China’s threat to Boeing and Airbus

June 13, 2012 on 1:00 am | In Aircraft Development | No Comments

Periodically it’s fun for mainstream media to hype the Chinese threat to Boeing and Airbus in the coming years. Irresponsible people point to the homegrown aircraft the ARJ-21 and the coming Comac C919 as evidence of this.

There are a few problems with this. First, the ARJ-21 really isn’t quite 100% homegrown. It is a regional jet based on tooling that China had from its assembly of the MD-90 aircraft. It’s wing was designed by Antonov and it’s cabin cross section, nose and tail are identifical to the DC-9 series.

Second, this aircraft hasn’t proven all that ready for real use. The wing designed failed stress testing thus limiting flight test envelopes at the direction of the Chinese Civil Aviation Authority. There are some reports that this jet is not particularly light for the mission conceived of for it and it isn’t being designed to be exactly a leap ahead of existing regional jets that not only do the job as well or better but which have far superior support in the world (Embraer E Jets and Bombardier C-700/900/1000).

It’s likely that the ARJ-21 will enter into service and find itself wholly irrelevant.

The same fate is likely for the Comac 919. This is a paper aircraft conceived as a competitor to the Airbus A320 series and Boeing 737 series aircraft. The C919 will use a CFM LeapX engine and is targeted to have a range that is significantly less than current Airbus and Boeing models have much less the new A320NEO and 737MAX aircraft. I already smell trouble here.

Comac is using technologies from avionics companies and engine manufacturers but lacks experience at integration and production that make such an airliner possible on a commercial basis. In many respects, for such an airliner to gain credibility in the marketplace, it almost has to be better than A320NEO and 737MAX offerings and it isn’t. Not on paper and certainly not in real world performance. It’s sub-par in every way.

The belief that a superior price will win over airlines is wrong. That superior price is unlikely to be less than what aircraft manufacturers are already offering airlines making large orders and price is only one component of acquisition. Other things involved are its cost to operate, cost to maintain and support from the manufacturer. The Comac 919 is not going to meet or beat either Airbus or Boeing in these areas.

So why would any airline buy such an aircraft? Because the Chinese government told them to, that’s why. It has orders but they come from Chinese airlines and in exceptionally small quantities.

Until China takes on a project that it can achieve integration and competitive operating economics on, it won’t learn how to build a major airliner. The idea that a chinese competitor arrives in the market place even in 2020 is silly. At this point, one could use a crystal ball and guess. My guess is that it is 2030 or beyond and by that point we’ll see Boeing and Airbus offering hyper-efficient new airliners that raise the stakes even higher. 2030 seems a long way off but it is only 18 years away. Look how long it took Airbus to gain marketplace traction with its product line under what were arguably far superior conditions compared to Comac’s. When you do, even 2030 seems awfully optimistic. It could happen but I, personally, wouldn’t bet money on it.

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Boeing wants AA to work it out alone

April 26, 2012 on 1:00 am | In Airline News | No Comments

Boeing CEO James McNerney expressed his and Boeing’s viewpoint that they support American Airlines having an opportunity to exit their bankruptcy as a stand alone company.  McNerney acknowledges that US Airways hasn’t bought Boeing in a some time and sees AA as a loyal Boeing customer as well.

Is this support for AA an attempt to preserve the AA orders for Boeing 737MAX aircraft?  At least a little bit, yes.  In addition, Boeing has and continues to support AA’s purchases for aircraft in a variety of ways.  They’re a good customer.  Is that support founded on sheer love for the airline?  I suspect not.

In fact, any worry about the 737MAX is kind of silly.  The merged airline would, upon conclusion, have far more Boeing aircraft and far more resources to service and operate Boeing aircraft than Airbus aircraft.  Furthermore, both airlines have orders for Airbus A320NEO aircraft already.  Airlines of that size can no longer afford to be an exclusive customer of one manufacturer or another.  Their size (and the size of several competitors) demand manufacturing positions that can’t be serviced exclusively by one manufacturer.

I suspect that if Doug Parker is able to re-assure Boeing over its existing AA orders, Boeing will go neutral or even supportive of such a merger.  At the end of the day, it’s about having a customer and earning money.  Furthermore, it even gives Boeing an “in” with the US Airways executive team that it has not had for some time.

