American Airlines CEO Gerard Arpey has hinted that his company may well use their new 787s (when they arrive) for replacing 767’s and that they would make a good fit for flights between New York City and London. This is in stark contrast to announcements we’ve heard from airlines such as Continental who are planning New Zealand and Africa flights with theirs.
There is no doubt that putting the newest aircraft and one with the amenities that the 787 promises on NYC-London routes certainly will serve the business class customer well. However, many analysts have already speculated that the 767 may well continue to be an equal performer (or nearly so) on that kind of route. The 787 is expected to realize its real benefits on routes in excess of 5000nm.
AA already has a large fleet of 777-200ER aircraft configured for not that many more seats than their 787s and uses them on its long haul routes already. Given that you would want to use those aircraft for those profitable routes, you have to find a place for the 787 and that means new routes and growth or replacement of existing airframes. In this case, many of AA’s 767’s are rather old and a 787 replacement will still yield benefits that should be appreciable.
Nonetheless, it’s disappointing that AA’s hints point to replacements on existing routes rather than growth. It is early days for that kind of speculation and that may well change. Currently, AA doesn’t even have a new pilot agreement governing that aircraft as of yet.
The Southwest Airlines Flight Attendants say that they don’t want to obstruct SWA from getting a larger 737 at all in response to speculation that this internal debate at SWA went public in order to force the hands of the Flight Attendants union.
Instead, they simply point out that adding another aircraft, according to their current agreement, opens that same agreement up to renegotiation on issues such as pay and working conditions.
Huh?
I don’t see any reassurances that they are for or against this still. Instead, I see language that I would interpret to mean that they see an opportunity to renegotiate their contract earlier than the first date it becomes amendable. It would appear that this remains a potential obstruction, to me anyway. At the least, it appears opportunistic.
One thing to come out last year during SWA’s attempt to purchase Frontier as well as during its controversy on codeshares with WestJet and Volaris was that SWA employees wanted to see more flying ( and more employment opportunities as a result of that additional flying) on their metal, not another company’s.
This addition to the fleet of the 737-800 does just that for the Flight Attendants with absolutely no change in their working conditions on a per person basis.
That would lead me to believe that SWA Flight Attendants do, in fact, present a possible obstacle to the addition of a new 737 type to their fleet. And until they speak more clearly on their intent, I think they continue to present the most risk to this decision.
Southwest Airlines admits it is considering adding a bigger 737 to its fleet and its the 737-800 that it is interested in. The 737-800 would give the airline more revenue opportunity used in and out of airports that have slot restrictions such as La Guardia or on routes with ever increasing density but where frequency isn’t justified.
Current SWA aircraft, the 737-300 and 737-700 carry 137 passengers and a 737-800 would probably carry about 175 people in a Southwest configuration. That’s an additional a potential increase of 38 passengers for those critical routes with costs that wouldn’t be all that much more than their current costs. A little bit more fuel and an additional flight attendant is all that is really required. That spells more profit.
And I like the idea. Frankly, I think Southwest could stand to add all 3 models of 737 to their fleet and I think they ought to seriously examine the potential of Hawaii and trans-continental flights. But, then, I also think they could stand to look at smaller aircraft for regional routes with high frequency too. It’s going to be the only way they can continue growth in the future.
However, don’t go thinking you’re going to see a 737-800 in SWA colours next year either. Southwest likes to mull decisions like this for quite a while and it would require negotiating amendments to their union contracts with the pilots and flight attendants at minimum.
Take note here, SWA pilots and FA’s, here is your chance to be industry game changers again. Pilots, you shouldn’t ask for a dime more to fly these aircraft. They require no extra effort on your part and it keeps the flying in your house, not SWA codeshare partners’. Flight Attendants, the same goes for you. The passenger count per flight attendant actually *drops* by two passengers with these aircraft. Be game players and make this happen. It costs neither union anything to make this work and most likely will add profitability to the company as well as future stability to your jobs.
This really is win-win. Get greedy and it is the beginning of a long end to SWA.
If SWA does adopt this idea, expect aircraft in the fleet 12 to 24 months after the decision is announced.
In a month, Frontier will have withdrawn the remaining Bombardier Q400 aircraft from the Lynx fleet and I continue to think that my have been a mistake.
