Michael O’Leary, CEO of Ryanair in Europe has been demanding a new deal for up to 200 Boeing 737 aircraft between 2013 and 2016 according to Reuters.  Keep in mind that up to 200 aircraft likely means a firm order for between 50 and 100 aircraft with options for more.   Boeing, on the other hand, has so far refused to negotiate what is by all accounts a rock bottom deal on their 737.   More amusing is that Airbus has so far refused to offer a better deal on their aircraft since they’re already familiar with Mr. O’Leary’s tactics when it comes to negotiating.  He likes to play one manufacturer off another.

There are likely several things at play here.  First, Ryanair has often made a profit by “turning” their aircraft rapidly and selling them for a profit to other, smaller players.  A situation that has no doubt irritated Boeing as they are looking to sell to users, not distributors.  The original pricing for Ryanair was negotiated at a time when commercial aircraft sales for the industry and Boeing in particular were pretty flat and there is no doubt that Ryanair offered a serious opportunity for cash flow at a time when Boeing was in need of filling slots in its delivery schedule.

Not so much anymore.  Boeing has a health backlog of orders and many of them for airlines who will pay more per aircraft and be happy to receive their 737s early.  American Airlines has continued to up its orders for the 737 in light of the fact that no new next generation 737 replacement is due anytime soon from either Airbus or Boeing.   Other airlines are likely to do the same over the next year or two.  There is no incentive for Boeing to make an even better price to Ryanair.

And I think Mr. O’Leary knows it.  But by making his threats and going public with them, he has begun to set an argument for why Ryanair will likely do a couple of things in the next few years.  One will be slowing their growth.  The truth is, growth opportunities for them in their market(s) are becoming few and far between.  Second, they really can’t continue to “flip” aircraft in the next few years as there are plenty of other sources developing  for second hand NG 737 aircraft.  Slowing their purchases will give them a public rationale for slowing growth and reduced profits from sales of the 737. 

I also doubt that Mr. O’Leary will distribute money to either his executives (in the form of bonuses) or to his shareholders.  If there is one thing he knows, it is that an airline lives and dies by its cash holdings.   It’s a weapon that I don’t believe he would give up.  Instead, they may choose to invest it.

Mr. O’Leary has publicly spoken about creating a new trans-Atlantic airline in the future.   Whether or not it is just talk, we’ll never know unless he does it.  However, he does need the right kind of aircraft for developing his self-described premium/economy airline for the markets he thinks he can access.  Part of his plan includes flying to secondary airports again in the US to save money.  A plan that, I think, he’ll learn isn’t nearly as feasible as it might be on the European continent.   There are no secondary airports with good transportation to their major market centers.   You can take passengers to Hartford, Connecticut, for instance, but there isn’t a cost effective way to get from there to Boston or NYC. 

However, that doesn’t mean Mr. O’Leary can’t access a number of markets and do so profitably.  He is a master negotiator and there are plenty of US airports that would potentially welcome such an airline.  With lots of cash, reduced capital requirements for the Ryanair fleet and good timing, they can establish such an airline if they can find the right equipment to use. 

And that leads us back to Boeing.  I think Mr. O’Leary recognizes that the 787 might be just the right equipment for such an airline.  Both the 787-8 and 787-9 offer the right kind of efficiency, size and economics for make such a venture a success.  There is no way that he’ll buy second hand aircraft such as the 767 or the A330 for such routes.  Its difficult to find new(ish) aircraft on the used market that are worth purchasing and the A-330 probably is just too big for the routes.  But the 787 potentially offers the right package.  And I wonder if the current bluster about a deal isn’t about getting Boeing “prepped” to do a deal on the 787 with earlier delivery slots at great prices. 

Time will tell.  One thing I’m entirely certain of is that Michael O’Leary doesn’t have nearly as much contempt for Boeing as his bluster indicates.  Both companies have done very well with each other and both understand that its in their interests to find a way to continue to do business.

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I  have a funny feeling that safety and getting those Delta/Northwest ops combined is about to become a big focus at the airline. 

Incident 1: NTSB INVESTIGATING LANDING OF COMMERCIAL JETLINER ON TAXIWAY IN ATLANTA
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The National Transportation Safety Board is investigating the landing of a Delta B-767 on an active taxiway at Atlanta Hartsfield International Airport (ATL).

According to preliminary information received from several sources, on Monday, October 19, 2009, at 6:05 a.m. EDT, a Boeing B767-332ER (N185DN) operating as Delta Air Lines flight 60 from Rio de Janeiro to Atlanta landed on taxiway M at ATL after being cleared to land on runway 27R. No injuries to any of the 182 passengers or 11 crewmembers were reported.

A check airman was on the flight deck along with the captain and first officer. During cruise flight, the check airman became ill and was relocated to the cabin for the remainder of the flight. A medical emergency was declared and the company was notified by the crew. A determination was made to land at the scheduled destination of ATL.

The flight was cleared to land on runway 27R but instead landed on taxiway M, which is situated immediately to the north and parallel to runway 27R. The runway lights for 27R were illuminated; the localizer and approach lights for 27R were not turned on. Taxiway M was active but was clear of aircraft and ground vehicles at the time the aircraft landed. The wind was calm with 10 miles visibility. Night/dark conditions prevailed; twilight conditions began at about 7:20 a.m. EDT and the official sunrise was at 7:46 a.m. EDT.

A team of four from the NTSB, led by David Helson, is investigating the incident.

The issue of runway safety has been on the NTSB’s Most Wanted List of Safety Improvements since its inception in 1990. Information on the NTSB’s work on runway safety is available at http://www.ntsb.gov/Recs/mostwanted/runways.htm
Incident 2: NTSB INVESTIGATING FLIGHT THAT OVERFLEW INTENDED MINNEAPOLIS AIRPORT
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The National Transportation Safety Board is investigating an incident where an Airbus A320 overflew the Minneapolis-St Paul International/Wold-Chamberlain Airport (MSP).

On Wednesday, October 21, 2009, at 5:56 pm mountain daylight time, an Airbus A320, N03274, operating as Northwest Airlines (NWA) flight 188, became a NORDO (no radio communications) flight at 37,000 feet. The flight was operating as a Part 121 flight from San Diego International Airport, San Diego, California (SAN) to MSP with 147 passengers and unknown number of crew.