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737MAX is getting real

April 11, 2012 on 9:02 pm | In Aircraft Development | No Comments

Boeing has revealed more details on its definition for the 737MAX now and one significant revelation is the decision to add 8 inches to the nose gear.  This was the tough choice engineering wise.

A new pylon and strut for engines will be used in the style of the 787 and the rear tail cone will be extended and the area above the elevator thickened to improve aerodynamics.  Electronic bleed air will be added to improve cabin pressurization (which is much like how the A350 will use bleed air)and better means more efficient fuel burn.

Airbus boxed Boeing into this aircraft by introducing the A320NEO.  I firmly believe that Boeing was leaning towards a new aircraft but also needed time and space to get where it needed to be with that aircraft.  Airbus’ introduction of the NEO made it much more imperative to deliver more efficiency now rather than a decade later.

But with the decision made, I also have to credit Boeing for appearing to have decided to go all in.  They are working very, very hard to bring as much advantage as possible to the single aisle wars with Airbus.

Some perceive that Boeing has been slow to release details and I understand that perception but the truth is that American Airlines’ order last summer forced their hand into a premature announcement.  Had they not had to make that announcement, these new details would seem very much on time.

Most believe that the status quo between the two manufacturers will be maintained.  It is thought that Boeing will have a slight advantage that, according to many, will remain about 2% better than Airbus.

I have a feeling that Boeing might be aiming higher.  I don’t think the decisions they are now announcing about this aircraft reflect a company that is struggling to maintain the status quo in the marketplace.  They appear to be working very hard to make every gain possible against their competitors to bring even more to the table.

Why do I think so?  Because these changes add more risk to their ability to deliver this aircraft in 2017.   If there is one thing Boeing knows, it’s that they cannot afford to damage their credibility with airlines further with a late arrival of the 737MAX.  This is not an all new aircraft with all new materials and airlines will expect it on time or early.

This won’t be revealed a la One Big Announcement John Leahy Style.  Boeing will simply add more and more substantiation to their claims as they continue discussions with airlines.  At the end of the day, most airlines prefer to see results over having a grand announcement.

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Airbus and Boeing need to sell

March 8, 2012 on 4:40 pm | In Aircraft Development | No Comments

A number of analysts have noted that the real goal for Airbus this next year is to sell production slots that are open for current A320 aircraft up to and including EIS for the A320NEO aircraft.  Both Boeing and Airbus need to find ways to preserve value on existing aircraft lines until their new generation aircraft enter into service as well.

It’s a delicate line they each walk.  You want to satisfy airlines with new aircraft but some of those who buy aircraft are lessors and you don’t want to anger them by depreciating their assets they already hold.  And a market glut of aircraft can result in depreciating demand for your new generation aircraft because the capital costs for current generation aircraft can become low enough to make sense for airlines to buy and use.

A good example of that last part is Delta buying more and more MD-90 aircraft.  The capital costs are low compared to current Boeing aircraft and the airliner provides close to current Boeing efficiencies. 

Both manufacturers know that their order books are soft.  Both know that some who have ordered both current and next generation aircraft aren’t necessarily going to be around to take delivery on those aircraft 5 years from now.  One great example is Lion Airways order from Boeing.   The dirty secret about that order is that Lion isn’t an airline with significant risk both in operations and financially. 

Airbus need to work hard getting their current production sold until their aircraft are in place but without depreciating values and without massive discounts to encourage orders.  It’s a tall order and a difficult challenge for both manufacturers.

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Michael O’Leary, Ryanair and the 737

February 1, 2012 on 12:20 pm | In Airline News | 3 Comments

Ryanair’s CEO Michael O’Leary has decided to express his disappointment in what they’ve seen of the 737MAX so far.  He mentions that what they’ve seen from the A320NEO so far, they’re impressed but what they’ve seen of the 737MAX so far does not.  O’Leary, not surprisingly offers that anybody buying aircraft right now is nuts given the prices. 

But the world has changed.  It’s not the late 1990′s or early 2000′s and manufacturers are not struggling to sell aircraft.  To the contrary, they are struggling to meet demand based on orderbooks.  Ryanair got stunning prices for their original massive orders.  Enough so that they could buy them, operate them for a few years and sell them at a profit.  Neither Boeing nor Airbus is interested in making such deals anymore and rightfully so. 

