Boeing now claims 600 commitments to its 737MAX re-engined airliner and that’s fairly impressive despite the fact that we know that 100 of those come from American Airlines.  But who else is buying is largely a secret so far.  Remember, Delta didn’t order the MAX.  It ordered the 737-900ER citing its needs being more immediate than the entry into service for the 737MAX.

600 commitments to a paper aircraft is pretty good for an airliner so recently announced.  Since Boeing is fairly honest about what it considers an order, we can presume that these “commitments” are formalized in some manner such as orders and/or letters of intent. 

But what is the aircraft.  4 months after hearing that the airliner existed when American Airlines announced its order, we still don’t know much at all about this airplane.  We’ve heard promises that have the 737MAX outperforming the Airbus A320NEO but . . . that’s all they are.  Promises. 

So far, we have no firm definition of what this aircraft really will be.  As the Wendy’s commercial asks:  “Where’s the beef?”

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Richard Aboulafia of the Teal Group has criticized Boeing and Airbus plans to ramp up production on their single aisle airliners and the man has a strong point.  Current demand isn’t from growth, it’s simply from the need to replace aging airliners and the thoughts of ramping up production to 50+ per month does smack of hubris. 

Some airlines do desperately need newer, more economical airliners.  American Airlines is a great example and they’ve made their order.  However, what makes sense for AA doesn’t necessarily make sense for another airline.  Take Delta, for instance.  Delta has a fairly mixed fleet with both Boeing and Airbus products.  What it doesn’t really have anymore is that 70’s/80’s fleet of aircraft with really inefficient engines a la MD-80s and what it does have in that category, it’s getting rid of fast.

But what about the MD-90s, you ask?  Check out what engine is on that aircraft.  It’s an IAE V2500, the same that is sold today on the Airbus A320 series.  What Delta is keeping isn’t nearly as old and inefficient as you think and the aircraft are far less capital expensive than new aircraft are.    Simply put, Delta is replacing exactly what needs replacement and not buying one aircraft more than necessary.

Other airlines are evaluating the options for what they need in the next 15 to 20 years.  Southwest has a fairly new, fairly efficient fleet of 737s and it will want to keep buying new aircraft, too.  But what does it need?  Right now, it needs the 737-800 and it needs it now rather than later.  It needs replacement aircraft for the remaining 737-300/500 aircraft in the fleet and that is being achieved with 737-800s (which  replace 737-700s which then replace 737-300/500 aircraft.)  But does it need the 737-MAX?

Well, yes and no.  It needs the MAX but the airline also is put into an odd position in that it is likely faced with the following scenario:  It will maintain a large fleet of NextGen 737s for the next 10 years or more.  If it buys the 737-MAX, it will need to hold onto those aircraft for about 20 years.  Assuming it can take deliveries in 2017, that means the MAX stays in the fleet for as long as 2037 or longer.  However, Southwest knows that a new single aisle airliner will be available around 2025.  That’s the airliner that it really needs to go deep on.  So, at best, the MAX is an interim solution for airines like Southwest (and Ryanair and others) and you don’t go deep on interim solutions. 

The same is true of the A320NEO.  For most airlines, going deep on the A320NEO is the wrong decision.  Well, for the committed Airbus customer, going deep on the A320NEO isn’t quite as foolish because it is fairly obvious that Airbus *won’t* have a replacement for the A320NEO as soon as 2025.  More likely, Airbus wouldn’t roll such an aircraft out until 2030.  This is why you’re seeing fairly strong orders for the NEO from existing Airbus customers. 

Right now, both manufacturers have deep, deep order lists.  They want to extract as much value from those right now as possible because they know that as soon as they do introduce new airliners, those orders will change quickly.  The market will become flooded with cheap, relatively new “classic” single aisle airliners with a new single aisle airliner introduction.   When the market is flooded with those aircraft, the manufacturers have a much harder time selling customers into their newest and best.   So they want to slim those lists down as much as possible right now. 

The folly is that ramping up production comes with fairly high costs and the only way to justify those costs is to be able to show that you’ll have an order list that will sustain those high production rates.  The manufacturers think the NEO and the MAX will garner enough orders to justify those production rates.  That’s the part that is suspect.  Yes, initial orders are high(ish) but consider this:  Annual production of the 737 and A320 already exceeds 800 aircraft a year.  That’s a lot of aircraft and it wasn’t that long ago when Boeing and Airbus could hardly find a buyer for the planes they were producing.  I’m talking about 2002/2003 time periods which were a result of September 11, 2001 attacks that reduced air traffic dramatically and killed the finances of airlines around the world. 