At 7:58 pm central daylight time (CDT), the aircraft flew over the destination airport and continued northeast for approximately 150 miles. The MSP center controller reestablished communications with the crew at 8:14 pm and reportedly stated that the crew had become distracted and had overflown MSP, and requested to return to MSP.

According to the Federal Administration (FAA) the crew was interviewed by the FBI and airport police. The crew stated they were in a heated discussion over airline policy and they lost situational awareness. The Safety Board is scheduling an interview with the crew.

The cockpit voice recorder (CVR) and flight data recorder (FDR) have been secured and are being sent to the NTSB laboratory in Washington, DC.

David Lawrence, the Investigator-in-Charge, is leading the team of 3 in investigating the incident.

Parties to the investigation are the FAA and Northwest Airlines.

It would appear that pilots at the combined companies are allowing themselves to be a bit distracted these days.  I particularly hope that the CVR transcripts for that second incident become available one day.  Something tells me that policy talk wasn’t the problem.

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In some ways, it was almost inevitable that Mr. Sullenbeger would damage his image, at least in my eyes.   Fox News has this story where the US Airways captain claims he has to work a 2nd job and 7 days a week to maintain a “middle class” lifestyle. 

Now, it is well known that US Airways (East) pilots have taken several cuts in pay and a hit on their pension over the past several years.  There is no argument that being a captain at US Airways no longer is quite the lucrative job it once was.  However, a senior pilot, a senior captain such as Chesley Sullenberger is only struggling to be “middle class” if he’s a fool with his money. 

Let’s take a look at the pay for a senior (such as Captain Sullenberger) captain at US Airways under the “EAST” (or original US Air) contract.  Captain Sullenberger is earning well in excess of $120 / hour as an A320 captain.  Taking a look at United Airlines, their compensation is just over $130 / hour for the same senior captain flying the same aircraft. 

The captain would argue that while that hourly seems high, there are many hours worked for which they don’t get paid.  And I agree.  Let’s say Captain Sullenberger has 6 flight hours on a particular day.  That works out to $750 for that day’s work.  If he flew 6 flight hours, he probably has about 10 hours of what we would consider real work time.  So, $750 / 10 is equal to $75 / hour in “real” pay.  If Captain Sullenberger is working 85 flight hours per month (and about 120 hours of “real” time per month), then he’s earning a base annual salary of about $127, 500 not including health and other benefits.   The truth is, Captain Sullenberger is probably earning a bit more than that annually if he schedules himself for good trips.  Call it about $140,000 / year not including health and other benefits.

So, Captain Sullenberger is probably flying about 1080 flight hours per year and  experiencing about 1512 “real work hours” per year.  The average full time employee in the United States works about 2000 hours per year and has a medium income of less than half of Captain Sullenberger’s salary, enjoys no pension although perhaps a 401(k) and medical insurance that wouldn’t approach Captain Sullenberger’s medical benefits. 

Somehow, I don’t feel sorry for Captain Sullenberger’s misery in maintaining his “middle class” lifestyle.   We all have been hurt in our retirements.  We all make investments in our education and career and few of us experience the kind of job security that a senior US Airways captain enjoys even today.   And to portray oneself as “struggling” with such pay and a need to have a 2nd job is a bit insulting to a great majority of Americans who are truly struggling to maintain any lifestyle.

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As I suspected, the new focus on airline safety is all about bird strikes.  The Middle Seat Terminal Blog (a Wall Street Journal blog) has THIS post.  After the US Airways Flight 1549 ditching, I suspected that there would be lots of chatter about preventing bird strikes and there has been.

Some of this chatter is about putting screens in front of the engines, for instance.  No one stops to think just how strong and well engineered a screen would have to be to withstand the force of an 8 pound bird and well as how fine it would have to be to keep debris from entering the engine.  Nor does anyone consider that by putting such a screen in front of an engine, you are effectively disrupting the air flow into the engine and that will, at the least, reduce engine efficiency if not keep it from operating as designed.

Consider a goose that weighs about 4 kilograms being struck by an aircraft going about 250mph.  That is just about the exact scenario for Flight 1549.  Such an impact represents over 27,000 joules of energy.   In very rough terms, that is enough energy to move more than 3 tons of weight about 1 yard.  By the time you engineer a screen for that jet engine, you need a better, more powerful jet engine to carry all that extra weight. 

The truth is that bird strikes are not uncommon and almost always result in non-event.  In fact, engines and other parts of aircraft structure have to be engineered to withstand most bird strikes likely to be encountered.  Jet engine makers have to prove their engine can take a strike and not furiously disassemble itself and damage a wing or fuselage.  Cockpit windows have to be able to take a punch too. 

The truth is that commercial aircraft handle these events very well and what happened to that Airbus A320 was actually a statistical anomaly.  It is so rare for a commercial jet to encounter birds and lose both engines to the point that the aircraft cannot return to an airport that in my research, I cannot find another instance.  Oh, it may well have happened but it is exceedingly rare. 

Put another way, you have a far greater likelihood of experiencing an “incident” from turbulence than you do from a bird strike.  That doesn’t keep you from flying does it?   From my perspective, this incident proves that nothing more does need to be done to mitigate problems from bird strikes. 

First, it is rare for them to disable an engine but it does happen.  A jetBlue Airbus encountered a bird strike this past weekend and rejected its take off.  After returning to the terminal, evidence of a bird strike was found.  Any other week, this would not have made national news.  For birds to disable both engines is virtually unheard of and that is a good thing.  Any modern two-engine airliner is capable of taking off, losing an engine and maintaining climb power to go around and return to an airport. 

Airports do their part to prevent this problem.  Unfortunately, airports happen to be places that attract birds because of the wide, open areas that are flat and which generally contain a lot of what birds want.  Airports scare them away and do their best to make flight areas a very unattractive place for them to flock to.  And they are very successful at that in general. 

One of the other points that I think escapes what happened to US Airways is the altitude that they encountered these birds at.  It was at about 3000′ above the ground and how common do you think it is to find birds at that altitude?  Very rare.

The traveling public is quite safe when it comes to bird strikes.  This was an anomaly and you are just only now hearing about this “problem” because it just rarely happens to ever truly affect a flight. 

