What’s the A330NEO got that others don’t?

September 16, 2014 on 8:41 am | In Aircraft Development, Airline Fleets | 1 Comment

Price and that’s about it.

It’s got more than the old A330 in the sense that every vehicle enjoys a new, modern engine.  The A330 is positioned as being a still young aircraft when, in fact, it’s pretty old these days.  The technology that the A330/A340 airplanes got was solidly from the 1980′s and wasn’t that innovative even then.  Remember that it was designed to replace Airbus’ A300/A310 aircraft (partly) and designed to compete against the 767 and DC-10.

Airbus didn’t have its sights on the 777 which was a couple of years behind it in development.  In fact, the 777 was more a response to the A330/A340 and MD-11.

So the point I would make is this:  There is a reason why the 767 isn’t selling anymore.  Same for the 757.

There was also reason why Airbus wanted to sell an A330 Tanker to the US Air Force:  It would keep a production line running for a while.

If the A330NEO was as good as the 787, it wouldn’t be immediately advertised for considerably less money.  And for certain, if that kind of performance was what all airlines were looking for, Airbus wouldn’t have been strong armed into making the A350.  In fact, it’s notable that the original A350 was a lot more an A330NEO than anything else.

The A330NEO is a response to a few airlines who would like to have more A330 airplanes but with a little bit better price.  Delta, for instance, wants some.  A few other airlines will order them as well and if the A330NEO is done right, it might even be profitable for Airbus.

But it’s not a revolution.  It’s barely an evolution.  I strongly suspect it will be a 767-400 for Airbus which means that it will keep some customers happy and in the Airbus camp but let’s put away this talk that 1000 Airbus A330NEOs will be sold.  Only 1100 A330 airplanes have been delivered to date so far.

This is a bridge airplane to keep some people happy for a while so Airbus can figure out what to do with its product line gaps.  Presently, the A350 isn’t a 777 (new or old) and the smallest variant, the A350-800 is highly unattractive to customers because it offers no benefit over the A350-900.  Airbus has nothing new to fill the gap between the A321NEO and the A350-900 and that’s a big gap.

So, for now, the A330NEO will fill that gap.  Sort of.  Kind of.

 

 

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A330NEO: Good Choice?

April 10, 2014 on 1:06 pm | In Aircraft Development, Airline Fleets | 4 Comments

Airbus may be embracing the idea of creating an A330NEO offering for customers and it would appear to have some acceptance from some customers.  To date, Airbus’ official approach has been to discount the A330 and show it as a cost conscious solution for airlines when balanced against the Boeing 787 offerings.

While airlines such as Delta seem to embrace the idea, one wonders if the investment in an re-engined widebody really is wise at this point.   Airbus doesn’t have the answer to the 787 and it appears the A350-800 won’t be a future answer either.  A lower cost development of an A330NEO would appear to offering something that slots in between the A321 and the A350.

I honestly do not think so.

The 787 clearly was the right size in the -8 variant as many, many airlines adopted this aircraft right from the beginning.  The -9 variant is similarly widely accepted.  Those two, together, are what Airbus has to compete against with the A330 or an A330NEO.  In some missions, it may do OK but it won’t be the long term answer that an investment in a widebody asks for.

It would be foolish for Delta to drive a multi-billion dollar investment in an aircraft that Boeing has a better and just as tested answer for when such an airplane would be available.

It’s become clear that a certain generation of airliners are nearing their end now.  The 767/757 is clearly on a rapid decline with passenger airlines and the A330 will begin that decline shortly.  It’s not a new airliner and the A350 series should have been slotted to replace it better.

Instead, Airbus made the mistake of Bigger is Better.  It’s made that mistake twice now.  Upgauging its offerings made the -800 less attractive to airlines because of performance, not because it was the wrong size.  The truth is that Airbus needed an range that spanned probably 4 aircraft and that’s hard to do.

In the competitive lineup, Airbus needed:

  • A350-700 | 787-8
  • A350-800 | 787-9
  • A350-900 | 787-10
  • A350-1000 | 777-200ER
  • A350-1100 | 777-300ER

There is no -700 or -1100 and the -800 is a bit heavy for the mission and no one wants it.  That leaves Airbus with (2) attractive medium sized widebody aircraft for customers and the A380.

That isn’t enough.  The A330 could be stop gap but it has to compete against a much more modern, efficient product lineup that Boeing will offer.  Look at Boeing’s potential now and over the next 10 years:

  • 787-8
  • 787-9
  • 787-10 / 777-200ER/LR
  • 777-300ER / 777-8
  • 777-9

Boeing wins.  It’s got the right sized aircraft with the right efficiency for a 20+ year investment that ranges the entire sweet spot for widebody aircraft.  Even the “older” 777 models in that line-up purportedly “beat” the corresponding A350 models on the “total” package of performance.  At worst, they hold their own against the A350 and that’s still pretty good.

Airbus needed 2 widebody families.  It has one and I think cobbling together a stop-gap measure for one of those in a A330NEO model is unwise.  The widebody technologies are here and they are useful now.  To not use them in an airliner would be folly, in my opinion.  They are maturing every day in the 787-A350-777 developments being done and that means that airlines in general will want those technologies rather than designs that date back to the late 1980′s.

 

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Delta buys Airbus

September 6, 2013 on 1:00 am | In Airline Fleets, Airline News | 4 Comments

Delta Airlines has announced an order for some Airbus aircraft and before anyone signals that this is the end of days moment for Boeing . . . relax.

