Lufthansa has announced a 48 plane order and while that isn’t all that remarkable compared to many aircraft orders these days, it’s an order that highlights two emerging developments in the airline world.  The Lufthansa order is for all Airbus equipment and it isn’t all for Lufthansa.

Some of this order is for its SWISS subsidiary (A320 family and A330), its Germanwings subsidiary (A320 family) and Lufthansa is getting more of the A320 and A330 family for itself.   The Airbus family concept is clearly allowing Lufthansa to take advantage of greater buying power as well as greater flexilibility amongs its various operations. 

Lufthansa can shift equipment to various subsidiary operations as demands change and can reconfigure that requipment relatively easy to meet the requirements of each subsidiary.  While many already knew and predicted this behaviour, it’s really remarkable in that its now become kind of matter of fact for an airline like Lufthansa.

This isn’t something Boeing really offers.  Not yet.  Boeing offers its 737 family, yes.  But it doesn’t have that type transition flexibility between a narrowbody family and a medium range/ long haul widebody family.  Not quite. 

The 787 and 777 will offer reduced transition times between the two types and that’s a good thing.  But there is no such animal between the 737 and its bigger siblings.  In addition, there is no real such thing between the 787/777 and the new 747-8i either. 

Boeing builds a great airliner and arguably they build a more cost efficient airliner in many respects when considering the aircraft and the trip itself.  What Boeing hasn’t yet instituted is a product line that is friendly across all kinds of operations that a large airline might have. 

It’s a core strength of Airbus and, frankly, a differentiator that, I think, will prove itself more and more valuable over the next two decades. 

The 737 replacement is a good place to start.  This will be a family of aircraft designed to meet the needs of airlines from about 150 seats up to 220 seats where the 787 will take over.  The 787 is advanced enough that making the 737 a baby 787, operationally speaking, could offer some additional value to airlines in the coming years. 

US Airlines haven’t exactly gone for this kind of family concept.  Not yet.  Northwest and United Airlines and US Airways all bought Airbus but they bought them without intending to realize the family concept from narrowbody to widebody.  I think that will change.  As we see SuperLegacy airlines develop, I think we’ll see a desire to harmonize more, not less over time.  More on that tomorrow.

Filed under: Airline News by ajax
No Comments »

Now we have a picture, although somewhat fuzzy, of the WTO findings against both Boeing/USA and Airbus/EU that frankly brings me to a different conclusion than some.  Without going into the complex findings on both sides and we really don’t have a public ruling on the EU claim yet anyway, we can begin to see the disparity come into focus slightly. 

The disparity comes in two forms.  First, the value of the violations.  Most conventional wisdom saw about $20 Billion in various subsidies that the EU and/or Airbus would need to remedy over time.  More important, it was a fairly loud condemnation of certain practices that will require fundamental restructuring in the EU to accomodate.  In other words, the Airbus business model, at first glance, will have to change pretty substantively. 

The first analysis of the WTO claim against Boeing and the US is a bit different.  The value of the violations is somewhere in the rough vicinity of $5 billion with about $2 billion of that already remedied by Congress.  The real kicker is that remedying these violations doesn’t require a fundamental business model change. 

The EU is already positioning itself to call, once more, for negotiations on this subject.  A number of US and EU based analysts predicted a need for negotiations on this.  I’m going to go out on a limb and say that I’m not so sure the US will be that interested in negotiations.  The incentive to negotiate usually comes from two parties having a roughly equal interest in having something settled.  At first glance, that doesn’t exist here.  Boeing takes far less of a hit by simply sucking it up, making the remedies and continuing their stance that the EU must take care of their own house.  It puts them on the high ground both politically as well as in a business sense.

I think the US/Boeing will likely make some nominal objections to the WTO ruling but I suspect they’ll breath and comply and then press their case even harder against Airbus.  The EU and Airbus will fight, kick and scream about changes on their own ends.  I think political leaders from the EU, in particular leaders from France and Germany, will press their case directly with our President and other members of our government.   While I do think there are some in our government (mostly Republican oriented members) who will be willing to negotiate, the truth is that it is not politically smart to engage in that over  here. 

We have an economy that is staggering still.  We have a population of 350 million people that our government has a responsibility to and most of those people are entirely unconcerned with the health and welfare of European nations who, quite frankly, have been rather snide and ineffectual during the global economic crisis over the past 2 years.   For Europe, the chickens have come home to roost and the crowing is going to sound awfully loud in the mornings.

In the long run, making those changes actually benefits Airbus.  Bringing them into a market driven business model as opposed to a subsidy driven business model will bring tangible benefits such as real profit and revenue.  The political leaders of the EU are the ones who really have to take the hit.  Airbus has been a huge jobs program for many of them and there will be a lot of fallout if and when Airbus leans itself out.

I think this will affect the KC-X tanker bid as well.  Secretary of Defense William Gates has repeatedly said that subisides shouldn’t play an issue in this award.  In fact, he may well be right about that.  However, right and what is politically smart are frequently entirely different things.  With this conflict on subisides receiving new light and a more clear picture forming, there will be massive political will being exerted towards a US based award and that means Boeing.

I think the KC-X tanker award gets pushed away from a November award.  With it scheduled so soon after mid-term elections, the wise thing will be to take stock of who will be in power and measuring the responses to each potential award.  Given that, I suspect this award will definitely push until January and potentially gets pushed until March of next year.  

Boeing needs to win this on merit this time.  A delay makes that more possible rather than less possible.  It allows emotions to settle and a rational decision to be made rather than a politically reactive decision.  They’ve lost this award twice now.  Once through corrupt practices and once with a bad set of requirements.   They can’t afford a third loss because of political winds shifting after an emotionally made award to them.  Play it by the book, offer the best price and make certain that your bid fully describes the work and realistic delivery. 

This latest (confidential) WTO ruling isn’t going to settle everything soon.  There will be appeals and counterclaims for a few more years.  However, it does put Boeing on higher ground and if they’re smart, they’ll refrain from crowing (too much) and get to work on selling aircraft.

Negotiations to settle this between the EU and US are unlikely if not for the reasons stated earlier in this post, then for world political reasons.  Several countries have emerging aerospace industries that will be encroaching on Boeing / Airbus territory.  They want a seat at the table and a negotiation between the US and EU over this doesn’t afford them much say in how they can advance their interests.   Boeing can best fend off that encroachment by continuing to take the most free enterprise approach it can in this market.  The move above board they are, the more the US can advance their interests and access to markets from this point forward. 

Boeing can, however, appease some of those countries by working even harder to bring those companies into partnership with Boeing.   One of the best actions to take would be for Boeing to draw those companies in both manufacturing as well as marketing partnerships that are profitable for both sides.  The first company I would approach is Embraer despite Embraer’s lean towards Airbus at this time.  Embraer has the most mature product line and it’s a natural fit to slide into markets in partnership with Boeing and just behind the Boeing product line. 

But I wouldn’t ignore Russia and Japan either.  Russia knows how to build aircraft and with just the right nudge, they could be a very effective partner for Boeing.  They could potentially even be a low cost manufacturing center in a decade.  They are the only other country outside the US and the EU to ever build large aircraft successfully.  Japan offers great engineering resources and manufacturing skills that embody the kind of quality control that is a must.  If Japan had built hose 787 horizontal stabilizers, we would have never heard about quality problems on them.   That’s a lesson learned for Boeing.

Yes, everything has a way to go yet but Boeing suddenly looks a lot better today than it did a month ago as a result of the preliminary WTO ruling.  The picture isn’t in perfect focus yet but it did get much more clear.

Filed under: Airline News by ajax
No Comments »

During and after the Farnborough Airshow, there has been a lot of speculation and commentary on Bombardier’s inability to announce a new order for their C-Series.  Many speculate that it is because it’s a bad aircraft and it has no hope of competing.

I think it’s because what orders did show up at Farnborough were for immediate needs, not future fleet replacement and/or growth.  Those who bought aircraft, bought them for near term delivery and they bought aircraft that fit into existing fleets.  While the industry is recovering, it isn’t exactly flush with cash for making long term purchases yet. 

Will the C-Series fly?  Yes, I think so.  In fact, I’m a bit unsure of why everyone is so ardently against this aircraft.  Bombardier knows how to make a jet and they know how to grow a jet from a base model.  Their current aircraft are well liked, frequently purchased and as efficient as any other in their class.

I am a bit dismayed that Boeing and Airbus have decided to cede the 100 to 130 seat market.  I think there is more opportunity there than is being identified but I’ll also concede that it requires a sub-737 class development that neither company likely has the money for right now.  On the other hand, a partnership with another manufacturer to design and build an aircraft for that market that would allow fast transition between one jet and another would be very advantageous.  It’s doable.