So, is a growth to 40 aircraft plus or minus a month justified?  Probably.  Almost certainly.  Is growth to 50 or more per month justified?  No and I don’t think the manufacturers are going to commit to that presently.  Right now, Boeing can reach to the high 40’s without too much trouble.  Airbus would struggle with that without making a much larger investment in a new line (such as in the United States.)

The A320NEO and 737MAX aircraft are interim solutions.  That’s it.  Initial orders will reflect some pent up demand to replace aircraft but it’s unlikely that the pace will continue in a sustained manner.  In fact, airlines are being much more prudent in their orders by ordering a few here and a few there to just keep pace with their conservative needs.  We won’t see a need for production rates at 50 or more per month until a manufacturer gets off its duff and builds a new single aisle aircraft.

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Now that the 787 is being delivered to customers, let’s ask a question:

In what year did Boeing announce the 787 and what was its original designation at that announcement?  The answer after the fold.

(more…)

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First, my apologies for going dark for such a long time.  My day job became suddenly very busy and required my full attention.

And now to take note that the 787 has been delivered to ANA and it is winging its way to Japan as I write this.  It’s a good moment for the 787 and Boeing and I’m glad to see this delivery take place.  It’s long overdue and all parties suffered a great deal of pain getting to this point. 

But even though it is a moment of celebration, I think it’s important to remember a few things going forward.

First, this is the first delivery and a better indicator of the state of the program will be how many more are delivered by the end of the year.  If this turns out to be a small handful, I think we’re looking at a program with production problems still.  (The latest indicator about this was Boeing’s last production halt to allow work to catch up just a few months ago.)  If Boeing manages to deliver more aircraft than expectations and I would have to say that this would need to be 12 or more deliveries, we might be able to relax and feel more confident that Boeing has the production issues well managed.

Second, this is a great aircraft but the one many more airlines want is the 787-9 and quite a few want to see what a 787-10 will look like.  The 787-9 isn’t due for another 2 years and it is dependent upon Boeing having its production ramped up completely.  My fear on the 787-10 is that Boeing will compromise the design into a derivative that is unsatisfying for customers.  My prime concern is that they’ll accept a range that doesn’t completely allow customers to use it in 777-200LR missions and I think airlines want that capability.  There will be more McBoeing cracks if the -10 ends up being that kind of disappointment.

Finally, there is the question of “what’s next?” for 787 technologies.  Boeing has spent a massive amount of money developing this aircraft and it not only has amazing promise, it’s already realized amazing gains.   Now they own a tremendous body of knowledge and . . . there is no other program to apply these to.   There is no replacement for the 737 being worked on and that is deferred for probably 10 years or more at this point.  There is no announced program for enhancing or replacing the 777 and there likely won’t be for some time to come. 

If you don’t use such knowledge, it creeps away from you.  At this point, there could be a 5 or 8 year gap between applying these technologies and given how technology rapidly evolves today, I think that’s a shame.  I continue to believe that the argument for a 737 re engine was justified by low capital costs alone and didn’t adequately consider just how devestating a full new aircraft would be to Airbus.   To not want to do that aircraft because you had not fully figured out how to scale production to 60 aircraft a month is . . . suspcicious.  I want to throw the McBoeing label out there when I consider this.

I know one thing . . . a 737 re-engine would have never gained traction with Alan Mullaly at the helm.

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Now that Boeing is on the home stretch in defining what it will do to provide the 737 MAX line, we should expect to see some movement towards improving the existing 777 line.  This will start to take place at Boeing outside our view but let’s take a look at the drivers.

First, engines are going to be a factor.  The GE90 is relatively new but let’s not forget that it fits in between 1st generation high bypass engines and the latest high bypass engines.  There is already talk that Boeing wants the GENx engine uprated from 100K to 110K thrust.  That’s a smart sweet spot and it will gain a percentage point or two in fuel efficiency but that only works if other things are done.

Weight reduction while maintaining seat and load capacity will be a driver.  I think we’ll see all parts of the aircraft examined for weight savings and through use of carbon fibre technologies.  One of the obvious places, in my opinion, is in creating a new wing.  A new wing capable of carrying more load more efficienty and made from newer, lighter technologies helps a lot here. 

The fuselage will likely remain the same in construction.  However, I think we may well see stretches occur.  I think we’ll see a slight stretch to the 777-300ER and a marginally bigger stretch to the 777-200LR.  The gap between the two will narrow slightly but both will carry more passengers.  I think the -300 will be limited in some respects by the fact that it is already a very long aircraft and they won’t want to make it much longer for fear that it will won’t fit within airline operations at many airports. 

