Regardless of whether or not a new 787 delivery delay affects Boeing’s financial guidance, this is a huge disappointment. Not just for fans of the airline industry either.
These days, we tend to see companies as cold and calculating and making business decisions based on logic rather than emotion. It’s a part of our culture to view particularly large companies like Boeing in just that manner. It is also a strong habit among the financial industry to view and analyze things on that level and that’s not entirely unjustified.
However, companies are run by human beings. Human beings do react emotionally to developments whether in their personal lives or within their business. Think I’m wrong? Go walk around a company on the day of a big layoff.
This latest delay is going to emotionally disappoint quite a number of people in the airline industry. It’s going to disappoint decision makers within the airlines themselves and it’s going to disappoint lessors too. These repeated disappointments are going to be the stuff that goes into books about Boeing and the airline industry 10, 20 and 30 years from now. It’s going to be described as the often delayed, highly problematic 787 program and the only thing we don’t know yet is whether or not the 787 is actually the success we think it is.
That kind of stuff gets remembered not just by today’s decision makers but by tomorrow’s decision makers. The junior managers who may well be the VP of Operations or VP of Maintenance at an airline and an influential person on future aircraft purchases.
Boeing isn’t the only game in town and there is bad news knocking on the door, too. The threat isn’t Airbus. Boeing knows how to compete with Airbus. The threat comes from the aerospace capabilities being developed by Bombardier, Embraer, Mitsubishi and others. Regional jet aircraft now, yes, but they’re acquiring intellectual capital that will permit them to build them bigger and bigger. That’s the threat.
And Boeing keeps giving airlines a reason to continue to look at the other guys and wonder.
You see, Boeing keeps setting a schedule and assuring everyone that they have plenty of safety margin built into these schedules to account for risk. And then those schedules slip again. Credibility on this program and, frankly, future programs, is swirling downwards in the toilet.
At some point, you have to be a company who keeps its word. You have to see the leaders of that company decide to make something happen *despite* the risks and problems encountered. It seems that about 8 months ago, Boeing’s leadership and particularly the leadership of the 787 program should have declared both internally and externally that this is it. No matter what it takes, this program will be kept on schedule from here on out.
But that didn’t happen.
This isn’t a slight schedule slip. First deliveries were going to happen early to mid Q4. Then they unofficially slipped to late Q4. With the latest announcement, no one really credibly expects deliveries until early Q2 despite Boeing saying it will be a Q1 2011 delivery. The truth is, none of us know when this aircraft will be delivered. The people backing that schedule just haven’t made things happen.
My own prediction: At the earliest it will be early Q2. It’s just a guess.
But at this point my guess is as good as Boeing’s.
When I saw the 787 land at the Farnborough Airshow, I was very impressed at how fast and cleanly it stopped. Even if it was relatively empty. So I found a few videos of aircraft making impressive stops around the world.
The 787 at Farnborough and courtesy of FlightGlobal.
South African Airways 747SP – notice how narrow the landing runway was.
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.
There are several reports out now that Emirates Airlines is going to announce an order for 30 Boeing 777 aircraft at this year’s Farnborough International Airshow in the United Kingdom this week. I’m sure that this will further strike fear in the hearts of airline executives and I’ll repeat THIS response. Just because they order it doesn’t mean they’ll know what to do with it when the time comes.
Another interesting piece of news is that Air France has invited Airbus and Boeing to respond with a proposal for supplying as many as 100 widebody aircraft over the next decade. The assumption is a mix of both the Airbus A350 and Boeing 787. I suspect conventional wisdom will give Airbus the upper hand (we are talking about Air France based in France where Airbus aircraft like the A350 will be made and where the French insist on buying local) but I like Boeing chances for this. Boeing could win this order by offering a mix of 787 and 777 aircraft with GE engines. Air France already has a large fleet of 777 aircraft, experience with the GE engines and may well be attracted by the expected quick and relatively cheap transition for pilots to move between the two aircraft.