The 3×2 economy seating layout is a bit of a risk for them but not as much as many seem to think.  Frankly, it’s my preferred arrangement vs a 3×3 layout.  Let’s face it:  anyone who has owned DC-9/MD80/MD90/717 aircraft knows that the arrangement can play well.

Range is the real concern.  I’m not sure these have to have trans-continental capability but I think they need the ability to fly at least 2/3’s the width of the country fully loaded.   Nominally, they have that capability as “max range” at the minimum.  Practically, I don’t know if they do and I suspect they may be a bit deficient.  I also suspect their cargo capability may be a bit anemic as well. 

The real risk on this platform is the engines.  Pratt & Whitney Geared Turbo Fans are the choice and we have not seen engines that are meeting their fuel consumption targets yet and it remains to be seen if those engines are as reliable as they need to be.  They cannot be merely “reliable” for that class.  They need to be CFM-56 reliable because those aircraft are going to see a lot of cycles each day.  I think that is far from proven when it comes to the P&W engine.

Yes, I think the aircraft will be built and I think it will be used here in the United States.  Successful?  I don’t know.  It depends on what you define as successful.  I don’t see this aircraft selling thousands of units but it isn’t fully defined yet either.

Look for similar speculation and derision about Embraer building a similar aircraft.  I think people just don’t want to see these guys moving in on traditional Boeing/Airbus territory.

Filed under: Airline Fleets by ajax
No Comments »

I’m still a bit in awe deep down inside that an aircraft of this size can take flight.  Not only take flight but fly as many as 500 people for as much as 8000 miles.  It really is a wonder.  Here are some videos about the A380:

 

A380 Crosswind Landing in Iceland

 

The A380 Brake Test (laboratory)

 

The A380 lands hard in Oshkosh, Wisconsin

 

The A380 lands at JFK airport the first time.

 

First A380 landing at LAX airport.

 

And the first landing of the A380 at London Heathrow airport.

Filed under: Trivia by ajax
No Comments »

United Airlines announced a second quarter profit of $273 million and that’s an impressive result.  If Continental’s come in as impressive as that, the heat will be on American Airlines in ways we can only imagine. 

Speaking of United and Continental . . . their respective pilot groups have come to an agreement on transition.  There is a transition agreement now in place for them but don’t think this means that the groups are near a final merge agreement.  The transition agreement just governs how the two airlines will operate with the pilots during the merger transition.  I suspect that obtaining a final agreement is still going to be a bit bloody.

BA cabin crew have rejected the latest British Airways offer for settlement.  After voting was completed, the latest offer was rejected by about 2/3’s of the labor group.   While that isn’t wholesale rejection, it’s significant enough to be a real problem.  The hold up is the restoration of flight benefits.  BA did finally agree to restore flight benefits to crew that had originally had them taken away for participating in the first round of strikes earlier this year.  However, they were restored with loss of seniority and that means they were restored as if these crew were entry level again.  This is an area that I’m afraid I side with the union on.  Those flight benefits shouldn’t have been taken away as a punitive measure and its the one big misstep by Willie Walsh.  The smart move would be to cave in, get another vote going and come to a final settlement. 

At the Farnborough International Airshow, single aisle aircraft orders are happening at a rapid clip.  Both lessors (GECAS, Air Lease Corp, etc) and airlines themselves (LAN, Flybe, etc) are ordering large amounts of aircraft for delivery over the next several years.  LAN has an agreement for up to 50 Airbus A320 class aircraft and Flybe has ordered 35 of the Embraer E-175 jets.  GECAS, GE’s leasing arm, has ordered 40 737-800 aircraft.  Still, I think this reflect the rather dismal orders placed last year more than it does resounding growth for the next few years.  In other words, I think a lot of these are replacement equipment rather than aircraft purchased for growth.

Filed under: Airline News by ajax
No Comments »

There are several reports out now that Emirates Airlines is going to announce an order for 30 Boeing 777 aircraft at this year’s Farnborough International Airshow in the United Kingdom this week.  I’m sure that this will further strike fear in the hearts of airline executives and I’ll repeat THIS response.  Just because they order it doesn’t mean they’ll know what to do with it when the time comes.

Another interesting piece of news is that Air France has invited Airbus and Boeing to respond with a proposal for supplying as many as 100 widebody aircraft over the next decade.  The assumption is a mix of both the Airbus A350 and Boeing 787.  I suspect conventional wisdom will give Airbus the upper hand (we are talking about Air France based in France where Airbus aircraft like the A350 will be made and where the French insist on buying local) but I like Boeing chances for this.  Boeing could win this order by offering a mix of 787 and 777 aircraft with GE engines.  Air France already has a large fleet of 777 aircraft, experience with the GE engines and may well be attracted by the expected quick and relatively cheap transition for pilots to move between the two aircraft.

Steven Udvar Hazy has his new company, Air Lease Company, and reportedly will be at Farnborough on the hunt for building his new portfolio of lease aircraft.  While money is starting to flow back into the lease business, I do wonder if the game hasn’t changed since the early 2000’s.  Airlines have seen the benefits of owning their aircraft because in bad times, they can leverage those aircraft for more operating capital in those bad times.  In addition, I don’t think Airbus and Boeing are in the mood to offer huge discounts to the lessors anymore.  If Michael O’Leary of Ryanair can’t get a deal for 200+ aircraft, why should we think lessors will?

Randy Tinseth, VP of Marketing for Boeing, will be releasing Boeing’s most recent current market outlook at Farnborough and it’s quite a positive one.  Boeing sees a need for 30,900 new aircraft between now and 2029 of which they expect 21,000 to be single aisle airliners.  They’re forecast is based on a growth rate of 5+% per year in the airline industry and that’s based growth rates since 1978 deregulation in the US (which have averaged 5% per year.) 

What’s interesting to me is that they see the regional jet share of that outlook as being significantly less than in the past.  I think that depends on what you call a regional jet.  If you’re speaking of 50 or less seats, I agree.  If we’re talking about 75 to 110 seats, I’m not sure I do agree.  Indeed, I think that the 90 to 130 seat market is going to be very hot and I think that Boeing and Airbus ceding that market is a mistake.  Even car manufacturers have discovered that it’s wise to cultivate customers at the entry level as opposed to waiting 20 years for them to be able to afford your product.

Finally, I understand that Boeing’s 787, ZA003, has landed in the UK and that marks its first appearance in Europe.  FleetBuzzEditorial.Com got some photos of the 787 landing at Farnborough which can be seen HERE.  I still really dislike the demo interior they’ve installed in that aircraft.

Filed under: Airline News by ajax
2 Comments »

Last Tuesday, the regular Delta Airlines flight from Portland, OR to Amsterdam experienced  a bit of mechanical trouble with cabin pressurization.  The Airbus A330 had to be diverted when it had already started out over the Atlantic and chose Goose Bay as its diversion, the closest airport available.

After landing in heavy rain, the passengers were house in the military base housing and fed in the military base cafeteria and generally killed time on base by doing things like playing tag in the parking lot.  It was an idyllic vacation.

A substitute aircraft didn’t arrive until Wednesday and, when it did, the crew for that aircraft timed out and couldn’t make the remaining 5 hour trip to Amsterdam.

Several passengers whose purpose in Europe had already passed were unable to simply turn around and go home but, instead, had to finish their trip to Amsterdam instead.  The original crew flew the now repaired original aircraft with passengers late Wednesday evening.

Delta gets you there.

Filed under: Airline News by ajax
No Comments »

Since the widely known WTO ruling on Airbus and it’s launch aid from member countries came out, there has been a lot of speculation on its implications for the airliner market, Boeing, the KC-X tanker and what the WTO might rule against Boeing on in its counter-claim.  Conventional wisdom is that both parties will get slapped heartily and that might end up being somewhat true although I suspect that far less will be found against Boeing. 

The difference is in the business models.  In many respects, Airbus/EADS has been run much like a state owned entity and its financing has largely derived from loans from member countries or with member countries’ backing.  Boeing, on the other hand, operates much more as a commercial entity and while it does benefit from things like tax breaks (on a state and local community level) as well as from participating in research and development efforts on the part of the government, it’s primary method of financing its commercial product line is from the financial markets.

When Boeing needs money, it goes to the markets and obtains market rate financing in the form of loans, bonds or through stock sales.  That’s the key difference between Airbus and Boeing.   Boeing follows a traditional and, more importantly, acceptable model for its financing.  A model that makes it difficult to show harm to Airbus/EADS. 