Whatever Airbus does to define the A350-1000 will be the driver for what Boeing chooses to do with the 777.  However, Boeing has to time their upgrades to be available at roughly the same time that the A350-1000 will enter into service.  There could be an entry into service as much as 1.5 years later but not much past that.  That will limit, in some respects, the kinds of re-engineering Boeing can afford to do on the 777. 

When do we hear about it?  Not before fall 2012, I think.  Perhaps even later than that.  Right now, Boeing will likely conduct internal trade studies in all areas of the aircraft and try to be ready to pick a direction on or about the time we really know the definition of the A350-1000.

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Update:  Southwest says they are *not* one of the airlines commited to the 737 MAX.

It’s official.  The re-engined 737 is approved to offer and Boeing says it has more than 400 commitments to the new aircraft already.  We already know that 100 of those is American Airlines.

But who are the others?  I think it’s a no-brainer that Southwest Airlines is a player in this and I think the strange silence that has suddenly enveloped Love Field is an indicator. 

We also know that one of the players is *not* Delta Airlines since their recent order is for the conventional 737-900ER and while there aren’t conversion rights, don’t believe for a second that Boeing wouldn’t accomodate Delta if Delta wanted them. 

I think the next player is Ryanair.  Not just because they’re Boeing user but also because Michael O’Leary has been incredibly quiet lately.  Few things could keep that man quiet but I think an airliner deal is one of them.  I also don’t think that Airbus is a player with Ryanair.  Neither Airbus nor Boeing is going to be offering firesale prices on these new options but there two factors that offers Ryanair more:  Better fuel and operational efficiency *and* reliability.  The dirty little secret is that Boeing 737s do have a slight advantage on dispatch reliability over Airbus and that makes a big difference for an airline like Ryanair.

There’s a lot we don’t know yet about the updated 737s but one thing being studied is increasing the gross weight of the -9 MAX to be even closer in performance (range wise) the venerable 757s.  That would be an A321 killer.

I also wonder if we aren’t going to see raked wings vs winglets on the new designs.  Boeing already knows how to do them for the 737 (The new P-8 Poseidon has them) and they’re supposed to be better for the really long missions. 

It’s good to see some action on this that isn’t being forced by Airbus and I think we’ll hear about several big deals over the next few months.  Know what will be really fun?  Seeing the 747-8i Boeing livery on a 737 MAX aircraft.

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Delta has decided to stick with its plans to order up to 200 aircraft in 2011 says CEO Richard Anderson.  This despite the sudden economic turbulence and it’s the right move.

Delta has some right old aircraft on its hands.  It’s fleet average age is 12 years which isn’t as bad as American Airlines but it doesn’t tell quite the story either.  Much of its mainstay narrow body aircraft is *old*.  And they’ll only get older while Delta waits for deliveries to start. 

What comes in this order?  My guess is that we won’t see any game changer orders for any 2nd tier manufacturer such as Bombardier or Embraer.  This will be about replacing older A320s, 757s and MD-88/90 aircraft.  Those are the aircraft with older, less modern and less powerful engines that are costing big dollars in fuel bills. 

I do not see this being about 767s or regional jet aircraft.  Nor do I see Boeing 737 replacements coming on line either.  It’s unlikely that we see 747s retired in favor of others in this round.

So who are the players?  Airbus and Boeing, of course.  I’m not sure I see this as either company’s advantage either.  Airbus will be pitching the A320/A321 NEOs and Boeing will be pitching the 737s (new and old) and it will be tough to call this one.  I think who comes out on top in this order will be determined by who has slots for earlier deliveries of the more re-engined aircraft.   If Airbus has slots, it will get orders.  We know that Boeing has slots but order delivery dates are somewhat murky, in my opinion. 

I do not look for Bombardier CSeries or Embraer E190/195 aircraft to be ordered in this.  They’re smaller and Delta has that seat range covered right now. 

My best guess?  I tilt towards this being Boeing’s order.  I think it might be won on price and an opportunity to get re-engined aircraft just a tad earlier than Airbus.  However, I do not think that means that Airbus is out of the game on future orders whatsoever.  I just think that it may come in the form of a follow on order in the next year and may well include Airbus medium to long range twin aisle aircraft as well.

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Various media reports point to Boeing leaning heavily towards a “minimum” investment strategy in defining what the new Boeing 737 Re Engine would look like. 

That means an aircraft that receives enough modifications to handle the heavier CFM Leap56 engine with a reduced fan diameter which should make the 737 models roughly equivalent to the Airbus A320NEO with about 2% cost efficiency advantages over the A320NEO.

My problem with this is that it simply confirms the Airbus A320NEO as the right move and offers Boeing little advantage over the next 10 to 15 years and possibly puts it at a disadvantage over that time frame since there are fewer areas to incrementally improve performance of that airframe over time.   One example is that the 737 already has winglets (aka “sharklets” on the A320). 