Airlines put off buying large quantities of aircraft for quite a long time and now the legacy airlines not only want them, they need them.  If O’Leary and Company wish to continue to operate a successful ULCC, they’ll be lining up to buy them as well because they do offer the kind of incremental gain in efficiency that is going to make the world’s legacy airlines much more competitive with ULCC’s like Ryanair. 

The truth is, I think the Airbus A320NEO does fit Ryanair’s needs a bit better these days.  But that would require a fleet change that would take years to accomplish and with A320NEO delivery positions reaching “unobtanium” levels for the next decade, the 737MAX probably does offer the best option given their position.  One thing is sure, the COMAC 919 isn’t going to deliver what Ryanair needs and certainly not on time.  Airbus can’t build more even faster to meet the demand on the A320NEO even with some airlines orders going away.  So I’m not sure why O’Leary wants to make an enemy of Boeing.

The truth is, Boeing will be happy to sell to O’Leary and take his abuse while they do it.  They’re just not going to give away aircraft anymore and it appears that it will take O’Leary a while longer to realize the position he and his airline are in.

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Welcome to the New Year – Part 3

January 4, 2012 on 1:00 am | In Airline News | No Comments

2011 wasn’t the worst year for airlines and 2012 won’t be either.  Instead, I think we’ll see more of the same in most respects.

Airlines will continue to constrain their capacity and that will show more discipine than I thought they had 3 years ago.  They’ve proven me wrong and I think the results are too good for them to not to continue over the next 12 months.

Fuel costs will continue to be a difficult thing for airlines to manage.  There will continue to be volatility but I don’t think we’ll see anything like 2008/2009.  The financial crisis in Europe will reduce some demand on oil but I see no real economic growth in any part of the world that will drive demand either.  The truth is that the emerging economies are largely dependent upon demand from both Europe and North America and neither of those economies will see high growth in 2012.

Airlines will continue to make large orders for more fuel efficient narrow body aircraft.  This only makes sense as the gains are more than enough to justify the purchases and now is the time to gain an advantage in bargaining with both Boeing and Airbus.  Furthermore, airlines need to hedge against their labor costs which will only grow over time.

Aircraft manufacturers have a much more sure path for the next 10 years now.  Boeing will be biding its time on improvements to the 777 until it sees more definition of the A350-1000 and it will throw its resources into ramping up 787 production, 787-9 development and 737MAX development.  It’s possible that we’ll see a real 787-10 announcement in 2012 but, if so, probably not until the latter part of the year.

Airbus has to get its act together on the A350 and try very, very hard to prevent too much schedule slip.  Despite its efforts, I think we’ll see more schedule slip and it won’t reveal the entire picture as that unfolds.  While I don’t expect quite the same delay as the 787 saw, it will be a significant delay and it will impact Airbus.  They’ll also try to flog the A380 as much as possible and may even succeed with small orders in parts of the world it hasn’t penetrated much to date.  I do not see any US based orders for the A380.  Furthermore, Airbus made some big promises for the A320NEO and it’s got to work hard to deliver on those.  They’ve made it out like the A320NEO is a no-brainer for development and while it is an incremental improvement, the engineering to deliver is non-trivial.

Bombardier will work its tail off to sell more of the CSeries and I think it may even succeed.  The sweet spot its lineup offers will become more attractive to airlines once they see Bombardier actually perform in the development and test of this aircraft.  The CS100 isn’t the attractive aircraft but its the one that will fly and deliver first.  Once the performance of that aircraft is established, I think we’ll see orders from US and European airlines come in large numbers.

Embraer has got a nice grip on the regional airliner business but it also has a problem in that, right now, there is no growth path into a larger plane for purchasers.  It has plans to work on re-engining the E-Series but I think they’ll concede the need to develop a larger airliner as well.  The Bombardier CSeries presents just a touch too much threat in the future. 

I don’t think we’ll see much from the other regional airliners being developed.  The Mitsubishi MRJ doesn’t feel quite right for airlines to me and doesn’t offer a growth path into a larger airliner.  The orders its racked up so far are fairly paltry and at risk, in my opinion.