I think both parties will have to modify their behaviour going forward but I think Airbus’ compliance will have far greater and far more long lasting effects on its business model than anything Boeing will have to do.  I also think that Airbus/EADS remains tied to answering to its member countries on things like exports and employment and that makes it much more difficult to outsource (a la Boeing) and/or manufacture their aircraft in other countries. 

In the long run, Airbus’ compliance will make them a stronger and more competitive business because they’ll retain the advantage of selling to their member nations but they’ll also understand how to respond to their financial needs as well as their customer markets. 

In the short run, it just got a lot more difficult for Airbus/EADS to launch new models because they’ll likely have to “pay back” that launch aid and obtain commercial rate financing.  In addition, their commitments to the A380, A350 and A400 projects make it very tough for them to obtain financing for and launch a new project such as an A320 replacement or a model that competes more effectively with the bottom end of the 787 model lineup. 

For Boeing, it probably means forgoing or even paying back tax incentives and it will mean Boeing having to examine where it builds its aircraft much more closely in the future.  Don’t be surprised if more of their production moves out of Washington State over the next 20 years.

Filed under: Aircraft Development by ajax
No Comments »

Two days ago, Emirates announced an additional $11 Billion order for 32 more A380 aircraft.  If all of its orders are delivered, this means a fleet of 90 A380 aircraft by 2017 or just 7 years from now.  It’s an impressive order and no airline enthusiast can deny that such a fleet is kind of exciting.  But it doesn’t make sense. for either Emirates or Airbus.

This certainly allows Airbus to plunge ahead for a while longer manufacturing the A380 but it really doesn’t put them any further ahead on earning any real profit from the airliner when you consider the deferrals and (potential) cancellations from other airlines.  In addition, this adds risk to their orderbook rather than reduces it because this indicates a growing dependency on just one airline for this aircraft. 

Several airlines have the A380 and most indications are that while they can make money with it, it isn’t a game changer for the airlines.  As the world of airline routes continues to fracture due to aircraft like the A330, 777 and now the 787 and A350, more and more flying is becoming “point to point” in the international world.  There are a relatively few routes that can support the A380.

Even the largest 747 fleet operators such as British Airways and JAL have made moves to start replacing their largest aircraft with Boeing 777 aircraft on most routes.  Yes, British Airways has orders for the A380 but one has to question how many they can support even on their busiest routes such as London-NYC or London-Australia. 

If British Airways (at one time they had over 50 747 aircraft) can’t support a large fleet of 747s anymore, how can Emirates do so?  Emirates doesn’t have magic working for it.  They don’t know something that others don’t.  They do have some cost advantages on fuel and labor but as time goes by, even those advantages narrow considerably.   So how does Emirates justify a fleet of 90 A380 aircraft? 

They don’t.  A fleet of 90 A380s means ownership of that aircraft for the next 30 years at minimum.  30 years of operating such aircraft is a long time and let’s not lose sight of the fact that there isn’t exactly hot demand for used jumbos these days.  Even relatively new(ish) 747s are now being retired into a life as cargo aircraft as 777s replace them. 

Further, Airbus and Boeing aren’t a bunch of huckleberries when it comes to forecasting their markets.  In fact, their forecasts tend to agree in most areas except the concept of the super Jumbo.  Boeing doesn’t see that market growing and has chosen to focus on serving the fat middle section of the widebody market (220 to 350 seats) with their 787/777 family. 

Perhaps Emirates will prove me (and others) wrong.  But I’d bet large money against them at this point.

Filed under: Airline Fleets by ajax
No Comments »

For a light Sunday, here are some videos of rather dicey crosswind landings by various aircraft.

Boeing 747 at Hong Kong’s Kai Tak Airport

 

Airbus A320 at Hamburg Airport

 

Singapore Airlines 747-400 landing in Zurich

 

The Airbus A380 learns to land in crosswinds

 

The Boeing 777 learns to land in crosswinds. Bonus shot of a 747SP doing the same.

The Concorde attempts a crosswind landing and decides to abort it on re-heat.

Filed under: Trivia by ajax
1 Comment »

No, seriously, where is it?  This is an aircraft that conversations began on in 2004.  It’s 2010 and I still don’t really know much about the aircraft despite being a keen industry observer. 

Mind you, I’ve heard the range promises and the seat costs promises but I haven’t seen the meat.  In fact, isn’t it a bit distressing that this aircraft is cloaked in so much secrecy that we still don’t know its final definition?  The few facts we have heard have actually originated from the few airlines that have ordered the aircraft in numbers.  Those facts haven’t been entirely good either. 

When Emirates starts talking about how the 777-300 still has an advantage, you might have a problem.  This is an airline that loves to play the two majors off each other.  Ordinarily, I’d expect Emirates to be trying to goad Boeing into building something new or something revised. 

Still, it’s time to start talking about this aircraft in more detail rather than with John Leahy’s rosy marketing promises.  It’s time to start hearing more about its real capabilities and how it will compete in the real world with the 787 and 777.   Right now, I really don’t know much at all and that really makes me question whether an entry into service for 2013 is even remotely possible at this point.

Filed under: Aircraft Development by ajax
No Comments »

It’s being reported by Aviation Week that a Morgan Stanley financial analyst is now predicting that Boeing will soon announce a 737 replacement development program.  See that article HERE.  Her reasoning is somewhat sound but is also tinged with a financial analysts viewpoint. 

Financial analysts see a re-engine program adding little if anything to Boeing’s financial performance.  A new aircraft would potentially garner hundreds if not thousands of orders during the development period and that backlog of orders would offer confidence to the financial world.   Fortunately, engineers run Boeing.  Creating an aircraft for the sake of a balance sheet is an unwise move unless many other criteria are met as well.  Most of those criteria are engineering related such as engine development maturity, new materials (CFRP for instance) maturity, etc.

This analyst also speculates that a re-engined B737 vs a re-engined A320 could still be 8 to 10% less efficient than the Airbus product.  Now her engineering prowess is really showing.  The two aircraft are neck and neck now.  Both would need substantial engineering changes to accomodate a new engine.  The new Pratt & Whitney GTF engine still is not showing the performance that has been promised.  In fact, in a Boeing vs Airbus matchup between like models, the Boeing generally has the lowest trip costs so far.  It’s an almost insignificant advantage but it exists and it shows this analyst hasn’t done too much homework.

Finally, there is more talk of this new aircraft being a twin-aisle development for faster boarding.  This one I doubt.  A twin-aisle wouldn’t just require a larger fuselage but it would potentially be heavier if kept as a circular cross section.  A new fuselage shape might lend itself to such a development but I really doubt it.  The 737 market is from about 130 to 180 seats.  A twin aisle means a shorter length and that means things like a taller tail.  It would imply more “structure” being necessary and more structure generally means more weight.  More weight means higher costs.  Perhaps a new fuselage shape might work but that means lots of new engineering and materials potentially.  I wouldn’t rule it out completely but I would give it an extremely low probability. 

That said, I would be less surprised to learn of a “twin” development of two sub-families somewhat similar to the 757/767 developments.  An aircraft family capable of serving from 120 to 160 passengers and, perhaps, another serving 160 to 200 passengers with a great deal of commonality might be the answer everyone is looking for.  That would allow Boeing to optimize their aircraft structures for missions in those categories and, at the same time, potentially offer commonality in engines, aircraft systems and pilot ratings. 

I continue to believe Boeing will announce a new program in the next 18 to 24 months.  I do believe it will be for a single aisle airliner(s) and I do believe that it may have an entry into service late in the decade.  Everything else is just a guess.  For earlier comments on this, you can read THIS blog entry. 

The argument that current 737 owners are afraid that a re-engine or new development program will hurt their aircraft values is barely valid.  It may hurt their values but if Boeing can engineer a new aircraft meeting offering a great gain in efficiency, then it is time to start developing it.  If they cannot, then they’ll wait.  There is no value to either Boeing or the airlines in waiting longer than necessary.  When the risks reach an appropriate level, they will launch this.  The question is, have those risks gotten to a point that they are acceptable?

Filed under: Aircraft Development by ajax
No Comments »

There is some new speculation and reports that Boeing is now leaning towards a new development aircraft to replace the 737 instead of a re-engine project.  See the Seattle Post Intelligencer blog post HERE.  The best of business cases for a re-engine project are usually fraught with risk and I’m sure that is no different in the case of this aircraft.   Although the 737 dates back to the late 1960’s, current versions date only from the 1990’s and continue to sell very well.

 

There are a few variables at play here.  First, Boeing doesn’t want to hurt its backlog of 737 orders and that’s understandable given the high profitability they provide.  Airbus is in the same position and neither company prefers to blink first.  On the other hand, if Boeing moves forward with a new design, it’s fairly certain that Airbus would blink rather quickly.