Lynx routes will be operated by Republic Airlines E170 jet aircraft. I get that “pure jets” remain somewhat attractive but I think the Q400 will have been shown to have earned more profit on those same routes. I get that Republic needed to find a use for some of their aircraft, too, but I continue to believe that retaining the Q400 would have proven profitable.
Yes, I’m repeating myself. It was a small fleet but a fleet that fit extremely well. In addition, the Lynx outfit was one of the things that really caught Southwest Airlines’ eyes during bidding this time last year. If you’re catching SWA’s eyes, you *must* have something going for you.
It’s interesting to me that despite the emphasis on finding lower costs, so many airlines continue to ignore the turbo-prop. Yes, Continental has it for its regional flights on a large(ish) scale but that’s about it if you ignore Horizon Airlines.
The fact that Alaska/Horizon Airlines is making pretty good money from them and on segments that, frankly, are a bit long for the Q400, should be signaling something to other airlines. But those airlines remain tone deaf and I think that’s a shame.
I look at the flights that American Eagle flies regionally from DFW and it makes me cringe to see those old ERJ-140 aircraft going to Texas and Oklahoma and Lousiana destinations that could be served so much more efficiently with a Q400 or ATR-72. The same is true for the Chicago area.
I honestly believe that the airlines are the only ones afraid of these aircraft, not the customers. Imagine how much more competive one might be using them, however. Low fares are the key, not a jet engine.
The Virgins of Sir Richard Branson are now growing a little closer together.
Now a member of one frequent flier program can earn their miles/points on other Virgin branded flights and will soon be able to redeem miles for flights on various Virgin brands too. The only question is why did it take this long?
Virgin Atlantic appears to be set to be the “leader” of this consortium and well it should be. With the various Virgin brands in place around the world, one would think this kind of linkup would have been fully integrated a long time ago. Yes, Virgin America has been leery of being too closely associated with Virgin Atlantic but I think we can be done with that silliness now.
There are some synergies going on that, I think, could not only be expanded upon but which could lead to more growth for all. Codeshares are one thing, I say start the Virgin Alliance and get cracking on linking up to the rest of the world. Can’t you just see the marketing? “Do you want to be a Virgin?”
The fact that Delta is courting Virgin Blue for codeshares in Australia is proof enough that that the Virgin products are good enough but they aren’t being tied together very well. This latest announce is a good step towards fixing that.
Sir Richard Branson has pointed out the challenges in competing on a route like DFW-London against British Airways and American Airlines, the two airlines who own that route and have done so for a long time. He’s right. Even when they were supposedly not cooperating, that route was “owned” by BA and AA alone. Not only does that remain so but now the two airlines can cooperate on the route.
But now Virgin America is going to fly to DFW. Imagine what happens if Virgin America is able to add a few more flights to DFW from other destinations. Suddenly, there might be enough feed for a Virgin Atlantic flight. Especially one utilizing an A330 or 787.
The Virgins need to cooperate and work with each other. They’ve got a great brand to work with, especially in English speaking countries, and it’s the best choice in fighting back against the alliances. The latest mergers and new alliance anti-trust agreements now should make it possible for the Virgins to argue on their behalf for close cooperation, something they’ve been somewhat reluctant to do for fear of anti-trust issues.
Virgin Atlantic needs to grow, as well. It’s time for them to push past their traditional routes and that’s going to require some different aircraft. Sir Richard Branson’s Airbus strategy hasn’t worked well for that airline and the 747 fleet is starting to get a touch old. 4 Engines 4 Long Haul sounded great but wasn’t the way to go. It’s time for Virgin Atlantic to start purchasing a 787/777 or A330/A350 fleet not just for economy but for flexibility.
Flexibility in that fleet should open up some opportunities for Virgin Atlantic worldwide.
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.
Coming out of the latest financial reports from Delta, several news outlets noticed that Delta has plans to continue to acquire used MD-90’s for their fleet. Unlike almost any other airline, Delta has found a use for these aircraft that beats the economics of the 737-800.
Surely the low acquisition costs and high reliability of these aircraft make a good case for their purchase. The MD-90 is a half generation newer than the MD-80 aircraft flying out there and since most were produced in the mid to late 1990’s, they have plenty of life left in them to be used for an economical period of time. It’s clear that Delta prefers to bridge the gap between the current offerings of Boeing and Airbus and what future aircraft that may come along late in the next decade.