In addition, this is the creeping incrementalism that we saw at McDonnell Douglas over nearly a 2 decade time period that led to their ultimate demise.  Aircraft manufacturers don’t win over the long term with derivatives and I’ll point out that there have been a total of 9 major derivatives of the 737 with several sub-derivatives of those as aircraft as well.  That’s an aircraft that has run its course without something game changing.

If it were to be a Re Engine strategy, it would have been far more encouraging to see Boeing design a new wing or a modification to the wing to bring additional gains.  It would have also been more encouraging to see a modification to the nose gear to permit a full on adoption of the CFM Leap56 and, possibly, even the addition of a 2nd engine choice (Pratt & Whitney GTF).   Yes, that begins to look like a new airliner but it puts Boeing firmly ahead in the narrow body game.

My own preference was to see Boeing make a move for an entirely new aircraft with introduction into service in 2018.  It would have been a difficult challenge but it is one that Boeing is in position to achieve.  It’s learning curve with new materials and design approaches has peaked. 

Offering that you couldn’t figure out how to immediately ramp up production to 40 to 60 aircraft a month is a somewhat lame excuse for backing away.  If you can build if efficiently at current production rates (in the mid 30’s per month), you can figure out how to build it at a 60+ aircraft rate when that time comes.

This, in some ways, smells like Boeing trying to maintain the older airliner to use as an replacement for aging military aircraft such as what they’ve done with the 737 in creating the Boeing P-8A Poseidon (replacement for the venerable P-3).   It’s notable that even that aircraft got a better wing in the form of having raked wingtips a la 767-400ER for longer duration, efficient flying.

My greater point is that you don’t win and you don’t grow as a company by playing “keep up” and playing it safe.  Airbus managed a coup by forcing Boeing’s hand and scaring them away from a new design.  Somehow, I severely doubt that a Boeing led by someone such as Alan Mulally would have adopted such a strategy.

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Airbus has racked up over 780 firm orders for the A320NEO since announcing its availability and even I have to say that I’m quite surprised at how fast that happened.  It would appear that airlines vocalized a desire for a new aircraft and ordered the re-engine like it was the best thing to happen since the Concorde.

There is absolutely, positively, no question that Boeing needs to get back in the game ASAP.  Theoretically, they did with the American Airlines order but . . . both Boeing and all other airlines have largely been silent on the 737RE since that order.

I was certain that we would hear other airlines grumble about being kept out of the loop or shout with joy that they, too, wanted to order the aircraft.  Instead, we learn at Southwest Airlines’ earnings call that they were kept in the loop and . . .

Nothing.  They were kept in the loop and  they endorse the aircraft but no other talk of an order.

The 737RE doesn’t have board approval to offer . . . yet .  However, in this particular case this really is a formality.  The lack of any other orders even getting mentioned as rumours tells us just how fast the AA deal was put together.  No one else is any farther along. 

I repeat, Boeing really needs to get back into the game.  Numbers are perception and Boeing knows how well it did when it was running up the 787 numbers in the early days.  Perception is as important as facts when it comes to whether or not an airline views your aircraft as leading edge.

Right now, we don’t even know what the 737-RE will be called and that’s kind of bad.

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As much as Boeing and Airbus would like to think so, they don’t.  If anything, I think they’ll promote the CSeries and I think they’ll encourage Embraer to go bigger. 

Look at the seat numbers on these aircraft.  The A319 and 737-700 seat roughly 135 or more passengers.  The A318 is a very poor candidate for the NEO and the 737-600 really isn’t offered anymore.  Neither works for mainline service very well because they’re heavy for the number of passengers they carry and their range just isn’t needed for routes requiring those passenger numbers.

Sub-130 seat routes aren’t going to be long and thin transcontinental routes.  To the contrary.  They’ll be the routes they are today and the routes we see developing even now.  They’ll be from Wichita, Kansas to St. Louis or Knoxville, TN to Chicago.  

And there is no airliner being offered that quite gets the airlines there. 

Airlines such as Southwest realize that a smaller airliner is probably necessary for growth now that they have the nation’s largest cities essentially covered.  Boeing and Airbus don’t make that airliner and they don’t plan to make that airliner.  But it’s needed.

And Bombardier is making the aircraft.  Embraer is considering what to do next when it comes to either re-engining its E series aircraft or building a new airliner (and I think they’ll build a stretched E195 with new engines, frankly.

An airliner series with practical passenger capacities ranging from 90 to 130 seats is just what these airlines need.  And legacy and SuperLegacy airlines will need them too if they don’t get their pilots to agree to revised scope clauses.