 

Airlines want new, more efficient aircraft and they would prefer a leap in efficiency equivalent to what was seen in the mid 1980’s with new models.  Newly developed aircraft at that time were  offering a 35 to 40% improvement in efficiency (cost per passenger seat mile) over the first generation of aircraft still flying.  They would like to see that leap again and, unfortunately, that’s unlikely. 

 

 The curve on engine and airframe technology advancements has reached a point where it is smoother and less steep.   Our knowledge of aerodynamics, engineering on airframes, new materials and, yes, engines, has become more stable.  There is less of a learning curve than there was with our first two generations of aircraft.  That means gains of 15 to 25% are probably what is achievable in the next round and that’s still very, very good.

 

Engine manufacturers are much more confident of their ability to deliver on their end than they were just 2 years ago.  Circumstances have changed and that leads to a company like Boeing examining the future and seeing less risk.  That’s a good thing.  At some point, the risk becomes appropriate and I think they’re approaching that point and realize it. 

 

Boeing has a great deal of new knowledge on using new materials and I suspect that their one challenge in using, say, CFRP for a B737 style aircraft is in figuring out how to scale it down.  Now that the 787 program is in production and testing, they likely see that it is a problem they can solve. 

 

Finally, making a move to build a new aircraft is timely for two reasons.  First, they’re development work on both the 787 and 747 is winding down.  New variants of the 787 will require a fraction of the development staff that the original design required.  They have resources that are freeing up and who could be put to use on new programs.   

 

Second, it would potentially put Airbus in a very constrained position.  Airbus is constrained on resources and money at present.  The A380 program is not earning them money and, if anything, is badly hurting their cash flow.  That program refuses to scale up into planned production and, what’s worse, airlines continue to defer their orders without ordering any additional aircraft. 

 

Airbus also is in the middle of developing the A350 and faces a number of technological challenges there, too.  They’re as new to the CFRP fuselage as Boeing is and it’s taking time to figure out how to build that aircraft right.  While production delays haven’t been announced, there isn’t an analyst out there who believes that this aircraft will show up on time and on budget.  It will most likely have as many challenges facing it as the 787 did and that means another program sucking up resources and money.

 

Finally, Airbus has problems with its military A400M aircraft development and a number of countries are very upset with Airbus performance there as well.  To add more fuel to the fire, Airbus/EADS will be attempting to win the KC-X tanker program at all costs and that requires still more resources that are in scarce supply. 

 

If Boeing announces a new build in the next year, it puts the fire to the feet of Airbus to come up with something in response and makes Airbus react to Boeing instead of the other way around.   Will they announce a new build?  Yes, I think in the next 12 to 18 months we’ll hear of the launch of a 737 replacement program probably taking something on the order of 5 years to complete.

Filed under: Airline Fleets by ajax
1 Comment »

Now that the 787 has entered into flight testing and has shown itself to be what was predicted and, possibly, even better, eyes are turning towards what happens next.   With entries into the market by Bombardier and Embraer with aircraft that isn’t quite a regional jet and almost a mainliner of today, new pressure is on Boeing and Airbus to start defining the future. 

 

New Boeing 737 and Airbus A320 replacements were expected to be announced by now originally and airlines were disappointed when both manufacturers stated in 2008/2009 that such aircraft won’t arrive before 2020 or beyond.  Airlines have asked that the next generation of aircraft have 20 to 30% better efficiency than the current aircraft or even more.  In the past, those kinds of gains were actually possible. 

 

Since both airlines feel that that date is so far in the distance, there has been new talk of re-engining both aircraft lines with new, more modern engines from Pratt & Whitney (GTF) or CFM (Leap-56).  Unlike many conversations, this isn’t about offering these engines on existing aircraft but about offering these engines on new build aircraft for the future. 

 

Everyone anticipated a CFRP Boeing being announced just 2 years ago.  Another blogger and journalist, Flightblogger, wrote this entry HERE about comments made by Boeing’s new Commercial Aircraft CEO, Jim Albaugh, about the difficulties in “scaling down” CFRP for smaller aircraft.  CFRP current requirements make it ideal for medium to large aircraft but present difficulties in making a smaller aircraft because you cannot “thin” the material as much. 

 

Both Boeing and Airbus are studying re-engine concepts at present and the Airbus A320 line is actually a better candidate for this since it stands a bit taller off the ground and is able to accommodate a new engine without necessarily re-designing landing gear, etc to fit a larger engine underneath the wing. 

 

I actually think we will hear about a new 737 replacement sooner than what Boeing has indicated.  It’s clear they’ve become more comfortable with the emerging engine technologies or they wouldn’t be talking about a re-engine effort.  They’ve also come a long way in using CFRP and learning about its properties and challenges than they were just 2 years ago as well. 

 

The truth is, there won’t be a 40 to 50% gain in efficiency in the next models.  Those kinds of gains were attained at a time when jet engine technology, wing technology and aerodynamics were still in their infancy relatively speaking.  With the passing of nearly 30 years since that phase, we’ve seen great gains in efficiency but nothing approaching what we saw prior to 1980 or so. 

 

I suspect that Boeing will identify what is straightforward engineering and what needs to be developed to bring an aircraft online sooner than later and may well make the investment.  Timing is everything on these efforts and the company is poised to complete two long, challenging projects in the near future (747-8 and 787).  What remains are derivative developments of the 787 (definitely a -9 and probably a -10) which will be reasonably easy jobs compared to the last 6 years.  Now there is room to work on the next big thing. 

 

Many have speculated that the next big thing is another widebody.  But with Boeing poised to continue to reap benefits from the 777 as it appears it will continue to outperform the A350 in many missions, a 737 replacement suddenly looks more logical.  More to the point, it’s a response that Airbus cannot afford to make at present given its heavy commitments to the A380 (can’t scale production up adequately), A350 (barely defined as the -900 and with almost no real definition for the -1000) and A400 (way over budget and potentially diminishing orders as they enter into flight test) development projects. 

 

I don’t think we’ll see this announcement this year or next.  I do think 2012 might be the year we begin to hear Boeing make noise about a new aircraft vs the Airbus A320.

Filed under: Airline Fleets by ajax
No Comments »

Ordinarily I stay away from non-commercial aviation subjects because they don’t interest me that much and they aren’t subject matter that I have a lot of knowledge on most of the time.  The KC-X Tanker RFP is something I’m very much interested in and I do know a bit about this one.*

 

Imagine you are a mountain climber.  Moutain climbing is difficult and dangerous work and you need the right equipment to succeed as much as anything.  Now, suppose you need an energy bar that will help you climb a particularly difficult mountain and you decide to ask for a price on products.  It turns out there are really just two energy bar makers and they do things kind of differently but both make a very acceptable energy bar depending on your requirements. 

 

Now you have to figure out your requirements.  You decide you need an energy bar that is compact so that carrying lots of these doesn’t take up all your backpack space but you need a minimum amount of calories from it so that when you have one, you don’t want another right away and consume all your bars prematurely.  You decide you need a mimimum of 200 calories from these bars and they shouldn’t be greater than 1.25 inches wide by 4 inches long by 0.3 inches thick.  That lets you carry enough bars with a margin of safety but also lets you have space in your pack for other necessary items. 

 

The US energy bar maker produces an energy bar that can be tailored somewhat.  It’s nominal size fits your requirements within tolerances and all you have to do is remove one bar from your count to make them fit and leave room.  It offers 210 calories so it meets your calorie needs too.  It’s a pretty good fit although not perfect.  The price is within reach but you need the best price possible because mountain climbing is expensive and every penny counts.

 

The French energy bar maker has a nice product too.  It’s a bit more tailored and was originally made for mountains of higher altitude than the one your climbing.  It’s size is 2 inches wide by 4.5 inches long by 0.5 inches thick.  It’s a bigger bar and you’ll have to leave out 3 or 4 bars from your count to make them fit.  Since this bar was designed originally for a different mission, the maker has increased its calories to 270 calories per bar.  There is a lot of energy stored in that bar.  It’s price is a tad higher but the French government wants to sell more to US mountain climbers so it has already subsized the cost of this bar so that it is competitive with the US manufacturers bar. 

 

On the surface, the French bar looks like a heck of a deal but you still dive into the details. You think about the climb ahead of you and realize that you might have a problem.  These bars go stale after you open them and if you don’t eat all of them, it goes to waste.  Your body can only take so much in at a time because extra contents can slow you down on your climb.  You only *need* 200 calories and you can’t cut those French bars in half because they go bad once you open them.  Then you realize that the French bars only allow you to carry a margin of safety of 2 bars whereas the US bars allow you to carry a margin of safety of 7 bars. 

