized” for the markets than they can using much of the Airbus family.
Airbus has one aircraft model suitable for this right now. The A-330. the A-340 is essentially dead since it under performs against the 777 in virtually any mission. The A-330 is right sized for a number of the current markets and many more of the future markets. The A-380 is suitable for only a few markets and those are already dwindling for some airlines. For instance, QANTAS has introduced the A-380 on their routes to the US. However, with a new Open Skies treaty between the two countries, there are also new entrants to the market like V Australia and Delta who are vying for customers with United and QANTAS very competively. Those airlines understand that it will take a while to develop their routes and build relationships with airlines in both countries to feed traffic but it will happen. As that traffic shifts from what was originally two airlines (QANTAS and United) to four airlines (QANTAS, United plus V Australia and Delta), what happens to each airlines’ loads?
It’s notable that QANTAS flies the 747 and A380 to the US and United flies the 747 exclusively. The new entrants are using the 777-300 and 777-200 for their flights. The 787 and it’s longer range capabilities will quite possibly fracture that market even more by making it possible to fly from the interior of the US to Australia instead of having to use a west coast gateway city. At that point, I don’t know that QANTAS has a use for very many A380s or 747s and, additionally, they don’t have any right sized aircraft for the route(s) until they start receiving their 787s which are late and somewhat deferred.
The Airbus A350 is capable of competing on many 777 routes and while it does have slightly lower trip costs vs the 777, it also has less revenue capabilty because it can’t haul as much cargo on the same missions.
The world’s airline routes are going to continue to expand internationally and at a far greater rate than traffic grows between any two nations. Having the right equipment for the right moment is going to be key for any international airlines survival. Those who don’t plan for it now and have it arriving in the next 5 to 10 years are going to wither to a slow death.
James Wallace of the Seattle Post-Intelligencer is reporting today on Airbus and notes a Wall Street Journal report that quotes Tom Enders of Airbus saying:
He disclosed that the A380 superjumbo program remains troubled by teething problems in its industrial phase, and that the company now expects just 18 deliveries of the world’s largest passenger aircraft this year, down from a previous target of 21 that was revised from 24 last year.
I optimistically forecast that Airbus would *increase* its deliveries over their projected schedule in this post.
That’s a significant reduction in deliveries for Airbus and the A380. What it means is that Airbus will suffer financially on that program even more now that they will be unable to receive the forecasted revenue for 3 of the A380 deliveries. The list price fo the A380 is about $320 million for each aircraft. Even with significant discounts, that 3 aircraft reduction in the schedule means reduced revenue of nearly $1billion.
It would seem that, this time, the problems are that the computer models for production of the aircraft did not take into account the effects of gravity on the aircraft structure itself and, accordingly, some assemblies and parts won’t fit correctly on production aircraft.
It’s always fun to make predictions about the coming year, right? Of course, I may well review my predictions in December of 2009 and decide against doing it again.
Boeing 787:
This aircraft will finally experience its first flight and I believe it will occur on or about its new scheduled time (early April). For Boeing, credibility is now at stake and they really do have to begin meeting deadlines. Financial analysts are becoming too skeptical of the company for comfort and airlines want their airliners. Boeing does have a reputation for being able to pull itself together and get something done in a crisis and that should serve them here.
I also believe we’ll see both static airframes begin their tests and new build airframes begin to flow from Boeing in about 6 months. My prediction? The 787 will prove to be a very capable aircraft and will meet or exceed its performance promises.
Airbus A380:
Airbus met its revised schedule of delivering 12 A380 airliners in 2008 . . . barely. Originally it was scheduled to deliver 13 in 2008 and 25 in 2009. Now Airbus says it will deliver 21 in 2009. However, it is becoming clear that Airbus is now quickly learning how to build these aircraft and turn them out. I predict they’ll exceed their 21 goal in 2009 by at least one aircraft.
Boeing and Airbus:
Both aircraft makers will begin to speak about the future of short to medium haul aircraft again. With milestones for the 787 and A380 being met, I suspect they’ll become more comfortable in speaking of the future of their aircraft lines. Look for discussions on both the 737 and A320 aircraft families and what interim technologies might be employed to improve their performance. I suspect we’ll hear about both weight saving materials being adopted as well as the potential of new incremental improvements on existing engines. Particularly the CFM-56 engines used by both makers.