Delta today is comprised of Delta yesterday and Northwest Airlines of yesterday as well.  Northwest Airlines was a big user of Airbus aircraft.  The organization does have a great deal of experience operating Airbus aircraft now.

Furthermore, no airline of Delta’s size can afford to continue to buy from one single supplier and be responsible to both their company as well as their shareholders.

And who says Airbus builds a bad product?  I sure don’t.  Delta has learned that the A330 works very well for them sitting between their 777-200 and 747-400 aircraft.  Part of this order is a “top up” of the A330-300 type to the tune of 10 additional aircraft.  Delta has (10) Airbus A330-200s and (20) Airbus A330-300s already and an additional (10) A330-300 aircraft sounds, to me, like Airbus is growing some capacity at the top end of their fleet.

The A330-300 is their second largest aircraft seating-wise, believe it or not.

And Delta ordered (30) A321 aircraft as well.  This is an airplane that arguably most US based airlines will be buying as it has been identified as a 757 replacement on certain missions.  Given that just 30 of them have been ordered, I suspect that the A321 offers a better replacement than the 737-900ER  in certain missions likely requiring more density rather than range.

No airline can afford to skip Airbus at this point.  Likewise, no airline should skip Boeing either.  Each manufacturer has viable products that can meet needs.  Aircraft manufacturers can no longer offer delivery positions that make it possible to stay in one product family.  Well, not easily anyway.

 

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Question: Why are airliners all looking alike now?

July 1, 2013 on 1:00 am | In Trivia | 1 Comment

I received a back channel question asking why all airliners are looking so alike now.

What the person was referring to was the fact that an A320 and B737 look, to the layman, almost exactly alike as do the medium and large widebody aircraft.  It’s true, the Airbus A330 is hard to distinguish from the Boeing 777/767 series aircraft too.

The only semi-distinguishable aircraft out there are the Airbus A340 (production has stopped), the Boeing 747 and the Airbus A380.

But the question is why.

The answer is aerodynamics.  As manufacturers strive to gain more and more efficiency out of their aircraft, their aircraft start to look more and more alike.

Simply put, it’s about function over form.  When you design one of these aircraft, you don’t “style” it with something that goes against the aerodynamics of the airframe because such a thing could literally cost the user millions in fuel costs over the life of the airplane.

So, today, we have the Embraer E170/190 which looks a lot like how the Bombardier CS100/CS300 will look  which looks a lot like the Airbus A320 series which in turn looks a lot like the Boeing 737 series.  Because that shape works, we have the Airbus A300 which looks a lot like the Boeing 757/767 which looks a lot like the Airbus A330/A340 which looks a lot like the Boeing 777 which looks a lot like the upcoming A350 which also looks like the Boeing 787.

They all basically look alike with some slight differences and that is completely driven by aerodynamic efficiency.

It’s notable that the “odd ball” aircraft do not really survive past a single generation and don’t show up anymore.  The 727 was out of the ordinary with Boeing and its T-tail configuration was only ever used once by them.  The DC-10/MD-11 3-engine weirdness didn’t really last that long either.  The DC-10 did but the MD-11 died a quick death.  In fact, it’s notable that the MD-11 mostly died in popularity because it didn’t meet efficiency promises.

Oddballs don’t survive very long and those that do survive are driven in their function by physics.

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Airbus vs Boeing: Widebody Aircraft

May 17, 2012 on 1:00 am | In Airline Fleets | No Comments

We could spend tens of posts evangelizing for one manufacturer over another in the Airbus vs Boeing wars.  I spent some time wondering how it is each overcame the other at various times and decided to chart their respective aircraft on seating, range, speed and engine count.  It’s not hard to see why the 767 got trumped by the A330.  The A330 was the logical growth aircraft.  It had the right seating, range and speed.

Similarly, it’s not hard to see how the 787 is trumping the A330 and 767.  It hits the sweet spot in seating (not too large, not too small) while killing competitors on range and speed.  The same is true between the 777 and the A340 (and I’ve thrown in the MD-11 for comparison).  Again, the 777 trumps its competitors soundly in all three categories.

But most remarkable of all is seeing just how the 777 stacks up in present form against the A350.  Now I understand why Boeing continues to be the preferred aircraft so far.  The A350 competes and even competes reasonably well but it still doesn’t really trump the 777 and in some cases, it doesn’t get close to beating the 777.

See the results below:

Airliner Comparison

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The A340

November 15, 2011 on 1:00 am | In Aircraft Development, Airline Fleets, Airline History | 2 Comments

Lufthansa Airbus A340-600(Flickr)

I got asked what I thought of the A340 last week by a reader of FlyingColors and decided to give some thought to that subject and write a post.

The truth is, the A340 was probably the first Airbus aircraft that I really liked visually.   I liked the slender appearance of the widebody fuselage and I liked the four engines and how they were hung on the wing in a proportion that just seemed a bit sexier than other 4 engine aircraft. 

I liked Airbus’ approach to the A340/A330, too.  I’ve always been fond of the parts bin approach to creating value for a customer and the A330/A340 development was certainly that. 

A fuselage that got borrowed from its first twin-aisle aircraft and CFM engines that were derived from the A320 aircraft.  Need a medium range hauler?  Use our A330.   Need a long range widebody?  Try our A340.   Going trans-Atlantic?  Use our A330 and if you’ve got trans-Pacific routes, we have this lovely 4 engine aircraft for you. 

And you got to have pilots that could fly both. 

It was a beautiful approach and a real answer to what was needed at the time.   It was way better than McDonnell Douglas’s offering in the MD-11 and Boeing really didn’t have an aircraft that even fit the needs at all. 

