The Boeing replacement for the 737 may end up as the most hotly speculated about aircraft in history.   This aircraft was first delivered in 1967 as a 737-100 seating about 100 people.  In fact, it was an exceptionally slow seller for most of the 1970s.  It’s now nearly 45 years old and the largest of the currently family, the 737-900ER, can seat potentially as many people as 200.  The first 737s had a range of about 1600 miles and the current longest range 737 can fly about 3000 miles. 

This aircraft has doubled its size and range over its life in what has been really 3 model ranges over that lifespan:  The original -100/200 aircraft, the -300/400/500 and then the -600/700/800/900.   There are over 6000 of this type delivered with more than 2000 still on order and it possesses possibly one of the best records out there for reliability. 

Replacing this aircraft is no small task and Boeing gets one chance to do it right.

It’s all about efficiency and the low cost per available seat mile that can be obtained.  Airlines want to see a replacement that gives them not just a good gain upon delivery but which also affords them the best advantage over the life of ownership. 

Capacity:  Most likely we’ll see an airliner family that seats from 150 to 210 people.  Airlines are already seeing the value of switching from the -700 model to the -800 model because they can fill the seats without really any additional cost.  (This was the main reason why the -600 never really took off:  airlines could fly the -700 for about the same costs and enjoy more flexibility.)   In addition to a robust passenger range, I expect that we’ll see the lower cargo area designed to accomodate a bit more payload than the present airliner.   While this aircraft will never be an uber freight hauler, the present 737 has always been a bit constrained both in volume and payload weight.  An improvement in that area will be desired.

Fuselage:  Boeing has already expressed doubt that their approach with CFRP for the 787 won’t necessarily scale down to a 737 type replacement.  That’s probably true but that approach is already several years old and don’t rule out some sort of plastic airliner for this development.  New materials are developed every year and the big advantage to this approach for such an airliner is that it helps with maintenance.  There would be reduced corrosion over the life of the aircraft and reduced fatigue as well.  Whether it is a composite barrel or plastic panels on a metal skeleton, it’s liable to be plastic of some sort.  In addition to reduced maintenance, it will also lighten the airframe even a small amount and reduced weight translates into carrying more payload a farther distance.

Range:  The base range for the next replacement will be, at the least, somewhere between 3000 and 3500 nautical miles.  In other words, expect North American transcontinental range at minimum.  Will it be designed to fly a 757 style mission across the Atlantic to Europe?  That’s anybody’s guess but I think probably not.  I don’t see a 5000nm range being designed into this aircraft as it really pushes the weight of the airframe in directions that designers are unlikely to want go in.   The 757 was an anomaly in aircraft design because engines available for that aircraft during its design were uncharacteristically robust.  Generally speaking, engines have to be pushed to meet such requirements.

Engines:  I don’t see a twin tail, open rotor design.  Instead, I see a relatively conventional layout with engines on the wings.  I do, however, expect two engine choices on the next design.  Why?  Because so many will be ordered that two engine manufacturers can enjoy good economies of scale and buyers like choice when it comes to engines.  

I think we’ll see engine thrusts starting somewhere between 20,000lbs to 22,000 lbs and ranging upwards to somewhere around 30,000lbs to 32,000lbs with bypass ratios in excess of 6 .0.  These engines will have big fans and they will drive the aircraft to be higher off the ground.  That’s OK because the typical airline using this aircraft today is nothing like the typical airline who used it originally.  Airports and airlines are better equipped and while loading will require equipment by default, it will still be easy to turn around this aircraft.  I expect we’ll see some cargo hold innovation to speed loading and unloading in this aircraft.

I believe the engine suppliers will be CFM(or, perhaps, just GE) and Pratt & Whitney.  Rolls Royce has never played well in the single aisle market and their basic Trent 3-spool design just appears to be too cumbersome to scale down for this aircrafts needs.  A Rolls engine in that approach would be heavier and less optimal for the typical flights.  In addition, Rolls Royce has done very little innovative work for these kinds of engine requirements. 

Wings:  Boeing has always done a good job of giving its aircraft enough wing for growth.  That won’t be any different here and this is where I think we’ll see some real gains in fuel efficiency.  Wing design has come along way at Boeing and they’ll push their technology quite a bit in this area.  I think we’ll see raked wing tips rather than winglets in the next aircraft.  They’ll likely resemble the 787 more than anything else although without quite the gull-like appearance in flight due to being shorter.   I think they’ll be largely plastic and I think they’ll retain good short airfield performance to keep the LCC airlines happy since they have a habit of flying into smalller, more obscure airports as a rule.

Twin Aisles:  I doubt it.  It’s a concept that has received attention but, at the end of the day, a wider fuselage to accomodate two aisles translates into a wider fuselage.  A wider fuselage translates into more drag and that means more fuel to power it through the air.  What I do expect is an ever so slightly wider fuselage that is likely more “round” a la Airbus. 

What I do think we might see is some sort of innovative approach to making it possible for the airline to load and unload from front and rear doors on a regular basis.  LCC’s like their fast turn-arounds and offering the ability to do this in a more self-contained, efficient manner will only make them happier. 

Passenger cabins:  I expect Boeing will certainly work hard to design an open and pleasant passenger environment that resembles their approaches with the 777/787/747 as well as their new signature Sky Interior.   We might even finally see some suggested seating innovation but no one owns this domain very well.  Boeing works with outside suppliers on behalf of its customers rather than supplying the seating themselves. 