Steven Udvar Hazy has his new company, Air Lease Company, and reportedly will be at Farnborough on the hunt for building his new portfolio of lease aircraft. While money is starting to flow back into the lease business, I do wonder if the game hasn’t changed since the early 2000’s. Airlines have seen the benefits of owning their aircraft because in bad times, they can leverage those aircraft for more operating capital in those bad times. In addition, I don’t think Airbus and Boeing are in the mood to offer huge discounts to the lessors anymore. If Michael O’Leary of Ryanair can’t get a deal for 200+ aircraft, why should we think lessors will?
Randy Tinseth, VP of Marketing for Boeing, will be releasing Boeing’s most recent current market outlook at Farnborough and it’s quite a positive one. Boeing sees a need for 30,900 new aircraft between now and 2029 of which they expect 21,000 to be single aisle airliners. They’re forecast is based on a growth rate of 5+% per year in the airline industry and that’s based growth rates since 1978 deregulation in the US (which have averaged 5% per year.)
What’s interesting to me is that they see the regional jet share of that outlook as being significantly less than in the past. I think that depends on what you call a regional jet. If you’re speaking of 50 or less seats, I agree. If we’re talking about 75 to 110 seats, I’m not sure I do agree. Indeed, I think that the 90 to 130 seat market is going to be very hot and I think that Boeing and Airbus ceding that market is a mistake. Even car manufacturers have discovered that it’s wise to cultivate customers at the entry level as opposed to waiting 20 years for them to be able to afford your product.
Finally, I understand that Boeing’s 787, ZA003, has landed in the UK and that marks its first appearance in Europe. FleetBuzzEditorial.Com got some photos of the 787 landing at Farnborough which can be seen HERE. I still really dislike the demo interior they’ve installed in that aircraft.
The Boeing 787’s introduction to a fleet is something that anyone who follows the aviation industry has been looking forward to. It was greatly disappointing that it did not meet its first flight schedule originally but anyone who follows this business was hardly surprised.
What was a bit surprising was a 2+ year delay in that first flight. However, Boeing was pushing its limits when it came to both technology and vendors. In many cases, both were factors in various delays. Boeing was right to push its limits, however. If Boeing expected to be an aviation leader, it needed to stretch itself and it quite rightly did so in this project. In addition, it was right to push its outsourcing as well. Boeing had already experienced good partnerships in outsourcing other airliners production work such as on the 777.
Even with all that has happened over the past 3 years in the 787 program, I still think Boeing was right to push its technology development for this aircraft. It remains a revolution for aircraft and continues to promise a great deal for airlines who use it.
However, perhaps Boeing pushed its vendor outsourcing too much. Actually, we knew they did when they purchased some vendor operations for the 787 outright. I think that, perhaps, Boeing didn’t have as much knowledge about outsourcing as it thought it did. It was, perhaps, viewed more like outsourcing on defense projects where such projects are often pushing the limits in every direction and commercial viability isn’t necessarily a key driver and meeting requirements is.
The latest announced delay finally frustrates me. The vague references to instrumentation and the fact that “test programs” experience unknowns just doesn’t fly anymore. As someone who works for a major aerospace and defense company, I’ve seen good programs and I’ve seen bad. This one is starting to stink from an execution point of view.
The truth is, a lot of risk could have been reduced in the test program using time before the first flight to ensure systems were extra mature. To a degree, it’s clear that was done in some areas and completely neglected in others. Issues with the horizontal stabilizer and how it was manufactured and/or installed should have been identified before first flight. There was so much time to staff and plan the flight test program, it should be going *faster* than its schedule, not slower.
In short, I don’t think Boeing has done nearly enough to reduce risk on this program. They keep getting surprised by things that just point to a too lean program and not enough investment in retiring risk. Airlines have a right to be frustrated at this point. Boeing has yet to have gotten their production up to anything above low rate initial production and its delays to allow manufacturers to catch up is shameful at this point.