ETOPS was changing the game at the same time, however.  So was engine development.

The MD-11 was a bit flawed in that it really needed a truly new wing and better engines to achieve its mission.  But the ever frugal derivative player, McDonnell Douglas, played things just a bit too frugal.

The 747 was simply a different class of aircraft.  The 767 was too small and too short ranged to fit the gap.

Airbus did a great job with those aircraft in offering a sweet spot solution for both capacity and range and then made a strong business case for both of them by making them as common as possible.  You cannot blame any airline who went that route.  It was, in the context of the times, the perfect solution.

What we didn’t really count on was engine manufacturers being willing to truly make game changer engines and ETOPS going far past anything anyone could envision.  The 777 was born and it was an even bigger game changer.  First an aircraft that solved the A330 problem just a little bit better.  Not fantastically better but it offered just a touch more capacity and bit more cargo capacity and it did it with engines that were more revolution than evolution.

The A330 has survived because of its improved derivatives and any airline using them makes great money.

The A340 got hampered by a few things.  It needed a bit better wing  and better engines (and finally got both in the A340-500/600).  The CFM engines were a great choice going in but the Rolls Royce Trents were the answer to a question that got asked a bit too late.

Airbus bet on 4 engines being preferred for long haul, trans-oceanic routes and given the dominance of the 747 in that market, it wasn’t a bad bet.   Their mistake was in underestimating Boeing’s ability to look forward.  Boeing saw the possibilities in ETOPS and extra high by-pass engines that were more reliable than anyone could have conceived of a generation earlier.  And it should have given its customer base at the time.

Airbus was hampered by a bit of McD disease and by multi-government ownership at the time.  It didn’t have enough capital to go “all in” on designs and knew it had to make its business case on flexibility which meant derivatives.  In fact, it often only got capital for new investment if that investment benefitted its owners in the form of jobs programs for their citizens.

While thinking about this post, it occured to me that Airbus even produced a 747-SP.  The A340-500 derivative.  It could fly fantastic distances but without enough passengers to make it cost effective.   Then the 777-200LR came along and was capable of doing *that* mission better and cheaper.

The 777-200ER and 777-300ER killed the A340 in all forms (And EADS CFO just admitted it in the press).  It could haul more passengers and cargo for the same or longer distances for less money.  It was that simple.  Boeing made the business case on trip costs and won. 

Even if hindsight is 20/20, you can’t say that Airbus made a mistake with the A340.  The A340 killed the MD-11 and exposed the weaknesses of owning 747s.  It did its job very well but it arrived just a little bit too late to enjoy its success for very long.  Timing is everything.

I would criticize Airbus for the A380.  Yes, it has made a few airlines some good money.  It also ignores the model(s) for long haul travel over the broad spectrum in favor of trunk routes.  It will never enjoy the numbers or prevalence of the 747.  On the other hand, neither will the 747-8i. 

I’m not sure the A350 is the answer either.  I don’t think it fits long, thin routes as well as the 787 and its planned derivatives.  I don’t think it fits the long, large capacity routes quite as well as the 777 either.  Its smallest derivative is an A330 replacement at best and I question whether or not it will ever get built.  Its largest derivative so far doesn’t respond to the 777-300 as a game changer either.  They are free to prove me wrong.

It’s not that I think the A350 won’t sell.  It will.  But I think it’s destined to be a player among a fairly small core group of airlines.  Much as the A380 is and will be.  Boeing took a page from the Airbus playbook and built the 787 to fit a nice, broad piece of medium and long haul routes and positioned itself to answer the largest A350 with a next gen 777 or next gen new build large capacity, widebody aircraft.

Boeing one ups Airbus over the next 20 years with its product line up and does it in a way that has the gaps covered in distance, capacity and service. 

With all of that said, I still think the A340 is one hell of an elegant and pretty airliner.  It lends itself to the great airliner liveries of the world.  Just look at these:

(All images from Flickr under their Creative Commons License)

B-HXJ

 

Etihad

EC-GLE "Concepción Arenal"

G-VGAS

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Lufthansa has a bad trans-Atlantic week

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

Lufthansa had to divert an A340 and an A330 had to divert to Calgary, Canada on the same day last week.  The A340 for a possible indicated hydraulic problem and the A330 because of a possible problem with a backup power supply. 

Still another flight had to divert to Goose Bay, Labrador after a warning of smoke in the cabin last week as well.

Are there problems with Lufthansa’s Airbus aircraft?  No, these things do happen and the more flights you have the more often it happens.  It’s unusual to have three incidents like this in quick succession but not unheard of.

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Southwest and International Flights

June 9, 2011 on 1:00 am | In Airline News | 1 Comment

Southwest CEO Gary Kelly spoke about using Baltimore’s airport (Baltimore Washington International – BWI) as a “hub” for international flights some time in the future.  He described it as being a number one consideration during conversations about Southwest going international.

Before anything else, don’t go presuming that Southwest is about to buy trans-Atlantic aircraft and start low cost services to Europe.  They aren’t as there is way too much on their plates right now.  However, it is another logical area to grow into once they are done digesting Airtran in about 3 years and provided the market exists at that time.

Quite a few might question using Baltimore but it does make sense.  It is relatively uncongested and offers the ability to not just draw those in Baltimore to its flights but also from the Washington D.C. and Philadelphia areas as well.  In addition, it connects nicely to all of the cities that Southwest services in the eastern half of the United States.  Furthermore, it is likely that any LCC airline taking on such a venture need not be tied to a major international airport such as JFK or Philadelphia or Washington Dulles.  In fact, they would probably want to avoid such airports because the cost of congestion is far higher than the cost of attracting people to some place like Baltimore.