US Airlines:
First, let’s take a look at my deathwatch candidates. The sudden and precipitous drop of oil prices allowed each of them to take a breather. Midwest Airlines, however, continues to speak little, fly only a little and its investors have got to be running out of patience. I still believe that they’ll ultimately go away. How they do it is the question. Rather than bankruptcy, I believe it will either be a sale or as a subsidiary airline of Delta/Northwest with the latter being most unlikely. Who will they be sold to? Good question. Perhaps Airtran will get what they wished for and develop indigestion.
Frontier continues to muddle along but faces rather intense labor strife still. I think their situation improved not only because oil prices dropped but because United continues to offer some of the worst product in the industry and because Southwest slowed its growth and took a breather. While I firmly believe United will do nothing to improve its product, I do think Southwest will return to its goal of killing Frontier as a Denver competitor some time in the late spring. I suspect Frontier will emerge from bankruptcy this year but I also firmly expect them to be out of business or acquired by December of 2009. Who buys them? I’ll bet on Jet Blue. The aircraft fleets are compatible and Jet Blue has to start building a hub somewhere else in order to continue to experience strong growth. Frontier gives them that chance. The long shot? American Airlines. Why? Because Frontier is working with AMR’s Sabre Reservations system now.
United Airlines, my favorite airline to hate. The Cranky Flier loves to rag on Alitalia and I love to rag on United. United has lost a tremendous amount of value over the last year and continues to have some of the highest hourly costs of any US airline. They’ve done nothing to improve labor relations, their service product or their fleet efficiency. Glenn Tilton is hated by airline pilots but I predict he is goint to be hated by investors before the end of summer. What happens? I’m really not sure. The best thing that could happen is for them to liquidate. However, I think some airline will see some value there and attempt to buy United and make use of its assets. Who? The logical choice is Continental but I believe they’ll hold on to their independent streak. So my next guess is a US Air / United V 2.0 merger will come about. Could it work? I doubt it but Doug Parker (CEO of US Air) wants another merger and United offers hubs he doesn’t have and some aircraft fleet compatibility. I’ll go “all in” and bet that we see a US Air / United Airlines merger announcement by December of 2009.
Moving on from the death watch, let’s look at other US Airlines for a few minutes.
American Airlines will maintain its status quo but will begin to feel pressure to conclude some union contract negotiations this year as financial analysts begin to view their lack of progress less and less favorably. CEO Gerard Arpey will begin to feel the heat but barring a large mistake on his part, will retain his position as CEO. One possibility, however, will be bringing on a potential successor as President of the airline.
Southwest Airlines will also mostly maintain its status quo but I will predict that by late summer its new CEO Gary Kelly will be under fire from both employees and investors for his shotgun approach to growth. It is beginning to look like it is unplanned and what people most value in Southwest is its ability to form and execute a coherent plan. There will be no mergers, no real growth and a sinking stock price by December but I think Mr. Kelly will hold onto his position until 2010 barring a major unforeseen development.
Continental, the best kept secret. Continental will maintain its status quo with, perhaps, very moderate growth in the international sector while it waits to see what happens domestically. They’ll enter the Star Alliance (exiting from SkyTeam) but discover it offers little value to them as well. I don’t think they’ll seek to merge with anyone in the next year but if they did, I’d pick them for going after someone like Alaska Airlines rather than United or US Air.
USA Today’s Today in the Sky Blog is reporting that Australian news outlets are now writing about an imminent announcement that Delta will begin flying from Los Angeles to destinations in Australia. Such destinations likely begin with Sydney and add Melbourne and/or Brisbane.
If true, this will mean that Delta will be the first airline to fly regular scheduled routes to all 6 inhabited continents in the world since Pan American Airlines. More important, it means competition for QANTAS, V Australia and United Airlines.
Currently, QANTAS is by far the main leader in that market flying Boeing 747-400 and Airbus A-380 aircraft. It has been said that about 1/5 of their net profit comes from such routes. V Australia, an international arm of Australia’s Virgin Blue, was originally scheduled to begin flying Boeing 777-300ER’s in December but had to slip the start to February 2009 due to Boeing’s labor strike this past fall. United Airlines flies the same routes regularly with 747-400 aircraft that by many accounts are worn and tired and certainly not offering the service options the other two do.