I like to watch the fare prices on various routes that I fly from time to time but none more so than the Dallas to Milwaukee run. To me, it’s an example of what real competition can do and I’ve written about it before. You can read my earlier post HERE.
Well, I took some time to see what was going on with that route now by sample fares and flights for mid-week departures between the two cities in August. First, the good news: Fares are holding steady at or about $170 for advance purchase tickets.
Second, the better news: Airtran is using the Boeing 717 on that route already. No SkyWest CRJ-200 regional jets, we get the real Airtran on a real aircraft that is really pretty comfortable. I figured Airtran would move in with the larger aircraft if only to put pressure on Midwest Express.
Now some bad news: Airtran is only flying an early morning and late afternoon flight on the DFW to MKE run. It’s worse on the MKE to DFW segment with a plain morning departure and late evening departure. I’m guessing it’s the best they can do for now but they’re going to need at least one more flight to make that really work. Their current offering via Atlanta is *not* what I meant by needing another flight either.
Midwest aka Frontier aka Republic is hanging in there. They have 3 flights using the E-170 Embraer jets and that’s really not a bad aircraft for that route. With 2×2 seating and a bit bigger cabin, it works for what is essentially a long and thin domestic route. Well, long-ish anyway. The bad news is that Midwest aka Frontier aka Republic has its first flight on the DFW-MKE run after 10am in the morning. That’s about 2 hours later than necessary.
American Eagle is hanging in there. This is a route that used to often cost as much as $300 round trip just 3 years ago and that was the best fare you could get. Often the only tickets to be had were in excess of $500 and the only choice you had was to fly to Chicago and take the bus if you wanted to save money. But here is the interesting part: American Eagle has its 5 flights a day and I will say they’re well laid out in terms of departure and arrival times. However, American Eagle is now using the CRJ700 on 3 of those five flights (the remaining two use the clapped out ERJ-140) and their fares are as competive as anyone’s.
And then there is Southwest. Southwest’s cheapest fares are competitive with everyone else’s and continue to be one-stop flights with no plane changes. Those flights are now running about 3 hours, 25 minutes however and that’s a bit longer than they were taking earlier this year. The non-stop flights of the other airlines are doing it in 2 hours, 20 minutes. Still, they are the bargain choice for 2 reasons. First, Love Field is cheaper to fly from for more people in the DFW area in that its taxes and fees are slightly cheaper and the travel to Love Field and parking at Love Field is cheaper too. Second, Southwest still isn’t charging for baggage. That means for someone checking a bag, the savings could range from $35 to nearly $80 and that’s real savings.
In practical terms, for me as a passenger to that destination, I probably could save as much as $50 each way in “real” savings by using Southwest. And I’d do it in the aircraft that had the *most* seat pitch of those serving the routes. That’s worth the extra hour of transit time on a leisure flight and might just be worth it on a business flight too. Why? Because my door to door time in the Dallas area is likely to be about the same using Love Field or DFW. I don’t have to drive as far to Love Field airport, take as long to park and/or transit into the terminal, check in quite as early or frenetically and that amounts to probably as much as an hour gained making the trip from the door of my house to the door of my family’s homes in the MKE area about the same no matter which airport and airline I take.
But I can save about $100 round trip if I’m flying with checked baggage and that’s a deal.
If Airtran wants to win Miwaukee, this is an important route for them to succeed on. They’ve got the right equipment for the route now but they’re going to have to work on their frequencies and departure times a bit to really win. Right now, their schedule looks like a compromise.
Midwest is probably continuing to do well but let’s see how they do when the brand changes to Frontier. I’m not saying they’re out of the game. To the contrary, this whole competition thing on this route could end up being Midwest/Frontier and American Eagle again in a year or two. Midwest has good frequencies, good flight times (mostly) and good service. However, Southwest will win this route, I think, when they can start flying it non-stop But that opportunity is still 3 1/2 years away.
When Emirates announced its latest purchase of 30+ more A380 aircraft, a lot of carriers took notice, particularly in Europe. The planned capacity increases that Emirates has put into place for the next 7 years is nothing short of baffling to most and it has made many airline CEOs wonder what they’re missing.