That leads us to another reason why that class of aircraft is needed.  Even if the legacy and SuperLegacy airlines get pilots to agree to new scope clauses that permit them to engage regional airlines for that 90 to 130 seat flying, somebody has to buy the aircraft and fly them. 

ERJ-140 and CRJ-200 aircraft are not going to be practical going forward.  They’ll hang on for a bit longer but they are going away because they are fuel inefficient and they’re getting old to boot.

Now that airlines know what is going to happen with both the Airbus A320 series and Boeing 737 series aircraft, they can start shopping for that next class of aircraft that permits entry into those smaller markets cost effectively.

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I wrote a long blog post early yesterday morning about American and the rumoured order it was about to make.  Then, later in the day, the rumours started flying that it would announce the order today (Wednesday).  And, boy, did they.

Let’s look at the details first:

• 460 aircraft on firm order with both Boeing and Airbus
• Boeing sells AA an additional 100 current 737NG aircraft.
• Boeing sells AA 100 737RE aircraft with the CFM LEAP engine.
• AA takes another 40 options for the 737NG and another 60 options for teh 737RE.

• Airbus sells AA 260 A320 Family Aircraft
• 130 are for current generation A320 family with the sharklets to be introduced in 2012.
• 130 are for A320NEO aircraft (with arrival in 2017 and so much for talk that the A320NEO line was sold out.)

The aircraft will begin arriving from both lines in 2013 and American Airlines thinks it will have one of the youngest fleets in about 5 years.

So what does it mean?  Well, for one, the cost to announce this order was tiny compared to a traditional order.  These aircraft will be on operational leases and it appears AA didn’t have to put much money down for these firms orders (if any.) 

This order will be of dramatic benefit for the airline when it comes to saving on fuel.  If AA had a fully modern fleet now, it’s likely it would not have lost money this past quarter.   The benefit in fuel savings on this order will take a while to be realized. 

This is the first official mention of a 737 re-engine and I think we’re going to see some gnashing of teeth on the part of some airlines over the idea that a fresh design is likely 10+ years away.  This might be good for AA, it isn’t good, necessarily for Southwest Airlines or Ryanair.

This is a big win for CFM and its LEAP56 engine and while the engine is only announced for the 737RE, it is almost certain that that engine will be chosen for the A320 family.

What this isn’t is a loss for Boeing.  The post I composed and just deleted talked about how having a single source for your aircraft wasn’t really practical for an airline of AA’s size and all other SuperLegacy and Legacy airlines operate mixed fleets already as a function of a merger.  What those airlines have learned is that neither Boeing nor Airbus has a supply chain that can meet all their needs all of the time and on time.  It wasn’t irrational for AA to go to Airbus.

However, this is a pretty big loss for Boeing in the psychological warfare arena of aircraft sales.  This will be spun many ways but at the end of the day, Boeing got bruised and is not the aircraft manufacturer who gets to crow about success today.  Expect other SuperLegacy airlines to take a long, hard look at this deal and begin to negotiate for their own SuperDeals on aircraft with both manufacturers. 

Why did Airbus win more orders?  Because AA already has a large 737 fleet.  It didn’t need quite as many 737s.  This really is an order of equals practically speaking. 

I do think the A321NEO will be the 757-ish replacement and I do not think that AA will upsize aircraft to the 737-900ER down the line.  Therefore, I think the A320 family order will be either

A) A full mix of A319/320/321 aircraft with multiple bases or

B) A320/A321 aircraft with focused bases

I rather doubt that the A319 or the B737-700 will be ordered at all.  This order is about a marginal increase in capacity over time for most routes with the 757s leaving ever so slowly over time. 

And that points out a glaring gap that I haven’t seen anyone talk about yet.  Through this order and previous small orders, American Airlines will have upguaged their entire fleet and particularly so in the next 5 to 7 years.  Presently, the smallest aircraft in its fleet will be the 737-800 or A320 at roughly 160 seats.

What serves the 120 to 150 seat range?  The MD-80’s are departing and rightfully so.  American Eagle has CRJ-700s that are configured from 63 to 65 seats and AA is currently scope clause limited on how many of these aircraft it can fly.  Now, AA has also announced that it will spin off American Eagle soon and we’ll talk about that in a future post but that only means AA can (and will) access other regional airlines for its sub-100 seat flying.

What fills the gap?  If AA manages to get a new pilot agreement that allows AA to subcontract its sub 150 seat flying, I’ll be rather shocked.  I do not think the pilots are going to cede that territory under the current contract or whatever agreement is made for the near future. 