The Sukhoi SuperJet, on the other hand, has a real chance, I think.  It’s Westernized, it’s flying and it does feel like its the right size.  The real challenge in this aircraft is ensuring support and with Boeing as a consultant, it may well have some help in that arena.  If it does succeed, that success will begin in Europe as well as for airlines of lesser developed areas such as the Middle East, India and the Far East.   If any orders come from the US, it will be years in the making.

If anything stirs in the US airline industry, I think it will be in the LCC arena and I think it will be small(ish) if anything.  I do not think we’ll see any legacy consolidation despite wishful thinkers for a US Airways / AA merger.  Something like that becomes much more likely in 2013.

I think American Airlines will plod through its bankruptcy in 2012 with a bit of scandal here and there.  I think its labor force is about to take a beating on wages and benefits and I think the resulting bitterness will last for years.   I also think that United and Delta will be growing a bit more concerned about AA late in 2012 once they have a picture of what AA’s cost structures are likely to be.

2011 was largely a “rebuilding” year for the airline industry.  2012 will be largely so as well.  Until the world economies recover, the best the industry can hope to do is manage its problems and earn a bit of money.  That’s eminently possible for them to do.

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Welcome to the New Year – Part 2

January 3, 2012 on 1:00 am | In Airline News | 2 Comments

World Alliances

I’m not sure we’ll see much in this territory for SkyTeam or Star Alliance.  They’ll continue to succeed and be smart in their attempts to gain more dominance in more parts of the world.  I think Oneworld is going to be smarting through this next year as a function of health problems at founding members American Airlines and QANTAS.  I also think that gaining the LATAM membership is not nearly as “sure” as they think it is. 

The Middle East

After ordering an insane amount of widebodies in 2011, Emirates will order another insane amount of widebody aircraft and beat up on Boeing about its 747-8i.  This has begun to feel like an addiction problem.

India

The airline industry in India has imploded and we’re just watching the mushroom cloud of debris settle.  For 2012, more explosions and more governmental heads will push even deeper into the sand.   Air India has already become the new Alitalia.

The Far East

Chinese airlines will order more aircraft and I expect we’ll see orders from them for 777s and A380s and possibly some A350s.  Not unlike 2011.  I don’t think we’ll hear about any stunning orders from that part of the world, however. 

China will tout its COMAC C919 even harder and most of us will try desperately to keep from laughing even harder.  Ryanair will back away from this aircraft quietly, I think. 

Japan will find ANA deploying more and more 787s on more and more routes with more and more success with that aircraft.  JAL will take delivery of its 787s and find that they not only work well for JALs needs but actually exceed expectations.  I think we’ll see an order for some more Boeing aircraft from JAL this year and I think it will be the 737MAX and 777-300ER.  No huge numbers but large enough to make a splash.

South America

LATAM got its approval from Brazilian and Chilean authorities (barely) and LATAM will begin consolidating its operations to make more money.  I think we’ll see a largish order from LATAM and it will be for an airliner to replace aircraft on both the Brazilian and Chilean side of the airline.   The aircraft of choice will be, I think, the Airbus A320NEO and I think they’ll bump up orders for the 787 and 777 as well.   TAM has 27 A350-900s ordered and I think that order *might* be at risk.  The strategy of using Airbus for narrow bodies and Boeing for wide bodies seems to be a smart one for airlines in that region.

I don’t think we’ll see more consolidation in South America but I do see South America becoming a bit of a battle ground between airline alliances.  Most see LATAM going with Oneworld and while I can’t disagree with the arguments, I think that SkyTeam and/or Star Alliance might just swoop in with one hell of a package that may be too hard to resist.  If this happens, Oneworld and American Airlines gets kicked in the groin in South America.

Aerolineas Argentinas?  The Alitalia of South America in 2011 and the same in 2012.  Enough said.

Europe:

British Airways managed to get through 2011 without any huge problems and saw Willie Walsh move up to the CEO position of International Airlines Group which means Willie’s still in charge.  Iberia, British Airways’ sister airline, saw Willie stirring things up with plans for a LCC subsidiary.  Iberia pilots decided to strike because shooting onself in the foot can’t be just an Indian thing.   IAG also managed to get a tentative deal to buy BMI from Lufthansa and become the Emperor of slots at London Heathrow . . . maybe.