Those partners have had 3 years to figure out how to ramp up production and prevent traveled work from happening. Having to “pause” the production to prevent traveled work at this point ought to be resulting in at least a few project managers getting fired. At this point, the only thing that should potentially delay entry into service is flight test revealing a near catastrophic development found only in real flight test. Seriously, all the systems should have an exceptional maturity and all the vendors and manufacturers should be capable of spinning up production beyond 2 to 2.5 aircraft per month.
Lean is good but this program’s project planning and execution stinks of being run on the absolute best case scenarios with very little provision for managing risk and retiring risk along the various waypoints of development in a sensible and, more importantly, responsible manner.
This aircraft will be a successful one. I firmly believe it remains a game changer for airlines. However, I’m left with a sense that Boeing continues to treat this program as “just another program” instead of treating it with a sense of urgency and acting as if its future depends on it.
The fact that there is as little outcry over these latest announcements demonstrates just how little this industry has come to expect from Boeing and this program when it comes to doing what Boeing says it is going to do.
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.
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.
4 days of vacation and not reviewing anything to do with the airlines (or defense industry or the oil leak in the gulf) and it was quite relaxing.
Right. Well, I see British Airways and Unite still haven’t got their act together. These two desperately need binding arbitration. British Airways needs it in order to bring back a degree of certainty to their operations. Unite needs it to, well, preserve some semblance of the idea that they “won” something. British Airways is winning this conflict now. They’re winning it in public opinion and they’re winning it when it comes to employee viewpoints. For Unite to continue without a deal only weakens them week by week.
I see that all kinds of politicians are questioning details of the Continental / United merger. Oddly enough, many of them are from Texas and those folks are questioning the wisdom of Houston losing the Continental HQ. Well, so do I but for vastly different reasons. Houston is not going to be dimished as a hub nor is it going to lose many jobs. In fact, I suspect they won’t lose any jobs in terms of “count” but I do think there will be transitions and changes. This is a prestige objection on the part of Senator Kay Bailey Hutchison. She lost the race for the Republican nomination for Governor in Texas and she desperately needs to appear to be looking out after “the people” in Texas if she expects to keep her seat in the Senate.
I simply think it is stupid to move HQ to Chicago because it is fantastically more expensive there. That’s all.
I saw a few stories about Australian airline JetStar adopting the iPad for inflight entertainment. And, unlike most bloggers on the airline industry, I don’t care really. I don’t see it as an industry trend, I don’t see it as unwise and I don’t think it’ll be but a blip on the airline horizon. iPads are cool and probably cheap to deploy. Oh, and you can deploy them quickly too. Will it be a trend? I doubt it but I don’t care. I really don’t.
Boeing refuses to say whether or not they’ll bring a 787 to the annual flightshow in England this year in Farnborough. They say they’ll make that decision closer to the show. I say they would be insane not to give their customers a taste. If they’re refusing to say, it may only be because they don’t know if their GE equipped test planes will fly their first flights on time. Still, if I were to be money on an outcome, I’d be betting that ZA001, the first to fly, will be there all shiny and spiffy. Maybe they’ll bring ZA003 which has seats. One way or another, I’m betting there is a 787 at Farnborough.
I refuse to talk about the person(s) who were left on United aircraft over the past few weeks.
It’s been over a month since the new “tarmac rules” have been in place. Am I the only one to notice only the soft sounds of crickets so far? We’re 1 month into the thunderstorm season and nary a peep from anyone except Kate Hanni of FlyerRights.Org who wants rules in place to keep airlines from being punitive against people who want off an aircraft. Actually, I somewhat support the notion but I think Kate Hanni is the wrong supporter for such a measure. She’s got too much mud on her.
No, seriously, where is it? This is an aircraft that conversations began on in 2004. It’s 2010 and I still don’t really know much about the aircraft despite being a keen industry observer.
