July 23, 2015 on 11:36 am | In Airline History | No Comments
My friend, Richard Cass of BraniffFlyingColors.com, has re-posted a financial analysis that I did some time ago and which refuted the idea that Harding L Lawrence simply spent 15 years running an airline into the ground. The purpose of that was to put some fact based perspective on a very emotional subject.
Please recognize that I don’t excuse Harding Lawrence entirely from the bankruptcy of Braniff but I would also point out (and did so during the Flying Colors conference last fall) that there were a number of people who contributed to the bankruptcy of the airline. The airline went on for 2 more years after Harding Lawrence’s retirement. Even more important, the entire industry for airlines changed in such a fundamental way, the impacts were felt until the 2000′s. That is the disruptive force of airline deregulation. Braniff was the first to go down, it wasn’t remotely the last.
Fair disclosure: I have a degree in economics and finance. My exposure to airlines has gone on for over 40 years. And, most importantly, I am the son of Neal J. Robinson who served in various executive roles at Braniff International. Those roles began in accounting and included titles such as VP Finance, VP Finance & Control, EVP Marketing. His career at the airline spanned 13 years and he was also responsible for guiding Jay Pritzker in the re-launch of Braniff II.
I would like to offer rebuttal to comments made by Brooke Watts via his Facebook site on Braniff. I’ll address them in order.
In order to assess a company’s financial stability, you must look at the “debt to equity” ratio
In simple terms, how much does the company owe vs how much it made
This ratio was near 1:1 during Beard. It increased exponentially under Lawerence (sic).
Therefore, Braniff was making a profit on paper, but owed more and more money over time
Well, Mr. Watts isn’t entirely incorrect on debt to equity ratios telling a story at a company, he inadvertently tells the story of exactly why Braniff was purchased and put into the hands of new leadership. A debt to equity ratio of 1:1 says the business is being run exceptionally conservatively and competent financial authorities then (and now) would have said that this business cannot adequately grow to maintain its position in the industry. That kind of ratio doesn’t scream “hey, look at me! I’m running a great business.” To the contrary, it screams that the business is run too conservatively and probably not returning a good ROI (return on investment) to its shareholders.
Curiously, Mr. Watts offers that this was all due to Harding Lawrence. In fact, C. Edward Acker led the purchase and arranged the financing for that airline for years and continues to be considered a very solid, authoritative figure in finance (airline and otherwise) even today. The airline ran its business under the very stern eye of Republic Bank as well (who served as the lead bank in financing the airline). It is disingenuous to characterize the airline being run into the ground with debt by a single person. This was a public corporation governed by some of the most conservative business leaders in the area during Lawrence’s tenure.
Again, Mr. Watts:
This stemmed from the fact that Acker and Lawerence decided to pay profits to “preferred stockholders” instead of re-investing in the company.
They also re-incorporated three times after 1965. And set up “Golden Parachutes” for themselves.
There were three sets of “books”. One for the common stockholders, one for the IRS, and a private one. Ted Beckwith was killed over the latter
This is just slander and terrible slander at that. It implies criminal acts by many men, not just Lawrence, in a public corporation for decades. Let’s be smarter than that.
This public corporation was being audited by a Big 10 accounting firm annually. It had fiduciary duty to report its actions to the SEC in an era when the SEC had substantial bite. It operated under the scrutiny of serious businessmen such as Troy Post, Herman Lay, Pamela Harriman, and others who had and still have reputations for being exceptionally responsible individuals.
As for the final statement on Ted Beckwith . . . Ted Beckwith was a contemporary of my father and man respected within and outside of Braniff. His murder was brutal and exceptional and entirely horrific for Mr. Beckwith’s family. To give purpose to his death with an implication of financial impropriety is just a giant disservice to Mr. Beckwith.
Mr. Beckwith’s murder is unsolved today and we do not know why he was killed. The circumstances around his death were barely investigated unfortunately. Lack of facts does not prove a thing. Furthermore, to suggest multiple sets of books is silly and slanderous to Mr. Beckwith (who was the EVP of Finance at the time my father was EVP of Marketing).
The airline suffered on a bet made by Harding Lawrence. A bet that several other CEOs made at the time of the 1978 deregulation of airlines. He bet big and it didn’t work. He does deserve some credit for the airline’s demise. Nonetheless, the airline was led and governed by others for more than 2 more years. There were 2 others who were in charge of the airline. This wasn’t due to one man and to say so really understates the entire airline industry.
I would ask that when people judge Braniff and Braniff’s fortunes, they do so with facts rather than gossip, speculation and unfounded rumor. It’s certainly OK to have a negative opinion of its leaders, including Harding Lawrence. But those opinions should be based on fact rather than emotions such as hatred. In the case of Mr. Watts, I’ll point out that the very airline he celebrates so much, the 1965 to 1982 era, was crafted by the very man he derides at every opportunity. The irony is curious.
Greg Robinson | Flying Colors Airline Blog
September 25, 2014 on 4:46 pm | In Airline Service | 1 Comment
KLM’s new strategy for lost items: a beagle named Sherlock.