 

Space and weight is at a premium in your backpack and now suddenly you realize that an energy bar that is tailored to your needs as closely as possible is probably the right choice.  More is not necessarily better if it goes to waste.  Space and weight is at such a premium that the only way to carry more French bars is to get a bigger backpack.  That means spending more money on a backpack and carrying more weight as you climb which means you may need more energy in the first place.  More requires more which requires more. 

 

You look at both selections and realize that price is, in most respects, the least important requirement.  The goal is to get up the mountain and back again quickly and efficiently.  Now that you’ve thought this through, you realize that the US bar is the best choice because it meets your specifications almost exactly without being burdensome.  The French bars meets your specifications too but it is so much “more”, there is a penalty implicit in its use for your application.  On a per ounce basis, the French bar offers the better deal.  On a mission basis, the US bar is a better deal. 

 

So you buy the US bar because it meets the mission better.  That, my friends, is what the KC-X tanker deal is really all about.  It isn’t that the Airbus is a bad tanker.  To the contrary, it’s a fine tanker made by an aircraft company that has an excellent reputation.  The problem is that it doesn’t fit the mission. 

 

The Airbus tanker does offer more nominal refueling capability and more cargo area.  No question.  But this RFP is to replace a fleet of tankers numbering in the hundreds.  No other country other than the United States projects its power through a fleet like that.  Even the really big western military powers like the UK or France only have a fleet of, at the most, a couple dozen tankers.  We can send a couple of dozen tankers on a single mission if we want. 

 

The tankers are a force multiplier but the way you really multiply your power is by being able to refuel several aircraft at once.  5 tankers takes care of a mission much better than 2 tankers because it allows the mission to refuel and carry on quicker.  On almost all missions, our current fleet doesn’t come back dry very often.  Almost never in fact.  The KC-135R tankers meet our needs just fine in terms of capacity for either cargo or fuel.  They’re just old and inefficient when it comes to operating expenses.  But they can still meet our needs fine.  We have a smaller fleet of larger tankers that fill the other needs when that occasion arises (which really isn’t often) called the KC-10. 

 

So although the Airbus carries more fuel, it isn’t carrying fuel we’ll really use.  That means extra expense for flying the extra weight of the aircraft that was designed to carry more fuel that isn’t needed. 

 

Our bases which house this current fleet were built years ago and have been fine tuned to our needs over the past 5 decades.  Again, our current fleet meets our needs so our facilities meet our needs.  The B767 basically fits the infrastructure footprint we already have in place and that means we can do a one for one replacement without needing to upgrade hard stands (concrete areas to park the aircraft on), refueling facilities, hangers, runways, taxiways, etc.  That means the KC-767 kind of “plugs in” into our existing infrastructure already.

 

The Airbus tanker requires more than 80% greater footprint in the infrastructure than the current fleet.  That means upgrading and changing our infrastructure in every location and systems changes for every part of the fleet.  As you can imagine, that adds significantly to our costs to operate that fleet as those changes will have to be done over the lifespan of the fleet and we’re not talking about changes that you can go to Sears for either. 

 

The Department of Defense cannot write requirements for an RFP that make both aircraft competitive.  These aircraft are too different from each other to be an apples to apples comparison.  Eliminating politics from the equation for the moment, they have two choices:  Buy by the ounce or buy by the mission.  When it comes to the military, buying for the mission is much more economical in the long run as we’ve seen time and again.  Remember when we had thousands of nuclear missiles?  The question was how many times did we want to destroy the Earth over and over again when a small fraction of those missiles would end civilization as we know it.  Buying by quantity isn’t always the best choice for these situations.

 

Let’s consider the politics though.  Yes, we are for free trade generally.  That said, we do a pretty bad job of enforcing fair and free trade when it comes to our political partners in the world.  France (and Europe) have massively subsidized Airbus and its aircraft development.   You know what?  That’s kind of OK to me.  They did it to redevelop an aerospace industry which is a strategic industry for any country and makes them militarily less reliant upon the kindness of others.  That isn’t a dumb move.  The problem is, they did it commercially instead of militarily because there was profits to be had.  I really don’t fall on the side of “punish the French” when it comes to these subisidies providing they stop it.  So far they haven’t.  They’ve got their industry, now they should let it sink or swim.  But subsidies are addictive (and we’re not innocent of such addictions ourselves either.)

 

Because an aerospace industry is strategically very important, we, too, should consider where this work goes.  No, we don’t want to be gouged for it but we don’t want to lose that knowledge and know-how either.  Were Airbus to win the tanker competition, that would effectively be the end of our capability to produce tankers 20 years from now.  The people who know how to do it would be retired or dead.  It would be extremely expensive to redevelop that knowledge base and it’s a knowledge base that is at the heart of our ability to project power as a country.  Stop and think about that for a few minutes.  I’ll wait.

 

Another consideration is the French and Germans themselves.  Both of these countries have some history of being non-cooperative with the US when they disagree or don’t want to participate in a conflict.   The Germans to a lesser extent but it still happens.  That is perfectly OK and their right.  However, DO WE WANT TO BE DEPENDENT UPON COUNTRIES WHO HAVE A HISTORY OF NOT NECESSARILY COOPERATING WITH US DURING IMPORTANT CONFLICTS?    What if you need spare parts from Airbus and the French government forbids Airbus from delivering those spares to us at a particular time because it disagrees with us?  That’s an important and critical consideration.

 

Airbus wants a foothold in the US.  An opportunity to build a factory here would be a huge advantage for them because they currently sell aircraft for dollars but their costs are primarily in euros.  If they builit aircraft here, their costs would be inherently less.   Add in the subisidies this company receives and that puts our own aerospace companies which have to sink or swim on their own at a dramatic disadvantage and potentially erodes our domestic strategic aerospace capabilities.  Is that what we want as a superpower in this world?

 

We shouldn’t be encouraging Airbus to compete for this stuff.  We should be encouraging another domestic company to re-enter commercial aviation.  We should re-develop that industry for our own benefit by encouraging someone like Lockheed to go back into that business so that in the future, we have healthy DOMESTIC competition for RFP like the KC-X Tanker. 

 

Is this tender a boon for Boeing now that Northrop Grumman has withdrawn?  No, not really.  Boeing can and should make a profit but let’s not forget that they’ll have opportunity costs involved in this and the current RFP requires them to offer a fixed price for a very long time.  There is a lot of risk involved in that. 

 

Will this mean an extension of life for the 767 commercially?  No, probably not.  Maybe for freignters a bit but commercial airlines depend too much on new technologies to continue with the 767 for much longer.  Does that make the 767 an outdated purchase for a tanker?  No, to the contrary.  It’s not the same 767 rolled out in the 1980’s for one.  Frankly, other than the basic design, little of that aircraft resembles the original 767s.  Not the wing, not the engines, not the avionics, nothing but the basic fuselage which was always a very efficient design.  The military is getting an extremely durable, long lived aircraft that should provide capabilities for another 30 to 40 years. 

 

*  I am employed by a first tier vendor to Boeing on this program and even work in a group that will be directly involved in the program.   However, I’m involved in military software rather than avionics or other hardware.

Filed under: Aircraft Development by ajax
No Comments »

Both Boeing and Airbus have a great selection of single aisle aircraft for domestic/trans-continental service in their B737 and A320 series families.  Both have excellent widebody families for medium to long haul service too.  The single aisle families can carry anywhere from about 130 to 190 passengers and that’s a pretty nice cross-section.  The current widebody families (and I’m excluding the 767 from this characterization but you’ll see why in a few minutes) accomodate a broad range of passengers ranging from about 270 to 400+ passengers.  Each even has new widebody family aircraft being introduced now and over the next 5 to 7 years that promise fantastic efficiency at incredible ranges.

 

Where is the aircraft to serve the 200 to 250 passenger count on a trans-continental/trans-Atlantic system?  Yes, the A330 and B767 are there but they’re really not quite the aircraft for that anymore.  The A330 is best as a -300 series aircraft and that encroaches into the 270+ territory.  The 767 is still being built but it is, for all intent and purposes, a discontinued aircraft. 

 

Previously we had the 757 and 767 capable of carrying that 190 to 250 passenger range on routes ranging from 2800 to 5500 miles and that market remains very active.  But no one is building a new aircraft for that segment.  The 787 misses it by a touch too many passengers and the A350 misses it by much more.  Neither the 737-900ER nor the A321 is capable of traversing the Atlantic ocean from the east coast of the US to points inside the middle of Europe.   They can barely make it across the continental United States.

 

Everyone is interested in aircraft for long haul routes that are intercontinental / trans-Pacific routes that yield quite a bit of revenue but for which there remains a fairly limited market.   Who is going to build the aircraft capable of flying from Northeastern United States to Berlin or Rome or Athens or even Helsinki without being too much aircraft?  Yes, the 787-8 can handle that route and probably handle it pretty well but it offers only a small marginal improvement on efficiency for those routes. 