Potential customers for this kind of airline service won’t be business oriented.  These will be leisure passengers looking for a great deal.  You won’t see business class on these airplanes but I do think you’ll see assigned seating.  (Assigned seating is almost a must for a widebody aircraft, IMHO.)

What kind of aircraft?  It won’t be 757s and I don’t *think* it will be 767s.  Although, it is interesting to contemplate the economics of an all economy 767-300ER new build aircraft for trans-Atlantic flights.  Many have thought that the 767 will remain competitive on such routes vs the 787 and that might be true.  787s?  Maybe but I think Southwest might have missed the train when it comes to advantageous pricing on that aircraft and I don’t think SWA will find used 787s on the marketplace anytime soon.

Airbus A330s almost seem interesting until you consider just how many people you would have in a high density, all economy aircraft like that.  It feels like too many and the same is true for the 777-200 (but I think you could almost make a business case for early build 777-200 “A” models that are starting to be retired by airlines such as United.)   The fact is that the 767-300 or 787-8 fits the size category almost perfectly and size will drive this choice. 

So will dispatch reliability because someone like Southwest needs an aircraft they can push into high utilization for such routes.  Not only would trans-Atlantic service require good load factors but it also requires frequency that uses that aircraft on 2 to 3 segments a day.  It’s doable and it is doable with the 767.

But at the end of the day, it’s all speculative right now and I do not expect SWA to announce anything like this at all until at least 3 years have passed.  In the meantime, they’ll gain experience operating Airtran’s international flights and learn how to deal with foreign travel.  They can buy and/or engineer new IT infrastructure that will meet the needs of such flights.  In short, don’t go planning a family vacation to London quite yet.

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Watch Airbus to see what Boeing does

June 6, 2011 on 1:00 am | In Aircraft Development | No Comments

Airbus has committed itself to the A320NEO series recently and Boeing continues to decide to not decide on what it will do with the 737.  All the while hinting at a new aircraft development for a 737 replacement to enter into service around 2019/2020.   Except that Boeing has also hinted from time to time that a re-engine might be in order while also saying that customers don’t want a re-engine. 

In addition, Airbus will be releasing its configuration for the A350-1000 aka 777 killer in the next few weeks.  Boeing doesn’t believe it quite meets the mark without a new wing and Airbus has said nothing about a new wing.  Right now, on paper, the 777-300ER still beats the A350-1000.  Unless Airbus releases a configuration that causes people to pause and gasp, Boeing will most likely not feel too threatened by Airbus for the time being.

And that’s why I say watch Airbus to see what Boeing does.   Boeing knows it can probably win against Airbus with a 737 replacement in the time frame it is talking about while managing to keep customers interested in the current 737 through incremental improvements that should keep the two aircraft competitive.  I’ve felt that Boeing wants to know what Airbus’ move is on the A350-1000 so it knows where to commit its resources.  If the configuration and definition for the A350-1000 moves it into competitive territory with the 777, Boeing knows it needs to get to work on improving the 777 (an exceptional moneymaker for Boeing presently) in order to not lose those customers for the next 2 decades. 

Boeing likely believes it can cover the 777-200ER territory with a 787-10 (and perhaps an incremental improvement to the -10 as an ER model later).  This leaves it free to preserve the 777-300 in its current configuration or find improvements to the existing design or even design a new aircraft family to fit above 787-10 and finish alongside the 747-8i. 

But what Boeing doesn’t want to do is commit to launching 2 new airplane programs simultaneously.  Boeing already knows what will likely happen if it does that.   

With all of that into consideration, I think that once we know the firm definition for the A350-1000, Boeing will know how to sequence its next airplane programs.  It will be either a 737RS first with a 777 replacement kicked off 3 to 4 years later or a 777 replacement first with a 737 re-engine done simulataneously and a 737 replacement coming 10 to 12 years after the re-engine. 

I strongly believe that Boeing wants to do the former sequence (737 replacement / 777 replacement) because it puts Airbus into a corner.  With this strategy, Boeing probably has an all new line of aircraft using the latest technology spanning from 150 seats to 450 seats while Airbus has the A320NEO and A350 series but with a gap between the A320NEO and A350 being filled by what will be quite the aging aircraft:  the A330.   In fact, there already is a gap, although minor, between the A320 series and the A330 series.  And make no mistake:  The A330 will begin to die in another 2 years or so as a result of the A350 and 787 developments. 

My prediction?  I think Airbus will announce nothing that threatens Boeing’s competitiveness in the 777 models.  Sometime late in the fall or early in the winter while riding on an uptick with the deliveries of the 787 and 747-8i to customers, Boeing will announce a 737 replacement program with a big airline order.  Sometime around 2017 or 2018, we’ll see Boeing announce a replacement for the 777 sized  above the 787-10 and right up alongside the 747-8i.

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Crash analysis and politics don’t mix.

May 20, 2011 on 1:00 am | In Airline News | 1 Comment

By now, most have heard of the successful data capture of the flight data and voice recorders on the Air France A330 that crashed into the Atlantic Ocean in 2009.  What has disappointed me most in this is the near instantaneous (for crash analysis) pronouncement that was leaked to the press stating that there was no obvious airframe fault. 

Disappointing because it is all too common that the press neglects to mention a few things.  First, both Airbus and Air France have manslaughter charges pending against them as a result of this crash.  France’s practice of doing this, in my opinion, severely clouds the issues that need to be settled and puts a highly charged political context to the investigation.  It’s notable that the French government has a huge stake in Airbus and still retains a take in Air France. 