September 16, 2014 on 8:41 am | In Aircraft Development, Airline Fleets | 1 Comment
Price and that’s about it.
It’s got more than the old A330 in the sense that every vehicle enjoys a new, modern engine. The A330 is positioned as being a still young aircraft when, in fact, it’s pretty old these days. The technology that the A330/A340 airplanes got was solidly from the 1980′s and wasn’t that innovative even then. Remember that it was designed to replace Airbus’ A300/A310 aircraft (partly) and designed to compete against the 767 and DC-10.
Airbus didn’t have its sights on the 777 which was a couple of years behind it in development. In fact, the 777 was more a response to the A330/A340 and MD-11.
So the point I would make is this: There is a reason why the 767 isn’t selling anymore. Same for the 757.
There was also reason why Airbus wanted to sell an A330 Tanker to the US Air Force: It would keep a production line running for a while.
If the A330NEO was as good as the 787, it wouldn’t be immediately advertised for considerably less money. And for certain, if that kind of performance was what all airlines were looking for, Airbus wouldn’t have been strong armed into making the A350. In fact, it’s notable that the original A350 was a lot more an A330NEO than anything else.
The A330NEO is a response to a few airlines who would like to have more A330 airplanes but with a little bit better price. Delta, for instance, wants some. A few other airlines will order them as well and if the A330NEO is done right, it might even be profitable for Airbus.
But it’s not a revolution. It’s barely an evolution. I strongly suspect it will be a 767-400 for Airbus which means that it will keep some customers happy and in the Airbus camp but let’s put away this talk that 1000 Airbus A330NEOs will be sold. Only 1100 A330 airplanes have been delivered to date so far.
This is a bridge airplane to keep some people happy for a while so Airbus can figure out what to do with its product line gaps. Presently, the A350 isn’t a 777 (new or old) and the smallest variant, the A350-800 is highly unattractive to customers because it offers no benefit over the A350-900. Airbus has nothing new to fill the gap between the A321NEO and the A350-900 and that’s a big gap.
So, for now, the A330NEO will fill that gap. Sort of. Kind of.
September 3, 2014 on 3:39 pm | In Airline Service | 4 Comments
I’ve weighed in on this subject several times but in light of the news circulating of multiple airliners diverting over conflicts among passengers having to do with seat reclining, it’s time to do it again.
It’s fascinating to me how vocal people are on this subject.
There are the highly vocal minority frequent fliers who think that seat recline is owned by the flier and he can do whatever he wants.
There are the other highly vocal “always economy class” fliers who think that it’s time to end seat recline.
Absolutely seat recline needs to be ended. With seat pitch averages down to 30 – 31 inches on most legacy airlines, there is simply no space for people to be reclining their chairs. At the minimum, airlines should disable recline on all seats that are economy class. I would include Economy Plus seats in this.
As a 6′ 2″ big man, when you recline your seat, the top of the seat is literally just a few inches (less than a foot) from my chest. Putting a seat back into my personal space on a multi-hour flight is not your right. Sorry, it just isn’t.
Furthermore, if airlines are going to constrain seat pitch, the consequence is having to disable recline and let people get over themselves. Or give economy seats more seat pitch. Or get used to the very high cost of a diversion. And if you airlines think you aren’t a party to that cost, you are. And courts will find you are.
For those of you who are about to shout, stamp your feet and declare your rights to a seat decline, you’re behaving childish at this point. Like a 5 year old and I include the numerous bloggers out there who like to declare this right as well.
The high price of the seat doesn’t entitle you to recline. It entitles you to safe transport from point A to point B. Unfortunately, you fliers made it about that years ago. Let’s accept the conditions that defines reality today and create a more “win win” situation for fliers in the back of the bus.
July 10, 2014 on 2:00 am | In Airline Service | No Comments
Southwest Airlines holds the unenviable #12 (out of 14) position for on-time arrivals on the latest list released. Hawaiian (surprise, surprise) is first and Alaska and Delta follow in 2nd and 3rd place respectively.
Southwest didn’t use to hold that position . . . ever. In fact, it held #1 positions in on time for a long, long time.
Now, yes, they’re bigger and they’re busier but . . . here is the thing:
Delta is #3. US Airways is #5 and American Airlines is #9.
Southwest is losing this battle badly and it isn’t just because they’ve entered non-traditional markets either. When people ask CEO Gary Kelly about a culture loss, these are the things that come to my mind. He refutes that culture loss but I don’t think that it is fair to believe that culture at Southwest is the same it ever was.
There are operational problems at the airline. Their systems are creaking under the loads they’ve been placed under. They have no systemized approach for scaling up to their demand and their not leaving happy employees in their path.
So, when people call out a deterioration of culture at the airline and they really do mean things going down hill such as on time arrivals, it’s best not to say “Oh no. We’re fine!” Acknowledge the problem and start to address it rather than acting as if there is no problem.
Otherwise, you start to look like American Airlines circa 2010.
July 9, 2014 on 11:36 am | In Airline News, Trivia | No Comments
Airlines such as American Airlines and Delta Airlines are sharply reducing the number of flights they are flying to Venezuela at this time. The problem is that while they like the flying, they can’t get their money out of Venezuela.