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This incident with US Airways Flight 1549 has made me realize that we now have two incidences (at the least) on record where a superb landing was made in an emergency situation and was done so during moments that call for graceful aircraft handling. 

I feel certain that this US Airways incident is one.  It does take grace and experience to land an Airbus A320 gently enough in the Hudson River so as to avoid any breakup of the aircraft.  A fully loaded, fully fueled airplane is not easy to handle and keeping it from over-stressing itself and breaking apart is a genuine feat.    The pilot, Chesley Sullenberger, is a certified glider instructor. 

Another incident that many airliner fans certainly know about is the Gimli Glider episode.  An Air Canada Boeing 767 ran out of fuel and was glided to a safe landing at a decommissioned air force base.   A fueling mistake had  been made at its last stop and both pilots found themselves woefully out of fuel in the middle of a transcontinental flight.   The Captain of that flight, Bob Pearson, was also an experienced glider pilot and used some flight techniques from that experience to make a safe landing at Gimli.  You can read all about that incident HERE.  (It’s well worth the time.)

What strikes me about this incident, so far, is that the pilots had very little time to execute a plan and manage their situation when it happened.  The bird strike occured somewhere near or over the Bronx Zoo (based on the observed flight track from Passur.Com).  From that moment, they had just a hair over 3000 feet in altitude, two failing engines and a highly populated area underneath them.  With engines providing some forward thrust, they maintained control of the aircraft, executed a tight turn just north of Manhattan and made contact with air traffic control.

While attempting to manage the aircraft for an emergency landing at New Jersey’s Teterboro Airport, the pilots had enoug presence of mind to realize, quickly enough, that they had not enough altitude nor forward airspeed to make it there and quickly lined up on the Hudson River instead.  Gently landing an A320 that likely weighed in excess of 150,000 lbs and which had little airspeed to maneuver with  is a nightmare scenario for any pilot.  Captain Sullenberger managed to line the aircraft up with the river, lower it to just above the water’s surface and then stalled the aircraft just right so that it essentially dropped into the water with almost no forward motion.  He did it so good, most passengers have described the impact as no worse than a minor rear end car accident.

A very well done job for all the flight crew and it was a genuine touch of class that Captain Sullenberger was able to walk the aircraft and ensure all his passengers were off and manage to be the “last one off the ship” as well.  For a really bad situation, it was the best of all outcomes.

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Here is an image of the area where US Airways Flt 1549 went down. It landed somewhere in the middle of the river just a hair south of where the Hoboken label is. It has since floated to near the Battery Park Pier shown in the lower right of the image.

CLICK HERE FOR IMAGE.

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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. 

Stay tuned for Part II.

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If Southwest gains those ATA slots and they do fly them all in and out of La Guardia, this does send an interesting message to those employees who are presently upset over the announcements of codeshares with both WestJet and Volaris.

You see, the big argument made for those codeshares was that it allowed Southwest to concentrate on its business model but enjoy the expanded business that those two airlines offered to Canada and Mexico.   It was an argument about focus and direction with the Southwest business model.  The employees, some of them at least and most important the pilots, have argued that with near zero growth planned for Southwest, these are routes (the international routes) that Southwest could fly with their own people and metal.

It’s an argument that I can see some truth in.   The flying remains a natural for Southwest.  After all, flying to either Canada or Mexico is not flying overseas.  Mostly it is flying to cities across a border in a manner that is quite consistent with the existing model.  While neither country would necessarily permit Southwest to build a network inside their country, there are plenty of provisions already in existence to fly to destinations in both countries. 

Southwest is perfectly capable of operating a website or websites that serve those countries as well.  Labor costs can’t be an issue because, frankly, they could literally outsource those functions to their two new codeshare partners.  WestJet knows how to turnaround a 737 and while Volaris owns A320 aircraft, they also know how to turnaround an airplane. 

Flying to either country does not require ETOPS aircraft and it doesn’t even necessarily mean overnighting aircraft and/or flight crew in either country.  Flights to either country can be “turns” that see no aircraft left overnight.   However, even if you did want to overnight staff in those countries, it isn’t logistically difficult.  Hotels are in abundance and all your staff need are passports.  Language really isn’t a problem either.  Oddly enough, Southwest flight crew speak English, a perfectly acceptable language for Canada, and I’ll bet that Southwest has plenty of crew capable of speaking Spanish already. 

Now La Guardia Airport does present some challenges that are contrary to the Southwest model.  It is a congested, expensive, weather affected airport with high labor costs and high costs to overnight aircraft.  I would wager that it is quite possibly MORE difficult to operate into and out of La Guardia than, say, Vancouver or Toronto or Monterrey or Gaudalajara.  

It also puts Southwest into one of the most competitive markets in the United States and while it does give them access to the business traveler, it does so in a major market where business travelers often expect and even demand creature comforts that Southwest doesn’t offer.   If you have the chance to fly 7 round trips to NYC, what cities do you connect NYC to?  This is mere speculation but I would guess that flights to Chicago’s Midway Airport are a given.  Possibly a flight to either Baltimore or Orlando or Houston or even Philadelphia.   I would actually bet heavily on Chicago, Baltimore, Orlando and Houston.  But even if it was Chicago only, you have, at best, 7 frequencies.  On that route, you would probably need a minimum of 7 frequencies. 

There is something that is unrevealed in this plan.  Certainly Southwest could boost frequencies by obtaining more slots in the future.  Maybe.  But that is historically difficult in a slot controlled airport and a market that rarely sees significant contraction in flight quantities.  It is even more difficult when you are entering a market that major legacy airlines will defend to the death.  No one has any incentive to cooperate with Southwest in making gate space or other facilities available. 

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Southwest Airlines has just announced a new codeshare with Mexican airline Volaris (partially owned by billionaire Carlos Slim.)  Like Southwest’s codeshare agreement with WestJet, this allows Southwest to gain access to international markets.  With these agreements with WestJet and Volaris, Southwest gets access to all of North America and gets to work with two airlines that have similar (not the same) operating environments. 