Mind you, I’ve heard the range promises and the seat costs promises but I haven’t seen the meat. In fact, isn’t it a bit distressing that this aircraft is cloaked in so much secrecy that we still don’t know its final definition? The few facts we have heard have actually originated from the few airlines that have ordered the aircraft in numbers. Those facts haven’t been entirely good either.
When Emirates starts talking about how the 777-300 still has an advantage, you might have a problem. This is an airline that loves to play the two majors off each other. Ordinarily, I’d expect Emirates to be trying to goad Boeing into building something new or something revised.
Still, it’s time to start talking about this aircraft in more detail rather than with John Leahy’s rosy marketing promises. It’s time to start hearing more about its real capabilities and how it will compete in the real world with the 787 and 777. Right now, I really don’t know much at all and that really makes me question whether an entry into service for 2013 is even remotely possible 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.
The Dallas Morning News Aviation Blog has THIS story about Delta possibly deferring or cancelling its (inherited from Northwest) 787 orders for 18 aircraft (and 50 additional options.) And this kind of makes sense to me.
Northwest probably did need those 787 aircraft for its trans-pacific routes. Its 747 fleet was adequate for some routes but others just couldn’t stand a 747 and Northwest doesn’t have any 777 aircraft. The combined fleet of Delta and Northwest is a different matter, however.
If anything, I think Delta might have one long haul aircraft type too many. That said, they have 767 (Delta) and A330 (Northwest) aircraft for medium haul routes and configured so that each is nearly ideal for passenger density. They have the 777 (Delta) and the 747 (Northwest) for long haul, high density routes as well. Frankly, I think Delta might be better off adding the 777-300 to its fleet and retiring the 747 but that isn’t their plan. They are refurbishing the 747 aircraft and extending leases on them. Clearly Delta sees a profitable use for them at this time.
The 787 isn’t going to be a trans-Atlantic aircraft. Certainly not on the first routes for any airline. A new(ish) build 767-300 or A330-300 can do those routes just as economically. The 787 is better suited to routes like NYC to Tokyo or LA to Sydney or Atlanta to Rio de Janeiro or even the US to India. Delta has the right sized aircraft for those routes.
Delta can probably sell those orders profitably at this point. There are a number of airlines who don’t have new(ish) 767s or A330s and there are several more who need to downsize from a 747 or 777 on long haul routes. Airlines such as Continental and AA come to mind.
Mind you, the enthusiast in me wishes all US airlines flew the latest and great aircraft. The practical side of me says we’ll probably only see Continental take up its orders on schedule and even AA will likely take its time adding the 787.
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.
FlightGlobal has THIS story about Boeing considering a wing extension to improve the aerodynamic efficiency of the Boeing 777 and improve load and range. How the 777 will sell against the Airbus A350 in development is a question everyone is asking these days even though the A350’s specifications and real performance definitions are, at best, still a bit murky.
Although the A350 is definitely a competitor to the 777, engine thrust is really what reveals may be happening here. So far, Airbus has been unable to grow its engine range into thrust ranges that approach what the 777 has with the GE90 engines. Airbus remains at about 93Klbs of thrust from Rolls Royce and its two larger aircraft versions, the -900 and -1000 are, for the moment, have Rolls Royce as a sole source for engines.
Already airlines who are operating the 777 and who have ordered the A350 have said that the 777 will still have a significant payload advantage over the A350. Payload advantages can translate into carrying more passengers, more cargo or more range. In other words, the 777, on first glance, remains a very viable aircraft and with performance improvements, looks to remain so.
But what happens if Airbus is able to convince an engine maker to grow its thrust range into the 105K to 115K thrust range of the GE90? That would probably mean a commitment to some kind of new engine from Rolls-Royce or a stunning reversal of position from GE on supply a version of the GE90 to Airbus. Nonetheless, it’s a hard to ignore how such a development would change the viability of the 777 overnight.