Virgin Atlantic didn’t die, didn’t find new partners and didn’t extricate itself from the chokehold that Singapore Airlines has on it.  Richard Branson actually didn’t make the news very often except to shout, stamp his feet and act insulted that Virgin Atlantic wasn’t able to do a deal to win BMI.  Expect Virgin Atlantic aircraft to start carrying some message against the IAG deal for BMI.  I actually think that Virgin Atlantic will have to find an airline alliance to join and if I’m right, I would lay very heavy odds on it being the Star Alliance. 

Lufthansa did itself a favor and got rid of BMI and I expect they’ll continue their very conservative mangement of the airline and the subsidiary airlines.  I do wonder how much longer Lufthansa can rely upon its A340 aircraft and somewhat expect Lufthansa to bite the bullet and buy the 777.

KLM/Air France:  I see nothing here at all.  Not in 2012.  I don’t expect a large widebody order nor a narrowbody order. 

I do expect Ryanair to make an order and I do think it will be the 737MAX.  In fact, I think it may well end up being the 737MAX-9 instead of the 737MAX-8.  Instead of repudiating the C919, Michael O’Leary will just quit talking about it.  Instead, he’ll suggest stripper poles could be installed on Ryanair aircraft. 

All in all, I think it will be a tough year for European airlines.  The financial crisis on that continent will make it very hard to earn an honest profit and Middle Eastern airlines will continue to erode the long haul traffic that European airlines have enjoyed for decades.

Tomorrow, a summary of what I see for 2012 and the world airline industry.

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Welcome to the New Year – Part 1

January 2, 2012 on 10:31 am | In Airline News | No Comments

Over the past 12 months, FlyingColors has doubled its readership and has seen nearly 1000 blog entries reached with enough words written to equal a book with over 1700 pages.  But enough about me, let’s look at the last year in the airline world.

North America:

Southwest Airlines did its deal with Airtran and bought itself an Atlanta base of operations and some very valuable landing slots at Northeastern airports.  As if that wasn’t enough, it made a firm deal on a bunch of 737MAX aircraft and agreed to take on even more 737-800 aircraft for its routes.  However, the airline wasn’t without some trouble:  Airtran pilots tried real hard to step on their on feet in a seniority deal with Southwest Airline pilots.

American Airlines struggled (more) and lost more than a Billion dollars (again).  Instead of making any real progress with its labor force, it decided to file bankruptcy but not before having made a historic order for aircraft from both Airbus and Boeing for the A320 and 737 series aircraft (with both A320, A320NEO, 737 and 737MAX in the mix).  2011 also saw long term CEO Gerard Arpey depart the company (to work with former Continental CEO Larry Kellner) and AA President Tom Horton took over.

Virgin America has horned in on American’s routes, Frontier has struggled more and more under Republic Airways leadership and US Airways still doesn’t have pilots or flight attendants integrated onto one seniority list.  JetBlue decided to fly more to the Caribbean, entrench itself even more at JFK airport and blew it during an October snowstorm (again).    United and Delta made money.  Quite a bit actually.

I think we’ll see Frontier either spun off rapidly in 2012 or the rapid decline of the airline necessitating bankruptcy of Republic Airways.  I don’t see a real strong suitor for Frontier except, perhaps, JetBlue but since Frontier isn’t based at JFK airport, I do wonder at JetBlue interest in an airline like Frontier.

I think we’ll see Alaska Airlines find even more odd partners for its success and still manage to cozy up close to Delta while doing it.  Southwest will start painting Airtran aircraft in its colors and operating even more great deals to more places from Atlanta but I also think that if any slots at JFK, LGA, EWR, IAD or DCA come available for purchase, Southwest will bid the cost of a Boeing and lose again.

I think it’s possible that Virgin America will make money in 2012 and I think it is really possible that we’ll all be pleasantly surprised by that.  The determining factor?  Cost of fuel. 

United will order a nice chunk of aircraft and I’ll bet that it will be an order similar in mix to the American Airlines order from both Airbus and Boeing.  However, I do not think it will be similar in size.  I think it will be a partial fleet replacement with lots of options for incremental change in the fleet.