When:  I expect a target for initial entry into service of 2019 to 2020.  Anything past that offers Airbus too much opportunity to steal customers.   It can be done and it is going to require quite a few resources.  That’s OK because this kind of effort should be flawless in meeting both requirements as well as in its execution.  This is potentially an airliner that sells in excess of 10,000 aircraft.  You can’t let Airbus continue to fill needs for customers (especially customers who have blended Boeing fleets a la United and Delta) while you dither around waiting for the perfect opportunity.  Once another guy’s airliner is purchased, it can take from 15 to 25 years to have another opportunity to fill that need. 

It will be a more revolutionary aircraft than evolutionary certainly but expect it to not look entirely different from what it does today.

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I was amused last week by a comment originating from Airbus that they believed that Boeing would actually re-engine the 737 rather than proceed with the new build replacement so frequently talked about lately at Boeing.  Amused because while I do think the Airbus decision was right (in that it did offer good gains and it was what they could do between now and the middle of the next decade) but also because the 737 is reaching a level of maturity in efficiency that the Airbus A320 hasn’t come close to yet. 

I always kind of marvel out how just a 1 or 2 percent increase in efficiency can yield such huge savings for airlines.  Not because I don’t understand but because it takes such determination to find these savings.  Engineers at Boeing have been doing this for a long time on the 737.  It wasn’t just adding winglets but lots of tiny things adding up to small percentages of efficiency gains that net big dollars in costs savings.   The driver for this initially was to compete better with the A320 but the truth is that a good aircraft manufacturer always pursues these incremental gains over the product lifespan. 

But as time goes by, there are diminishing returns for the effort (read: work) that has to go into finding these gains.  The latest generation of Boeing aircraft have seen those pursuits for nearly 15 years and they (Boeing) have been relentless in their pusuit.   Finding those gains going forward for the next 10 years is going to cost a lot more for a lot less gain. 

There are always outside new developments.  Just last week we learned that easyJet is painting their aircraft (Airbus A320) with a new paint technology that is much thinner than previous paint techniques.  Provided the paint proves to be durable over an appropriate lifespan, easyJet expects to see efficiency gains of 1 to 2 percent due to less weight an and an aerodyamically smoother surface across the aircraft.  Provided the process isn’t terribly more expensive and it is as durable, this could save countless airlines a great deal of money over the ownership of an airplane.

No matter what each manufacturer does in its product line of significant note such as re-engining or designing new aircraft, the relentless pursuit of small incremental gains in efficiency will always go on and never more so than for the kind of airliners that the A320 and B737 represent.

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Airbus is reaping big orders and a renewed interest in its A330 since Boeing has been unable to deliver the 787 even remotely on time and that is going to hurt Boeing in a few ways.

Delayed by 3 years now and with only some hope of commencing deliveries later this year, Boeing is paying penalty payments for its poor performance and those payments are being walked across the street to Airbus, not Boeing. 

Boeing is being hurt since it hasn’t been able to offer a substitute aircraft to the airlines that the airlines want.  It’s cheaper to build an airplane at cost than it is to pay big dollars in penalty payments that go to the competition. 

What’s worse, Airbus is attracting a long look from traditional Boeing customers who now have little hope of obtaining a 787 any time in the next 5 or 6 years.  That’s great for Airbus but it is a warning to Boeing as well.  A stubborn resistence to the idea that bringing even more control of the 787 supplier network under Boeing’s wings is creating problems that some customers will have to question if they’ll ever be resolved.

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The next round in the subsidy fight between Boeing and Airbus is heating up with each company’s interpretation of WTO findings with respect to Boeing while we await “official translations” of the WTO ruling.  Airbus, of course, says Boeing got tons of subsidides and hurt Airbus by as much as $45 Billion.  Boeing says the ruling is relatively benign and just $2 Billion in subisidies will be noted.

As is usually the case, I expect that neither is exactly right.

However, in my opinion, it will be very difficult for the WTO to find that Boeing has been as competitively advanced by subsidies as Airbus.  At the end of the day, Boeing is a commercial enterprise with real shareholders operating in a country that expects it to commercially succeed.  Airbus?  Well, they would be the opposite of that. 

Like it or not, the world at least accepts and tacitly endorses companies that are competing and being responsible to shareholders to return a profit on investment.  That effort might be helped by subsidies but it’s still a commercially competitive enterprise.  Airbus is competitive but at the cost of inefficiencies as a result of it being a jobs program and a military/aerospace program for France and Germany.  If you removed subisidies from both airlines’ schemes, Boeing still has more than adequate opportunities to succeed whereas Airbus doesn’t. 

Even the Boeing ruling hurts Airbus with its timing.  This expected ruling once again, highlights even more egregious behaviours on Airbus’ part and that is concentrated into arguments against its parent company, EADS, in the KC-X tanker competition.  It’s a right line that EADS has to walk because, politically, they can’t afford to be seen as a fully subsidized effort to win business from the US government that inherently does take away both jobs as well as economic development from these shores.  On the other hand, EADS need to be a player in this kind of competition at some point or its political masters will find less and less incentive to advance its causes. 

The DoD continually refuses to make allowances for subsidies.  In fact, it almost gleefully rubs its hands over the idea that EADS might “buy” its way into the program which does yield savings for the DoD but also comes at a huge political cost on both sides of the aisle.  At the same time, no politician can quite afford to be seen making Boeing a sole source for this either. 

It’s a mess with no great solution.  One solution promoted is a split buy.  Politically, this makes sense.  Operationally, the only good choice is the Boeing in that it allows the military to project force in the way only the US Air Force can manage to do. 