I’m quite certain that these new codeshare routes will, in fact, boost Southwest’s revenues (as well as the revenues of these other participants) and I’m sure both relationships will prove to be rewarding in many ways other than just money.  If one airline could operate throughout North America, it really would look very similar to this codeshare arrangement.  

These two new arrangements for Southwest found me pondering how it could be done better than just a simple codeshare.  One way to further integrate without attempting a merger (something all three airline’s governments are very unlikely to allow) would be operating an interchange. 

An interchange was a fairly common tool in previous decades within the United States.  The idea is that two (or more) airlines operate the same equipment on a route that is shared.  One of the most famous interchanges was when Braniff operated the Concorde from Dallas to Washington D.C. where an Air France or British Airways crew would take over and fly the aircraft across the Atlantic to either London or Paris.  At the time, each time the Concorde arrived in Washington, the aircraft would be “sold” to Braniff who would then hang new ownership papers in the cabin and change the registration temporarily for operation in the United States.  Obviously that kind of inconvenience would not be tolerated today between airlines but there really isn’t a reason for it either.

Wouldn’t it be interesting to see Southwest operate such an interchange with each of their partners.  A Southwest aircraft could be used to fly an international interchange between Canada, Mexico and the United States with only crews changing between focus cities for each airline.   For instance, imagine a B737 flown from Toronto to Chicago by a WestJet crew where a Southwest Airlines crew would take over and fly it from Chicago to Houston.  In Houston, a Volaris crew could take over and fly that same aircraft to Mexico City (Toluca) and then turn it around for a return trip.  

The advantage is that customers never have to leave the aircraft and it would therefore permit a more seemless network for transitioning from one country to another.  The only problem with that scenario is that Volaris has an Airbus A320/A319 fleet and while WestJet flies the 737, they are partial to the 737-800 type instead of the 737-700 aircraft preferred by Southwest.   Nonetheless, it does cause one to think about the possibilities that might exist between the three airlines. 

It also points to other opportunities for other airlines.  Codeshares are good and convenient for airlines but they still require a passenger to travel from one hub to another hub and when it comes to international connections, it does force the passenger to often de-plane, clear customs and transition to another part of an airport to continue on to a destination.  Sometimes that isn’t all that painful but more frequently it is a great inconvenience to the passenger and a barrier that many avoid.

With airline alliances relatively stable now, many could choose to adopt similar (if not the same) types of aircraft and offer trans-global interchanges for both companies and their passengers.  It also would allow them to further standardize their service and even possibly take advantage of fleet flexibility between partners.  For instance, what if QANTAS and American Airlines shared a portion of their 787 fleet and allowed it to “flex” between North America and Australia according to seasonal demands?

I suspect there are many more opportunities to be had from both codeshares and, possibly, a new version of interchanges between airlines. 

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Delta / Northwest is not only big with respect to the number and type of airplanes they have, they are also big for the number of hubs they are currently operating.  Conventional wisdom continues to bet that some of those hubs will be closed or rationalized just as it bets that the airline fleet will be reduced.

My guess is that there really won’t be a reduction in hubs of any real significance with the exception of two.  This new airline has two hubs in close proximity, Memphis and Covington/Cincinatti, and each serves similar markets.  However, rather than being combined into one, I suspect that Memphis will likely be de-emphasized into a “focus” city with more connecting traffic routed through Covington/Cincinatti.  The yields in each city are very good but Covington/Cincinatti is by far the city with the best yields.  Memphis is likely to remain as a focus city because it is a good gateway to the central midwest section of the US.

All other hubs in the US such as Atlanta, Minneapolis / St. Paul, Detroit, and Salt Lake City have the airline as a dominant carrier and there is no reason to combine any of them with respect to the routes they serve. 

Now, both airlines operate significant flights from gateway cities such as Los Angeles and New York and it is quite likely that the airline will work hard to combine some flights going to the same cities.   For instance, flights from the New York area going to the same destinations in Europe will be combined to raise the load factors on the equipment being used.  However, Europe presents an interesting problem because Northwest has been in a close relationship with KLM and has used Amsterdam as a “hub” to connect to other cities in Europe.  Delta, on the other hand, is used to flying direct flights to a variety of cities in Europe without a hub or close partner.  I suspect the relationship with KLM will be reduced so that Delta can raise the loads on its own flights to smaller European cities.

Northwest comes to the table with a hub in Tokyo, Japan and they have 5th Freedom Rights to pickup and carry traffic from Tokyo to other cities in Asia.   On the surface, that would appear to be a very valuable asset.  However, the value of that arrangement was far greater when the political climate in Asia was much different and the range of aircraft made it more convenient to fly to a central hub.   Today, it can be much more profitable to fly direct to a variety of Asian cities using newer, long range aircraft such as the Boeing 777 and the about to be introduced 787.  I have no doubt that the Tokyo hub will be retained in some form because the yields from traffic originating in Tokyo to other Asian cities is still well worth the effort but I suspect that there will be a renewed emphasis on point to point flying as things evolve in the new airline.

The thing most likely to change at Delta’s hubs will be the aircraft equipment.  With a wide variety of equipment to choose from, it would be unsurprising to see a shift of long haul aircraft between the hubs in order to improve yields, load factors and even to explore new routes.  That will be done slowly and carefully so that Delta doesn’t have to service too many different types of aircraft at each hub.  Once again, aircraft being used at various hubs to service various areas will probably be rationalized.  It would be unsurprising to see A330s shifted to longer South American and African routes with B767-400’s moved to trans-atlantic routes originating in MSP and DTW. 

Los Angeles will probably see a greater concentration of 747 aircraft being used on trans-Pacific flights.  New York and Atlanta will probably see 777 aircraft moved in for long range, point to point flying to destinations in India, South America and even Asia.  

At present, Delta has 4 different types of long range aircraft in the 747, 777, A330 and 767 with another on the the way (787).   Since Delta already operates GE powered 777-200ER/LR aircraft, they’ll likely place an order for some 777-300ER aircraft and use those to replace the aging 747 aircraft.  That will reduce flying by one type.  The A330 aircraft will be retained until a fleet of 787-9/10 aircraft can be purchased and then the A330 will likely be let go.   Delta’s 767-400 aircraft is fairly new but it will probably suffer the same fate as the A330 in being replaced by 787 aircraft in the future.  Suddenly, two basic types with 2 sub-types between them can service all the long haul routes and, at the same time, offer some harmony at each hub. 