Most recently, American Airlines has said it has over $700 million that it cannot retrieve from the greedy hands of Venezuela’s government. $700 million is a lot of money for any company and even for an airline, that’s a lot of cash. News reports now say that nearly $4 billion (with a “b”) is being restricted by Venezuela due to currency restrictions in place.
Venezuela (and some other countries) are greatly restricting the amount of foreign currency that can leave the country at any one time. Because of rampant inflation and hyper-inflation induced by socialist movements in such countries, these nations now have a severe problem is coming up with enough “hard” currency to pay their global bills.
That’s significant when it comes to Venezuela because this is a nation that has had a profitable oil export going on for years. Typically that brings in more than enough foreign currency to balance outflows for most nations.
The worst of this is that as these balances grow in these countries, they look more and more attractive to hold on to. $4.9 billion is a lot of money to a nation such as Venezuela. In fact, it’s about 1% of Venezuela GDP.
Think about that for a moment. For foreign airlines alone, Venezuela is intentionally restricting as much as 1% of its GDP.
How is this done? The nation devalues its currency strongly and regularly. An airline such as American Airlines sell a ticket for say, $200, it’s paid for (in Venezuela) in Venezuelan Bolivars at the official exchange rate. That exchange rate is set by the government. But the government changes that rate arbitrarily and lower before that money gets to the airline. Here is a simplified example:
SuperStar Airlines sells tickets in Venezuela for Bs 1000.00 (One thousand Venezuelan Bolivars). Juan Diaz purchases a ticket and pays in cash Bs 1000.00. The exchange rate is (officially set by Venezuela) set at 4 Bolivars to $1 US. The airline collects this money into a Venezuelan bank account in that currency. Now, periodically, SuperStar Airlines would like to have that currency sent back to its headquarters in the United States. But the Venezuelan government makes this very difficult to do because it’s a large sum of money. Basically, this currency has to be sold for dollars and the only place those dollars can be purchased (legally) is the Venezuelan government.
So the Venezuelan government “sells” dollars for an exchange rate that is set at Bs 5 to $1 and suddenly the money that SuperStar Airlines has is now worth much less.
What makes this worse is that the Venezuelan government is maintaining several different exchange rates that are “official” and those are egregiously unfair to the businesses such as airlines operating to and from that nation. In addition, the government is devaluing its currency more in the exchange rates that primarily effect foreign businesses. Furthermore, it’s only permitting a trickle of cash to be exchanged and sent out of the country at a time.
This results in a condition where it just doesn’t make sense to fly to Venezuela. Actually, it doesn’t make sense to do any business in Venezuela and one could be tempted to call Venezuela the Alitalia of countries at this point. When you can’t make money and take it back home periodically at a rate that allows you to earn a reasonable profit, you just have to stop doing business in that country.
This is what many airlines are doing now. One thing that the former President (of Venezuela) Hugo Chavez understood was that he needed foreign businesses to do business in Venezuela and he kept this game at a tolerable level. New President Maduro and his government is not making it tolerable because to do so means they cannot throw money at their citizens to stay in power.
And staying in power is important.
This is very reminiscent of how many nations in South America operated in the 1960′s, 1970′s and 1980′s. And it killed those economies. Airlines had to be very creative with how they got money out of those countries legally. Braniff was very good at this but even Braniff would find itself doing very odd things from time to time. For instance, its leather seats came from leather from Argentina. That leather was “exported” by Braniff because they had to buy something to take “value” out of the country. Leather was a way to get “value” out of Argentina. Other times, executives would travel to the Latin American country in question, buy financial instruments of various types (often bonds) and then stuff their suitcases with them and come home. I know this because that is exactly what my father had to do at Braniff more than once.
When an airline gets to the point that it says it is untenable to continue business in a nation, that’s pretty bad. Airlines will do business with just about anyone if there is money to be made.
I strongly suspect that Venezuela’s response will be that their airline will fly people where they need to go. Except . . . how will that airline gets its money out of those countries when they use retaliatory measures (allowed) against Venezuela? This is only one chapter of a multi-story chapter. Stay tuned for more.
July 7, 2014 on 2:00 am | In Aircraft Development, Airline Service | 2 Comments
I read a story from Forbes recently where the possibilities that the 787 opened up were discussed. Specifically, how new routes to China were springing up now that the 787 was available to do “long and thin” routes for airlines.
United Airlines opened up a thrice weekly route from San Francisco to Chengdu (in the interior of China) that is 6857 miles in length. Not nearly the maximum distance a 787 can fly but certainly a distance that isn’t flown often. That is the equivalent of flying across the United States from coast to coast 3 times.
The reason that route is possible is because the 787 delivers seat costs that are less than much larger airliners (777, 747, A380) despite it being able to seat just over 200 people. The United Airlines 787 seats just 219 people, for instance.
On that San Francisco – Chengdu route 40 years ago, the route would have been flown from San Francisco to some place such as Japan on a 747 where a smaller but still long-legged airliner such as the DC-8 would carry some passengers onwards to Chengdu, a distance of 2100 more miles.
That is the magic of airliners today: direct routes instead of spoke-hub–hub-spoke.