I think this latest round makes the KC-X tanker competition even more toxic and I fully expect further delays in its award while DoD masters wait for things to settle enough to determine the political winds.

Note:  This writer works for a major US aerospace company that is a full partner on both programs.

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Boeing’s CEO, James McNerney, reiterated Boeing’s view that re-engining the 737 even in light of Airbus’ A320NEO announcement is not the pathway to success for Boeing.  They continue to believe that if a new 737 replacement is forthcoming in the 2019/2020  timeframe, customers will wait.  I agree.

However, if customers are asked to wait until 2025, I’m not so sure.  There is only so much more additional performance that Boeing can get from either the airframe or the engine on the 737.  Let’s not forget that, in many respects, the current 737 lineup continued to perform well against the A320 in part because of the development of the winglets and the evolving refinement of the CFM engine.  Additional gains are going to be increasingly difficult to find.

Also of concern is McNerney’s announcement that research and development will be going down over the next couple of years and that they intend to cut back on some of their engineering resources which are extraordinarily high (say McNerney) at present while retaining their core capability.   While I understand the cravings for normalcy, this worries me. 

To really get a 737 replacement out in the 2019/2020 timeframe, it’s time to get started now.  You have effectively just 8 years to redesign another technically innovative aircraft that will compete for 20 years or more.  Schedule is more critical in accomplishing this than budget is.  It takes time to design innovative technology and implement it into a product that must be 99% reliable “out of the box”.   Boeing’s schedule for doing so is, in some respects, already eroding.

I think there is more time to consider options for the 777 line than there is for the 737 replacement.  Enough airlines and, in particular, 737 customers have signaled the very strong desire for a better airplane. To act as if you have all the time in the world or even little competition for these people is a bad idea.  Even Southwest acknowledges that they can handle transitioning to a new type and they don’t mean just transitioning to a new Boeing. 

There are 3 SuperLegacy airlines who’ll be shopping in the next 1 to 2 years for fleet replacement and 2 LCC carriers who need to find new efficiency gains in their fleet (Southwest and Ryanair) who could literally place enough orders to pay for the 737 replacement.   Having something that will significantly beat the A320NEO in the stated time frame that also provides for future efficiency and a product line capable of lasting 20 years is almost a necessity rather than something to study for another 2 years.

The 737 replacement won’t be an evolution of the 737.  It will be much more a revolution for single aisle aircraft much as the 787 is for medium capacity, twin aisle aircraft.   Furthermore, I think you would want to have that program on firm footing and about to produce new aircraft as you begin to enter into engaging on a 777 evolution or replacement later in the decade.

So what’s the hold up?

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Virgin America has announced its intentions to order 60 new Airbus A320 aircraft with 30 being the A320NEO (New Engine Option) with deliveries taking place until 2019.  That means Virgin America will triple the size of its fleet (or more) over the next 8 years. 

While VA already signaled that they planned to buy 40 new aircraft, an additional 20 reflects a certain confidence that it is going to be earning solid profits going forward.  I’m sure that some of the new aircraft (probably the last ones) will replace some original aircraft in this scheme but it reflects a plan for heavy growth between now and the end of the decade.

Let’s put that growth in perspective.  jetBlue has about 160 aircraft presently serving 63 destinations after being in business for about 11 years.  In that fleet, there are about 115 A320 aircraft (with no orders on the books) and 45 Embraer E-190 aircraft (with an additional 60 aircraft).  I use jetBlue as an example because they are somewhat similar airlines with similar service products. 

So, Virgin America thinks it can grow its mainline fleet to about the same size as jetBlue over about the same period of time.   However, jetBlue got to its size in part by using the E-190s to “feed” traffic into their system from smaller destinations.  This would seem to imply that VA will have to think about a similar strategy. 

I suspect VA will start looking at how to build its network around its focus regions.  There is some opportunity on the West Coast but I think they’ll have to look to feed their system in other places as well.  Places such as DFW, Chicago and on the East Coast into New York City and Washington D.C.

Why order now?  Well, Virgin America is solidly in the Airbus camp and now they know what Airbus will be doing with its product line for the next 10 to 15 years.  With that knowledge in hand, it was an opportune time to make that order since Airbus will be very interested in getting airlines onboard with their decision to re-engine the A320 series.  In other words, they probably got a good deal. 

Why the A320NEO?  That goes to efficiency.  Again, VA knows what Airbus’ strategy will be for the next decade and a half and that means they know what kind of efficiency will be offered.  It only makes sense to get the most fuel efficient aircraft possible when competing here in the United States.  Even those that aren’t NEO aircraft will give VA an advantage in that they’ll be new engines with the latest upgrades available and that translates into money saved against the competition.

And they get one more advantage:  They’re at the head of the line when it comes to other potential buyers in the United States such as Delta or United airlines.   Virgin will be receiving the best, most efficient aircraft available as soon as or even sooner than most of its competition.  American Airlines has no new plans for aircraft other than to keep taking on 737-800s at present.  So on VA’s transcontinental flights, it will likely have the most fuel efficient aircraft available and having that advantage in that competitive marketplace means a greater chance of profitability and competitive advantage when it comes to fares.

Virgin has 2 or 3 years to go when it comes to considering how to feed its network with smaller aircraft.  I wouldn’t look for an order in that area for some time to come.  However, when they do start looking, I suspect the Bombardier CS series will be strong contenders for that airline if VA selects the new Pratt & Whitney GTF engines since Bombardier is offering a similiar engine on that aircraft product line.

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It has been reported loudly that Delta is poised to issue an RFP (request for proposal) for as many as 200 jets and this is an order no manufacturer wants to lose.   The rumour comes just days after a record breaking Airbus order from IndiGo of India.

