December 13, 2013 on 2:57 pm | In Airline Fleets, Airline News, Mergers and Bankruptcy | No Comments
American Airlines didn’t waste time in making a new order for new regional jets. The order is split between Bombardier and Embraer.
Bombardier CRJ900: 30 orders / 40 options
Embraer E-175: 60 orders / 90 options
The CRJ900 jets will go to US Airways wholly owned subsidiary PSA and, as you can imagine, PSA pilots are thrilled. The Embraer jets are To Be Determined and, as you can imagine, the American Eagle pilots are way less than thrilled.
I honestly can’t read the motives of American Eagle pilots. That airline is grossly overburdened with expensive 50 seat (or less) regional jets that will be going away. Make no mistake, even if the capital costs are exceptionally low for keeping those planes, they are going away. They are inefficient, costly to maintain and frequently break down at this point. They are becoming quite old and they don’t fit the modern world model.
American Eagle pilots, represented by ALPA, haven’t found an agreement with American Airlines. American Airlines president Scott Kirby thinks they can put a deal together and I think that . . . maybe not. AE pilots are very well paid and many have decided to make a career at that airline instead of doing what most other pilots at other regional airlines do after a few years: transition to a mainline airline.
I think AE pilots want to be paid like mainline pilots with mainline schedules. If true, I think that American Airlines has a solution for that problem: sell or shut down the airline. In case anyone wasn’t watching, there really aren’t any buyers for expensive regional airlines with old equipment. Comair anyone?
I feel bad for the AE pilots because they have a lot to lose and they don’t have much bargaining power. If a deal is made, I would make sure that AE pilots have the right to upgrade into mainline AA operations for the next 10 years. Pilots who stay in the regional airline game for their career can expect to see bankruptcies, consolidations, strikes and layoffs that are reminiscent of an era already gone in mainline operations. Fighting won’t change that.
The best favor a union could do for those people is find a way for them to move up and out.
Oh, and those Embraer jets that just got bought? They aren’t going to be committed to American Eagle until and if there is a contract. Wait too long and they’ll go to someplace like Republic who already operates them and who already works for American Airlines.
May 22, 2013 on 1:00 am | In Airline News | No Comments
I like the idea of Porter Airlines. This is an airline that actually operates using Bombardier Q400 aircraft from a small, inner city airport in Toronto and does so profitably. It uses the Bombardier Q400 in a manner I’ve always suspected would earn great money for an airline.
I like this airline because it represents a business model I have strongly advocated for flights of the type that Porter flies. It flies its aircraft on routes that fall roughly within an 800nm radius of its home airport, YTZ, or better known as Billy Bishop Toronto Airport.
Instead of cramming seats into the aircraft with a 30″ or less pitch, Porter offers a generous 34″ pitch seat that is roughly as wide as that which is in an Airbus A320 or Boeing 737.
The seat is attached to an extremely fuel efficient turboprop airplane that is also quiet and able to fly as fast as a jet (door to door) on routes less than 400nm and nearly as fast on routes up to 800nm.
The airline makes money and now it wants to fly jets. Specifically, it wants to fly Bombardier CS100 jets from the tiny Toronto inner city airport which currently doesn’t have a runway long enough for the jets and which actually bans jets.
Making the necessary changes both physically to the airport and to the laws is very daunting to say the least. And we are talking about Canada here, not the United States.
Porter has made an interesting play. It’s got an order for new Canadian made jets that are very important to the Canadian aerospace industry that is contingent on Canadian federal and provincial and city governments caving in to its demands.
We think this foolish. Porter’s success dosn’t come from flying from that small airport nearly as much as it comes from the aircraft it uses. Highly efficient turboprops.
To be true, Toronto’s main airport (YYZ) is incredibly expensive to fly from and does offer two strong competitors (Air Canada and WestJet) and so what. It is, at most, a level playing field.
If Porter wants to fly jets, let them fly jets . . . from YYZ. Turning Billy Bishop into a Canadian London City Airport just isn’t the right thing to do in this case. Even London City Airport has more infrastructure than this small airfield.
March 11, 2013 on 1:01 pm | In Aircraft Development | 3 Comments
Bombardier’s CS-100/300 aircraft are nearing the p0int where the first test aircraft will be taking flight in a few months. Last week, an unveiling of sorts took place to show off the aircraft which, up to this point, has actually stayed on time more than most aircraft being developed today.