It’s why airlines do want range and the idea that airlines will accept less range for a cheaper vehicle is somewhat suspect in my opinion.
It’s why I believe that the A380 is a niche airliner and will forever be a niche airliner. Why should I fly from Dallas to Dubai to Mumbai on Emirates when I could theoretically hop on an American Airlines’ 787 and fly from DFW to Mumbai direct? (And very doable on the 787-9, I might add.)
This is the quiet revolution of the 787. It isn’t the carbon fibre or engines. It’s the very cost effective airliner for such routes.
July 5, 2014 on 2:00 am | In Trivia | No Comments
Am I the only one to notice that American Airlines’ social media has suddenly become both entertaining and fun? I used to go months without seeing posts from American Airlines on Facebook and now I see multiple posts each day and they are funny and moving and entertaining. It sets a great tone for this airline and I hope its nurtured.
Some examples are:
- a post of an airplane wing against a sunrise backdrop in the sky with the words “O beautiful for spacious skies…” on 4th of July.
- Another sunrise photo with an AA tail at a airport gate with “The early bird gets the worm…”
- A post on a Wednesday with a photo of a 777 taking off that says “Hump Day? More like #WheelsUpWednesday!”
- A photo of an AA Captain who happens to be a woman that says: ““Fifteen years ago, another female captain brought her 7-year-old son on a work trip. Throughout the sequence and on the layovers in the Caribbean, he took it all in. On the flight back into Miami, one of the flight attendants asked if he wanted to be a pilot when he grew up.
He scrunched up his face and, with complete disdain, said, ‘No, that’s a GIRL’S job!’” – Capt. Kathi Durst, Fleet Captain 737″
These posts are fun, saucy and I hope they continue. Great job, American Airlines
July 4, 2014 on 12:27 pm | In Airline History, Trivia | No Comments
The Spirit of ’76 / Braniff Flying Colors
July 3, 2014 on 12:50 pm | In Airline News | No Comments
First Quarter earnings last year in 2013 for United Airlines was a disappointing loss of $362 million. United worked extra hard to deliver even worse results in 2014 with a loss of $580 million.
All of this in the face of historic and near historic profits being enjoyed by airlines across the United States. American Airlines Group is having a banner day but we’ll have to excuse some of that blistering performance as it’s most recently out of bankruptcy and it has yet to stabilized in its merger. Regardless of my dampening the mood on AAG, they have done far better out of the gates than virtually any other airline and that ain’t nothin’.
It bets the question of what will happen to United Airlines and I keep visiting this subject as things keep getting worse. I strongly suspect we will see a change in leadership in the near future at that airline as these results won’t be tolerated for very much longer.
That won’t solve the problem, however. United’s problems are both organizational as well as culture based. This isn’t an airline whose employees want transformative change. In fact, there is a belief that if the leadership would just get out of the way and give them what they want in salaries, the airline will operate profitably. Each union holds the company hostage with poor performances and behavior that is a patient wait for the company to start to teeter again.
Overthrowing leadership rarely gets you what you want. An ailing airline doesn’t provide leadership in salaries, growth or quality of life.
It will take a transforming leader to turn United Airlines around at this point and I think that person will be very hard and very elusive to find. Such a leader will have to gain the trust of both sides of the company (United and Continental) will simultaneously imposing change and bringing about vastly better operational efficiency.
That’s a tall order for that airline. Who do you hire?
It will be tempting for someone to hire a CFO from another airline. United has enough financial management to run 4 or 5 airlines. Those good enough for the job have the dream jobs of their careers already.
And the excellent Continental Airlines leadership is just kind of . . . gone.
It will be tempting to find someone who is already a top CEO or who has retired from an already successful company. I believe United will need someone hungry to lead and transform rather than someone who has the mission to act as steward for the airline.
The right leader is always out there. The trick is to find her or him in time. The UAL Board will have to remove the current leadership, find a steward and then go on a search to find the right person for the company. Waiting very long simply means that the company loses more money. The merger is almost 4 years old now and no modern airline merger had bled red ink like this one.
I would go look at the leadership at airlines such as American Airlines Group (but be prepared to fight Doug Parker hard for any of them), Southwest Airlines and Delta Airlines. I would look hard at Alaska Airlines as well. Find your man, give him carte blanche to execute change and step back to see what happens.
June 30, 2014 on 1:58 pm | In Airports | No Comments
Recently, the mayor of Houston, Annise Parker was quoted as saying that Dallas and Houston do compete for international traffic and my only reaction was “Finally, someone willing to admit the truth.”
Both cities are large hubs and both are large gateway cities for the region. For 40 years, the cities have worked furiously to ignore the fact that each desperately competes with the other for international flights. In fact, until recently, I would have argued that Houston IAH had more diversity in its international operations than Dallas Fort Worth DFW.
I know for fact of many IT professionals working in the Dallas area under H-1B visas frequently go to Houston by car to travel home because it’s cheaper.
With Houston’s construction of an international terminal at Houston Hobby, it’s about to get even more competitive with Dallas. For while Dallas Love Field will be unrestricted to domestic traffic in the 48 states, Houston Hobby will be unrestricted . . . completely.