At this point, it’s still rumour but this one strikes me as pretty much dead on.   Delta has a huge fleet (720 aircraft with about 40 orders in place which include the deferred NWA order for the 787) and quite a few of those aircraft need to be replaced now or in the immediate future. 

Delta has the Northwest fleet comprised of the very old DC-9-5o, MD-88, MD-90, 757, 747 and some older Airbus equipment.  The Boeing fleet from Delta’s legacy side isn’t quite as old but there are some 757s and 767s in need of replacement as well.  Considering the widely varying fleet, it would come as no surprise that an replacement order is due.

Oil prices and future fuel prices will also drive the need for this order sooner than later if Delta’s goal of a consistent operating profit is to be realized. 

Pundits think this is Boeing’s to lose and I disagree.  Richard Anderson, CEO of Delta, has much more history with Northwest and he is no Airbus hater.  This will be an extremely heated competition and I will say that if Boeing were to lose this order or a significant portion of it, that will sting Boeing and its product line for years to come.

The prime driver for selection is going to be based on a number of items.  First and foremost, trip costs for aircraft to serve a particular grouping of routes.  We’ll see orders for single aisle aircraft to serve what I would call non-transcontinental routes.  In today’s world, that would be the Airbus A319 and Boeing 737-700.   Having trans-continental capability in the aircraft would be a plus but these aircraft are going to serve the focus cities of the airline with routes stretching out from the cities but not across the country.   The mission that the MD-88s, MD-90s, Airbus A319s and Boeing 737-700/800s are serving today.

The A319s are brand new and so are the Boeing 737-700s/800s.  This is going to be about replacing the McDonnell Douglas fleet.

Then there is a need for the larger trans-continental capable aircraft that remain single aisle serving longer trunk routes that won’t justify a widebody.  Currently, the Airbus A320 and Boeing 757 are serving those routes.  The A320’s arrived in early 1990’s and the 757s date from the early 1980s to the late 1980s.  The options for replacement here are the Airbus A320/321 and the Boeing 737-800 and 737-900ER.    Neither aircraft actually “replaces” a 757 which has great range and great payload.  I don’t think the A320s are going anywhere yet so this will probably involve a 757 replacement and they (Delta) may or may not want it to harmonize with their existing A320s.

Then there are the 767s.  Some are getting old and some are quite new still.  Delta needs an aircraft stretching between what a 757-300 offers and an A330-300 offers.  The 787 fits this and the fact that Delta has deferred its legacy NWA order for these makes me think that these aircraft won’t be candidates for replacement.

The 747s are pretty old and frankly I don’t think these we very well cared for either.  They need to be replaced and I do think we’ll see orders to do this on these aircraft.  None really serve routes that demand 4 engines so I think we’ll see a replacement oriented around 2 engines.

I think it’s anyone’s guess on the single aisle orders.  Airbus will fight like crazy to win this order with their A320NEO options and Boeing may well have to announce a 737 replacement at a great price to win it back.   Boeing should actually have great incentive to get going on the 737 replacement if Delta is truly interested.  With Delta, Southwest and, potentially, Ryanair all wanting a better 737, there is an exceptionally strong business case to get going on this.

If Boeing doesn’t offer a better 737 in this, I think the order goes to Airbus.

As for the 757/767 replacements . . . well, I’d give the edge to Boeing.  I think the 787 *is* a good answer for these aircraft.  They offer the right amount of extra capacity for growth, long haul capability, extremely high efficiency and flexibility.  I do think it possible that an order might be mixed between the A330 and 787 unless Boeing gets off its duff and gets that 787-9 into production.  The 787-9 is the A330 killer.

Since I don’t think the A330s are going anywhere, I don’t see much opp0rtunity for Airbus’ A350 in this mix.  It’s deliveries are too far off and the A330s just don’t need to be replaced for a long time.

I think Delta’s large widebody strategy is likely going to be a mix of 777-200s and the 777-300ER to replace the 747s.  They already have a fleet of 777-200LR with GE engines so I think they’ll order 777-300ERs with GE engines to replace those 747s.  It will do everything the 747 will do only more efficiently.  I do *not* think the 747-8i will enter into this order.  Delta doesn’t need the capacity and the 777-300ER will serve all the routes the 747 is currently serving with no problem.  The A350-1000 is far too far off and its ability to perform is simply way too unknown for this to be serious contender at Delta.

I do not think that Bombardier or Embraer will enter into this order at all.  They just don’t have a product that meets the needs of an airline like Delta very well at all.

Don’t expect an order announcement for about a year.  Delta will let the manufacturers fight it out with best and final offers for quite some time and it will take time itself to do a detailed analysis.   But I can’t wait to hear their decision.

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With the announcement of Asiana Airlines purchasing (6) Airbus A380 aircraft, I began to wonder about the success of this aircraft as a whole.  So far, it appears that Boeing was right about the demand for very large aircraft although it lost all of that demand (practically speaking) upon the arrival of the A380.  My biggest concern about this program is the airlines it is dependent upon.

Just one airline, Emirates, is responsible for 37% of the A380 orders and just one region, the Middle East is responsible for 44 % of all the A380 orders.  That is a stunning amount of eggs in one basket for a region that is volatile and largely dependent on wealth generated from one commodity.  Think about that, roughly 1 of 3 A380 orders comes from a small handful of airlines who are based in a tiny area that is highly interdependent.