I think Delta will continue to make a big pile of money with very little controversy surrounding it except that I think Delta will look for and execute a plan to encroach on more Legacy and SuperLegacy airline routes as it has announced its intention to do so from La Guardia Airport.   I also think that Delta will decide its not afraid of Southwest and it will decide to give Southwest a taste of bullying it hasn’t experienced before.   Particularly in Atlanta.  It’s not just an opportunity for Southwest to succeed in Atlanta but it is also an opportunity for Delta to capture lost customers.

I think we’ll see capacity restraint for another year and higher air fares than seen in a long, long time.  I do not expect to see another new airline show up and I think we may well see one true LCC depart the picture if things get particularly rough with respect to fuel prices or competition.  Milwaukee will become the regional airport it was intended to be instead of a bloody battleground between LCC airlines.

Tomorrow:  The rest of the world

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Now it’s United

November 29, 2011 on 1:00 am | In Airline Fleets | No Comments

Now we see some rumour developing that United Airlines is in talks to make a 200 aircraft single aisle purchase.  This has credence due to the fact that United has about 200 aircraft that are some of the oldest around (these are 757s and 737s mostly from the original United Airlines) and those aircraft are likely having a real impact on the bottom line as a result of fuel costs and maintenance.

I think we’ll see an order and I suspect that order may well go all to Boeing.  It may be named United but it is run by Continental executives now and those executives have found ways to effectively use the 737 on their routes.  Furthermore, I think Boeing may be able to offer earlier delivery positions than Airbus can.

What might we see?  I would look for a sizeable portion to be 737-900ER aircraft with some 737-800s.  In addition, I think we may well see a follow on order for the 737MAX aircraft again in the -800/-900 configurations. 

The current fleet of Airbus A319s are “good enough” and while some of the A320 aircraft are getting older now, they aren’t quite old enought to start planning retirement of until those older 737-500 and 757-200 aircraft are replaced.   About 1/3 of the A320s were delivered in the mid 1990s with the balance showing up from around 2000 and on.  Almost all of the A319s arrived in the early 2000s.  There is maneuvering room left with those fleets.

Airbus will want to keep United but I think they’ll struggle to offering the delivery positions that United will need.  Those positions are needed now and over the next 7 to 10 years.  Airbus has sold most of those positions.  The only way to offer early positions is to increase production even more.

And both Boeing and Airbus are struggling to figure out how to increase their production beyond their plans for production rates that will already be historic for commercial airliners.  It would require another production line and even more suppliers for airliners that are now fairly obsolete in light of the A320NEO and 737MAX.

Look for an order announcement in the next 1 to 3 months and my bet is on a 200 to 250 aircraft order of 737s with about 100 of those coming from the 737MAX line.

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Is Fuel A Threat?

November 10, 2011 on 1:00 am | In Airline Fleets | 2 Comments

Every airline reporting on its quarterly financial performance last month cited fuel as a major impact to their bottom line.  Airlines saw significantly higher fuel prices this year compared to 2010 and it’s true that it’s a hit to profits.

On the other hand, it’s notable that fuel hedging contributed significantly to their losses on paper.  Why?  Because fuel prices did not go up high enough for those fuel hedges to provide benefit.  Instead, they went down.

The truth is, it isn’t high fuel prices that are killing airlines.  It’s the price volatility that hurts them.  Airlines haven’t been able to plan their costs very effectively for the past 3 years.  Hedging is supposed to “smooth” that volatility and it will except that it also causes paper losses which reflect negatively on the airline when it announces its financial performance.

Is it necessary?  I used to think so.  In fact, I was a big advocate of fuel hedging not because of the windfall profits it provided many airlines for many years but, rather, because it really did make costs stable.  US Airways has stopped fuel hedging and their financial results show that fuel hedging just may not be necessary anymore.  Their profits are not taking a hit from hedging contracts that “lose” money.

In fact, US Airways performance is exceptional when balanced against the challenges it has.  This is an airline that 6 years later is still effectively operating as two airlines (under one name).  It still doesn’t realize that kind of synergies it needs to from its merger.  It has serious impacts from labor groups who cannot agree on what day it is much less on who represents them with the company (this would be the pilots) and it still doesn’t have a combined seniority list with one agreement in place with both the pilots and the flight attendants. 