I realize that AA has been serving markets that might demand a 120 to 130 seat aircraft with higher frequency using smaller jets but it can’t do that forever.  Is there another order for aircraft lurking in the background here?  Maybe.  The Bombardier CSeries does fit that whole very nicely and does it in harmony with this announced order.  In fact, it presently is the only airliner that does.  Embraer gets close but it doesn’t quite get there.   If I were Bombardier, I would be knocking on American Airlines’ door with a most excellent finance package for its CSeries CS100 and CS300.

There is one more question lingering as well . . .

How will American Airlines paint its A320 family?  The aircraft cannot be polished like its 737 counterparts.  I strongly suspect we’ll see a metallic silver used with the current paint scheme over that.

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Boeing is going to pause its 787 production line in Seattle for 1 month . . . again.  Swirling theories have it that its necessary for parts to catch up and change incorporation to take place.   This line hold takes place for the first time this year but after 4 such holds in 2010.

One wonders how Boeing will increase production to 2.5 aircraft per month this summer and increase it up to 10 in 2013 given the holds that continue to happen.  In addition, if various needed assembly pieces are experiencing shortages, how does Boeing supply its soon to be open South Carolina production line for the 787?

And why do we care?  Because for no other reason than the 787 really is a test of new production supply chains and the failure of those supply chains may well call into question the rather stunning production rates being talked about for both current Boeing 737 and Airbus A320 lines as well as future new aircraft. 

Typically, supply chains can keep up once the real demand is known.  I don’t doubt that the supply chain will eventually find its rhythm.  However, it could still take a few years for that to happen and only after Boeing makes further changes to its supplier structure.  In the meantime, failure to deliver 787s impacts Boeing’s bottom line and its ability to move on to other new aircraft.

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Boeing Commercial Aircraft President Jim Albaugh met with American Airlines executives, including CEO Gerard Arpey, a couple of days ago and I think, tentatively, this is a positive development with Boeing.  On the surface, it certainly signals that Boeing does consider American Airlines a very important customer.  It *might* signal that Boeing has started to realize that airlines really aren’t just poking at them over a new single aisle aircraft.

I say might because there is a tendency for Boeing to not always recognize that a customer really is at risk until the very last moment. 

Nevertheless, Boeing presidents don’t go calling on just every airline executive team on a whim.  It would be my hope that Boeing got an earful on what is needed and, more importantly, the timing for meeting that need.  For about a year, all we’ve heard is trade studies about re-engining vs new single aisle aircraft and that things tilt a bit towards an all new aircraft for 2019. 

I think airlines would like to hear about a new single aisle aircraft kicking off development asap with entry into service around 2017.  There is probably some wiggle room there but only after commitments have been made.

While news reports say Albaugh visited American Airlines, I do wonder if Southwest wasn’t visitied as well.  If not, I expect we’ll see another cannon shot across Boeing’s bow from SWA in the near future.

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Airbus has announced its plans for the A350-1000 and airlines have responded with yawns or, in the case of one airline, a bit of outrage.  Airbus can still change their minds about the final definition of this airliner but not without more delay or a commitment from an engine maker that would be pretty unrealistic.  So we know what the A350-1000 will look like, more or less.

And what is Boeing’s best response?  I’m not sure the timing is right for an all new widebody large capacity airliners to sit just above the 777-200ER to just below the 747-8i.  But I do think the timing is right to greatly improve the 777.   Imagine the pain Airbus feels with a 777 update that provides a better wing constructed of composites, a fuselage that is slightly lighter due to some composite use and engines that are bit more fuel efficient as a function of incorporating GEnx engine technology.   What if Boeing can offer a 777-250/777-350 that offers more seats, 500 to 1000nm range improvement and/or a slight upgrade in payload capacity?

That little squeak you heard is Airbus salesmen contemplating that scenario.  I can see a strong business case for such aircraft and I think you would hear a lot of airlines bark out loud “sold!” if it was announced.   Does it get announced this year? No. Boeing has got to figure out the 737 replacement family, finalize the 787-9 production, get the 787-10 kicked off and then contemplate the 777’s future.  I wouldn’t expect anything developing on the 777 until 2014.

But it’s fun to think about the possibilities.

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One consequence of the A321NEO is that everyone is talking about it being a Boeing 757 replacement.  Everyone talks about how the 757 fleet needs to be replaced and I think quite a few people are missing the point on the 757.

It’s an aircraft conceived of in a regulated era, born in a deregulated era and an airplane that has never really been part of a family of aircraft.  It’s a red headed step child that despite its status, airlines found a use for it.  It was built with too much range, too much power and for an airline model that didn’t include hubs and frequency.