If it is a fault with the aircraft, Airbus will potentially suffer marketplace setbacks and if Airbus experiences that on what is their most successful widebody, the nation of France will feel it too.  It’s a conflict of interest, plain and simple.   It’s easy to see who gets thrown under the bus in this:  the pilots.  If it is pilot error, Air Frances suffers but doesn’t suffer a lot and Airbus is vindicated.  If it is a maintenance problem, France’s flag airline suffers a lot and Airbus suffers a bit as well.  If it is Airbus’ fault with design, France’s shining monument to aerospace suffers a lot and Air France suffers a little bit, too.  Pilot error is the desired judgement in this.

While there have been attempts at politicizing air disasters in the United States, we also have so far maintained mechanisms to avoid that as much as possible.  As a result, there is a great deal of credibility on the part of the NTSB when a ruling is finally made. 

Not so in France who has already managed to spend 10+ years managing its image with respect to the Concorde by making Continental Airlines and a DC-10 the whipping boy in that disaster.  The not so distant crash of an A320 on a test flight in France also managed to taint the pilots as the source of most of the problem as well.   In fact, I would say that if you are a pilot in France and you’re flying for a French airline and/or a French built aircraft, your reputation is quite likely to suffer in the post crash analysis. 

The truth is that pilot error is very frequently a contributing factor in disasters.  People are human and pilots are people and human do make mistakes.  Particularly in a fast moving crisis.  Today’s pilots are almost always not where such things start, however.  Even when we discover pilot error, it almost always starts with poor airline procedures or training. 

I find the reporting that has already occured on this disaster (the Air France A330) in the French media highly suspect and a signal that we’re already finding a reason to not find blame in French industry.  No one should be making any pronouncements about any data within the first 48 hours of analysis.  I would wager that any NTSB investigator would blanche at such an idea. 

This is a huge dissservice to the airline industry and public safety.  Maybe it *is* pilot error and if it is, then we do a disservice by clouding it with acts that appear political.  If it is a fault in the airframe, we need to know about it and we need to most specifically avoid missing that conversation as a function of blaming a pilot.  If it is a fault with the airline and its procedures, the airline needs to fix those procedures and a public discussion on what happened will help other airlines fix their procedures as well. 

Allowing blame to creep into this so early and so loudly only negates the value of a crash analysis.

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An A330 for a 787

February 9, 2011 on 1:00 am | In Aircraft Development | 1 Comment

Airbus is reaping big orders and a renewed interest in its A330 since Boeing has been unable to deliver the 787 even remotely on time and that is going to hurt Boeing in a few ways.

Delayed by 3 years now and with only some hope of commencing deliveries later this year, Boeing is paying penalty payments for its poor performance and those payments are being walked across the street to Airbus, not Boeing. 

Boeing is being hurt since it hasn’t been able to offer a substitute aircraft to the airlines that the airlines want.  It’s cheaper to build an airplane at cost than it is to pay big dollars in penalty payments that go to the competition. 

What’s worse, Airbus is attracting a long look from traditional Boeing customers who now have little hope of obtaining a 787 any time in the next 5 or 6 years.  That’s great for Airbus but it is a warning to Boeing as well.  A stubborn resistence to the idea that bringing even more control of the 787 supplier network under Boeing’s wings is creating problems that some customers will have to question if they’ll ever be resolved.

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Delta wants jets – lots of them

January 16, 2011 on 1:00 am | In Airline Fleets | 8 Comments

It has been reported loudly that Delta is poised to issue an RFP (request for proposal) for as many as 200 jets and this is an order no manufacturer wants to lose.   The rumour comes just days after a record breaking Airbus order from IndiGo of India.

At this point, it’s still rumour but this one strikes me as pretty much dead on.   Delta has a huge fleet (720 aircraft with about 40 orders in place which include the deferred NWA order for the 787) and quite a few of those aircraft need to be replaced now or in the immediate future. 

Delta has the Northwest fleet comprised of the very old DC-9-5o, MD-88, MD-90, 757, 747 and some older Airbus equipment.  The Boeing fleet from Delta’s legacy side isn’t quite as old but there are some 757s and 767s in need of replacement as well.  Considering the widely varying fleet, it would come as no surprise that an replacement order is due.

Oil prices and future fuel prices will also drive the need for this order sooner than later if Delta’s goal of a consistent operating profit is to be realized. 

Pundits think this is Boeing’s to lose and I disagree.  Richard Anderson, CEO of Delta, has much more history with Northwest and he is no Airbus hater.  This will be an extremely heated competition and I will say that if Boeing were to lose this order or a significant portion of it, that will sting Boeing and its product line for years to come.

The prime driver for selection is going to be based on a number of items.  First and foremost, trip costs for aircraft to serve a particular grouping of routes.  We’ll see orders for single aisle aircraft to serve what I would call non-transcontinental routes.  In today’s world, that would be the Airbus A319 and Boeing 737-700.   Having trans-continental capability in the aircraft would be a plus but these aircraft are going to serve the focus cities of the airline with routes stretching out from the cities but not across the country.   The mission that the MD-88s, MD-90s, Airbus A319s and Boeing 737-700/800s are serving today.

The A319s are brand new and so are the Boeing 737-700s/800s.  This is going to be about replacing the McDonnell Douglas fleet.