I do wonder if Northwest’s 787 orders will be switched from Rolls Royce engines to GE GEnx engines.  That would permit Delta to operate two basic aircraft types that would use the same brand of engine and engines that share some basic design philosophy as well. 

The tricky part of managing all of these hubs for Delta will be the domestic fleet which is comprised of Airbus A320 series, Boeing 737 series, DC-9 series and MD80/90 series aircraft.  Because it is more efficient to perform maintenance on a domestic fleet that keeps the aircraft close to a maintenance center, I do wonder which hubs will get which aircraft.   Both Airbus and Boeing offer good choices for domestic fleets in the A320 and 737 series.  The DC-9 fleet is old and will be retired over the next couple of years so it isn’t a factor.  The MD-80/90 aircraft isn’t exactly old but it does become somewhat of an orphan and they don’t offer the fuel effiency that the A320 and 737 offer.  It’s quite possible that Delta will retain both the A320 and 737 series and simply order more of both until they can choose a next generation domestic fleet type from Boeing or Airbus.   I do believe that the MD80/90 fleet will be selected for retirement in the next 2 years. 

The exciting part of this merger will be watching the decisions that Delta makes about its new future. 

Filed under: Airline Fleets, Airline News, Airline Service by ajax
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The US Justice Department approved the merger between Delta Airlines and Northwest Airlines today.   The two companies will now begin to work on executing the combination as quickly as possible and it should culminate with a combined operating certificate in 1 to 2 years. 

In the meantime, Delta and Northwest have already made a great deal of progress towards completing the merger.  The executive team has been selected, agreements with pilots have been obtained and each company has been working pretty hard towards merging the culture of each airline together.  While no doubt there are bumps in the road still to be encountered, this particular merger shows great signs of being accomplished with relatively little strife. 

Flight Attendants are targeted for being a trouble area.  Delta’s flight attendants are non-union and while there have been a few votes over the years to unionize, all have failed pretty soundly.  Northwest’s flight attendants are unionized and have been characterized as even miitant.  Delta’s CEO, Richard Anderson, has urged that everyone work together and while his stated preference is for no further unionization (and he has backed that up by being very willing to negotiate differences), he also has said that he and the rest of the executive team will abide by whatever vote there is.  It is likely that the flight attendants will have a vote after the merger is officially executed and it is likely that it will be in favor of unionization since a combination of Northwest’s flight attendants with the minority of Delta flight attendants in favor of a union would win any vote.

While both CEOs of each airline have professed that such a diverse fleet of aircraft will permit them to “right size” aircraft to a particular route, it is highly likely that the fleet will be pared down over time.   Northwest’s youngest aircraft are manufactured by Airbus and Delta’s fleet is comprised entirely of Boeing products.   Certainly both major aircraft manufacturers will see an opportunity with this merger and both will be pitching their mainstay aircraft lines, the Airbus A320 series and the Boeing 737 series.  With an gentleman’s agreement in place between Delta and Boeing that gives Delta preferential delivery slots, this is Boeing’s opportunity to lose.

A good guess is that, initially, the Douglas DC-9 fleet will continue to be eliminated and bases for the Airbus A320 and Boeing 737 fleets will be established at selected hubs.   It is possible that the Airbus A330 fleet will be phased out in favor of more Boeing products such as the new 787 of which Northwest already has a significant order on.  The 747 fleet will most likely be phased out over time in favor of the 777-300 and which Delta already owns in the 200ER/LR version. 

The combination of these two airlines will form the world’s largest airline both by revenue and traffic.  This will even dwarf American Airlines by a significant degree.  However, because of industry contraction and the obvious economies and advantages to be gained by constraining capacity in markets that the new Delta will be dominant in, it is likely that the airline will actually contract both its fleet and, to some degree, its employees.  However, major layoffs of any significant numbers are very unlikely and most contraction is likely to be done through natural attrition.

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Given the semi-success of the all business class airlines that formed around flying from NYC to London, I’ve wondered if there wouldn’t be a demand for such service between Los Angeles and NYC.  Frankly, I wonder if an all First Class service between those two cities wouldn’t be in demand. 

I could see an airline such as American Airlines or Delta Airlines or United Airlines fitting out a 737-800 or A320 with their international business class or first class product and offer a customized service from the curb to the airplane as well.  If one flew from LAX to EWR, it would be as convenient as convenient gets and serve industries such as the entertainment business with near private jet service. 

The airlines would simply need 2 or 3 dedicated aircraft refitted and could draw upon senior staff for such flights.  With lie flat seating, the airline could offer both morning and evening departures from each city and by flying into EWR, put their customers close to Manhattan.  They likely could charge a small premium (10 to 20%) over their existing product just to allow people to avoid flying with the masses and the associated delays that come with more people on one airplane. 

That is the one city pair that could support such service.  I do believe it could have potential for profitability but I also believe it would raise the profile of the airline as well.  

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United Airlines, an airline that has offered spotty-at-best service for more than 10 years, seems to have the 9 lives of a cat to most people.  Unfortunately, of all the legacy airlines, it is the one that should have melted away some time ago.   It emerged from bankruptcy in 2006 after spending 3 years and over $300 million reorganizaing itself to operate in a world with $50 / barrel oil without a realistic plan to deal with contingencies.

The problem is, oil was already at $60 / barrel when it started fresh.  Since 2006, United has been the one airline that always manages to arrive to the party in rumpled clothes and only a $5 bill to pay the door charge.   Those rumpled clothes are an aging fleet (although all of the truly old Boeing 737s are now being withdrawn from service to cut capacity) of aircraft that do not match the interior quality or service level of most of its competitors. 

The management team, most importantly CEO Glenn Tilton, has spent more than 2 years maneuvering to merge this airline with another and, yet, has been rebuffed by all potential candidates such as Continental, Delta and US Airways.  Indeed, they took a particularly condescending attitude towards US Airways’ offer to explore mergers when Glenn Tilton implied that he and his team would remain in place and “mentor” the US Airways management team including Doug Parker. 