Everyone talks about airlines needing to replace their 757 fleets and its true that these airliners are now old by any standard and will need replacement in the fleet.  But the one thing we shouldn’t do is assume that the mission being served by the 757 is the mission that airlines want to use their next aircraft for.

I’m not sure there needs to be a 757 replacement.  I’m also not sure that we don’t need a 757 replacement.  The original missions that Boeing conceived of for the 757 are not the missions that airliner served primarily.  It would be a mistake to assume that airlines want to replace 1000 757s that are serving long, thin trans-Atlantic routes or trans-continental routes.  They don’t.  Airlines simply found that they could use that expensive asset on those routes and earn money.

But airlines may well have already identified how they want to serve that mission in the future and it may well not resemble anything close to the current 757.

Boeing is right to let the airlines define the missions.  The next Boeing 757-like airliner to come from Boeing will be from a family of aircraft and it never really was the 737-900ER even though that airliner can serve in place of the 757 on most domestic routes.

I don’t think we’ll ever see such a hybrid airliner made again.  Can you imagine Boeing or Airbus sizing an aircraft to fit a smallish market and then providing it with over-powered engines?  I can’t.   Building a family of airliners is about tailoring the aircraft to fit the missions very well and todays missions are very different than they were even in the 757s heyday.

Don’t expect the A321NEO to be a 757 replacement.  Expect it to be an excellent coast to coast airliner for longer, thinner routes between those cities.  I don’t think it will be used for Hawaiian and trans-Atlantic routes in great numbers although it may get employed on a few of those missions if it can work and make an airline money.

Who says airlines want to fly such an aircraft to all kinds of cities in Europe?  I don’t.  In fact, I think that airlines aren’t that interested in such routes (they may be profitable but only just so) being served by such small aircraft.  Such routes don’t yield a very attractive number of dollars on a daily basis and they do come with risks to that profit that airlines don’t enjoy (fuel stops, for instance).

I would also point out that the engines needed for a “true” 757-like replacement don’t exist today.  There are no new next generation engines in those thrust ranges at this time and I’m unaware of any real plans or needs for such in the next ten years either.

But if airlines want a 190 seat trans-Atlantic capable airliner that is efficient and reliable, they’ll communicate that to Boeing and Airbus.  The fact that Airbus and Boeing aren’t running around and chatting up such an idea kind of indicates to me that that requirement really isn’t in the top 5 airline mission requirements being talked about today.

The next generation of single aisle airliners will be different than the current generations because those missions evolve.  Airlines will be asking for something different than just a better 737-700 replacement.  They’ll be asking for a range that will serve their current and projected future needs and that will define airliner families that look very different from the Boeing 737 and Airbus A320 series.

If anything, I think the mistake Airbus made with its NEO development is that it is only offering better engines, not a better aircraft.   It won’t have a better cockpit, better seat layout and it won’t be lighter or more durable or more reliable.  That’s where Boeing can really zing Airbus and where it should.

However, for Boeing to do so, they have to, you know, announce the damn project and get on with it.

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American Airlines apparently is playing the Ryanair game with both Boeing and Airbus by using a 250 aircraft orders as both a carrot and a stick. And now we know why John Leahy was hinting at Boeing losing a major network carrier.

Make no mistake, this really would be a very big loss for Boeing.   The question is whether or not Boeing is taking American seriously in this.  Some might be tempted to think it’s a bluff, I do not think it is anything resembling a bluff.  The A320NEO is something that American needs more than most network airlines. 

Instead, this is a “put up or shut up” move to Boeing and I’ll wager that it won’t be the last.  Airlines want to know what Boeing is going to do and waiting very much longer is likely going to result in either more orders for Airbus or renegade orders to Bombardier and Embraer. 

And Boeing can’t be just a medium to large aircraft builder.  It needs this single aisle market for many reasons and the airlines are dissatisfied with Boeing’s tentative approach to what it plans to offers airlines next.  To be fair, even the 737NG is getting a bit long in the tooth and promising incremental improvements isn’t going to satisfy airlines anymore.  Much like the new and improved A330 that Airbus tried to sell many years ago didn’t fly either.

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The competitive spirit that Airbus engages in, particularly at air shows, always both impresses me and kind of repulses me.  I admire the gusto in which they present themselves and the entreprenurial spirit with which they approach their brand management with.  I dislike the bravado and somewhat cheap order tactics as well.

After this Paris Airshow, a few things occur to me when it comes to Airbus.

First, it is time to stop behaving like a teenager in this rivalry that exists with Boeing.  Despite all the bravado, what we know is that both aircraft manufacturers pretty much compete evenly in the marketplace.  Some years Airbus delivers more aircraft or sells more orders, other years it is Boeing that does so.  The bravado always seems a little distasteful when you consider how Airbus got where it was and, at the same time, I’m glad for Airbus’ presence because it’s clear that it does motivate Boeing to do better.