Dallas / Fort Worth has never treated Southwest Airlines as a full partner in the community. In fact, the metroplex area has always been willing to embrace the employment but never has been willing to truly work with Southwest to find out how to grow the airline in the DFW area. American Airlines has had something to do with that.
This area is home to the biggest US Domestic Airline by passengers (Southwest) and the largest airline in the world (American Airlines) but Southwest gets very little Love.
Dallas doesn’t drive competition. It doesn’t drive access and it doesn’t drive diversity in who serves it. Houston always embraced both Continental and Southwest and worked hard to become attractive to a wide range of international airlines. As a result, air fares from Houston to destinations inside and out of the United States are more competitive in general.
That’s a shame for the Dallas / Fort Worth area because I think it will continue to favor American Airlines and it will continue to restrict Southwest Airlines. Love Field will be held in check from any growth because of the latest deal with the Devil (holding the terminal to 20 gates of which Southwest gets to hold 16 and which Southwest must give up gates if it wishes to use DFW. ) It’s a problem that few in the area are really aware of.
Yes, Houston and Dallas compete and Houston generally kicks Dallas’ ass on a regular basis.
June 13, 2014 on 12:51 pm | In Aircraft Development, Airline Fleets | No Comments
Emirates has cancelled its order for (70) Airbus A350 aircraft and that has left Airbus with a black eye. It’s not a body blow to the program but it is an unhappy moment for Airbus and Airbus’ COO John Leahy whose best spin on the subject was that the 787 has had more cancellations over its program. (The 787 has also been a program for years longer and has considerably more orders overall.)
The blow comes from the fact that Emirates is a good Airbus customer and it would appear that Emirates is rejecting the premise that the A350 is a solution for high density, long haul carriage. The underlining of this conclusion would be Emirates’ large order for the 777-X.
The A350 clearly fits a need among airlines but as a product line, I continue to wonder if it hits the right mark. When Airbus has to consider an A330NEO to slot underneath its A350, that isn’t good. The A350 was originally supposed to be a kind of A330NEO.
The 787 has its product range in the 787-8, -787-9 and 787-10 and it joins that product range with the new 777-8 and -777-9 which sees Boeing providing a combined product family that spans 5 aircraft and a seat count ranging from 240 (3-class) to about 405 (3-class). Pilots can transition between the two aircraft family in a single handful of days and that amounts to great flexibility for an airline.
Those 2 families also offer state of the art fuel efficiency and engines. They are the advanced leap that airlines look for.
Airbus has the A330 (getting old no matter what Airbus thinks) and the A350 which will span a seat count from 270 (3 class) to 350 (3 class) and that’s pretty narrow and leaves a large gap for widebody long haul between 220 seats and 270 seats. It also leaves a 60 seat gap at the upper end and Airbus’ only other answer is the mammoth A380 which already has at least one customer (Emirates) asking for a NEO.
It’s a black eye and the appropriate action on Airbus’ part is to better consider how it meets airlines needs for long and thin routes as well as long and thick at the upper end but below the A380. Unfortunately, the A350 is already fixed in specifications and that leaves little maneuvering room.
Which leaves me thinking that the A350 was never well thought out from a strategic point of view. First, it was going to be an A330NEO, then it was going to be an A350 and then it morphed into the A350XWB aimed at the 777 but without quite the revenue capabilities of a 777.
Hint: Make sure you make money for your customers. When the 777 is the darling of the party, give them a 777 or better, not a compromise.
It’s a black eye and one that other customers, particularly those in the Middle East who are voraciously ordering aircraft, will pay attention to. It doesn’t “end” the A350 but it highlights Airbus’ diminished ability to serve its customers in the twin engine, widebody class.
And we need Airbus to do better than that. Without Airbus, there really is no Boeing and vice versa.
May 30, 2014 on 4:27 pm | In Trivia | No Comments
A preview of my trip(s) on US Airways today:
So far anyway.
May 26, 2014 on 11:25 am | In Aircraft Development | No Comments
And who cares?
China is and its very own aircraft manufacturer, COMAC, says it is about to deliver the first ARJ-21 aircraft to customers.
I suspect the customers cringed at the idea of having to take delivery.
The ARJ-21, for those of you who don’t know, is China’s attempt at a regional jet. To be fair, the aircraft has a lot of US content in it in the form of avionics from Honeywell and Rockwell Collins as well as a GE engine (the CF34 used by many regional jets and which is being replaced with Pratt & Whitney GTF engines by other regional jet manufacturers.)
Nominally, the aircraft is designed to compete in the 70 to 100 seat class also known as Embraer and Bombardier country. It won’t.
The airliner, despite China’s protestations to the contrary, is a copy of the McDonnell Douglas MD-80 series aircraft that was assembled in China as the MD-90 for a brief while. Admittedly, Chinese MD-90s are reportedly just as good as any other but they were also made from kits. It even will share the 5-abreast seating the DC-9/MD-80 series had.
It does have some new bits: the airliner got a new wing courtesy of Antonov and “fly by wire” courtesy of Honeywell. But if you think the latest generation of intellectual property was given to China for this airliner, you would be wrong.