Incremental performance improvements are common on airliners and Boeing knows it can grow the distance between the two aircraft with these improvements but only if Airbus is denied a 100K+ thrust engine. Since Rolls Royce has had quite some time to recoup investment on its large Trent engines and time to spend on research and development, I would not discount the possibility that they’ll commit to such an engine in the future but probably only if they retain some sort of exclusivity.
I think the extended wing, engine performance improvements and other tweaks will keep the 777 in the sales game for the next 4 to 6 years but if Boeing wants to retain supremacy, it’s time to start asking what the follow on successor to the 777 might look like.
Boeing has the 787 back on the right track and while they’ve got some work to do in getting the 787-9 and the speculated 787-10 into production, that has become straightforward engineering now. The 747-8 has come into its own test program and since that is an incremental re-development of the 747, there isn’t much there that isn’t straightforward engineering as well.
The 737 successor is by all accounts something to be deferred for development until late in this decade. Instead, it will receive a new engine almost certainly which will require some changes to the existing design but nothing that would warrant calling it a new aircraft. Instead, such an aircraft will be much like a 747-8 development.
That means there is potentially a 5 to 6 year gap there in which a new development program can take place before the 737 development must start in earnest. I rather think that’s the moment of opportunity for Boeing to go forward with that new large wide body replacement aircraft. It will push the company, certainly, but that development, particularly with what they’ve learned in developing the 787, would almost certainly dominate the markets for 20 or more years if they were to make the commitment.
Both Boeing and Airbus have a great selection of single aisle aircraft for domestic/trans-continental service in their B737 and A320 series families. Both have excellent widebody families for medium to long haul service too. The single aisle families can carry anywhere from about 130 to 190 passengers and that’s a pretty nice cross-section. The current widebody families (and I’m excluding the 767 from this characterization but you’ll see why in a few minutes) accomodate a broad range of passengers ranging from about 270 to 400+ passengers. Each even has new widebody family aircraft being introduced now and over the next 5 to 7 years that promise fantastic efficiency at incredible ranges.
Where is the aircraft to serve the 200 to 250 passenger count on a trans-continental/trans-Atlantic system? Yes, the A330 and B767 are there but they’re really not quite the aircraft for that anymore. The A330 is best as a -300 series aircraft and that encroaches into the 270+ territory. The 767 is still being built but it is, for all intent and purposes, a discontinued aircraft.
Previously we had the 757 and 767 capable of carrying that 190 to 250 passenger range on routes ranging from 2800 to 5500 miles and that market remains very active. But no one is building a new aircraft for that segment. The 787 misses it by a touch too many passengers and the A350 misses it by much more. Neither the 737-900ER nor the A321 is capable of traversing the Atlantic ocean from the east coast of the US to points inside the middle of Europe. They can barely make it across the continental United States.
Everyone is interested in aircraft for long haul routes that are intercontinental / trans-Pacific routes that yield quite a bit of revenue but for which there remains a fairly limited market. Who is going to build the aircraft capable of flying from Northeastern United States to Berlin or Rome or Athens or even Helsinki without being too much aircraft? Yes, the 787-8 can handle that route and probably handle it pretty well but it offers only a small marginal improvement on efficiency for those routes.
It would appear that the world market could stand to see another A300/767 sized aircraft that offers the kind of efficiency we see being promised in the 787/A350 aircraft being built today. And that really shouldn’t be difficult at all for either manufacturer. The fuselage sizes and engines necessary are known quantities. The technologies to raise the efficiency needed for those routes are all available today. There is no challenge to building this kind of aircraft but it doesn’t even appear to be on the drawing boards (or, rather, CAD screens) of either company.