Say what you will about US Airways but it isn’t the company we knew in the 90’s or even 3 years ago.  Doug Parker and team are really America West and they’ve been better at executing to plan than virtually any other management team at a legacy airline.  If anything, Mr. Tilton would be well served by Mr. Parker’s mentorship. 

Now the marriage dance in airline mergers is essentially over.  Delta and Northwest are walking down the aisle, Continental has chosen to stand alone (wisely in my opinion) and American Airlines has decided to pursue trans-atlantic partnerships with British Airways and Iberia Airlines.  There is no one else left for United to pursue a merger of equals and they lack the cash and operating plan to purchase a smaller airline as well.  Indeed, Continental Airlines is joining the Star Alliance (of which United is a founding member) and that may benefit United but if they think they will remain the shining star in the US market for that alliance, they are sadly mistaken.

Continental’s management team is stable, smart and agile in this market.  They are uniformly the choice of airline among business travelers (and that is who pays the bills) and possess a young, modern, harmonized fleet of aircraft that serve the routes efficiently.  Continental has hubs that will serve that alliance well in both NYC, Houston and Cleveland and offer Star Alliance members excellent codeshare options throughout the United States.

United Airlines has a fleet of 747s that are some of the oldest -400 models and by all passenger accounts they are in desperate need of refurbishment (unplanned for 3 years and not recognized for another 2 years while United showed its legs to potential suitors).  They possess a large 777 fleet which, on the surface, would imply some modernity there.  However, about half of that fleet are early model “A” market 777s powered by the less powerful and efficient Pratt & Whitney engines.  No lip gloss found there.  The other half are 777-200ER models that would at first glance appear to be more modern intercontinental aircraft.  They aren’t, really.  They’re what Boeing originally referred to as “B” market 777s and, once again, they are powered by the less reliable and efficient Pratt & Whitney PW4000 series engines.  I would point out that every other operator of this aircraft in the US is using the more powerful and efficient Rolls Royce Trent or GE90 engines (American Airlines, Delta Airlines and Continental Airlines.)

Their 767 fleet, a large one comprised of 767-300ER models, shows the same flaws as their 777 fleet.  While some were built as recently as 2001, they are all powered, once again, by the less fuel efficient Pratt & Whitney engines.  I’m sure a theme is beginning to reveal itself here. 

The same also remains true for their 757 fleet in that they are powered by the lesser Pratt & Whitney engines while other airlines are utilizing the real rocket of that type, the Rolls Royce RB211 powered 757 that, with winglets, is capable of ETOPS trans-atlantic operations.

Ignoring the soon to be gone 737 fleet (which is old and dingy but not powered by Pratt & Whitney for once), the remaining aircraft are various Airbus A320 types.  While they are not old by airline standard, most are more than 10 years old and some are approaching 15 year of age now. 

An old airplane is not an unsafe one but, in United’s case, it is an uncomfortable one.  While other airlines have paid attention to maintenance, comfort and even tuning engines, United has spent its time navigating bankruptcy and its management team has bet their golden parachutes on a merger.  With no other really suitable partners, they are now faced with operating an airline that by most standards, is not competitive.  What’s worse, they have lost 2 years time that could have been spent executing a service plan that might work.

If the cost pressures airlines are facing continue for another year, they (United) will be faced with another potential bankruptcy and, this time, it should be a liquidation.  There is no argument for this airline continuing its operations under the present regime nor is there an argument for it continuing to operate simply to support air transportation in the United States or abroad.  There are plenty of air carriers that can take up the slack and operate more coherently than United.   In fact, the only part of United ceasingly to exist that I find distasteful is that it potentially offers American Airlines an even greater lock on Chicago’s O’Hare airport.  Since I experience that kind of fortress here in the DFW area, I know just how expensive that can be for a consumer.

Successful airlines share a few qualities that I’ve noticed over the years.  They generally possess a young, fuel efficient and harmonized fleet.  They buy the airplanes configured for performance on a variety of routes.  They have leadership rather than just executive management.  They focus on a clean, comfortable flight experienced that is defined by the service provided by its employees.  Such an airline also carefully watches its money and nurtures its finances to avoid running cash short on the wrong day.  It takes care of its employees not by offering the best salaries but by offering a living wage, a hospitable workplace and with fair treatment in both hard times and good.

That is the antithesis of United Airlines and, so, they go on the Death Watch.

Filed under: Airline Fleets, Airline Service, Death Watch by ajax
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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”.

Filed under: Airline Fleets, Trivia by ajax
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The Dallas Morning News reported that American Airlines will be both accelerating 737 deliveries as well as taking up new orders for the Boeing product.

As they replace MD-80 aircraft (The Boeing 737-800 is as much as 20% to 25% more fuel efficient than the equivalent MD-82/83), your chances of a middle seat go from 1 in 5 to 1 in 3.  That said, I still find the prospect of flying newer 737s more attractive than the alternative.

I remain completely puzzled that American Airlines and United Airlines have not ordered 787 aircraft.  The 787 fits into their fleet and routes very well and offers just that kind of gain in fuel and maintenance efficiency that both airlines desperately need.  Currently, only Northwest Airlines and Continental Airlines have the B787 on order among the legacy carriers although US Airways does have some A350 aircraft ordered.  Indeed, the A350 ordered by US Airways seems a bit too large for their needs even when the purchase is justified with the cross-cockpit qualifications that the Airbus product offers with US Airways existing A320/A330 products.

The new DeltaNorthWest Airlines will have Northwest’s B787 orders and will continue to take deliveries on the B777-200LR it already has ordered.  Those two aircraft come very close to each other in performance and seat-mile costs in the ultra-long haul market but the 777 has the advantage when it comes to cargo-carrying capabilities.

I cannot believe that for the foreseeable future, there will be no true 757/767 replacement and it is even more difficult to believe that airlines continue to make plans to retain most of those aircraft for the foreseeable future.  Both the 757 and 767 have AviationPartnersBoeing winglet programs in place now resulting in fuel efficiency gains as much as 6% on the 767 but they still remain older aircraft with ever increasing maintenance needs.

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The competition that exists between Boeing and Airbus has to be one of the fiercest fights ever seen in commercial aviation.  Among aviation enthusiasts, most are dedicated only to one or the other and just visit an aviation enthusiasts discussion website and you’ll discover debate that is even more heated than what exists between Airbus and Boeing.