The only companies who have ordered this airliner are Chinese airlines, Chinese lessors, an Indonesian airline, a Myanmar airline and GECAS. I’m betting GECAS ordered its token 5 to keep doing business in China.
I’m somewhat surprised that North Korea or Cuba or Iran hasn’t ordered one.
I’m pretty sure the Myanmar order is political as this airline (Myanma Airways) also recently made a much more real order with GECAS for 6 Boeing 737-800 and 4 Boeing 737-MAX8 aircraft. It already is leasing the Embraer 190AR. One suspects that China felt it needed some “international” orders and went out and strongarmed a couple.
The Indonesian airline, Merpati Nusantara Airlines, does operate a Chinese airliner. It operates the AVIC MA-60 which is a kind of revised Antonov which kind of looks like an ATR-42 turbo-prop. This airline also has some old 737 aircraft. Given what we know about the state of airlines in Indonesia, I think we can assume that this airline has ordered what it did simply because it couldn’t get airliners from anyone else.
Still, the ARJ-21 is important if for only one reason: It’s a very educational exercise for China who will use it to build the also inferior COMAC C919. The so called Boeing/Airbus competitor that China is already late on as well.
China won’t build a competitive airliner in this decade. It probably won’t build one in the next decade either. You can bet that if they stick with it, they will be building a competitive airliner in the decade after that. The one thing that the ARJ-21 does signal is that China is serious about figuring out how to capture that aviation market which is theirs and a piece of the global market as well.
May 15, 2014 on 4:25 pm | In Mergers and Bankruptcy | No Comments
In the airline industry, mergers are a mixed bag of successes and failures. Continental Airlines, for instance, nearly died twice due to poorly executed mergers. Northwest Airlines was impacted for years and years from its merger with Republic.
In more recent history, those mergers have been more successful such as US Airways (from America West and US Airways) and Delta (Delta and Northwest). The jury remains out on Southwest and Airtran (although this is trending towards success) and US Airways and American Airlines. Sadly, I think the trend on United is that it is failing as a merger.
Delta is the rock star of airline mergers and I think there two great reasons why.
First, Delta engaged in an airline merger that built a powerhouse network. Delta and Northwest had hubs that were truly complementary and which brought together a strong domestic network and a strong international network.
That union of networks provided genuine revenue synergies that you rarely see in a merged airline. The networks supported each other and built upon strengths and didn’t merely see capacity reduction on common routes.
The second reason Delta hit the right pace is financial. This airline watched its capital costs and set financial targets for performance that, for the first time, included paying for the cost of capital at an airline. Instead of buying all new aircraft, the airline has managed its fleet carefully using aircraft that had low capital costs but which also provided near competitive fuel efficiency.
The airline also managed its revenue appropriately by focusing on doing something that my own father was a vocal advocate for: treating each city pair and route as a business that should be profitable. Instead of asking that a sum of routes make some kind of profit, Delta expects its routes to ultimately become profitable or to be removed from its system.
The airline is no loner focused on being the biggest airline nor the airline with the greatest frequencies. It’s focused on being the most profitable airline and managing to that goal by ensuring what it does brings a return on investment to the company.
And who embodies this same kind of approach?
Definitely Southwest although they continue to be on my watchlist. Before anyone says it isn’t the same Southwest Airlines from 20 years ago, let me offer this: I wouldn’t want it to be.
Southwest does watch its routes carefully still and does work hard to ensure it’s city pairs are profitable. However, they are clearly going more network than ever before and I do wonder if the complexity is going to overwhelm their good senses. Time will tell.
I think the American Airlines / US Airways merger has the potential to be more profitable than Delta in time. And I think it will have one key advantage over Delta: Better aircraft.
Delta is walking a very fine line on its fleet ages and will be in danger of getting into trouble from a fuel spike as a result. American will have one of the newest, most fuel efficient fleets around and that will help mitigate against fuel spikes quite a bit.
United, I think, is a growing failure and the truth is that while I think this has a great deal to do with poor management, I also struggle to find a compelling argument for merger these days. The synergies don’t seem to be there and I don’t see the two parts adding up to a sum greater as a whole. The jury may still be out on this merger but the jury foreman is taking final votes and it’s not looking good presently.
May 13, 2014 on 4:54 pm | In Aircraft Development | No Comments
Both Airbus and Boeing have next generation updates to their single aisle products on track for delivery in the next few years. The Airbus A320NEO is arguably the better seller over the 737MAX but both are succeeding well enough to continue sales for quite some time.
But who will blink first?
That is, who will build the next completely re-designed single aisle aircraft that will replace the Airbus A320NEO and Boeing 737MAX aircraft in the market?
In the greater scheme of things, I continue to believe that if Boeing had built a new 737 replacement, it would have ultimately won The Single Aisle Wars for a decade or more. They would have sacrificed some sales today but . . . I think they would have cemented dominance in that market for years to come.
Sadly, that didn’t happen.
Airbus has been making the right calls lately and I think they’ve done a great job in estimating what the market wants as well as being willing to step forward and build what the market wants. Boeing hasn’t shown much courage.