Emirates operates on a model of being “hubbed” in the perfect place from traffic between Europe and India, Asia and Australia. They compete with other international carriers on service and they compete with everyone with frequency and convenience. Currently, many of those flights from Europe to those destinations require a fuel stop and Emirates uses Dubai for that fuel stop which allows them a big advantage on X things: fuel is cheap, landing and taking off is cheap, Dubai is “on the way” to most of those destinations and isn’t much of a diversion for them, and they’re able to utilize their aircraft much more than some on a per day basis.
That’s a powerful advantage. Emirates has also kept many of the largest European governments (economies) from protesting much at all by being a huge customer of Airbus. It’s very difficult for those governments to bite the hand that feeds their aerospace industry. It’s notable that neither Canada nor the US have felt nearly as accomodating towards Emirates (and other UAE carriers) when it comes to access to their markets and in the case of the US, this is despite the fact that Emirates has also been a pretty good customer of Boeing’s.
All of that scares the hell out of European international carriers. Emirates also claims that these carriers are discovering that it takes an A380 to compete with an A380. And then they went all in with their latest A380 order. It’s very tough for those airlines to sit at the table and wonder if they can afford to go all in.
I don’t think it takes an A380 to compete with an A380. I think it takes an A380 to compete with an A380 on a few trunk routes and I think Emirates’ model crumbles with the 777LR, 787 and A350 for much of the destinations it serves.
Right now, I think there is an attraction to the A380 on those routes for 2 reasons. First, it’s the latest and greatest in long range aircraft. Second, it has the freshest service product installed as a function of it being introduced by airlines for only the past 2 years. Over time, the “newness” of the aircraft will go away (just as it did with other new aircraft introduced) and the service product will be matched by others on other aircraft.
Right now, a lot of those legacy international carriers that are so worried are trying to compete with Emirates using 20 year old 747-400 aircraft with a service product that is, in many cases, a generation out of date. If it isn’t a 747-400, it’s a 777-200/300 with a service product that was “copied” from the 747. See where I’m going here?
Since we don’t have much visibility into the real financial picture of Emirates, a lot of analysis of them is speculative. We don’t know where their financing comes from and at what terms. We don’t know what their fuel prices are and we don’t know what their labor costs are either.
That said, I don’t believe it is impossible to compete effectively with Emirates now and particularly in the future. I believe those long, high capacity trunk routes that Emirates works so well are going to fracture with the next generation of jets.
It’s already possible to use a 777LR to reach all of Asia from Europe and the 777-300ER will serve 90+% of Asia and do it point to point. While Europe has traditionally been the transit point between Africa and the Americas, that’s already changing. US airlines are now serving Africa more and more with smaller equipment that fits those long, thin routes pretty well. South American airlines are initiating services to several parts of Africa with similar equipment. and it only gets better as the 787 comes on line.
So Emirates may capture some traffic for a while from the US but it is unlikely to dominate particularly in the future. The magic routes to Singapore, Indonesia, Australia and New Zealand are likely to remain an Emirates strength but take note that those same international carriers in Europe who are freaked out right now are also now taking delivery of their own A380s. Air France has them, Lufthansa just took delivery of its first and British Airways has them on order. They will have the aircraft to compete with Emirates.
Frankly, I don’t understand why someone such as British Airways doesn’t explore setting up a Dubai base to compete directly with Emirates. Or any of the others, for that matter.
Regardless, this belief that huge trunk routes will remain is, in my opinion, false. Those trunk routes will fracture into more and more “point to point” routes that are longer and thinner than ever before and the airlines serving those will be the preferred airlines for that travel. People just don’t like connections when they can go non-stop. If they can’t go non-stop, they still prefer the fewest connections. It’s the time saver and saving time is why we fly.
Frankly, I can see Emirates becoming a bigger player in its region of the Middle East/India/Northern Africa/South East Asia but I see them contracting over the next 15 to 20 years on those trunk routes provided those other international carriers step up and get to work on their fleet and service planning.
There isn’t anything magical about Emirates and despite their potential advantages from being Dubai owned and based, that doesn’t make them the carrier that can’t be beat. It takes work, investment and planning but it can be done.
The last thing those airlines want is their own governments becoming more restrictive of access to markets. It’s a world where that game is tit for tat and that works to no one’s advantage. They can all survive and prosper with the right combination of leadership, management, planning and investment.