 

It would appear that the world market could stand to see another A300/767 sized aircraft that offers the kind of efficiency we see being promised in the 787/A350 aircraft being built today.  And that really shouldn’t be difficult at all for either manufacturer.  The fuselage sizes and engines necessary are known quantities.  The technologies to raise the efficiency needed for those routes are all available today.  There is no challenge to building this kind of aircraft but it doesn’t even appear to be on the drawing boards (or, rather, CAD screens) of either company. 

 

There are a lot of 757/767/A300/A330-200 aircraft still out there but they’re aging fast and have a limited lifecycle left at virtually any airline.  I do wonder why airlines aren’t pushing more for a 200 to 250 passenger, 5500nm aircraft particularly since we’re talking about routes that are medium haul, bread and butter routes for much of the global airline system.  It is a sweet spot being ignored and I think that the manufacturer that identifies it and addresses it sooner, rather than later, is the manufacturer who enjoys a healthy order book for the next 2 to 3 decades.

Filed under: Airline Fleets by ajax
No Comments »

Over the past few days, there have been a number of news stories about the trial that is to begin outside Paris, France against Continental, 2 former Continental employees and 3 French nationals ( an official with France’s civil aviation authoritythe DGAC and 2 former employees of Aerospatiale.)  Any airline enthusiast knows the story of the Concorde crash July 25th, 2000 and the resulting aftermath of modifications, return to flight and then the permanent retirement of the Concorde in 2003.

 

What is tragic is that the five men and Continental (the corporation) are being tried for involuntary manslaughter and this entire trial bothers me quite a bit.  First, the three Frenchmen being tried strike me as scapegoats put up for trial and the benefit of seeming to be “fair”.  Second, to blame Continental or its employees for this tragedy just seems, well, so very French in attitude.

 

The two former Aerospatiale employees, Henri Perrier and Jacques Herubel, are both very old men and accused of failing to carry out modifications on Concorde after a series of tire blowouts in the 1970’s revealed design flaws that allowed debris from tires to penetrate the Concorde wings.  There is the story of the Air France Concorde that suffered a blowout on take-off from Dulles airport in the late 1970’s that saw its wing tanks penetrated and it managed to leak tons of jet fuel before returning to land. 

 

It is true enough that such flaws were known for a long time.  It was a two part problem.  Because Concorde took off at such higher speeds (as fast as 250mph), it was difficult to build a tire for it that would not catastrophically fail in the event of a blow-out.  Mind you, blow outs just happened more often back then too. 

 

The second problem was the wing.  It was possible for a tire blow out to throw pieces of the tire up against and into the wing of the aircraft where fuel tanks existed.  As you can imagine, it isn’t a good idea to penetrate fuel tanks ever and certainly not next to 2 afterburning engines on take-off.

 

Over time, the tires got better (but not fixed per se) and Concorde managed to fly successfully for 2 more decades before the tragic crash in France.  A little historical context is necessary to understand everything at play here.

 

First, Aerospatiale is now a part of EADS/Airbus.  And guess who owns a large chunk of EADS?  Yup, the government of France.  I should also mention that Aerospatiale was formed from the merger of several government owned aerospace companies in 1970 and continued to be owned by the government of France.  Notice that they are not a part of this trial.  

 

Second, guess who owned Air France in the 1970’s. . . yes, the government of France.   Air France was a government owned entity in a variety of forms until privatization occured in 1999.  However, the French government still owned a majority holding of shares as recently as 2002.  Further, Air France has always been recognized as a national flag carrier in France and even despite privatization, it holds that kind of status throughout the nation even today.  Notice that Air France is not on trial either. 

 

If someone should be on trial for this tragedy, it should be Aerospatiale/EADS, Air France and, possibly, the DGAC (French civilian aviation authority).   At least from the French perspective.  However, it is much easier to lay blame at three elderly men who are old enough to not have any “patrons” in the government still and therefore leave them unprotected from what by all appearances is a failure on the part of the French government rather than these men.

 

I’ll also take note that France has studiously avoided dragging BAe Systems (formerly BAC and the co-builder of Concorde) as they are, wait for it . . . still a first tier vendor to EADS/Airbus although no longer a partner.   No finger was pointed at the UK government for permitting design flaws to continue on for 2 decades and the UK was just as aware as the French.  However, the French have to work with the UK and and business is business.

 

Frankly, I predict that the French court will likely lay the blame firmly at Continental’s feet and assign some to those 3 elder Frenchmen on trial.

 

But the real tragedy will be France failing to shine sunlight upon their own behaviour and complicency in this crash and that makes France a less safe place for all concerned. 

 

Sadly, French arrogance when it comes to this kind of issue still rules today.  When an Air France A-330 was lost over the Atlantic Ocean near the coast of Brazil, the offer of US investigatory assistance was nearly ignored entirely.   That is criminal in itself since the US has the best investigative force for airline crashes in the world.  There is no one who comes close and that is why the US is asked to assist with investigations around the world.  However, the US has the nasty habit of, more often than not, calling a spade a spade.  Something that the French will not tolerate when it comes to their aerospace and aviation industries.

 

The Continental Airlines employees on trial will not be present.  They will be represented and therefore they run almost no risk of imprisonment no matter what the outcome.  However, I think that makes it just easier to blame them as a face saving gesture.   I suspect that no matter how vigorously Continental Airlines defends itself they will be the ones to pay ultimately.  

 

The three Frenchmen on trial may suffer some blame, again as a face saving gesture, but I wonder if they’ll take it.  They have no reason to.  An 80 year old man has little to lose in speaking out at what was going on in the 1960’s, 70’s and 80’s.

 

If this post seems xenophobic, I can see why that might be the interpretation.  However, I stand by my characterizations of both the French government and the French aerospace industry.   I doubt seriously that anyone who has observed the aerospace industry would disagree with me either.  My characterizations are based on their deeds and those deeds have been many over the past 50 years.

Filed under: Airline History, Airline News by ajax
No Comments »

Today, part 2 in my views on whether or not we’ll see a real “Ryanair” style airline here in the United States.

 

Watch what you fly here.  The most recent LCC entrants here have bought Airbus.  No real surprise as Airbus likes to make a heck of a deal on an aircraft for new airlines in the hopes they’ll have the “in” for future orders if that airline succeeds.  

 

Boeing isn’t too interested in that.  They want to see a solid business plan and a real possibility of success.  What’s more, big orders aren’t the enticement they once were for Boeing.  Boeing got burned on a few of those deals with Ryanair being the most notable since it allowed Ryanair to buy aircraft, fly them for a couple of years and sell them at a profit.  Boeing isn’t going to let that happen again any time soon.

 

Is Airbus the right aircraft?  Yes.  No.  Maybe.  I kind of think not.  I think it is well suited to the jetBlue and Virgin America airlines of this country because they can support that upgraded service product nicely.   That said, those airlines would have done just as well with Boeing aircraft.  In fact, jetBlue went with Airbus because Boeing refused to offer a decent price for a decent order.  

 

But Airbus doesn’t strike me as quite the right choice for an LCC.  They’re a bit higher off the ground, have a little worse operational dispatch rate and don’t always have the best range vs weight ration for certain routes.   Yes, they’re a family of aircraft that offers a range of size that captain can fly across the type range. 

 

Boeing seems better.  Supported here in the United States, you have better access to mechanics, parts and plenty of maintenance contractors to keep you going.  They’re a little bit closer to the ground, a little easier to turn around and have a little bit better dispatch rate.  In addition, their range of capacities is a little bit better for routes and virtually every model has trans-continental capability now without being weight restricted. 

 

The model I would look long and hard at isn’t either of those.  I think a new LCC carrier trying to emulate Ryanair ought to take a serious look at the Embraer 170/190 aircraft.  They’re cheaper to operate and can carry a full load of passengers and baggage although little cargo (which isn’t an LCC’s concern anyway.)  They offer a family of sizes, have a good dispatch rate, offer quick turn arounds, great range, good comfort and great potential for routes requiring frequency and low costs.  It is no wonder that David Neeleman chose them for his new airline, Azul, in Brazil.

 

But you can go used in the US and do pretty well too.  Allegiant Airlines buys used MD-82/83/87 aircraft, for instance.  They MD-80’s are overbuilt, cheap to buy and still pretty cheap to operate.  They have range, good dispatch rates, ease of maintenance and they’re abundant on the used market.   The same is true of older Boeing 737 models (pre Next Generation models) and those are becoming to cheap to purchase as well. 