This airline also flies from far less popular hubs, contracts with far less ideal regional airlines and has far fewer international flights and even if it could fly more international routes, it lacks the equipment to do so.

But the airlines makes a strong profit.  As strong or stronger than the SuperLegacy airlines.  The one thing it hasn’t done is announce major paper losses as a result of fuel hedging.  It might be time for more airlines to roll with the punches.  It’s a highly complex, risky effort that doesn’t appear to be providing the benefits its supposed to.

Fuel price volatility will continue to be a problem.  Airlines need stable oil prices and, frankly, so do the world economies.  However, let’s not forget that fuel is a problem for *every* airline.  They all enjoy the same problem in this area. 

I expect that we will see airlines focus more and more on fuel economy over the next several years.  We’re already seeing it in some airlines such as American Airlines who has finally realized that if it dumps its MD-80 aircraft, it can not only enjoy double digit improvements in fuel efficiency, it can fly more people as well.  That doesn’t mean that airlines with Next Generation 737s or Airbus A320 series aircraft will be dumping their fleet for new aircraft.  They won’t.

It does mean that we’ll see older aircraft from the 70′s and 80′s going away.  Yes, that means MD-80s but it doesn’t mean MD-90s (which use a far better engine).  The other aircraft it points to are those that many may not have considered. 

The 767-200ER is already clearly a candidate for removal and the 767-300 isn’t far behind it.  These are 1970′s design aircraft and with engines of similar caliber.  There are no more improvements and as fuel climbs, these aircraft become quickly unattractive even when completely paid for.  The 757 is entering into this territory as well.  I would expect that we’ll see a number of these begin to be retired or sold off for cargo work.  Again, these are 1970′s aircraft and while their amazing performance lent them a lease on life, they’ve become very expensive balanced against other aircraft that can perform 90%+ of the same missions.

Say goodbye to the older 737s.  I’m talking about the 737-300/400/500 series aircraft.  These are efficient, for their time, but very inefficient when compared to the latest modesl coming off Boeing’s line.  They had a short extension to their usefulness but you will see these depart rapidly from US based fleets over the next 1 to 3 years. 

The oldest A320 series aircraft are now due for replacement as well.  Some are older than those inefficient 737-300 aircraft and no longer have the fuel efficiency that the latest Airbus offerings possess.  They *seem* like a new aircraft.  I’ll point out that the A320 aircraft started deliveries in the late 1980′s (1988) and several US airlines such as United own some of the oldest models. 

Look for airlines to “upsize” their aircraft.  Southwest is doing this by buying the 737-800.  For a tiny bit more in costs, Southwest can fly significantly more passengers on routes that are seeing enormous demand.  They can make more money for a tiny incremental cost in fuel and one additional flight attendant. 

Finally, buying blocks of the A320NEO and 737MAX will make an airline look smart.  It is universally recognized that while oil prices may one day stabilize, they won’t return to $20/barrel.  The airline with the most fuel efficient aircraft will see an advantage.  That’s why I honestly believe we’ll see a large order from Southwest Airlines for the 737MAX.  It’s a good evolution for the airline and it will continue to fit within its business plan for some time to come. 

Why no orders from Southwest yet?  Because Southwest is one hell of a good negotiator and recognizes that they have power in the simple fact that if Southwest buys the aircraft, it’s an endorsement that everyone will pay attention to.  I expect to see an initial Southwest order for 100 to 200 aircraft sometime in the next 6 months.  Southwest will get its deal and Boeing needs Southwest to stamp approval on the MAX.

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Ryanair and the COMAC C919

November 9, 2011 on 1:00 am | In Airline News | 2 Comments

Ryanair says that it may buy or lease used aircraft to fill its gaps until the COMAC C919 arrives in 2018 with a 200 seat aircraft. 

I say that that statement is Ryanair standing up and yelling “Look at me!  Look at me!” to Boeing and Airbus.  ]

While Ryanair says its dead serious about this aircraft, they conveniently do not rule out striking a deal with Boeing or Airbus on their aircraft and I would point out that China has yet to produce a viable commercial aircraft . . . ever.  They are getting closer and I do believe that China will one day manage to succeed. 