I had a few thoughts on what I have seen and heard so far. Wow, that aircraft is big compared to anything made by Bombardier before. It doesn’t look like a regional jet, it looks like a mainstream jet with mainstream intentions.
Apparently Bombardier has been running around and promising potential buyers that they can make the aircraft a little longer and manage to cram in as many as 160 seats on the airplane at 28″ seat pitch. This is sold as feasible because a rather large executive with Bombardier can “fit” into these seats they are planning at that pitch. I would like to point out that even I can fit into such a situation. The real question is whether or not I will willing subject myself to such a seat pitch. And do we not recognize that a Bombardier executive might just have an incentive to say it’s a dandy thing to experience?
Consider that the plan is to cram 160 seats into this aircraft which is 127 feet long and compare that to today’s American Airlines MD-82/83 aircraft which is 147 feet long and which has just 140 seats on it. Even if you lengthen the CS300 a touch (which they plan to do) it still doesn’t really get you where you need to be.
I have a feeling that Bombardier is already discovering that the CS-100 might be a touch undersized and that the CS-300 might need to be a bit longer at the cost of range as well. Both these aircraft nominally are capable of trans-continental flights in North America and I would argue that that range is just a hair too much for those aircraft.
This is a good looking aircraft and it sounds like it’s coming together very well on the whole and despite high use of composites. I would suggest that Bombardier get it built, get it in the air and start showing the economics to airlines quickly. There is no need to grow into Boeing/Airbus territory with this aircraft. Airlines will buy this aircraft if it can offer 110-130 seats with the same dispatch reliability as a Boeing/Airbus with the promised improved seat costs.
This is an airliner that AA, United and Delta all need in the domestic United States. This is an airliner that, if it proves itself, Southwest should be looking at as well. Have faith in yourself and recognize that until you can show people that this airliner meets or exceeds promises, there will be some skepticism. Bombardier is entering new territory here and it needs to remain confident in itself in the meantime.
March 9, 2013 on 1:00 am | In Aircraft Development, Airline Service | No Comments
William Swelbar has a white paper posted on his blog about small community air service and the merger of American Airlines and US Airways that has inspired me to some thoughts. The essential point (of interest to me) among his many well thought out points is this: It isn’t the LCC carriers that provide this service. It’s the network carriers that do so and we have lately denied that air service through slot divestitures to LCC carriers.
On the one hand, he’s entirely right. On the other hand, I question who “deserves” air carrier service in today’s world. My own view of the history behind this is that there are cities where such service is, in my opinion, not justified today.
Let’s not forget that small communities were originally served with some regularity in the past due to a few primary circumstances which are very different today.
First, fuel costs are monumentally more than they were even 20 years ago. Low fuel costs allowed for a competitive fare to these communities via available aircraft that just doesn’t exist today. Airlines are constrained by the fact that sub-50 seat jets are un-economical to use in just about any circumstance today and there are no desirable replacement aircraft in that category on the way.
Second, those many of those communities needed that air service because overland transport to major cities was very poor and even non-existent at that time. Today, we have not only a full major interstate highway system but every state in the continental US has an excellent secondary highway system. It’s difficult to find a place in the continental US today that is truly remote. In most cases, people are no more than 1 to 2 hours away from air service at the worst.
Third, we don’t encourage this service the right way. We do subsidize it under certain circumstances and do so for routes that, in my opinion, defy imagination as to why their subsidized. At least quite frequently. What we don’t do is subsidize industry to come up with a cost effective, profit earning solution to providing the service. Even airlines receiving subsidies today look at those routes and realize that even if they are earning a modest profit, greater profits can be earned elsewhere and they go to earn those.
I think we need a program that encourages an airplane manufacturer to come up with what I would call the Essential Air Service Airplane. This is an aircraft that require no greater than 500nm range fully loaded and no more than 30 seats and should travel at speeds comparable to ATR and Q400 aircraft. They should be ruggedly reliable for dispatch so that they do not strand themselves at outstations and they should be capable of rough weather service.
Survey the network airlines and ask them what such an aircraft looks like to them in definition. Create a government RFP for such an aircraft and contract the network carriers into committing to a minimum number of purchases and let the markets go to work. Frankly, I would like to see Bombardier and/or Embraer work this problem themselves because I think such an airliner has potential in places such as Africa, India and parts of Asia and Australia. Small and efficient can be very profitable if it is reliable. Look at Azul in Brazil and you’ll see just how that works out.