It seems that Delta, if it does fly the route, is planning to use 777-200LR aircraft that are very capable of flying the distances as well as carrying a full load of cargo while doing it. Ironically, the 777 was originally designed with QANTAS in mind although they never ordered any of the aircraft. Indeed, with optional fuel tanks and a light cargo load, it is said that the 777-200LR might be capable of flying from Atlanta to Sydney regularly although it is highly unlikely that this will happen. A more likely choice might be a late build 787-800 which Delta will be receiving as a function of purchasing Northwest Airlines.
This kind of competition is not want any legacy carriers on this route want. Delta is operating with relatively low labor costs, new aircraft that are the most efficient available for long haul routes and they have a new network (from their merger with Northwest Airlines) that will feed the aircraft to capacity loads. If Delta does launch this service, look for United Airlines to withdraw from the market. They are the airline that lacks both the service product and fresh aircraft to compete.
The Seattle Post Intelligencer aviation reporter, James Wallace, is now reporting the possibility that Boeing’s new 787 may not make its first flight until February or March of 2009. Citing the 57 day long strike just settled by Boeing, the program is now supposed to be under review. At the beginning of the strike, Boeing’s 787 program manager had stated that it would be a day for day slip until first flight.
However, late February or early March is not a day for day slip and I think this news begins to reveal that there are indeed other problems on finalizing the 787 for its first flight. The 787 is now more than a year past its original forecast for first flight and had been definitively scheduled for a 4th quarter first flight this year. Prior to the strike, that was expected to be some time in the middle of November, 2008.
The delays to the program really should come as no surprise since this aircraft involves far more innovative engineering than probably any other commercial aircraft designed in the past 40 years including the 747 and A380. Still, another schedule slip after re-defining the program schedule and including plenty of time for more unanticipated problems begins to reveal that this is in fact a program in trouble. At this point, it is safe to say that Boeing is likely to experience a great deal of trouble getting the production ramped up to meet demand.
V Australia, a new subsidiary international airline of Virgin Blue is due to start new routes from Sydney to Los Angeles in December of 2008. They will be using new build Boeing 777-300ER aircraft configured in an economy, premium economy and business class setup. Many question the viability of successfully flying that route against the likes of QANTAS, Air New Zealand and United Airlines but I have a feeling these guys are approaching this route with more right sized equipment.
QANTAS and United Airlines both use 747-400 aircraft that typically have 343 and 374 seats respectively. V Australia’s 777-300 aircraft will have about 300 seats in their mix. However, V Australia will fly the most fuel efficient aircraft in its class and offer a brand new cabin whereas the QANTAS and United aircraft are older, less fuel efficient. In addition, with the coming fracturing of the US-Australia market, the 777 and 787 will fly those routes with lower seat costs and higher load factors than the 747 can offer.
QANTAS will be placing the A380 on that same route in the near future and while its seat costs will match the 777, the real question is whether or not they can fill the aircraft. The QANTAS A380 has 450 seats to fill every flight. The V Australia only has to fill 300. Allowing for similar departures and seat demands, the 777 makes money a lot earlier in the game.
Convetional wisdom is against V Australia and the 777. I remember that the only airline to participate in the design of the 777 and not buy it was QANTAS. There is a reason why the 777-300ER and 777-200ER have the range and efficiency that they have today. It was designed for those US-Australia routes. If V Australia keeps a good schedule and are able to manage their fuel costs well, they’ll likely succeed. Those routes could use a more economy minded competitor.
Here is the new V Australia 777 on the Microvolt / Paine Field website.
In the 1970’s, Japan was experiencing fantastic economic growth and both ANA (All Nippon Airlines) and Japan Airlines needed more lift for their internal domestic routes. They approached Boeing and inquired about using the 747 for these high cycle, short duration flights. After investigating the possibilities, Boeing discovered that relatively minor changes (landing gear for instance), they could produce an aircraft that met their needs.
By eliminating 3 classes of service, galleys and other long range accomodations, the Boeing 747SR was born and able to carry as many as 525 passengers in this new domestic configuration. Later, those same aircraft were replaced with 747-400 Domestics capable of carrying over 560 passengers.
That was the first 500+ passenger commercial aircraft but now the new Airbus A380 may be capable of carrying as many as 800 passengers in a similar domestic configuration. There is some debate that such an airplane would be of use since the logistics of carrying an additional 300 passengers becomes almost unsolvable for existing airport configurations. No doubt Airbus would happily build the airplane if there is, indeed, a market for it.