However, their ARJ21 is a non-starter since it is heavy and, you know, no one has really ordered it except Chinese airlines who were told to order it.  Building a first time, competitive single aisle mainline aircraft requirese a body of experience that China doesn’t have.  Brazil has it.  Arguably Japan has it.  Canada even has it. 

China doesn’t. 

So why should Boeing or Airbus feel threatened by Ryanair’s moves?  They shouldn’t.  Sooner or later, Ryanair will have to make a move on a next generation 737MAX or A320NEO.   And they will get a good deal but gone are the days of getting a deal where you can buy a 737-800 and sell it in 3 years to *make* money on the sale.  Neither manufacturer are, in the least, that desperate.

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Airliner production.

October 28, 2011 on 1:00 am | In Airline Fleets | No Comments

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

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

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

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

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

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

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

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

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

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

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737RE definition might be firming up

August 18, 2011 on 1:00 am | In Airline News | No Comments

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

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

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

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

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

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

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

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

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

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Order Numbers

August 8, 2011 on 8:49 am | In Uncategorized | No Comments

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

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

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

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

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

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

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

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The A320NEO and 737RE does not kill the CSeries

July 28, 2011 on 1:00 am | In Airline Fleets | No Comments

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

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

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

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

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

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

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

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

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

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

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American renews its fleet

July 21, 2011 on 1:00 am | In Airline Fleets, Airline News | No Comments

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

Let’s look at the details first:

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

 

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

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

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

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

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

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

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

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

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

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

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

B) A320/A321 aircraft with focused bases

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

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

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

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

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

There is one more question lingering as well . . .

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

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AA and Boeing/Airbus

July 11, 2011 on 3:17 pm | In Airline News | No Comments

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

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

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

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

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Airbus and its competitive spirit

July 1, 2011 on 1:00 am | In Airline News | No Comments

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

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

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

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

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

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

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

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

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American Airlines and the A320

June 27, 2011 on 1:00 am | In Airline Fleets, Airline News | No Comments

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

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

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

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

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

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

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

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

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

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The A320NEO and the Paris Air Show

June 24, 2011 on 1:00 am | In Airline Fleets, Airline News | No Comments

On the one hand, Airbus COO John Leahy gets to make good on his prediction of 500+ committments to the A320NEO by the Paris Air Show.  He even gets to land a traditional Boeing customer (Garuda International) but at the risk of sounding anti-Airbus and pro-Boeing, there is a bit more to this story in my opinion.

First, Garuda is hardly a critical Boeing network carrier.  It stings a bit for Boeing but . . . when you have a competitive environment, customers change from time to time.  That said, we aren’t hearing about Airbus customers switching to Boeing either. 

Second, Airbus landed committments for 500+ aircraft.  Not firm orders.  Some of these committments are Memorandums of Understanding, some are Letters of Intent and some are orders.  Boeing plays a bit more fair in this area in that it doesn’t “count” something as a committment until it is a firm order. 

Third, when you look at who these committments come from, it isn’t game changing.  They are almost all from existing Airbus customers and from customers in areas where Airbus and France have heavy influence.  There is no radical shift in the landscape.   If you’re an Airbus customer and you need a single aisle airliner, you’re pretty much going to order the NEO.  That’s what has happened so far.

All of that said, Boeing is in danger of becoming a bit too secretive of its plans.  It’s clear that major Boeing customers want to see something on the table.  Moreover, I suspect that they would like to be let in on the discussions about what an airline *wants* in a new single aisle airliner / 737 replacement / 737 re-engine.  If I were a Boeing customer, I would imagine that my attitude towards Boeing at this point would be quite similar to SWA’s CEO Gary Kelly’s.  In a word:  terse.

With the announcement made on the A350-1000 (which would appear to more or less bring that aircraft into competitive range of the 777-300ER but not exceed its capability), it’s time for Boeing to bet again.  They have a firm handle on the 787-9 development and I think they’ll find it within themselves to repeat that on the 787-10.  (Although one does wonder if they’re considering enough range / payload for the 787-10 given that airlines clearly enjoy the performance of late model 777-200ER/LR aircraft. 

Boeing can’t afford to dither around much longer.  It’s time for a decision and enough time has passed to make that decision.  If they’re confident they can make a new airliner that is 20%+ better, make the bet and get going on it.

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