In these conversations, I pick on cities here in Texas like Waco quite often. Waco does not justify high frequency flights to DFW airport (and Houston Intercontinental) with 50 seat jets. It’s far too close to Dallas for that. But if you had a small essential service airliner defined above, that airliner could actually serve the frequencies that exist today as fast or, possibly, faster than the 50 seat jet and potentially with greater reliability.
Don’t build this aircraft with too much range. Keep it simple and constrained to true regional routes. It can’t be a mistress to the short haul, small community markets and also mistress to the long and thin markets.
Make it large enough to inspire confidence and I think we know enough about building such aircraft today that we can make it possible to walk an aisle in this aircraft without feeling like you’re crawling into a cave. Make sure it can serve these routes from hot and high locations such as Denver, Salt Lake City and Phoenix. That means some slats and flaps most likely but do not make this aircraft a STOL aircraft. The airports it would serve today are all adequate for a small aircraft configured to meet these needs with efficient wings. STOL aircraft sound great until you realize they are rarely needed but they always have the penalty of being built with draft that can’t be avoided.
If I’m Embraer or Bombardier, I would look to build this aircraft in Wichita, Kansas. There is enough expertise there, enough facilities and I’ll bet that Kansas would be looking to make a heck of a deal on taxes these days. Use modern avionics but design it to be simple and easy to qualify on. Make it the airliner that future jet pilots start on. Make it forgiving which will help some in making it rugged and reliable. Use as many Commercial Off The Shelf components as possible and go to Garmin to build your flight deck instead of going with a pricey system from someone else.
Make it so that a network airline and/or regional airline can purchase this aircraft and operate it profitably with oil at $130 / barrel right from the start. Offer loans at low interest rates to ensure capital costs are low enough to be attractive to these same airlines. Get airports to offer low cost fees for using such airliners to their airports. Convince those same airports that these airliners are their future and not their shame. Keep the jet ego out of this conversation.
This airliner can be built and it can be profitable for the manufacturer and the operator. It needs a sponsor and while I readily admit that it might not offer as much net profit as a 737 sold at list, just how many of those 737s do we think are selling for list prices anyway? It is entirely possible that Boeing and Airbus are now making profit on lease deals rather than on the sale of an aircraft.
This aircraft needs someone of vision and leadership to see it done. That person needs to be able to go to 8 to 10 airline heads in the US and convince them that not only can it be done in a timely manner, it can be done cost effectively as well. Those guys still exist but they are a bit harder to find. And it doesn’t have to be Bombardier or Embraer either. This could be Cessna or maybe even the new Beechcraft. Maybe it needs to be a partnership between the two companies. Partnerships have been very good in some instances. I point to the GE/SNECMA relationship as just one example.
Airlines are dysfunctional organizations. You won’t get them to provide that air service by offering them the chance to break even or make a modest profit. They won’t necessarily band together and ask for a new airliner either. But if you deliver that baby on their doorstep, they just might adopt it and call it their own.
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.
December 23, 2011 on 1:00 am | In Airline News | No Comments
A startup airline calling itself Odyssey Airlines has ordered 10 Bombardier CSeries aircraft to use on a startup venture providing business class service between London (London City Airport) and New York City (JFK) in direct competition with British Airways who currently provides such service with A318 aircraft.
The airline says that by using these aircraft, a stop in Ireland wouldn’t be necessary.
I’m scratching my head over this. The CSeries is planned to offer as much as 2800nm of range and that route is about 3500nm in distance. Granted, reducing the seat count makes for a lighter aircraft and stretches range but this still feels a touch pie in the sky at this moment.
In addition, how many seats can you fly and will it really make sense on a trip cost and per seat cost basis? I’m going to guess that, at most, they’ll manage a 2-1 aisle configuration and no more rows than the BA A318 (8 rows) giving just 24 seats vs British Airways’ 32 seats. That doesn’t feel warm and fuzzy either. Yes, BA has to stop in Ireland on the way to NYC. It also has the infrastructure there to do that with very small incremental costs.