The next largest region responsible for orders, Oceania/India/Southwest Asia, is responsible for 23% of A380 orders with most of those placed by two airlines:  QANTAS and Singapore Airlines.  Now, I would bet on those two airlines.  QANTAS because of their rather unique position in their markets and Singapore because of their ability, day in and day out, to fill their aircraft.  But the remaining orders from airlines in that area such as Malaysia Airlines, Thai Airlines and Kingfisher, are suspect at best.  I question their ability to use and fill those aircraft regularly and I wonder if some of those orders won’t ultimately be converted to A350 orders with deliveries farther into the future.

Europe accounts for about 20% of the orders and almost all of those airlines do possess the ability to use the aircraft based on their current business.  However, their traffic is being impacted more and more by those Middle East airlines who’ve also bought the A380 but who also enjoy dramatically lower costs.  In addition, at least two of those airlines were, at least in part, driven to make their orders by their political leaders in Germany and France.  Any political influence in orders for such an aircraft bring some risk into the picture.  Ultimately, those airlines have to earn a profit from those very expensive assets and filling 500 seats daily is a difficult thing to do day in and day out.

The only region with orders that seem credible is the Far East (China, Korea, etc).  Those locations have the numbers to fill those aircraft and their orders are small and cautious, not big and grandiose, at 9% of all A380 orders.

Is it a success?  Well, when your order book is so heavily depedent one so few, it doesn’t speak well of your ability to drive future orders and ultimately have a program that at least breaks even.   Do you really believe that the Middle East and, in particular, Emirates, can continue to drive that order book up to the point that Airbus can earn a profit?  I don’t.  I also don’t think Europe or the Far East can do it either.  In the case of the former, routes are fracturing into ever more longer and thinner routes.  In the case of the latter, the number of people who can travel is very dependent upon what are, in some cases, still 3rd world economies. 

So, no, the A380 isn’t succeeding financially and it isn’t likely to succeed financially.  40 years ago, a vanity project could be tolerated but if Airbus was run as a real business, this is a program that would be getting the axe, not promoted by the likes of John Leahy.

Airline           A380 Orders

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There have been some truly disappointing revelations about the 787 and its development over the past 2 months.  We have learned that more than 300 aircraft were priced at or below $76 million excluding engines.  A startingly low price for this class of aircraft no matter what it is made of.  We’ve seen just how bad the vendor management has been for this global product and it is highlighted by Boeing buying these facilities to run them themselves to achieve better production rates and quality control.  Finally, we’ve learned that many of the technological approaches involved in this aircraft are going to require a longer period to mature than was originally expected as well.

Richard Aboulafia has referred to this program as a disastrously executed, brilliant vision and that strikes me as real truth at this point in the program.  He also speculates that the 787-8 may well be the “interim” aircraft while the -9 actually ends up meeting the performance needs of airlines in the long run.  That, too, strikes me as real truth.

What hasn’t been considered yet is where the ultimate solutions found for the 787 influence future production.  I continue to believe that Boeing hasn’t laid a complete egg with this aircraft.  I think it will prove to be, in many respects, a legendary airplane over time.  I think it will have a long production run and favorable reviews through its lifetime. 

Once these solutions are found and that oh so necessary experience is, well, experienced, it will have a positive influence on future aircraft development.  Boeing may no longer be poised to earn scads of profit on the 787 but it is well positioned to use its body of knowledge to earn scads of profit on other aircraft it needs to build.  They will have gone through all the pain necessary to know how to apply these new technologies to a 737 replacement or a 777 replacement/enhancement and that will serve them well in the future provided they don’t let lose all those people involved in this program.

The 737 replacement may not use these exact approaches such as CFRP or an all electric architecture but it will use some variation on a theme for that technology and they’ll know how to do it better.  They’ll be past the hump, so to speak.  This speaks well for Boeing in the latter half of the next decade.  Right now, they’re hurting.

But also consider that Airbus hasn’t pushed the envelope nearly so much and they have a great deal of learning to go through still.  And as tough a road as Airbus has in front of them with existing programs, that forecasts still more pain in the future.

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Next up:  World Alliances

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

The Middle East:

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

India:

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

The Far East:

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

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

Oceania:

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

South America:

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

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

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

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

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

Colombia / Central America: 

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

Venezuela:  Bah!

Europe:

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

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

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

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

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

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

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

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

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

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

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

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

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Southwest has indicated its readiness to investigate different fleet types in the future to meet its needs and the driver for this is fuel costs.  Their famous adherence to the 737 was more appropriate even 20 years ago but in this age, they have a large enough fleet and a large enough network to justify multiple types. 

Sticking to one fleet type has its benefits but those benefits don’t grow large when the fleet size expands past a certain point.  There is all kinds of debate on how many aircraft you have to have to make it efficient but I would say that for Southwest, a minimum of 60 to 80 aircraft is probably a sweet spot right now.  Big enough to make maintenance and handling optimum and big enough to offer flexibility through the network.

Does this mean SWA is going to add more fleet types?  No, not necessarily.  It means that it is time for them to put together a different fleet plan for the future.  If there is one thing I’m certain of, it is that SWA will have 737s for a long, long time.  The real question is . . . what kind of 737s?

In addition, SWA still does quite a bit of regional flying on mainline equipment that was efficient with 737s 20 years ago but isn’t nearly so today.  One great example of that is the flights from Dallas to places such as Lubbock and Midland and even Little Rock.  It might be beneficial for Southwest to identify a new fleet type that is smaller (in the 100 seat range) for maintaining frequency to those destinations but also offering better fuel economy and cost of ownership.   And they’ve got choices.