Then there is a need for the larger trans-continental capable aircraft that remain single aisle serving longer trunk routes that won’t justify a widebody.  Currently, the Airbus A320 and Boeing 757 are serving those routes.  The A320′s arrived in early 1990′s and the 757s date from the early 1980s to the late 1980s.  The options for replacement here are the Airbus A320/321 and the Boeing 737-800 and 737-900ER.    Neither aircraft actually “replaces” a 757 which has great range and great payload.  I don’t think the A320s are going anywhere yet so this will probably involve a 757 replacement and they (Delta) may or may not want it to harmonize with their existing A320s.

Then there are the 767s.  Some are getting old and some are quite new still.  Delta needs an aircraft stretching between what a 757-300 offers and an A330-300 offers.  The 787 fits this and the fact that Delta has deferred its legacy NWA order for these makes me think that these aircraft won’t be candidates for replacement.

The 747s are pretty old and frankly I don’t think these we very well cared for either.  They need to be replaced and I do think we’ll see orders to do this on these aircraft.  None really serve routes that demand 4 engines so I think we’ll see a replacement oriented around 2 engines.

I think it’s anyone’s guess on the single aisle orders.  Airbus will fight like crazy to win this order with their A320NEO options and Boeing may well have to announce a 737 replacement at a great price to win it back.   Boeing should actually have great incentive to get going on the 737 replacement if Delta is truly interested.  With Delta, Southwest and, potentially, Ryanair all wanting a better 737, there is an exceptionally strong business case to get going on this.

If Boeing doesn’t offer a better 737 in this, I think the order goes to Airbus.

As for the 757/767 replacements . . . well, I’d give the edge to Boeing.  I think the 787 *is* a good answer for these aircraft.  They offer the right amount of extra capacity for growth, long haul capability, extremely high efficiency and flexibility.  I do think it possible that an order might be mixed between the A330 and 787 unless Boeing gets off its duff and gets that 787-9 into production.  The 787-9 is the A330 killer.

Since I don’t think the A330s are going anywhere, I don’t see much opp0rtunity for Airbus’ A350 in this mix.  It’s deliveries are too far off and the A330s just don’t need to be replaced for a long time.

I think Delta’s large widebody strategy is likely going to be a mix of 777-200s and the 777-300ER to replace the 747s.  They already have a fleet of 777-200LR with GE engines so I think they’ll order 777-300ERs with GE engines to replace those 747s.  It will do everything the 747 will do only more efficiently.  I do *not* think the 747-8i will enter into this order.  Delta doesn’t need the capacity and the 777-300ER will serve all the routes the 747 is currently serving with no problem.  The A350-1000 is far too far off and its ability to perform is simply way too unknown for this to be serious contender at Delta.

I do not think that Bombardier or Embraer will enter into this order at all.  They just don’t have a product that meets the needs of an airline like Delta very well at all.

Don’t expect an order announcement for about a year.  Delta will let the manufacturers fight it out with best and final offers for quite some time and it will take time itself to do a detailed analysis.   But I can’t wait to hear their decision.

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Welcome to the New Year – Part 2

January 7, 2011 on 1:00 am | In Airline News, Airlines Alliances | No Comments

Next up:  World Alliances

There is never that much revolutionary change in alliances.  Last year, there was a fight over JAL between Oneworld and SkyTeam and Oneworld won but they really were destined to.  It made sense for JAL.  The alliances worked a bit to get better access to areas they were deficient in and to a large degree, they were successful.  I don’t expect much change, if any at all, this year.

The Middle East:

Emirates did what Emirates does:  it ordered more aircraft.  I did what I do:  failed to see how they’ll use all those A380s and 777s.  The financial scene in the Middle East and, in particular, the UAE continues to be weakish and while I suspect it will recover somewhat this year, I think the area no longer carries that gleam it once did.  I don’t see any failures in the near future but I don’t see any airlines really blooming either.  Success there is, as is true for most businesses there, fairly dependent upon oil prices.

India:

Nothing astonishing happened there but it was already pretty mucked up.  It remains mucked up and will likely stay mucked up this year.

The Far East:

China did kind of force their airlines into agreeing to buy Chinese aircraft as I predicted.  In fact, Chinese aviation is suddenly acting very Chinese in that it is being required to toe a more obedient line.  Face is everything there and I don’t like it when airline businesses are operating on the basis of “face” rather than good decisions.  It’s notable that in the launch orders for the COMAC C919 aircraft, each airline took up just 5 aircraft orders each.  They don’t want that airliner any more than anyone else.

JAL has done OK for the year.  They’ve made progress with their finances and they did make some hard choices.   They did have to file for bankruptcy protection and no one should have been surprised about that.  The new CEO, Kazuo Inamori, and President, Masaru Onishi, are succeeding and making hard choices.  Frankly, more so than is characteristic of a Japanese company and they deserve credit and support.  This airline isn’t fixed yet but it is on its way.

Oceania:

QANTAS got hit pretty bad by the Rolls Royce failure on its A380.  United Airlines is still on the US-Australia routes but badly needs to upgrade its product and it doesn’t appear positioned very well to do so.  Perhaps Jeff Smisek & Company will address that better this year.  Delta and V Australia didn’t get to form an alliance and they’re trying again.  Someone has to give in this area and it will be either in the form of a codeshare alliance between Delta and V Australia or in the form of an airline withdrawing from the market (United or V Australia).

South America:

LAN, in fact, did continue to succeed in South America.  So much so, they bought TAM to create LATAM and then bought AIRES (a Colombian airline)covering both the east and west coasts of South America.  LAN is, in my opinion, now a SuperLegacy of South America and that’s a bit dangerous for them.  South American governments are more protective of their countries airlines that is the custom in other parts of the world.  