Furthermore, British Airways has a business class brand and the infrastructure in both London and New York to make the business class traveler feel pampered. It’s a trusted service product and I don’t think you can pop up and attract travelers to your business without lowering prices substantially. The truth is, these flights aren’t sold on price anyway. They’re sold on service and if others can’t beat British Airways service, what makes Odyssey think they can?
This is a stinky plan, in my opinion, using the wrong aircraft (which *will* need ETOPS to do this by the way) and I don’t think it gets off the ground in the long run. If the demand is actually there already, British Airways would serve it with more frequencies using more A318s. They might not have anymore in the fleet but sourcing a long haul A318 isn’t exactly hard to do since anyone who owns one is generally looking to sell it.
I do not see this taking off, pun intended, and I think it’s more publicity related than anything else since you don’t need 10 aircraft to do the London-NYC run from London City Airport. One wonders if there is another agenda going on with this startup that hasn’t been revealed yet.
August 28, 2011 on 1:00 am | In Trivia | No Comments
We all know Bombardier’s 50 seat jets in the CRJ-100/200 series aircraft. The CRJ-100/200 aircraft are actually derivatives of the original Canadair Challenger business jet and Canadair is the foundation of what became Bombardier’s aerospace division.
Can you name the first Canadair 50 seat airliner?
The answer after the fold: (more…)
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.
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.
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.
May 24, 2011 on 1:00 am | In Aircraft Development | No Comments
The US Export-Import bank has announced it will begin backing narrow body aircraft purchases with low cost loans for US domestic airlines. This means domestic airlines purchasing Boeing 737 can now access the same low cost loans that foreign airlines have been getting. Why?
Because the equivalent Canadian institution has decided to do the same for the Bombardier C-Series.
This is good news for airlines, particularly in the United States, because I think we’re going to see a storm of low cost loans made by various governments to support the purchase of new aircraft. No doubt the European governments will do the same to support Airbus. The gloves are off.
I don’t know if this is good for the airline industry, however. Newer, more efficient aircraft in the fleets is good but this kind of loan storm, if it happens, could also have the effect of encouraging airlines to stretch their finances to take advantage of this and airlines do not need to be stretching right now.
In addition, these kinds of loans can distort the aircraft marketplace long term. A buying binge can result in a drought later. I’ll take stability over a flurry of purchases any time. Droughts can stymie aircraft development and I would far rather see a new Boeing narrowbody rather than another 1000 Boeing 737s sold. It’s better for everyone all the way around.
April 1, 2011 on 1:00 am | In Aircraft Development, Airline News | No Comments
Pratty & Whitney has done pretty well this week. First off, they’ve won the IndiGo order for the Airbus A320NEO and that is a big order over time. 150 aircraft is nothing to sneeze at. P&W already is in development on this engine for Bombardier (CSeries) and Mitsubishi’s regional jet. In addition, COMAC has now expressed interest in this engine for its 919 developement.
At first glance, P&W appears to be getting interest from the little knowns but that’s simply because they’re the ones with new aircraft in development. The Airbus A320NEO adds legitimacy and the order for IndiGo’s A320NEOs solidifies it.
It does strike me that airline industry appears attracted to the perceived greater promise of the GTF. When does the GE/Snecma CFM LEAP 56 engine start gaining interest? It’s noticeably silent in that area so far.
March 28, 2011 on 1:00 am | In Airline News | No Comments
Southwest Airlines CEO, Gary Kelly, continues to speak loudly at his doubts about Boeing providing a replacement that is 10 or more years down the line in lieu of a re-engine. At the J.P. Morgan Aviation, Transportation and Defense Conference, Kelly spoke of this dilemma for Southwest and just how unsatisfying it is.
Southwest wants more fuel effiency sooner than what Boeing is publicly talking about. Kelly believes that Southwest needs to advance its talks with Boeing on this subject. Kelly also believes they can manage more than one type of aircraft in their fleet and believes the Boeing 717 will offer many possibilities for Southwest going forward. Finally, he also believes they can source their next mainline aircraft from several manufacturers, not just Boeing and he includes Airbus and Bombardier (CS Series) in that statement.
There isn’t anything new being said here. However, its the fact that Kelly has taken to saying it in virtually every public forum that is significant. Southwest wants Boeing to pay attention and the fact that Kelly continues to speak indicates that Boeing isn’t doing a very good job of listening so far. Is it hubris, dysfunctionality or a short wait before they hope to wow Southwest?