One thing is sure, however:  Should SWA pursue a smaller aircraft to standardize on, it won’t be a Boeing or Airbus.  They’ve got the 717 coming into the fleet via their Airtran merger and they’ll likely play with that aircraft for several years.  However, a 717/737-500 replacement won’t be a Boeing/Airbus aircraft.  It will be one of the semi-mainline regional jets being offered by the likes of Embraer and Bombardier most likely.  And it will be an aircraft that can be punished with high utilization rates.  On the surface, the Embraer E-190 series looks like the best bet to me.

I think their larger, single aisle aircraft will continue to be Boeings and I think that, for the near future, those will be 737s.  It is an almost foregone conclusion that they’ll also be pressuring Boeing for a new 737 replacement more and more over the next 2 years.  That replacement aircraft is liable to start with roughly the size of a 737-800 and have several larger types above it.  Southwest will likely choose to purchase several of the sub-types to meet their needs on various different routes that have wildly different constraints. 

This is about fuel efficiency and keeping down the trip costs.  Southwest has never had amazing load factors but the kind of load factors they’re experiencing today are historically high and they are unlikely to fall much in the future.  They need a larger aircraft than the 737-700 in the future. 

In the near future, they’ve got enough differences to work with.  This kind of talk is about pushing manufacturers to start considering what to offer airlines such as SWA in the longer term.

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Southwest made its intention to purchase the 737-800 official a few days ago and while no one is surprised, it is gratifying to hear it has been made official.  This will be a good choice for SWA going forward and it would appear that their first deliveries in 2012 will be 20+ of the -800.  Gary Kelly has said that that is too small a fleet and indicated that about 80 in the fleet would be about right.  These new aircraft will be replacements for SWA’s older 737-300 aircraft rather than in addition to them.  However, the greater size of the 737-800 means that there will be significant capacity growth in 2012.

Interestingly enough, SWA started advertising for an ETOPS manager several days ago and *lots* of people noticed that.  ETOPS will be necessary for SWA to serve Hawaii.  Just a month ago, I wrote about SWA and Hawaii HERE.  Apparently all of the deliveries in 2012 will be ETOPS equipped aircraft so I think that my thoughts on SWA starting a Hawaii route in 4 to 5 years from now is a touch off the mark.

Instead, I’d say we’ll probably be looking at SWA starting routes to Hawaii in at little as 3 years.  They still have to get the aircraft and they still have to learn how to maintain that ETOPS fleet and they also have to figure out how to do the flights and from what cities should they be flown. 

Gary Kelly, CEO of Southwest, also made an interesting comment or two about the 737 and a new engine option and/or replacement for that aircraft.  Kelly rightly points out that Boeing is talking about having something for its customers in 10 years and comments that: “When you talk about something that’s 10 years from now, that’s not a solution, that’s an idea.” 

I couldn’t agree more. 

The Airbus A320NEO isn’t going to be a 737 killer by any stretch.  In that respect, Boeing doesn’t have much to worry about.  But Gary Kelly is right, Boeing hasn’t got anything on the table.  The next generation 737s started to roll out of the factory in 1996 and that isn’t all that long ago if we were talking about a new aircraft.  But the next generation 737 line weren’t “new” aircraft.  They were evolutions of the original designs. 

It’s true that engine technology is needed but nobody is really driving that technology all that much so far.  Both Airbus and Boeing continue to look at new engines as more an annoyance than a need.   The A320NEO isn’t a Boeing 737 killer but a new single aisle short to medium haul aircraft from Boeing is most definitely an A320NEO killer. 

It concerns me that all we’ve heard from Boeing is that their customers aren’t asking for new engines because it’s clear that airlines aren’t asking just for new engines but new airplanes.  And Boeing is behaving a bit too arrogant with respect to their customer base in my opinion.  I wasn’t much of a fan of the Bombardier CS300 so far but now I kind of hope it makes it and it’s a bit of a Boeing killer. 

If Southwest wants a new, efficient (as possible) airliner, it’s time to get to work.  Because of Southwest wants it, I guarantee you that every large operator of the 737 wants it too.  With fuel prices as high as they are and due to be higher in the future, even a 10 to 15 percent efficiency gain is something an airline can’t afford to ignore or defer.

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A French court has found both Continental (as a corporation) as well as a Continental mechanic guilty of involuntary manslaughter yesterday and it stinks on many different levels.

Even if we ignore the fact that all the French parties in this trial were acquitted while the only US based parties (Continental and the mechanic) were found guilty, it still stinks for air transportation.  This sets a bad precedent for future air disasters, particularly in France, since going forward there will be little if any incentive for any party to cooperate in an investigation. 

It’s a precendent that any airline has to pay attention to when it comes to operating on French territory now and in the future.  When you face criminal liability as an airline and when your employees are subject to that same liability, it has to make an airline think twice about operating flights within your country.   When your “verdict” is blatantly patriotic as this one is, you really send a signal to those airlines and it isn’t a welcoming one. 

There is now no good reason for any airline employee to cooperate with any investigation into an air disaster and frankly I think this even extends outside of French territory.  This will have implications even in the United States as far as attorneys are concerned and that’s wrong.  Investigating an air disaster is already a difficult and contentious process at best.  Subjecting *any* mistake at all made by an airline employee to criminal liability means that it is in all employees best interest to shut up and say nothing on the record.

Accident investigations frequently result in changes in how something is done when we reveal the mistakes or uknown factors involved and that’s good.  That’s the reason why air disasters, as a percentage of air travel, have decreased so much over the last 30 years.  This one decision sets that back decades.