Continental Airlines has announced the second 787 route that it will initiate with the arrival of the Boeing 787. The first was from Houston to Auckland, NZ. This time, it’s Houston to Lagos, Nigeria and I’m seeing a trend here.
Continental is clearly intending to make Houston much more of a international gateway city and that makes some sense to me. Houston Intercontinental Airport isn’t overcrowded, has excellent feed to it domestically and the new 787 makes a lot of long, thin routes not only possible but profitable.
It doesn’t hurt that there is a fair bit of oil business in Nigeria too.
This flight will be subject to a fair bit of regulatory approval and planning on the part of ContiUnited but it is both sensible and doable. It’s clear that the 787 will be used to expand opportunities rather than simply replace existing aircraft, at least by ContiUnited anyways.
It’s also further proof that very large aircraft flying hub to hub (hello A380 and B747) as a model for international travel is going to be reduced as these new, next generation widebody aircraft come online.
There is no doubt the airline industry is changing again. With legacies merging to become SuperLegacies and owners of very diversified fleets, there is more and more pressure on regional airlines. In addition, the bankruptcies of the 2000’s have led to airlines with lower cost structures and revised contracts that allow more “regional” flying of mainline routes. That would imply more regional airline flying but the “regionals” flying those aircraft under those scope clauses are, for the most part, owned by the legacy airlines.
Republic airlines has been attempting ot diversify itself by buying Frontier and Midwest. Mesa airlines is just holding on by a thread. ExpressJet tried branded flying and corporate flying without much luck. So, where does it from here?
I think cost is going to be the driver in the future. Regional jets became prolific for one reason in the 1990’s: cheap oil. That’s gone and it is unlikely that we’ll ever see it again. Three regional airlines adopted a newer model of flying modern turboprop aircraft and I think it is interesting that those three also happen to be pretty profitable and reliable operations. Horizon (wholly owned by Alaska Airlines), Frontier’s Lynx and Pinnacle (Colgan) on behalf of Continental all adopted the Q400 turboprop and made it work very nicely.
Yes, Lynx is going away since Republic couldn’t justify a small subfleet when it had other aircraft that were more expensive and which would sit idle if not used on behalf of Frontier. However, even Southwest Airlines was very intrigued by what they saw of Lynx last year when they decided to bid for Frontier. Horizon continues to be profitable and flies this aircraft on some pretty long routes and remains competitive with regional jets and even some mailine aircraft. Pinnacle (Colgan) has done very well for Continental out of the NYC area and will soon be expanding its turboprops into Houston for Continental.
The turboprop is much cheaper to operate. A 30% to 40% load factor can result in a break even flight whereas some airlines effectively lose money on similar routes using small regional jets.
They are cheaper to buy. A Q400 costs less to purchase than an E170/190, has almost as many seats and is just as comfortable for 90%+ of all routes. They’re also a little bit cheaper to maintain.
The modern turboprop can fly block times on routes of 500nm or less that are competitive with any jet. Oh, there might be 5 minutes difference in the block times between a Q400 and an E170 or B737 but it’s a competive block time. Why? The turboprops reach crusing altitude faster, can take off from more runways and can land quicker (reduced time to go from cruising to landing altitudes.)
I think we’ll see independent regional airlines explore more turboprop flying for the legacy airlines in the future. It is a niche that fits them well and, yes, goes back to basics. The regionals which are flying mainline routes with semi-regional jet equipment are going to be subsidiary companies of legacies in the future. The legacy airlines can use them to onboard new pilots and use them as places to keep pilots hired when furloughs are necessary from mainline flying. Unions like that and, as a result, are likely to embrace allowing more “scope” for flying the 70 to 100 seat aircraft on more mainline routes in the future.
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.
The Dallas Morning News Aviation Blog has this post HERE about analysts beginning to like the idea of a merger between American Airlines and US Airways. This marriage occurred to me back in April and you can read my post HERE. Eric Torbensen at the Dallas Morning News thinks it is a terrible idea and I disagree.
The real reason to perhaps not do a merger between these two airlines is that American Airlines is terrible at mergers. Their employees don’t embrace them and their executive corps approaches them like predators. As a result, mergers at AA tend to be plain “consumption” rather than growth or partnership.