Yet, I think it will be Boeing who builds that next aircraft. I think Airbus will focus on its A320NEO and I think their next project will be an A330NEO and they still have considerable work to finish on the A350 series aircraft.
Boeing has the 787-10 to complete which will be an unsatisfying derivative instead of a hit (it won’t have enough range/payload to really attract customers to it, in my opinion). Nonetheless, the 787-10 will be pretty easy to bring to market. They have the 737MAX to get done and that will be a low risk effort as well. The 777-8/9 will also be a fairly low risk aircraft, too.
Boeing has all low risk programs with everything getting to market by 2020. By 2020, Boeing will have realized that the 737MAX isn’t quite making it for the single aisle airlines. To remain in business and truly engage with the airlines of the world, Boeing will have to commit to a new 737 replacement and it will have to push the envelope pretty far.
I believe that 737 replacement will start at about the 160 seat capacity (standard 2 class) and run up to 210 to 220 seat capacity. I think all variants will have trans-continental range and I believe that at least the top two variants will have intercontinental range with ETOPS at introduction.
I do think there will be 3 variants but I also suspect many will speculate that there will be 4 variants. My expectation will be:
Variant 1: 150 – 160 seats, 3600nm range
Variant 2: 180 – 190 seats, 4200nm range
Variant 3: 210-220 seats, 4200nm range
I think we’ll see a geared turbo fan a la Rolls Royce on the aircraft or a Pratt & Whitney engine. What I don’t think we’ll see is a CFM engine. The CFM design isn’t going to make the leap into the next generation. It held up for the NEO and MAX but only barely. The Pratt & Whitney is more likely the future.
What else will be different? The fuselage will not be metal although it likely won’t be like the 787 either. The wing will be much more efficient and the cockpit will be harmonious with the 787 and the 777-8/9.
What it won’t be is a 757. As much as everyone hopes for another overpowered 757 to show up, it won’t be that. Instead, it will be an aicraft uniquely designed to answer a question for 20 or more years. It might look like a 757 but its design and requirements will make it entirely different.
But first someone has to blink.
May 12, 2014 on 1:59 pm | In Trivia | No Comments
About a week ago, I received a comment posted here on FlyingColors that was both rude and offensive. That post came from a long time Braniff fan located here in Dallas.
Sadly, Brooke Watts isn’t a nice man.
I have found his website (The Braniff Pages) and associated Facebook page to contain a wide array biased comments on Braniff over the years with a vitriol marked for former Braniff CEO Harding Lawrence that borders on rabid. Frankly, the things said about the Harding era are bizarre and don’t actually reflect many facts. Hey, that’s my opinion and you’re free to ignore it.
But I don’t think that Brooke is one to really rely upon facts to support arguments.
The bias tends to change the story of the airline, particularly in the Harding years, but I’ve tended to maintain an attitude that it’s his website and his opinions and he’s free to shout them out as he wants.
I regret to inform all of you that Brooke doesn’t really extend the same courtesy to anyone. else.
That’s a shame because he does have quite the collection of items and he could be a great advocate for the airline’s history.
Instead, Brooke tends to threaten and abuse people and does it with such regularity that I cannot ignore it anymore.
About a year ago, Brooke decided that he would attempt to bully me away from a comment on his Facebook page by posting my name and address publicly and demanding to know if I was that person. Only after he did this did I find out that he’s done it to others several times. Unfortunately, Brooke has the habit of deleting anything that disagrees with him on his Facebook page.
Fortunately, I kept a screenshot of his bullying for posterity before he deleted it since I had noticed that he had that habit some time earlier.
Still, I tend to look at people acting like that and just leave it be. After I replied firmly to Brooke suggesting he acted inappropriately in taking that action, he banned me from his Facebook page.
This had the effect of . . . nothing.
I’ve ignored Brooke since then and I’ve counseled a number of other people that he’s attacked both privately and publicly to do the same. Specifically, I’ve suggested that there is no arguing with someone who spews hate and its best to leave it be.
I’ll admit that the cumulative effect of his actions has upset me at several points for he seems to have a flair for attacking people who actually have nothing to do with him.
And then his latest remark came in the form of a comment made to the FlyingColors blog. Specifically, he wrote:
“Yes, and you have NO airline experience. You are a tool and an idiot.”
I approved the comment because I’ve generally had a policy of approving all comments that didn’t include blatantly foul language. This one was borderline but it seemed more right to approve it than not.
I’ve let this be for a period of time because I wanted some clarity before responding, if I did at all.
I think the bullying and insults needs to stop, frankly. So I’m making it public. As many pointed out to me when I was growing up, how you act in public really is a direct reflection on upon yourself and what you stand for.
Brooke is free to comment all he wants on his forums. He’s free to ban people from his websites and forums. He can send private emails and insult anyone he wishes to. Including me. Brooke can shout and denigrate a wide variety of people from the Braniff era if he so wishes.
But I won’t tolerate someone like him being like a low-brow and a cretin. So his comment gets published here and any other insults he cares to push onto my site will be published as well provided they meet the guideline that I don’t care to have intentionally foul language. However, there is one caveat:
From here on out, I shall be giving them a place of prominence so that those associating with Brooke can see his behavior clearly.