But let’s not ignore the patriotism involved in this.  It’s a factor and anyone who doesn’t acknowledge that just isn’t using facts.  As in all things like this disaster, there were a number of factors involved in the final outcome.  To absolve anyone French from any responsibility badly damages the reputations of the French legal system, the French government, Air France and the governming authorities for air transportation in France.  How can you, as an individual or company, trust these entities in the future if you witness them throwing a US based company in front of a moving bus while saving themselves.

This kind of behaviour is the worst you can observe in France and I’ll point out that this kind of stuff isn’t limited to just France either.  France just happens to be very good at it and, maybe, better than most. 

If this is what we can expect from the French court systems and government, shouldn’t we consider this when it comes to EADS/Airbus’ particpation in the KC-X tanker contest?  What if they won this contest, performed poorly and then hid behind the French government to escape consequences?  We’ve just witnessed a willingness to preserve French interests over truth or facts so why should the US (or any other government) believe that fair treatment and real consequences are available under any conditions that threaten French national interests in the future?

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The dirty little secret in aircraft sales are the subsidies that are used both in the United States and Europe to bolster their exports.  You see, you can actually affect your trade balance by selling just a few extra aircraft and that really isn’t possible to do with virtually any other industry.

Right now, foreign airlines such as Emirates or Ryanair can purchase airliners using financing from sources such as the US government in the form of low cost loans.  If we sell and deliver more 737s to Ryanair or 777s to Emirates, it helps our trade balance.  The airlines get to grow with lower costs that are a function of these loans that offer lower than market interest rates.

And let’s face it, Ryanair and Emirates aren’t exact airlines in need of subisidies. 

The same situation exists in Europe with Airbus.  You didn’t think that United Airlines and Northwest Airlines bought those Airbus A320s at market rates, did you?

To date, it’s been the dirty little secret among governments and the manufacturers.  Recently, US airlines started pointing out the inherent disadvantages of this when it comes to their ability to compete and they’ve got a strong point. 

The truth is, sudsidies aren’t necessarily bad if we’re using them to bolster transportation in parts of the world where obtaining any financing is difficult.  But we’re not.  Not really.  It’s a good idea that has been turned on its head with loopholes for situations that just no longer exist. 

Now a pack of airlines who are major beneficiaries have indicated that they are open to relaxing the “home country” rule that forbids such subsidies being offered to airlines in home countries as long as no restrictions are put into place that would inhibit their own great deals.  Read more about it HERE. 

How nice.   It’s notable that removal of this “home rule” would also permit several of these airlines to get the same great financing  in Europe on Airbus models in addition to Boeing aircraft. 

How about we end all subsidies to all airlines with the exception(s) of those in true third world areas?   Is it appropriate that an airline like Ryanair can purchase airliners from Boeing at already ridiculously low prices and then finance them with such low cost loans that they’re able to buy a 737 and re-sell it for a *profit* 3 years later?

No, of course not. 

A better idea would be to come to an agreement on how to offer these subisidies to airlines in poor countries who might really benefit from such a subsidy and then eliminate such things for any airlines operating in modern economies.

This means you Ryanair/Emirates/Virgin Blue/Etihad/CargoLux/Oman/Norwegian/Pegasus/Wizz airlines.  Not a one of you is a disadvantaged airline.  Instead, you’re all airlines who are pounding your competition into the ground with lower costs that really are a direct function of these subisidies.

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Tim Clark says Emirates wants more range from Airbus and its A350-1000 than it presently offers and it expects more from Boeing’s 777-300ER, too.  The airline is unsatisfied with the inability to serve ultra-long haul routes from Dubai with what it considers adequate payload.  Adequate payload is carrying 350 passengers from Dubai to Los Angeles with a full cargo/baggage load in about 16.5 hours. 

Frankly, that’s expecting a lot from even advanced technology.  We’re getting there but the big problem is how much fuel you have to carry to achieve those distances with those loads.   Those distances begin to require airliners to carry more fuel in order to carry more fuel for range and you can guess how quickly the diminishing returns show up on such a prospect. 

Lighter but stronger aircraft can solve that but we’ve already seen what a challenge  that can be with the 787.   There is no doubt that the manufacturers will figure out how to do it somewhere along the line but my gut tells me that this isn’t a problem solved with a better wing or better engine.  It’ll require re-thinking the large widebody airliner in a way that will require even better composites and other lightweight materials. 

It takes time to develop and test those materials.  It can take a lot of time to even figure out how to ramp up production on these exotic materials.   We still haven’t seen 787 partners prove they can meet production demands for CFRP fuselage barrels.  I think they can but the proof is in the pudding and we haven’t tasted the pudding yet.

My gut tells me we are at least 15 years away from producing a truly revolutionary widebody capable of carrying 40+ tons of payload for those ranges.  We’ll get there and it’s time to start thinking about it but don’t look for such an aircraft in the next 10 years.  It won’t be showing up. 

Besides, it’s a relatively limited market and it’s become clear that the manufacturers need to turn their resources towards producing a better short haul, single aisle airliner.  Frankly, that’s where the real money is at in the next 10 years.

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There has been a lot of talk about the Chinese aircraft, the COMAC C919, over the past year and what it means for Boeing and Airbus.  From my perspective, it’s not the aircraft that is a threat.  To the contrary, I do not believe this aircraft will be any more successful than any other Chinese made commercial airliner.  However, I do think that there is a signal to be read in that the way the Chinese have chosen to engage in this project signals that they are learning and they do want to be a player.