Now, if they could embrace a merger, I believe one such as this could be good for them. First, a merger like this wouldn’t definitely not be sexy. The sexy merger partners are now fully occupied and, frankly, there was perhaps just one that really would have qualified as sexy and doable for AA and that was Northwest Airlines. They’re gone. But just because an AA / US Airways marriage isn’t the sexiest thing on the planet and just because it doesn’t necessarily bring the gains that another partner would have provided doesn’t mean that it doesn’t make financial sense.
This one could. Look at the route maps first. US Airways offers a hub presence in two areas of the United States where AA is actually a bit weak. Phoenix is a nice hub in the web and while it isn’t the strongest hub in the country, it does pretty well. Yes, Southwest is there but guess what? AA knows how to compete with Southwest.
Charlotte is a nice Southeastern US hub that pvovides coverage in area that AA hasn’t gotten much traction. AA tried having a hub in Raleigh (didn’t work) and has, from time to time, tried to expand Nashville. It has Miami but that really is more of an international gateway city than it is a domestic hub. So AA has presence in some weak(ish) focus cities for the SE that the Charlotte hub could change for them.
So, in terms of a domestic network, it works. It really is quite complementary to AA’s existing system.
There is some compatibility between the executive leadership of the two companies. Doug Parker is a former AA manager, for example (and his wife still is an AA flight attendant) and some of the other executive staff has roots in AA as well. Some that don’t are from Northwest and the cultures between Northwest and American Airlines aren’t dissimilar either.
But let’s talk about the romantic international part of this. No, US Airways doesn’t offer much to AA that it doesn’t already have. It’s US Airways weakest area. But it isn’t a money loser and there are some hidden benefits. American can probably either A) redirect feed for those flights to one of their existing gateway cities or B) bolster the US Airways international product and make the US Airways international flights a bit more of a competitor. The smart team would do both.
There is another benefit: A more diversified fleet. There is some overlap between the two companies (737, 757 and 767 equipment but the US Airways mainstay aircraft are Airbus aircraft now. The A320 series aircraft could be useful to redeploy onto AA routes currently being served by the MD-80 fleet. The Airbus A330 equipment could be redeployed to AA routes requiring a little more capacity than a 767 but which aren’t in need of a 777’s size or range.
Finally, such a merger would offer Oneworld domestic coverage in areas of the US where it is definitely weak. The Oneworld alliance leans on AA only in the US and the other two alliances were bolstered by at least 2 airlines domestically. This is a great opportunity to improve the Oneworld alliance.
There is value in such a marriage. The problem is, the people who know how to do this kind of marriage and make it work are at US Airways, not AA. Doug Parker and Company understand the value of a union like this and know that you embrace the partners strength and use it. Gerard Arpey and Company come from a school that is more about being a predator and consuming your competition without really embracing them as partners. Since AA is so much larger than US Airways, it’s Arpey who would lead such a merger and I don’t think he’s the right one.
Actually, I think Doug Parker could do fantastic things for AA. If he can succeed with US Airway’s assets and weaknesses, he very likely could do wonders for an airline like AA with its resources. But the AA board would have to want him and despite the recent flare ups against Arpey from analysts, Gerard Arpey still holds the full confidence of AA’s board of directos. He isn’t going anywhere anytime soon.
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.
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.
FlightGlobal has THIS story about Boeing considering a wing extension to improve the aerodynamic efficiency of the Boeing 777 and improve load and range. How the 777 will sell against the Airbus A350 in development is a question everyone is asking these days even though the A350’s specifications and real performance definitions are, at best, still a bit murky.
Although the A350 is definitely a competitor to the 777, engine thrust is really what reveals may be happening here. So far, Airbus has been unable to grow its engine range into thrust ranges that approach what the 777 has with the GE90 engines. Airbus remains at about 93Klbs of thrust from Rolls Royce and its two larger aircraft versions, the -900 and -1000 are, for the moment, have Rolls Royce as a sole source for engines.
Already airlines who are operating the 777 and who have ordered the A350 have said that the 777 will still have a significant payload advantage over the A350. Payload advantages can translate into carrying more passengers, more cargo or more range. In other words, the 777, on first glance, remains a very viable aircraft and with performance improvements, looks to remain so.