In 1966, American Airlines released a set of specifications for a new kind of an airplane, an “air bus”. This plane was to carry 250 to 300 people in a wide body configuration using two new, more powerful fan jets and it would be able to operate short to medium trunk routes such as Denver – Los Angeles or New York – Chicago. Many enthusiasts will recognize that both McDonnel Douglas and Lockheed responded to this with the DC-10 and L1011 aircraft and both were to become rather legendary.
But while the DC-10 experienced great commercial success and the L1011 became the pilot’s airplane (reportedly one of the easiest planes to fly ever built), it was Airbus that got it right with their A300. Both the DC-10 and L1011 were “compromise” aircraft in that they had 3, instead of two, engines to meet a specification that United Airlines issued: the ability to take off with a full load from Denver’s mile high airport.
Airbus was originally formed between Aerospatiale and Deutch Aerospace with Spain’s CASA and England’s BAC joining later. Their original aircraft utilized 2 GE CF-6 engines and had a range of about 1500 nm. The A300 would later grow in both range and payload ultimately culminating in the A300-600R which was capable of carrying more than 260 passengers and a full cargo load for more than 4000 nautical miles.
At one point in the mid 1970’s, Airbus A300 sales were so bad that they had to just keep manufacturing airplanes in order to keep the assembly line open while betting that times would change and their aircraft might be adopted by others. One landmark change in sales for Airbus was Eastern Airlines. Frank Borman, President and CEO of Eastern, was searching for a replacement for Eastern’s Boeing 727-200 aircraft that would carry more passengers with better operating efficiencies on Eastern’s high density, East Coast routes.
Borman, the former NASA astronaut, was a tough negotiator and ultimately got 4 Airbus A300s to try out for terms that amounted to the cost to operate the aircraft. Eastern discovered that the aircraft was a huge moneymaker for those routes since it consumed 30% less fuel than the competing Lockheed L1011 that they also owned.
Ultimately, Boeing responded with the 767, also a twin engined aircraft, originally designed for much the same mission as the A300. However, in many ways the two aircraft evolved to serve different missions. The A300 thrived as a trunk airliner that could carry a massive amount of cargo easily (because its fuselage was designed to accomodate 2 side-by-side industry standard LD3 containers) and operate on high density routes with both speed and low seat costs. While it was certified for ETOPS(Extended Twin Engine Operations over water or “Engines Turning Or Passengers Swimming) and was even ultimately used on over-water transatlantic routes, its specialty remained its original mission.
The Boeing 767 was built with a narrower fuselage that could not accomodate those same LD3 cargo containers two abreast but it did find its own mission in the transatlantic arena as it gained both range and capacity. To use the similarly sized 767 on the same routes as the A300 was to set oneself up for failure. The A300 was just too good at what it did.
American Airlines owns a number of A300 aircraft and while they were always used primarily for those same routes that Eastern once flew (NYC to Miami and the Caribbean), they also used the aircraft for transatlantic routes such as NYC to London.
To date, there is no other better aircraft for that short to medium haul, high density mission that the A300 has served so perfectly. Since many A300s are aging now, they are being withdrawn from service but there exists no true replacement for this marvel either. Boeing 757/767 aircraft cannot carry either the same passengers or cargo efficiently and while the A330/340 aircraft use essentially the same fuselage, they only begin to show true efficiency on 4000nm or greater missions.
In most markets where the A300 has been withdrawn, that capability has been replaced with greater frequency with airlines using B737-800/900 aircraft and A320/321 aircraft. The Boeing 787 derivative 300 series does, at first glance, meet that mission profile carrying a great number of passengers (280 to 310) on routes as long as 3000 nm. However, the only airlines to order the 787 are Japanese carriers ANA and Japan Airlines. Many speculate that the 787-300, designed to replace the 767 and A300 on regional routes, will either have to grow in range (4500nm) or face being a Japan only aircraft. Indeed, Boeing announced last year that the 787-300 won’t be certiied for use in the US although it could be done very easily should Boeing decide that there is a market in the US for such an airplane.
Sadly, Airbus does not have a new replacement on deck. Their focus has been on the giant A380 and developing their new A350 series aircraft. Sales of their A330 aircraft have been brisk still and Airbus will likely turn its focus to an A320 replacement aircraft once they have both time and resources.
I have no doubt that Airbus will once more “get it right”.