Family and friends have, from time to time, asked me whose airplanes I like the most.  I probably lean towards Boeing more than anyone but for different reasons than many have.  Before going further, I should say that I think Airbus builds a modern, competitive airliner and is in no way materially inferior.

I like Boeing’s approach to an aircraft.  I think they value customer experience just a bit more whereas I think Airbus tends to value an airline just a bit more.  One example is the difference between the 737 and the A320 aircraft.  Both are made for the identitical market and both are modern, fuel efficient jets.  Both have had rough spots over the years and both companies work incredibly hard to sell these jets to all kinds of airlines.

I should say that I admire how well Airbus has done at making their aircraft families cross-compatible when it comes to flight crews.  A pilot for an A320 can upgrade to an A330/A340 with a lot less training than a similar upgrade from a B737 to B767/B777.  Airbus makes owning their entire aircraft family highly beneficial *if* their aircraft family can fill all of your missions. 

However, I do find the 737 just a hair more comfortable.  I’m a rather tall and big person with longish legs.  Having flown numerous examples of both aircraft, I find the aisle seat experience roughly similar and the window seat experience very different.  The A320’s fuselage is more “circular” and therefore curves inward more at the shoulder to head height of most people.  At the window, my perception is that my head must lean away from the fuselage and that feels uncomfortable.  The 737’s fuselage is more ovoid and that same curve is more gradual and starts more above the passenger than next to him. 

The seats should be roughly the same but my perception is, again, different.  This simply may be a function of what US airlnes are using for a seat on the Airbus vs the Boeing.  My perception is that the A320 class of aircraft typically have a seat that is a touch thinner, a touch harder and therefore a touch less comfortable on flight durations of 2+ hours.  I have felt it on America West aircraft, US Air aircraft, United Airlines aircraft and Northwest Airlines aircraft.

I once had a chance to fly from PDX (Portland) to DFW (Dallas / Fort Worth)  via DEN(Denver).  My flight from PDX to DEN was on a United Airlines A320 that appeared to be older but not “old”.  Within 1 hour, I found myself fidgeting and since I was in Economy Plus next to a window, I expected to feel more comfortable.  I didn’t.  The next segment was on a United Airlines 757 (not a 737 but it does have the same fuselage dimensions and uses the same seats) in plain old Economy rather than Economy Plus.  I was simply more comfortable.  The window seat felt more accomodating and I was finally able to relax enough to nap despite less legroom. 

Each aircraft manufacturer tries hard to find the right niche for aircraft and I would argue that as a result of this competition, they actually are more complimentary these days than directly competitive.  An airline could be well served by both Airbus and Boeing without sacrificing efficiency. 

If I were to pick a fleet for the upcoming Delta / Northwest merger, I would center on using the 737 family for domestic service (using a combination of 737-700 and 737-800 aircraft, the 767 (or 787-3)  for domestic transcontinental and Hawaii service, the A330 for trans-atlantic (Europe and Africa) and South American service, the 787 for South American / Southeast Asia and trans-pacific service and the 777-200LR and 777-300ER for long haul, high density international traffic from hubs like ATL (Atlanta), MSP (Minneapolis / St. Paul), DTW (Detroit), JFK (New York City) and LAX (Los Angeles). 

It’s hard to say where the new Airbus A350-XWB will fit in “mission-wise” when it comes to such an airline.  While it’s passenger economies may be a tad better than the 777, it won’t haul nearly as much cargo.   At present, it cannot quite adequately fill the 777 mission role and it might just be a tad too big to compete directly with a 787-9/10 either. 

One thing I admire about Boeing is that they tend to “right size” their aircraft for various markets.  Often people directly compare Boeing and Airbus aircraft on the criteria that one aircraft can carry more people on the same mission than another.  Occasionally, that’s valid.  More often, not.

An airline needs aircraft that “fit” the passenger and cargo demand of various routes.  Boeing has 40 years of experience helping airlines plan their fleet on these needs and does it well.  The 787 was never intended to be a 767 or 777 replacement.  It was developed to fit an emerging demand that really fell in between those two aircraft. 

The next replacement for the 737/757 series will fall somewhere new as well and probably will not fill a need below the 737-700 and probably will not fill a role that exceeds the 757-300.  That’s a 2 class aircraft that will probably have a family range accomodating from 150 passengers to 220 passengers.  Real aircraft range will probably include transcontinental capability for all variants at about 3500 to 4000 nm (nautical mile) max range.  Airbus will likely target a similar set of criteria with the next generation aircraft.

The discriminators in the next battle between Airbus and Boeing will be things like the best operating efficiency, dispatch rates and passenger comfort.   I would give the edge to Boeing when it comes to efficiency and dispatch rates and it is anyone’s guess on passenger comfort.  I’m certain that both companies will sell an amazing amount of the next generation single aisle aircraft and I’m equally certain that airlines will praise both.

Filed under: Airline Fleets, Airline Service by ajax
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I got asked today what airline(s) I thought might be in real trouble.  Thinking about it for a few hours, I’ve come up with a sort of “death watch” list.

First on my list is Midwest.  They just announced they’re grounding their MD-80 aircraft and, as a result, cutting several important routes while expanding their codeshare with Northwest Airlines (who now owns a “passive” 47% stake in Midwest.)

Giving up routes such as Milwaukee – Los Angeles does not bode well.  With only Boeing 717 aircraft, they have limited themselves to routes that are “heartland” oriented.  For instance, the 717 can’t make it from MKE to LAX.  It can fly from Kansas City to Los Angeles (that route stays for now) but who wants to fly from MKE to LAX via MCI (MCI stands for Mid Continent International by the way)?  The airline business is, first and foremost, a network game and Midwest just cut 40% of its network putting itself below the critical mass in my opinion.

The proposed merger with Airtran would have saved them but they made a deal with the devil (Northwest) and Northwest has no interest in Midwest surviving really. 

Next up is Frontier.  Their hub is Denver and they have already cut back their focus cities.  While their fleet is new and fuel efficient, part of their business model counted on being the only LCC (Low Cost Carrier) game in town.  Not so true anymore. 