But what happens if Airbus is able to convince an engine maker to grow its thrust range into the 105K to 115K thrust range of the GE90? That would probably mean a commitment to some kind of new engine from Rolls-Royce or a stunning reversal of position from GE on supply a version of the GE90 to Airbus. Nonetheless, it’s a hard to ignore how such a development would change the viability of the 777 overnight.
Incremental performance improvements are common on airliners and Boeing knows it can grow the distance between the two aircraft with these improvements but only if Airbus is denied a 100K+ thrust engine. Since Rolls Royce has had quite some time to recoup investment on its large Trent engines and time to spend on research and development, I would not discount the possibility that they’ll commit to such an engine in the future but probably only if they retain some sort of exclusivity.
I think the extended wing, engine performance improvements and other tweaks will keep the 777 in the sales game for the next 4 to 6 years but if Boeing wants to retain supremacy, it’s time to start asking what the follow on successor to the 777 might look like.
Boeing has the 787 back on the right track and while they’ve got some work to do in getting the 787-9 and the speculated 787-10 into production, that has become straightforward engineering now. The 747-8 has come into its own test program and since that is an incremental re-development of the 747, there isn’t much there that isn’t straightforward engineering as well.
The 737 successor is by all accounts something to be deferred for development until late in this decade. Instead, it will receive a new engine almost certainly which will require some changes to the existing design but nothing that would warrant calling it a new aircraft. Instead, such an aircraft will be much like a 747-8 development.
That means there is potentially a 5 to 6 year gap there in which a new development program can take place before the 737 development must start in earnest. I rather think that’s the moment of opportunity for Boeing to go forward with that new large wide body replacement aircraft. It will push the company, certainly, but that development, particularly with what they’ve learned in developing the 787, would almost certainly dominate the markets for 20 or more years if they were to make the commitment.
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.
Republic Airways Holdings, Inc., the parent company of Frontier and Midwest as well as 4 other regional airlines, has ordered 40 new Bombardier CSeries CS300 jets with options for another 40 as well.
The CS300 will seat about 120 people in a mixed class layout and has enough range to fit current Frontier/Midwest needs especially if they select the CS300ER (about 2900 nautical miles range). It’s an aircraft that really begins to infringe upon B737/A320 territory (especially the A318) and which promises very good efficiency, particularly for the kinds of missions Republic flies.
These are most certainly for the branded Frontier/Midwest network. They fit the missions that both of those brands are flying now and compliment the existing A319/A320 Frontier fleet as well as the EJets currently flying for both Frontier and Midwest. The CSeries 2×3 Economy configuration has the potential offer a better product than many airlines offer with their larger aircraft since a passenger has just a 20% of getting a middle seat versus 33% chance on a 737/A320 aircraft.
These aircraft will not fly for the regional airlines serving legacy airlines such as Delta, US Airways or United. The unions for those airlines will never allow that kind of semi-mainliner aircraft fly on behalf of the legacies. No doubt Republic look to re-allocate some of their EJets such as the E170 back over to such flying and this purchase gives them more flexibility in the future.
This is a big order for Republic Airways. Nominally worth about $3Billion, Republic no doubt got significant discount for being the launch customer of this version (Lufthansa has already ordered the CS100) but it does make me wonder if they can afford the order right now since Republic has spent much of its cash holdings and it remains to be seen if legacy airlines are going to be happy about continuing contracts for regional service with an airline that is now competing with them on a mainline level. Time will tell since these jets aren’t due to enter service until 2013 and there will likely be some delay added to that rough date.
At the first of the year, I wrote 3 blog posts shown HERE, HERE and HERE. It was really just my random speculation on what to expect over the next 12 months. Well, now it’s December of 2009. Let’s see how I did.
Boeing 787: I guessed at an April 2009 first flight. It still hasn’t flown although speculation has it flying this month either by December 14th or December 22nd.
Airbus A380: I guessed they would make their goal of producing 21 aircraft this year. As of November 30th, 2009, Airbus says they have delivered 7 A380 aircraft this year. Ouch. This is a program that is in financial trouble. No, I don’t think it will be cancelled. Not yet but please don’t try to tell me this program will make a profit.
My deathwatch had Midwest Airlines going away most likely by a sale. That did happen and while the airline has essentially evaporated (from its original form), it does remain as a brand being run by Republic Airways.
I speculated that Frontier Airlines would be bought out of bankruptcy but I guessed that jetBlue would be the buyer. In fact, Southwest Airlines and Republic Airways were the suitors and Republic won.