Curiously, LATAM is now operating airlines in two different alliances:  Oneworld and Star Alliance.  While there is speculation that they’ll continue this with LAN brands in Oneworld and TAM brands in Star, I think they’ll have to pick one and this may well mean a big battle among all three alliances.   This is an area where SkyTeam could do well for itself by gearing up for battle now.

Aerolineas Argentinas:  Well, what can I say?   Well, I’ll say exactly the same I did last year. 

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

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

Colombia / Central America: 

Avianca TACA is doing fine and I look forward to seeing how they’ll compete against LAN. 

Venezuela:  Bah!

Europe:

British Airways accomplished a few things.  They got into a royal battle with their flight crew that remains unresolved today in part by being petty.  Their flight crew union, Unite, furthered that argument by being petty.  BA did get their merger with Iberia accomplished and after many, many years they have their anti-trust agreement for trans-Atlantic flights between its European Oneworld partners.

Look for the BA/IB union to do OK in its first year and they may even start looking for another partner as soon as possible.  The anti-trust agreement between Oneworld partners should also add to the bottom line.  However, it’s time to settle this fight with Unite and it’s time for Unite to get real.

Lufthansa is moving along and did do something with their BMI purchase.  I don’t think it did them any good when its CEO, Wolfgang Mayrhuber, started complaining about its ability to compete with the likes of Emirates.  Whether or not he had a real point (and he probably did), it also did signal just how hard a job they’re having with the task of competing with the Middle Eastern airlines.

They also still have their A340s and their plans to add the 747-8i.  They got their first A380 and all I see is fat, fuel consuming airplanes.  This is going to be a problem for them if oil prices rise much more and when you consider that much of their competition is flying fuel efficient A330s and 777s, it makes you wonder about their long term strategy.

KLM/Air France:  More of the same.  I think this airline will need to make an order for new widebody aircraft soon.  Because it remains, essentially, a French airline, I see a large order for A350s and a small order for 777s.  I do not see the 787 in Air France’s future.

Airlines will earn profits and even earn great profits throughout the world.  Many will be “record breaking” but as much from inflation as a recovery.  Those profits will soon start to burn a hole in someone pocket and that is when I think we see capacity growth.  I think that capacity growth will start with the Middle East airlines pursuing more revenue lucrative traffic from Europe and North America.  But we’ll see it happen in the United States, too. 

I would dearly like to see the 787 enter into service with someone and I think we will see it do so.  But Boeing has got to get a rein on itself.  The failures in the 787 program are as much about poor management as they are about stretching technology.  There is too much accountancy going on there and not enough visionary leading.  It’s time for them to start winning and they could do so by winning the KC-X tanker program once and for all.  But it is also time to start talking about what’s next. 

The demands of the 787 program *will* decrease as will the demands from the 747-8 program.  Will it be talk of a 737 replacement or an improvement to the 777?  I think the airlines would like to talk about the 737 replacement and that seems sensible.  Rather than play cautiously, reach again, I say.  Push engine manufacturers to come up with something to raise the game and push technologies again.   It’s also time to talk about the 787-10 and I think there are more than a few airlines who would like to be a part of those discussions.

Airbus is going to muddle along denying any real problems with the A350 until the end of this year.  Then we’ll hear about something delaying the entry into service date by a considerable amount.  John Leahy will insult Boeing and claim the A350 will put the 787 to death but it won’t.   Airbus might well buy the KC-X tanker program but I question the wisdom of this in light of their ongoing A380/A400/A350 problems as well as their announcement development of a new engine option for the A320 series.  When do they earn money the proper business way?

It would be nice to see Embraer make a move into the 130 seat market and I think those guys could do it very well.  Bombardier gets bashed by everyone but I still think they have something with their CS series and I think it will be taken up by another airline soon.

I think we’re going to see another round of fees.  Just as soon as airlines can identify what other parts of their service they can de-couple from the basic flight.  I think we’re going to see airlines put a price on early boarding and we’ll probably see fuel surcharges amounting to tens of dollars.

But let’s hope we see an interesting and prosperous year in the airline industry.

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Delta defers its 787 orders to 2020

October 28, 2010 on 1:00 am | In Airline Fleets | 3 Comments

Delta Airlines has come to an agreement with Boeing on deferring its order for (18) 787 aircraft until the year 2020 or about 10 years from now.  Delta inherited the order when it merged with Northwest Airlines and there has been talk of this happening for over a year now.   It has also arranged to sell (4) 737-800 to third parties upon delivery from Boeing. 

Delta has new(ish) aircraft and it has really old aircraft.  What it doesn’t have is worn out aircraft that require replacement.  Not in the 787 category anyways. 

What’s going on?  Well, operating airliners is a funny thing.  You can buy new, operate new and sell relatively new.  Your costs to do that are generally worth it because you’re also getting a lot of efficiency and since the aircraft is new, maintenance is far cheaper.  Ryanair does this.  You can also hold on to old aircraft, refurbish them from time to time and while they aren’t very efficient with fuel, the capital costs to operate the aircraft are dirt cheap.   Northwest was in the habit of doing this with 40 year old DC-9 aircraft. 

Delta has been buying up used aircraft that fit its model such as the MD-90 and it is going to hold on to other aircraft that have lots of life in it.  Their 767 fleet will hold up for quite some time yet and there is some evidence that the 767 may be no more costly to operate on routes of about 5000nm or less than the 787 is.   In addition, they have a pretty young A330 fleet that was inherited from Northwest and it definitely won’t require replacement anytime soon either. 