That said, I also think Airbus is a bit reactive when it comes to competing.  I don’t always sense that they’re defending the right things in the marketplace but, rather, defending their image against all comers.  Reacting isn’t always good.  Take the Bombardier CSeries vs Airbus A319NEO scenario that is unfolding.  Airbus COO John Leahy has actually come out and called for Bombardier to cancel the airplane.  Airbus has pitted its A319NEO against the CS300 as the better aircraft and I’d like to point something out.   It’s a mainliner by any definition and one based on a design that is 20+ years old.   Boeing/McDonnel Douglas pitted the 717 against the Embraer 170/190 and got its hat handed to them. 

Picking your fights is an art.  Some do it well, some don’t.  Boeing has done pretty good until recently although I think the influx of McDonnel Douglas execs hurt them.  McDonnel Douglas execs never could decide when to fight so ended up hardly ever fighting.  Airbus execus fight like bulldogs even when someone just happens to walk nearby. 

Airbus needs to understand that it isn’t going to compete everywhere all of the time.  Fighting off Bombardier and Embraer just expends money on low return investments. 

That said, Airbus also just racked up 700+ firm orders for the A320NEO and, that, my friends, is very healthy competition.  Say what you want (like it doesn’t include any US network carriers or Boeing customers), they put it up there in 6 months and they did it much like Boeing did the 787 orders. 

This is what you politely call a tap on the head for Boeing.

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Last Thursday, there were a number of reports (mostly based on a Bloomberg report) that said that American Airlines was in discussions with Airbus to buy 100 A320 class airliners. 

As you can imagine, this spurred quite a bit of speculation.

Many have the incorrect idea that AA is contractually committed to buying Boeing only.  They are not.  There is a gentleman’s agreement that has been followed since the 1990’s that has had AA getting preferred aircraft pricing and early slots  in return for remaining an all Boeing customer.  There is no financial penalty for walking away from this except what AA might not get in preferred positions and pricing.

And I’m not even sure that exists.  The truth is, AA is big enough to get preferred pricing and early slots regardless.  They wield enough buying power to make any aircraft manufacturer sit up and pay attention.  So it doesn’t hurt for AA to talk to Airbus.

Is the Airbus A320/A321 the right aircraft?  Quite possibly.  The A321 will do a better job of fitting AA’s requirements for a Boeing 757 replacement compared to the equivalent 737-900ER.  It will fit almost all of the missions the 757 is currently serving (except for trans-Atlantic flights) and it will do it with pretty good efficiency compared to what Boeing is offering right now.

Are they serious?  Well, I wouldn’t be surprised if this was both a warning shot over the bow to Boeing as well as a serious discussion.  American Airlines really does need a better fleet going forward and it cannot afford to wait until 2019/2020 to get started.  The 737-800 is a good fit as a MD-80 replacement but not as a 757 replacement.  Boeing’s 737-900ER has worked well for Continental but I don’t think it would work too well for American because of range and payload.

American needs better seat mile costs on its routes and it can achieve those because it can fill its aircraft with business passengers.  Diversifying between manufacturers isn’t a bad idea anyway as it makes things just a bit more competitive and the airlines probably gains from that.

This may well be the “major network carrier” that Airbus COO John Leahy has spoken of with respect to the A320NEO.  If it is and if there is an order, it will be a major blow to Boeing.  Not because Airbus invaded the United States (they’ve already done that) but because AA would be regarded as one of Boeing’s most solid customers.

I wouldn’t say this is a done deal but I would say that we now have reason 998 why Boeing should, you know, get with the program.

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There have been two passenger airliners that were designed and built for supersonic travel.  The Concorde, an Anglo/French adventure and the Tu-144, a Soviet design.

Question:  Which airliner did Boeing participate in?

The answer after the fold . . . (more…)

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Ryanair has signed a design agreement with COMAC to participate in design discussions on the COMAC 919 airliner.  Ryanair has been searching for a way to either A) bully Boeing into offering more 737-800 aircraft for below profitable prices or B) replace their Boeings with a rock bottom priced aircraft.

Is this the path forward?  I don’t really think so.

This is Ryanair trying to shoot another shot across Boeing’s bow.  The COMAC 919 is highly unlikely to be a competitive airliner even at deep discounts.  It would be a far greater threat if Bombardier had a CSeries aircraft planned that fit Ryanair’s needs.  They don’t, Airbus won’t play the threat game and Boeing has no interest in selling 737-800s so cheaply that airlines can sell them at a profit.

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