To build a successful Boeing/Airbus competitor, you really do have to have quite a bit more experience than what the Chinese have.   The real threats to Boeing and Airbus come from Bombardier and Embraer, in my opinion, because they not only know how to build an integrated system called an aircraft, they also know how to meet an airline’s needs as a function of having built their businesses from the ground up.

Bombardier and Embraer have doing what they do for a long time and they’ve learned through both successes and failures as well as from working with airlines to find out what they need in the next product they make.  There is no substitute for experience when it comes to building that integrated system.  That has never been more true than it is today.

China has a robust airline industry, to be sure, but it is one that has been dominated by the sublime customer service that Boeing offers every customer and even Airbus has struggled to bring itself to parity with Boeing in this market.  Chinese airline executives understand and, more importantly, value what Boeing brings to the table when it comes to a complete customer product.

Chinese aviation industries would have been far better served with the goal of producing a world competitor in the regional jet class and taking their time to do it right.  I’ll point out that Japan’s aviation industry has decades more experience building aircraft systems and even they are just getting their feet wet with a total system in the new Mitsbusihi regional jet.

A good jet engine isn’t the key to success in producing a Boeing/Airbus competitor.  Competitive jet engines are easy to find.  The harder part is the airframe, the avionics, the testing, the wing and many other things.  It comes from knowing how to squeeze out even 1% more efficiency from an already mature system.  You can’t buy that experience off the shelf.  You have to earn it.

All that said, China has decided to get partners and good ones at that.  They learn and they’ll listen and they’ll build their upon their experiences and as long as they keep trying, they will succeed more and more with future generations of aircraft.  They key is to be in this for the long haul.  

 Traditionally, executing a strategy in support of the long view is a strong point for the Chinese but in this particular case, I sense a very un-Chinese like impatience to be a player.   The real thing Boeing and Airbus should pay attention to is whether or not they regroup and re-engage when the C919 isn’t the killer app they think it is.  If they do, it’s time to start getting worried.  If they retreat and allow their experiences to wither, it’s over.

You can’t even build a modestly good aircraft and expect to succeed.  You have to not only be able to make it look attractive from a performance point of view, you have to be able to service and support that product 100% of the time.  Even Boeing and Airbus will tell you that it isn’t easy to do.

Take a look at the ARJ21 aircraft being built in China at present.  It’s an aircraft that has already, for all intent and purpose, been exceeded by Bombardier and Embraer.  It won’t fly for any airlines outside of China most likely and even then it’s unlikely to be even much of a political success.  It’s an exercise to learn how to build an integrated system and China will have to work mightily to build upon that effort with the C919. 

Even the Chinese airlines who made “orders” for the C919 at the recent Zuhai aviation show signaled some doubt.  Most only made firm orders for 5 aircraft each with options for more.   Frankly, that implies resignation to political realities, not enthusiasm.  China is a country to watch in this business but this particular aircraft isn’t a threat whatsoever.

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

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

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

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

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

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

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

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

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

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

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It’s always been hard to make the case fo re-engining commercial airliners.  The government does it because their aircraft see far fewer cycles and are therefore used for a much longer duration. After 20 years, the government may well have another 20 years of service life left in the aircraft and re-engining makes sense.

I can’t honestly think of a re-engine program on a commercial airliner that was a financial success and that’s why both Boeing and Airbus are backing away from this idea.  Admittedly, Airbus isn’t exactly backing away yet but it is growing quieter and quieter about the subject.

Boeing has openly discussed building a new design as a 737 replacement and several airlines have openly expressed interest in the idea.  It is the obvious pathway to go forward on but the timeline is what is giving manufacturers fits.

Boeing and Airbus want to offer a quantum leap in efficiency with new aircraft and they sense that they don’t have the right technologies to make that happen on a small, single aisle aircraft yet.   It is going to be very difficult if not impossible to offer 30%+ gains in efficiency on the next airliner.  There has been too much learned in the art of making an airliner efficient now and that means the gains will be incrementally smaller as time goes forward. 

The engines are close enough to make that call.  With a firm build committment, engine makers could make an engine that would be a leap ahead of the rest in time for first flight.  It would require a big investment and hard work to make that happen but it is possible at this point.  Of course, the numbers of aircraft that would use these engines make the business case for that investment so the likely road block on engine development going into high gear resides with Boeing and Airbus. 

We already know quite a bit about wings and there isn’t much to be gained there.  Use of new materials could help with weight and that will help a bit but huge gains from new wing designs are likely a thing of the past.

Fuselages are one area that everyone speculatese about.  We see the gains to be had from CFRP (carbon fibre reinforced plastic) in the 787 project and assume we can get those in a 737 project.   Well, with the existing technology, those gains aren’t quite there.  That solution doesn’t “scale down” to a single aisle, 150 to 190 seat aircraft very well.  In addition, Boeing and its partners haven’t quite gotten their production to scale “up” to a level that would support high volume production that a 737 replacement would require from day one.

There are newer technologies emerging that may be satisfying for such a project’s fuselage but we’re not quite there yet and this is where the delay is coming from, I think.   I don’t think that Boeing and Airbus quite have a handle on whether or not the technologies are viable enough to pursue for production and I think that is requiring more study and thought before a committment.   The fuselage (and interiors) are the last place to make big gains and the “efficiency” needed is going to have to be won from that area. 

At the end of the day, it isn’t engines that is driving these decisions, it’s fuselages and their weight.  The manufacturers want to offer everything they can because this is an aircraft they’ll likely be building for decades and you want to have what people want when you make that kind of committment.

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

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

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

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

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

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

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

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

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

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

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

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

Filed under: Airline Fleets by ajax
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