Delta is clearly going to preserve its capital and work towards distributing profits from its revenue streams.  This hasn’t worked for airlines very well in the past but it is the stated intention of Delta CEO Richard Anderson.   Even it becomes necessary to change courses, they can.  Delta is a huge airline now and if it decides it wants to move up deliveries on aircraft or even just order more aircraft for timely delivery, Boeing and/or Airbus will happily accomodate them.  They have some flexibility here.

Is this the right move for every airline?  No, it isn’t.  Delta’s 767 fleet is pretty young with a considerable number of its 767 fleet having been delivered in the late 1990s and very early 2000s.  The A330 aircraft have all been delivered to the airline starting in 2003.  They don’t need to elbow their way to the front of the line to get their hands on aircraft. 

Is this the move for every airline?  No, it isn’t.  Other airlines have the bulk of their fleets being delivered in the 1980′s and early 1990′s and that means they are wearing out and do require replacement.   Each airline has to manage its money and its fleet and it can be a delicate dance.  In today’s airline world, flexibility is the key.

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Today’s airline just like yesterday’s, only different

September 26, 2010 on 1:00 am | In Airline Fleets | No Comments

It’s become more and more clear that airlines are going to likely have 3 or 4 basic categories of aircraft.  First, the 100 to 135 seat category with a range that isn’t transcontinental but which allows a full load fly 3 to 3.5 hours maximum. 

Second, the 150 to 210 category with a range that will include trans-continental routes.  This was previously served by the 757 and 767 but has seen today’s 737 and Airbus 320 families take over. 

Third, the 220 to 280 seat arena which includes flights ranging from trans-continental to trans-oceanic including both the Pacific and Atlantic oceans.  We’ve seen the Airbus A330 and 767 and even the 777 in this area and that’ll continue for a bit longer too.  But it will be owned by the 787, 777 and A350 soon enough.

Finally, the very large aircraft on trunk routes that demand high capacity and high-ish frequency.  The 777-300ER, 747 (-400 and -8i) and A380 are the players here.  In the future, we’ll see more of the 777-300ER and A380 than the 747-8i and I think Boeing will have to come up with an aircraft that fits this area better both in economies as well as seat range. 

Nothing much has changed except that the models from Boeing and Airbus are getting freshened or replaced and their ceding the 100 to 135 seat market to Bombardier and Embraer.  The regional jet manufacturers are invading Boeing and Airbus territory and that’s brought along an interesting development. 

We can ignore the Comac efforts to date.  Their plans for a 150+ seat aircraft are just that, in my opinion, plans.  You don’t enter that arena without a lot of experience building something smaller and generally without experience being a partner on similar efforts for a while.  Those aircraft won’t fly, pun intended.

With a couple of exceptions, regional airlines are bringing those new 100 to 135 seat aircraft with them instead of that flying remaining with the majors.  Scope clauses continue to get revised to include larger aircraft and instead of major airlines adopting new equipment to serve those routes, they’re ceding that area largely to their regional airline partners.

The why involves what it always involves:  labor costs.  They can have it flown cheaper by someone else and earn more money.  As that scope increases, however, I do wonder why you would continue to contract that out to an independent airline instead of owning it and its revenue stream.  Why wouldn’t you want to vertically integrate and own that lower cost structure as well as control the service product?

Instead, we see SuperLegacies prepared to sell off their regional airlines and pretty cheaply at that.  Even new-ish ones with pretty low labor costs. 

At some point, these regional airlines are going to see that they can operate their own networks and while they may choose to remain partnered with majors, they’ll also see they can take on more of the risk and much more of the profit available. 

Yes, it’s been tried already a couple of times and while those efforts sputtered at the 50 seat jet level, they won’t necessarily sputter using 90 to 110 seat jets that are coming on line.  Republic may be the first to do it successfully by buying brands and working to build an integrated network while continuing to service partnerships with major airlines, time will tell.  If they are successful, will they one day leave their partnerships with the majors and become a force to content with on their own?

And where does that leave the SuperLegacies in the future?  Will they continue to walk away from the bottom end of flying when it comes to capacity?  Will they continue to cede that work to partner airlines while working to build their long haul flying?  Can they afford to cede that much control on what, today, feeds their networks for that long haul flying?

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Lufthansa orders planes

September 25, 2010 on 1:00 am | In Airline News | No Comments

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

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

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

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

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

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

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

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

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

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Delta offers a brief vacation in Goose Bay

July 11, 2010 on 1:00 am | In Airline News | No Comments

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

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

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

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

Delta gets you there.

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Lost Teenage Sailor Found with QANTAS jet

June 11, 2010 on 1:00 pm | In Trivia | No Comments

Teenage girl Abby Sunderland set off two emergency beacons after her boat’s mast was removed in heavy weather yesterday.  You can read details HERE.

The rather interesting part of this rescue operation, to me, was that she was located and contacted after a QANTAS A330 was chartered and sent to find her.  No coast guard aircraft could make that trip and very few (if any) military aircraft in that part of the world would have been capable of doing it.  An empty A330 could do it easily (it was about a 9 hour trip total).   The pilots of the aircraft were able to communicate with Ms. Sunderland when she used her marina radio.

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Emirates and the A380

June 10, 2010 on 1:00 am | In Airline Fleets | No Comments

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

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

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

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

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

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

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

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

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AA / US Airways: Analysts decide they like it.

June 9, 2010 on 1:00 am | In Airline Fleets, Airline News, Airlines Alliances | 2 Comments

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.

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