 

In the end, an LCC needs an aircraft type that is relatively easy to expand into a fleet, keep one class of pilots flying it and which has a ready source of aircraft to augment and/or replace the fleet with. 

 

One type, many sizes should be the rule.   Ryanair uses one size, the Boeing 737-800 and Southwest basically uses one size, the Boeing 737-700 but they can afford to do so.  A new LCC needs operational flexibility and being prepared to use the three basic sizes of either type would be a good thing. 

 

But you can split your types too.  Airtran did this successfully by entering the world with DC-9s, transitioning to Boeing 717s and then growing in capacity by bringing on the Boeing 737.   That worked because while they needed two different pilot groups, the pilot groups could be kept “rational” with the same pay rates.   jetBlue split their types between the Airbus and the Embraer(190) and split their pilot groups pay rates too.  There was risk involved in that but jetBlue avoided that by offering pay rates on the Embraer that were as generous as that being offered other pilots flying mainline aircraft at other airlines. 

 

Find airports that welcome you and that have demand to locations you can serve.  Sounds easy but it isn’t.  In the US, airports tend to be wedded to airlines that have served them for decades.   When DFW opened, it was served by a number of major airlines and each terminal served one or more airline.  Now, DFW has been taken over by American Airlines (nearly 4 of 5 terminals) and does little to serve the needs of airlines who aren’t AA. 

 

Airports need to figure out that putting all their eggs in one basket with a major, hubbed airline isn’t a good strategy in the long run.  Once those airlines have that dominance, they use it to beat airports down on fees and coerce airports into paying for infrastructure the airlines then get to own.  It doesn’t benefit the local economy to have one dominant airline as prices rise and service falls.  This isn’t just true for DFW either.  When airports begin to aggressively pursue new entrants, everyone will win.

 

New and existing LCC entrants need to make a better argument too.  All too often, LCC’s tend to fear competing in those markets dominated by a major legacy carrier and that’s a mistake.  Airtran wasn’t afraid to go up against Delta and it paid off.  jetBlue wasn’t afraid to compete in one the most competitive markets in the world (NYC) and against some of the biggest airlines.  In the past, there weren’t good examples of what an LCC can do for both an airport and a metropolitan area.  Now there is and new LCCs in particular need to use that to their advantage. 

 

Treat your staff well.   Airlines sell a service product and while you may get customers on price, you’ll keep them with service.   Offering strategies to your crews that permit you high productivity and your crew a living wage along with a good working conditions can only lead to your success.   Treat them like commodities and you’ll fail.  Southwest, Ryanair, jetBlue and Airtran get this.  Skybus and Mesa Airlines don’t.  Look at who is making money. 

 

Quality of life is just as important to airline crew and staff as wages.  Airlines that offer good quality life tend to have happy crew flying their flights and treating their customers right.  At the end of the day, it is a lot cheaper to keep a customer than it is to find new ones every week. 

 

Will we ever see a close replica of Ryanair’s model here on a national basis?  Yes, I think so.  Right now, no.  The market is too crowded but that will change again and new airlines will be started again.   US attitudes towards fees and advertising are changing, although slowly.  

 

First we need to see a major airline liquidate or merge with another to reduce capacity some more.  Then we need to see an uptick in the economy that induces people to spend some money on travel again (both leisure and business travel.)   There needs to be a glut of aircraft useable for such a venture (and that’s happening already) and airports need to figure out that it is in their best interest to find space for these new entrants.  That really hasn’t started to happen yet but it may yet still happen.

Filed under: Airline History, Airline Service by ajax
1 Comment »

Ryanair is certainly the darling of LCC carriers and, to a certain degree, they even kind of outshine Southwest Airlines.  Lots of people look at the US market and wonder about having a Ryanair-style carrier here.  Skybus Airlines (read more about them HERE) was supposed to be the one but tanked miserably and by every appearance, the only people who didn’t expect them to fail miserably was their executive staff.

 

Could such a carrier exist here?  Sure they could.  In fact, I think it already does in the form of Allegiant Airlines (find out more about them HERE.)  Allegiant is all about flying routes point to point using secondary or even tertiary airports and providing extreme low cost prices which are augmented by fees galore.  And they make a considerable profit doing so.

 

What does it really take to be a Low Cost Carrier in the United States?  First, let’s really define what that is.  Interestingly enough, US Airways uses LCC as its trading identifier on the stock markets.  Is it a LCC carrier?  Not by any definition.  jetBlue and Virgin America both style themselves as LCC carriers but, let’s face it, while they offer great value, neither are a Ryanair style LCC.

 

Southwest Airlines and Airtran Airlines are probably both the best examples of true low cost carriers operating nationally here in the United States.  Allegiant certainly is but they’re still focused much more on the leisure markets and many of the routes they serve compete with quite literally no one. 

 

Skybus failed for a few reasons.  First, they picked a hub that defied rational thought in Columbus, Ohio.  As you can imagine, there isn’t a whole lot of traffic trying to leave or get there.  Hubs don’t work well for LCC carriers.   Focus cities do but not hubs.   If you want to make money as any kind of airline, you had best be offering flights between two places people want to go. 

 

Second, you have to pick between offering frequency and relative value or absolute lowest cost and infrequent service.  You can’t be all things to all people.   Skybus kind of offered high frequency and absolute lowest cost and hoped it would stimulate new traffic.  The problem is, there is only so many people who want to fly between Columbus, Ohio and Greensboro, NC.   You really can’t do that route once or twice a day every day of the week.  Not at any price.  Not with large, mainline aircraft anyway. 

 

Third, just because you can fly to a secondary or tertiary airport doesn’t mean people will go to that airport to use your airline at any price.  Case in point, Bellingham, WA and Skybus again.   Bellingham, Washington is a long way away from most anyone in the Seattle-Tacoma area.   It’s 90 miles from downtown Seattle, 122 miles from Tacoma and it is a tortuous drive in traffic for anyone in that metro area.  Bellingham is convenient to, say, Vancouver, British Columbia but that means crossing a border.   In the case of the SEA-TAC area, you need to be flying from their main airport.   And the lesson is that you have to look long and hard at each area you’re serving. 

 

LCC carriers have succeeded in flying from secondary, smaller airports such as Love Field (Dallas) and Midway Airport (Chicago) and even Long Beach (LA area) because those airports remain highly accessible to a large number of people.  And as both Southwest and Airtran will tell you, sometimes if you want to enter a market, you have to bite the bullet and fly where people want to go.   I take note that since Airtran has decided to defend itself against Allegiant, even Allegiant figured out it needed to change airports in the Orlando area to remain competitive. 

 

Choose your fees and advertising carefully.  The United States is a different place than Europe.  Advertising that is racy or in bad taste doesn’t go well here under the best of circumstances.  It doesn’t matter if you think it should or not.  It just happens to be that way and a new airline is going to change the moral outlook of this country.   Oh, yes, Spirit Airlines has gotten away with it now and then but they remain a minor player and it has possibly turned off as many people as its turned on. 

 

An a la carte fee system (a la Ryanair) is something that this country is completely unfamiliar with when it comes to airlines.  Now, that is changing and it will likely change more but it is an evolutionary thing, not revolutionary and some fees are going to make customers feel burned no matter what.   Skybus’ Ryanair-like approach to charging a fee for even looking in their direction was offensive to customers here in the US particularly when, at that time, no one else had even really dabbled in it.

 

While I do think more a la carte offerings will and should be instituted among airlines, it will be done differently here.  Luggage fees have generated a massive amount of resentment with customers and while they have generated significant additional revenue for major airlines, it has also caused many customers to more carefully consider their options.  Southwest has bucked that luggage fee trend and the results are showing. 

 

There is place for an airline that charges for checked luggage, beverages, meals, blankets and airport check-in.  But the amounts of those fees still have to have some value.  Particularly when legacy airlines already have those fees as well.  Charge more for checked baggage than American Airlines and you run the real risk of turning people off.   We’re really not a true a la carte culture here.

 

Be careful of your publicity.  Ryanair’s CEO, Michael O’Leary, gets away with outrageous statements and even expressing a certain outright hostility to his own customers.   That works in Europe and, in particular, within the UK and Ireland.  Those are cultures who know how to take such statements with a bit more of a wink and a smile.  Here in the United States, it’s a flat turn off.  Our culture is based more on politeness and friendliness.  Bark at your customers or even insult them and they will walk elsewhere. 

 

Tomorrow, Part 2 of this post.

Filed under: Airline Service by ajax
No Comments »

Let’s talk alliances before anything else.