They have United Airlines above them as a legacy carrier operating a substantial hub in Denver and offering a nicely segmented set of seat choices and a global frequent flier program.  Below them is Southwest Airlines.  Southwest has entered that market with a vengeance and contrary to denials on te part of Southwest, it is crystal clear they intend to put Frontier out of business.  Much of Southwest’s growth has been focused on Denver and their CEO has already stated their intention to put more capacity into that city.  Denver can support two airlines, not one.  Since Frontier is already in bankruptcy, they’re my pick for going away. 

The only saviour is an airline that fits into their network and I can’t identify one that really meshes well with both their route network and their fleet. 

My third pick is Virgin America.  This is an airline that doesn’t quite know what it wants to be.  On the one hand, they want to be a trans-continental, high value, high service airline.  On the other hand, they want to be perceived as the west coast version of Jet Blue.   Trans-continental flights can’t make money using the equipment they have (Airbus A319/320) and their base, SFO (San Francisco) can’t support a real hub operation with good traffic given the competition they have from both legacy carriers and established LCC’s.

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Not you, the consumer. Oh, we know your type these days. You buy on price and frequency. Next is loyalty to your frequent flyer plan (and some of you even buy based upon gathering your FF miles ahead of price.) You aren’t going to change. You never really have and you never really will. You are the girlfriend/boyfriend who promised to change and never did.

It’s time for airlines to fly smart. No, really, it is.

Southwest Airlines pioneered the modern strategy that most airlines try to emulate in one form or another. They have a single type of aircraft (Boeing 737) and trade high load factors for high utilization of aircraft and crews. It’s a model that works for them and even for some others. Legacy airlines have adopted a modified model that included narrowing the fleet types which allows not only fewer costs in equipment but also permits airlines to use their staff across a broader range of aircraft.

But it appears (to me at least) that that strategy in the current economic climate is going to prove flawed. The truth is, the airline industry tends to have to re-invent itself every 30 years or so. That reinvention has taken the form of a revolutionary change in aircraft or, in the case of the 70’s, a new regulatory climate. Traditionally, it’s aircraft.

One of the criticisms of the proposed Delta / Northwest merger is the mish-mash of fleet types they’ll have. The CEO’s of both Delta and Northwest have responded that it in fact appears to be a big advantage in the merger because it will permit them to “right-size” each city pair with the proper aircraft. What this means is that with different fleet types comprimised of aircraft capable of varying efficiencies and loads allows them to fit the right aircraft to the right flight.

For example, a flight from Atlanta to Nashville might typically carry an average of 90 passengers per flight and Delta might be using a Boeing 737 for the flight segment that carries about 130 passengers. That means their using a new (high capitol costs but more fuel efficient) airplane to fly the route with an average load factor of 69%. It’s a short flight segment so the fuel efficient engines of the 737 don’t play as big a role in savings as they would on a longer flight. Post Merger, Delta may put a Northwest DC-9-40 on the segment that carries about 110 passengers. Suddenly the capital costs are extremely low (the airplanes were paid for years and years ago and the costs to operate it are maintenance and periodic refurbishment), the load factor is now 81% and flight has about similar fuel and labor costs. What’s more, that 737 can now fly on flight segments with average loads that are much closer to its capacity and which provide greater revenue yields as well.

More airlines in the US need to re-examine their fleet strategies. Almost all flights being flown by regional jets of 50 seats or less *lose* money now. Particularly when they are used for “long and thin” routes such as DFW / CLE (Cleveland). An airline of real size (US Legacy carriers but also LCC carriers such as SWA, Jet Blue and Airtran) can benefit from a diversified fleet.

There are countless “shuttle” type routes that could yield far more profit by using new, advanced turbo-prop aircraft such as the Bombardier Q400 and ATR-72. There is no rational justification to use regional jets on short segment routes when compared to these advanced turbo-props for instance.

An airline could, for instance, fly a Q400 on flights between Dallas and Austin offering 70 seats per flight and make money by filling only half of them per flight. Time flying between cities would be virtually the same as Southwest Airlines’ Boeing 737 and seating would be about as comfortable. The capital costs, maintenance, fuel and labor costs for that aircraft are all significiantly less than the 737 but offer about the same comfort and convenience.

Reduced fleet types made sense in the 80’s and 90’s because airlines were focused on the hub and spoke model. It allowed an airline to use aircraft interchangeably and since fuel costs were extraordinarily low, load factors could be as low as 60% and an airline could still make money.

Today, airlines need aircraft that are more pin-point appropriate for their routes. Short segment shuttles should be flown by Q400’s while longer segments with greater density should be handled by 737s and A320s. Large trunk routes should be served by Boeing 757s, Airbus A320/321s and even smaller widebody aircraft such as the Boeing 767 and Airbus A330. Longer, thin routes should be served by the upcoming Boeing 787 and A350-900 aircraft while long, high density routes will be better served by the Boeing 777, Airbus A350-1000, Boeing 747-800 and Airbus A380.

There will be increased demand for a new kind of aircraft. One that is a re-birth of the original DC-9 and Boeing 737. A 100 to 120 seat aircraft that can fly 25% more efficiently over route segments of 500 to 1000 nautical miles. Bombardier (Canada), Embraer (Brazil), Mitsubishi (Japan), AVIC (China) and Sukhoi (Russia) are all working on such aircraft or already have such aircraft available for order. Boeing and Airbus don’t.

The days of flying a regional jet such as an Embraer ERJ-145 or Bombardier CRJ-200 are over. They cannot fly profitably short or long, thin routes anymore as they offer, at best, only 50 seats and a product that is quite unpleasant for trip durations over 1 hour.

Legacy airlines no longer can afford to “sit” on routes to protect them for use at later date. All of the capacity cuts made so far are squarely aimed at routes that do not generate sufficient revenue to justify their existence. To serve those routes in the future, they’ll require an aircraft whose economics ENSURE profit.

That means airlines will seek to merge and become bigger because size permits greater fleet diversity and fleet diversity means more revenue per passenger. Even airlines such as Southwest, Airtran and Frontier will have to begin considering the value of “right sizing” their fleet to their customers. To some degree, Airtran does that with their mixed fleet of Boeing 717/737 aircraft.

Greg

Filed under: Airline Fleets by ajax
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