And for those of you wondering if that could have been Brooke, the IP number of the person who made the post traces back to his home address which, coincidentally, I had available due to a purchase I made on Ebay. So, it was Brooke, his wife or his dog, I would imagine.
May 9, 2014 on 4:09 pm | In Airline Service, Airports | No Comments
Virgin America appears to be the winner of the 2 gates at Love Field according to numerous reports in Dallas media. There is no official city announcement to date but reporters are citing two unnamed sources in the City Manager’s office confirming this outcome. Dallas media is rarely wrong with such sources.
It’s an acceptable outcome for Dallas. It won’t really increase competition in this marketplace very much except on a few long haul routes out of Dallas but it will be quite interesting to see the effect Virgin America has on those routes as I think it will provide justification for pursuing even more competition in the marketplace.
When I’m asked who I would like to see get those gates, that’s a tough question. Frankly, after much thought I’ve begun to think that Dallas might have actually been best served with common use and better served by Delta Airlines or American Airlines flying out of those gates.
Let me make an announcement: There is room in the DFW marketplace for a shorthaul provider using the Q400 or ATR72 to serve markets in the Texas regional area out of DFW. In my opinion, you could very well make a killing with this airline.
Particularly if you base out of DFW.
From DFW, you could serve: Houston (2 airports), Austin, San Antonio, Corpus Christi, Brownsville-Harlingen, McAllen, Abilene, Laredo, Midland-Odessa, El Paso, Lubbock, Amarillo, Little Rock, Fayetteville, Tulsa, Oklahoma City, Shreveport, Memphis, and New Orleans.
You can string together low frequency cities for a better load factor and you can do high frequency turns at larger city airports. And you could probably do a deal with some of the other airlines serving DFW to interconnect.
Your seat costs would be superior, your weather would be more than acceptable and your price would make your competition whimper.
In the meantime, let’s be glad the The Great Gate Fight is over (we hope) and see what comes next.
May 7, 2014 on 1:21 pm | In Airports, Mergers and Bankruptcy | 1 Comment
The City of Dallas promises a decision on the Love Field gates held by American Airlines at this time. Their plan is to have a briefing on the LEK Consulting report, an executive session briefing by the City Attorney and then there will be an open discussion.
In my opinion, the City of Dallas is marching blindly towards major lawsuits from a number of parties. The City Council has apparently chosen to believe that the sudden demand for these gates means they get to be the big players.
Careful what you ask for. Airlines have vastly more powerful legal resources and the US Justice Department is never amused at amateur hour getting in the way of a Justice Department decision.
If Dallas chose to acknowledge the lease currently held by American Airlines and permit a reasonable sub-lease, it would be ironclad in its ability to withstand challenge. Maintaining the status quo, so to speak was its safe and legally appropriate choice.
By choosing to dangle these gates around on the pretext of benefiting The Citizens, Dallas is opening itself up to at least 3 lawsuits by my count. Lawsuits that will cost Dallas and find Dallas having to bow to a legal settlement that could well be far worse than the present proposed outcome by The Leaseholders (aka American Airlines).
Evidently Dallas has a lot of extra money laying around these days and doesn’t mind the costs to its citizens. It has already spent $50,000 on consulting to expose itself to these (potential) lawsuits.
If the City of Dallas wishes to promote the welfare of its citizens in this airport, the City should publicly and strongly advocate for a (needed) expansion of Love Field with gates held for common use by all airlines (including Southwest) on a periodic auction basis (annual is best). That’s what would best benefit the city and certainly that is a “best investment” for The Citizens.
May 2, 2014 on 1:25 pm | In Airline Fleets, Airline History, Airline News, Mergers and Bankruptcy | 1 Comment
I honestly think it’s only a matter of time before the American Eagle spinoff, Envoy, is shut down. Unable to get an agreement with the pilots, American Airlines has decided that Envoy will not receive new aircraft for new flying.
Instead, new aircraft will go to other regional airlines and Envoy now faces a 3 to 4 years dry season and a wind-down of the EMB-140 fleet.
In part, I do think that pilots wrongly played tough in their latest negotiations. I think that getting an agreement that kept them in the game was a far smarter bet than to reject the agreement and find themselves in a business that has no prospects.
If I were a pilot at Envoy, I would move heaven and earth to get a job with a “major” and move on with life. Only if I had retirement prospects over the next 2 to 3 years would I hang on.
The choices are slim out there. Pilots cling to the idea that a pilot shortage will change things.
The so called pilot shortage has been spoken of for 10 years and never really has materialized. Airlines have figured out how to deal with such shortages in ways that don’t count on pilots. I wouldn’t be betting on a shortage that has never materialized to date. It’s possible that it will but betting on it only makes you look naive at this point.
I fully expect Envoy aka American Eagle will be shutdown in less than 4 years. I do not think it has good prospects for a merger either. They have nothing but a very senior pilot base that has shown intransigence towards the changes in the industry. Why merge with that when you can just wait for the creature to die?
No, I think Envoy will join Comair (ex Delta) in a very undignified death.