I thought that United Airlines and US Airways would announce a new merger with Continental a dark horse candidate for buying United. In fact, Continental became a member of the Star Alliance and firmed its relationship up with United but wisely kept its distance otherwise.
I said that Southwest Airlines would maintain its status quo but that Gary Kelly would be under fire from both employees and outsiders and he was. However, that view is already being reversed again by Southwest’s resurgent strength in the business.
I thought that the Middle Eastern airlines such as Emirates, Etihad and Qatar wouldn’t see a bankruptcy or merger but would slow their growth and aircraft deliveries. That, in fact, has happened and now we see Emirates working hard to distance itself from Dubai World’s financial woes.
China: I said deferred orders. Pretty much what happened.
The Far East: I said airlines from that region would maintain their status quo, probably would not defer orders and might make new orders to replace existing equipment for greater effiency. Again, pretty much what happened.
Australia: I saw QANTAS slowing growth, deferring some orders and fighting hard against new entrants. Again, that’s pretty much what happened. I also saw two weak competitors on the US-Australia routes: United and V Australia. That is pretty much what is happening although V Australia has been pretty smart in working into a relationship with Delta where it appears the two airlines will cooperate with codeshares. United remains alone and with weakening demand.
South America: I said the Argentine government would take Aerolineas Argentinas back from Grupo Marsans and the airline itself would muddle along or contract rather severely in some areas. Bingo. Exactly what happened. I also predicted Azul would become the jetBlue of Brazil and its not hard to guess that that airline is pummeling its competitors. A future prediction was for the airline to fly internationally in 2014 with Airbus equipment. We’ll see.
Africa: I saw Delta continuing to pursue flights to major African cities (true) and SAA (South African Airways) issuing a small RFP for 777 aircraft to replace its rather inefficient A340 aircraft (didn’t happen.)
India: I thought Jet Airways and Kingfisher might merge with the name Jet Airways being retained. In fact, both airlines continue to exist but both are suffering severe financial problems, deferring aircraft deliveries and generally flailing about trying to find a way to continue. One of these airlines will still ultimately have to exit the market and I continue to think it will be Kingfisher. They have the wrong aircraft and the wrong aircraft on order. However, Jet Airways is suffering badly from labor actions among its employees.
United States: I picked United to fail. It hasn’t happened and while they continue to live, their cash holdings are being reduced, they still have severe labor issues, their service product continues to suffer and I still think they should be the ones to disappear. I also thought Glenn Tilton would be ousted and, possibly, replaced by Doug Steenland. That didn’t happen but John Tague has been groomed as Tilton’s replacement. I still think Tilton should go if United can’t fail.
Europe: I thought we would hear of a surprise from Lufthansa. I didn’t like their purchase of SWISS and I didn’t like their flying the A340 in competition against the 777 being flown by many of their direct competitors. They’re still here, still making money and they bought BMI. I still think we’ll here of misfortune from them but apparently it will take a while longer.
Random Speculations:
I thought Southwest might add another aircraft type. It didn’t happen but I think their interest got perked up when they looked at buying Frontier and saw the economics on the Q400.
I thought Delta might order more Airbus A330 aircraft. Instead, Delta is parking them in the desert for the winter season.
I speculated that both China and Japan would defer or drop their regional jet programs. That didn’t happen but the Chinese jet program appears to be a bad aircraft and unlikely to be used by anyone except Chinese airlines forced to buy it.
I thought Bombardier would see a major order (20+) for their Q400 series aircraft from a US customer. Horizon Airlines did up their orders for 10 more but there were no other significant orders.
Airtran to form a small midwestern hub. Yup, that happened. In Milwaukee where they’ve taken over from Midwest Airlines and now face Midwest (brand owned by Republic) and Southwest Airlines entry into the market. I think Airtran will hold on here and continue to develop business.
Last, I hoped that jetBlue or Virgin America would enter the DFW market. Virgin’s CEO, David Cush (formerly of American Airlines) did recently speculate about adding flights to either DFW or Austin. I suspect they’ll choose Austin and DFW will remain a fortress for AA.
That’ s it for my 2009 predictions. I’ll make more at the start of 2010. On the whole, I probably did as well as anyone in making predictions in this business.