There are a lot of 757/767/A300/A330-200 aircraft still out there but they’re aging fast and have a limited lifecycle left at virtually any airline. I do wonder why airlines aren’t pushing more for a 200 to 250 passenger, 5500nm aircraft particularly since we’re talking about routes that are medium haul, bread and butter routes for much of the global airline system. It is a sweet spot being ignored and I think that the manufacturer that identifies it and addresses it sooner, rather than later, is the manufacturer who enjoys a healthy order book for the next 2 to 3 decades.
And that isn’t exactly breaking news, is it? Everyone knew it was coming and now it has happened. Japan Air Lines must now face the music, reorganize and find a way to survive.
It isn’t as if they were a shining example of profitability over the years. Indeed, it was yet another airline formed as a national flag carrier that was ultimately privatized and which ultimately went into deeper and deeper debt. Its cousins are airlines like Alitalia and Olympic, not British Airways and American Airlines.
The blame lies in the company culture and by that I mean it went too long in a regulated and semi-regulated environment and then got set free into the competitive winds of the world with a crew of executives that never knew any real competition. Its one positive attribute was its service level which by most accounts was impeccable.
There has been a lot of criticism for the CEO, Haruka Nishimatsu, over the past few weeks. Particularly when it was announced that he was ultimately going to be replaced by Kazuo Inamori, founder of the Kyocera Group. I wrote about that announcement HERE. Tonight I remembered a video that was passed around among many airline enthusiasts as a kind of great example of what an airline CEO should be. Mr. Nishimatsu is shown riding a bus, eating in the general cafeteria of the company and generally being one of the people. I remember many people posting on other blogs about him earning just $90,000 in salary after cutting all his perks when he had to slash budgets and staff at JAL. (See below)
Let’s remember that this guy at least tried to do the right thing which is quite unlike many in this business at times.
So, what’s next? Well, JAL has to layoff thousands of employees, reduce costs at every level, probably purchase some new aircraft and find a way to claw itself back into profitability. That’s a tough thing to do even in good times.
I’ve some doubt about their choice of CEO to do it with. This is a man who plans to work for no salary and put in “3 or 4 days” a week as well as choose a second-in-command from the current airline ranks. Huh? Really?
What JAL needs is a seasoned airline executive who has extensive experience in competitive environments and who understands what it means to run both a national and international airline. There are plenty of those around in this world but, yes, it does potentially mean hiring someone who isn’t Japanese to run the airline. Or at least to lead the airline out of its current problems.
There is some precedent for this. Nissan’s CEO is Carlos Ghosn, a Lebanese-Brazilian man who came to Nissan from, of all places, Renault. He made enemies until he surprised everyone by bringing Nissan back to profitability. If they can’t stand to hire outside of Japan, then they would do well to find someone at ANA to take over.
If the Japanese government and JAL’s board want to be serious about recovery, they need someone who is the best, not someone who is politically safe.
JAL will likely rid itself of its 747 fleet in favor of a 777 / 787 fleet for its international operations. It is time for those Airbus A300 aircraft to go too. It will have to eliminate stupid routes like flying from New York City to Rio de Janeiro. Their focus on First Class and Business Class will have to be realigned. (An amazing portion of some of their international aircraft is dedicated to these two classes leaving only a small portion for Economy Class.)
But I have to say that I think this is going to turn much uglier before it gets better. I think JAL will flounder and I think the Japanese government will continue to pump money into it (and, in a way, they kind of have to since they provide the only competition to speak of for ANA.)
“We believe it is important to secure customer convenience by the injection of public funding. However, we are also highly concerned that the fair and competitive environment would not be secured under the financial support and injection of public funding.”
That kind of criticism is rare in Japan but ANA has had to fight for its success since its inception. They have a point but strangely even I find such a statement a bit tacky on this day.