 

There is a huge battle taking place over who gets to have Japan Air Lines (JAL) business.  The financially struggling airline has suddenly become a hot property and American Airlines (OneWorld) and Delta Airlines (SkyTeam) are fighting over JAL like it’s a supermodel.   Both airlines are offering hugely attractive financial packages to JAL and I suspect the poor airline has no idea of who to nod their head towards. 

 

Ultimately, I think JAL will stay in Oneworld.  There is more at stake here than what is offered as a financial rescue package.  Japan is still a very nationalistic country and keeping the identify of what is, for most purposes, its flag carrier will be important.  It has a solid relationship with Oneworld and American Airlines and compared to the risk of joining with SkyTeam and the possibility of being a second tier player in that relationship, JAL has a safer bet with Oneworld. 

 

In addition, I don’t think JAL can afford to wait for anti-trust immunity to act with airline partners and it won’t have to by staying with Oneworld. 

 

The Middle East:

 

I continue to think that the major international airlines (Emirates, Qatar, Etihad) of the Middle East are more at risk than they claim.  Yes, they’ve experienced phenomal growth and, yes, they continue to purchase aircraft like a 5 year old buys candy but what’s next for them and their route systems? 

 

The Middle East doesn’t offer a good connecting point for North or South America.   Airlines in North America can reach their markets non-stop with existing aircraft and why would a passenger choose to connect via an airport in the UAE (United Arab Emirates) when they can fly non-stop at a competitive price.  Better service product won’t attract these customers.  

 

There is very little business between South America and Africa, India, The Middle East or Southeast Asia and, so, South America isn’t a place that could serve as a growth area for those airlines. 

 

Emirates, Qatar and Etihad have succeeded by offering a hub between Europe and the Middle East, India, Southeast Asia and (to some extent) Australia/New Zealand.  However, even European airlines are adding longer range aircraft and are able to reach each of those destinations non-stop  more and more with the exception of Australia and New Zealand. 

 

In addition, each of those airlines is bankrolled to some extent with oil profits and the uncertainty of those profits and the uncertainty of other investments in the Middle East has to raise the risk for that continued bankrolling.   I don’t see any of these airlines failing in the next year but I do see them perhaps deferring orders and re-organising their fleets. 

 

India: 

 

What a catastrophe!  No airline in India will do well for now and there has to be some consolidation in this market in the near future.   Kingfisher and Jet Airways are both excellent candidates for takeovers and, perhaps, they are excellent candidates for each other.  Kingfisher bet on Airbus by ordering A330 and A340 aircraft first.  Their A330 fleet doesn’t quite have the range it really needs to expand outside of its current markets and the A340 was a terrible choice for long range flights.  So much so, it got rid of the aircraft on order. 

 

Now, Kingfisher has a few A350 and a few A380 aircraft on order for deliveries starting in 2014.  While it could desperately stand to have the A350 now, I don’t see how it can wait until 2014 for the aircraft.  I also seriously doubt it will ever take up the A380 both because of cost and an inability to fill the aircraft enough for regular flights. 

 

Jet Airways also has a great service product but bought too big of an aircraft for the routes it needed to compete on.  Jet Airways purchased the 777-300ER when it really needed the 777-200ER/LR for the international routes it proposed to serve.  Now 4 of the aircraft are leased to Turkish Airlines and 3 are going to Royal Brunei leaving just 3 for Jet Airways. 

 

Both Kingfisher and Jet Airways have a great service product and good networks across India and neighboring countries.  They would be better served by merging and using one brand for their national service and another for their international services.  Kingfisher for India and Jet Airways for international service. 

 

The Far East:

 

China has a lot of problems coming to roost with the inevitable decline in their economy which is heavily dependent on North America and Europe.    Look for some consolidation in this market.  I do think that Chinese airlines face potential issues from government mandates to purchase indignenous aircraft being developed now.  There is little chance that the aircraft being built will be competitive internally or externally.  At least for this first round of development.

 

While JAL is suffering and ANA (All Nippon Airlines) isn’t performing that great at present, I see no major changes in the Japanese markets.  This is an area that will bounce back but only after a long fight.    The same is true for Korea. 

 

Oceania: 

 

Australia will be interesting to watch.  I’m tempted to guess that the status quo will remain in most cases.  The competition between the US and Australia only continues to grow more fierce and something has to give.  I still think that United Airlines may well be the airline to withdraw from this market and only because of the rather unique market relationship formed between Delta and V Australia (and Virgin Blue). 

 

 QANTAS will continue to own a large piece of all air travel from its home nation and they could be helped along with some deliveries of the 787.  At some point, QANTAS must grow and growth means a lot of long and thin routes to be added. 

 

South America: 

 

I don’t think there will be any major news from this continent over the next year.  LAN will continue to succeed by operating smart and honest.   Brazilian airlines will continue to fight things out but there is enough international business for each of them and their real threat comes from Azul on a domestic basis. 

 

Look for Azul to consider adding a larger aircraft to its fleet and don’t count Boeing out on that deal.   It would be easier for David Neeleman to add the Boeing 737 to his fleet in Brazil because he could outsource maintenance more easily. 

 

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

 

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

 

Colombia and Venezuela: 

 

Avianca Airlines has joined hands with Grupo Taca and I suspect that will be a good thing for both airlines.  Avianca could benefit by the exellent managment of Grupo Taca and Grupo Taca could benefit from greater access to South American markets.   Its almost certain that the two will harmonize their fleets and service products for greater economies while maintaing the two identies for greater acceptance throughout Central and South America.

 

Venezuela:  All airlines erode further due to the increasing interference of the Venezuelan government and, more specifically, Hugo Chavez.  I lost hope for Venezuela’s airline industry when they forced Conviasa (in partnerhsip with Iran Air and originally using an Iran Air 747-SP) into a route between Caracas and Tehran with an intermediate stop in Damascus.  This is the ultimate in “this route makes no sense.”  If the government can do that, then they’ll do other things to damage the industry.

 

Europe:

 

The European continent’s airlines are hunkered down just as much as the US based airlines.   There isn’t much to be expected in Europe for the next 12 months but let’s look at it anyway.

 

British Airways is kind of the American Airlines of the UK.  They’ll always somehow manage to survive and generally pretty well.  They have their own labour troubles but, again, they seem to be capable winning these for now.  British Airways needs to cut costs a bit more so I wouldn’t be surprised at some order deferrals and/or hastening the exit of the 747-400. 

 

The one airline I continue to wonder about in Europe is Lufthansa.  While they have a good service product and an excellent reputation, they also seem to have some weaknesses.  Lufthansa continues to purchase weaker sisters in Europe such as SWISS, Brussels Airlines, Austrian Airlines, Lauda Air and, now, BMI.  

 

20 years ago, this would seem reasonable in that European countries were pretty nationalistic.  Now, not so much.  Yes, there are some pockets of nationalism that exist but I wonder at maintaining so many different brands, fleets and networks now.  It would seem that the brands could be pared down to 2 or 3 mainline airlines and 3 to 5 regional airlines.   BMI wasn’t an airline that was succeeding in any great way and what does Lufthansa get for their purchase?  I see little of value.   I don’t know that BMI gets Lufthansa an entry into the UK that is of any more value than the Lufthansa brand itself.

 

I also wonder about their fleet.  They have a large fleet of A340 aircraft serving medium to long haul routes and that cannot be very efficient or profit enhancing.  Yet, Lufthansa has made no real move to correct this problem.   Their one major aircraft order in the past several years was for the four engined 747-8i.  They have no orders for the 787 (although Boeing would no doubt happily accomodate them with early delivery positions) nor the A350 (and I’m certain Airbus ould love to add them to the order book as well.) 

 

This puts Lufthansa into competition with British Airways who has moved towards operating more twin engine, long haul aircraft (777 and 787) as well as KLM/Air France (777).   Yes, they do own some A330 aircraft but their true long haul equipment is the A340 and 747.

 

KLM / Air France:  Not much here.  I don’t see an order for aircraft coming from them unless Airbus magically announces a GE engine for the A350-1000.  Otherwise, I seem them holding their cards close to their vest and waiting to see what happens in Europe.

 

The BA/Iberia merger:  I never saw the attraction myself.  It’s a low rent copy of the KLM/Air France union and I suspect there are many issues to resolve before the two really combine.   Personally, I think the odds of this merger actually taking place is, at best, 50/50. 

 

 Their alliance with AA over the Atlantic will continue to be a strong issue for the US Justice Department.   The BA/AA strength on the US/UK routes and the the IB/AA strenght on the US/Spain routes is really a bit too much.   I think the DoT/FAA is willing to let this alliance go forward but I think the DoJ is going to speak loudly and force a request for concessions.   Concessions that I think, this time, BA and AA may meet with some negotiation.

Filed under: Airline Service by ajax
2 Comments »