Everyone says it is Delta and SkyTeam who will lure JAL away from the Oneworld alliance. I must say, given all the talk, I’m beginning to be swayed. However, I remain skeptical that they can enter into the SkyTeam alliance, particularly with Delta, without their being some anti-trust issues on the part of both governments. If they are leaning that way, I believe it is because someone in the Japanese government is leading them to believe there will be no issues. I do not think that that will be the case in the United States, however. One look at the criticisms of the AA/BA/Iberia anti-trust case and you’ll see what I mean.
There have been a few attempts to create long haul, low cost carriers over the past several decades. Laker Airways and People Express were two examples of that from years past. Neither succeeded in the long run due to competition but also because long haul flights are a different creature.
Now I’m beginning to think someone could do it. It would require a few very special adjustments to make it successful and those adjustments would be a real challenge to accomodate but, yes, I think someone could do it.
Michael O’Leary of Ryanair has talked of doing this but his concept, at least how he has laid it out, is fraught with peril since it is based on a Ryanair strategy.
Long haul flights really only work between two large population centers because they do depend a lot on airport infrastructure and originating traffic in those areas. They are international and that requires airports that can accomodate customs and immigration facilities and airports that have runways that are long enough for long haul aircraft.
They also can’t depart and arrive at just any time. Not to be attractive anyway. So schedules are much more important and frequency isn’t necessarily the key as much as finding routes that offer high aircraft utilization.
Until recently, they also required really large aircraft such as the 747 or DC-10/MD-11 to lower the costs per available seat. Filling those aircraft day in and day out is difficult on a point to point basis if you don’t have really large population centers to feed those aircraft.
Things have kind of changed though. For one, there are aircraft that might be suited to such operations which offer very low CASM (cost available seat mile) but which aren’t so big that they become difficult to fill. I’m thinking of the Boeing 787 and 777 and the Airbus A330 and A350.
These aircraft are capable of long haul flight, offer enough capacity and the kind of operating costs that might just make such a venture possible. In particular, the 787-8 and A330 make this look real attractive.
The one twist that I think you would need is partnerships to feed these flights at major cities that would serve as the departure points for such flights. In the past, I would be skeptical of this being possible. Now, not so much. Southwest Airlines is forging partnerships with LCC carriers in Canada and Mexico (WestJet and Volaris) and its just the kind of partnership that a long haul LCC venture could use.
Imagine an LCC carrier using the A330 or 787-8 flying routes such as DFW-London or Chicago-London or NYC-London. Or even Portland, OR to Amsterdam or Denver to Germany. Maybe even Salt Lake City to Japan.
The best aircraft would be the 787-8. It would accomodate medium to long haul flights perfectly with low enough CASMs for virtually any city pair. Its expected to be more low maintenance than any other aircraft of its kind. It could become the 737 of long haul quite easily.
If you had partnerships with LCC carriers on both sides to feed connecting traffic (something else that Southwest has done a time or two with its relationships with ATA and Icelandair (which was actually an interline agreement), you might be able to do it.
Imagine Southwest Airlines feeding such an LCC in places such as Denver, Baltimore, Pittsburgh, Portland or Seattle and Ryanair feeding such a venture at airports such as Dublin, London-Standsted or Frankfurt-Hahn. Or, perhaps, Airtran feeding such an airline from Atlanta to Rio de Janeiro with Azul providing the feed in Brazil.
This new LCC would have to be the “codeshare” on the domestic/regional flights and its own entity on the long haul international portion. Domestic/regional partners would benefit from the additional regional traffic but really should not be selling tickets from Kansas City to Rio de Janeiro via Atlanta. It goes against their models. These partnerships should be about each sticking to their models but providing some interlining between the two.
Oddly enough, I see airlines in two parts of the world being able to do this. The United States would be ideal because a US based long haul LCC carrier can reach around the world from the US borders. The other area would be one based in the Middle East such as Dubai which could also reach around the world.
With Open Skies agreements falling into place left and right, the right aircraft being available now and LCC IT infrastructures becoming flexible enough to enter into this kind of partnership, it might just be possible in the near future.
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.