I actually lean towards hubris in this case. I believe Boeing thinks that Southwest will wait. I believe that Southwest is not the same Southwest Airlines that existed in the mid 1990′s and if Boeing expects to keep them as a mainline customer, it’s time for some transparent talks on what these airlines need.
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.
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.
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.
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).
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.
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.
December 20, 2010 on 1:00 am | In Airline Fleets | No Comments
Southwest has indicated its readiness to investigate different fleet types in the future to meet its needs and the driver for this is fuel costs. Their famous adherence to the 737 was more appropriate even 20 years ago but in this age, they have a large enough fleet and a large enough network to justify multiple types.
Sticking to one fleet type has its benefits but those benefits don’t grow large when the fleet size expands past a certain point. There is all kinds of debate on how many aircraft you have to have to make it efficient but I would say that for Southwest, a minimum of 60 to 80 aircraft is probably a sweet spot right now. Big enough to make maintenance and handling optimum and big enough to offer flexibility through the network.
Does this mean SWA is going to add more fleet types? No, not necessarily. It means that it is time for them to put together a different fleet plan for the future. If there is one thing I’m certain of, it is that SWA will have 737s for a long, long time. The real question is . . . what kind of 737s?
In addition, SWA still does quite a bit of regional flying on mainline equipment that was efficient with 737s 20 years ago but isn’t nearly so today. One great example of that is the flights from Dallas to places such as Lubbock and Midland and even Little Rock. It might be beneficial for Southwest to identify a new fleet type that is smaller (in the 100 seat range) for maintaining frequency to those destinations but also offering better fuel economy and cost of ownership. And they’ve got choices.
One thing is sure, however: Should SWA pursue a smaller aircraft to standardize on, it won’t be a Boeing or Airbus. They’ve got the 717 coming into the fleet via their Airtran merger and they’ll likely play with that aircraft for several years. However, a 717/737-500 replacement won’t be a Boeing/Airbus aircraft. It will be one of the semi-mainline regional jets being offered by the likes of Embraer and Bombardier most likely. And it will be an aircraft that can be punished with high utilization rates. On the surface, the Embraer E-190 series looks like the best bet to me.
I think their larger, single aisle aircraft will continue to be Boeings and I think that, for the near future, those will be 737s. It is an almost foregone conclusion that they’ll also be pressuring Boeing for a new 737 replacement more and more over the next 2 years. That replacement aircraft is liable to start with roughly the size of a 737-800 and have several larger types above it. Southwest will likely choose to purchase several of the sub-types to meet their needs on various different routes that have wildly different constraints.
This is about fuel efficiency and keeping down the trip costs. Southwest has never had amazing load factors but the kind of load factors they’re experiencing today are historically high and they are unlikely to fall much in the future. They need a larger aircraft than the 737-700 in the future.
In the near future, they’ve got enough differences to work with. This kind of talk is about pushing manufacturers to start considering what to offer airlines such as SWA in the longer term.
December 18, 2010 on 1:00 am | In Airline News | 2 Comments
Southwest made its intention to purchase the 737-800 official a few days ago and while no one is surprised, it is gratifying to hear it has been made official. This will be a good choice for SWA going forward and it would appear that their first deliveries in 2012 will be 20+ of the -800. Gary Kelly has said that that is too small a fleet and indicated that about 80 in the fleet would be about right. These new aircraft will be replacements for SWA’s older 737-300 aircraft rather than in addition to them. However, the greater size of the 737-800 means that there will be significant capacity growth in 2012.
Interestingly enough, SWA started advertising for an ETOPS manager several days ago and *lots* of people noticed that. ETOPS will be necessary for SWA to serve Hawaii. Just a month ago, I wrote about SWA and Hawaii HERE. Apparently all of the deliveries in 2012 will be ETOPS equipped aircraft so I think that my thoughts on SWA starting a Hawaii route in 4 to 5 years from now is a touch off the mark.
Instead, I’d say we’ll probably be looking at SWA starting routes to Hawaii in at little as 3 years. They still have to get the aircraft and they still have to learn how to maintain that ETOPS fleet and they also have to figure out how to do the flights and from what cities should they be flown.
Gary Kelly, CEO of Southwest, also made an interesting comment or two about the 737 and a new engine option and/or replacement for that aircraft. Kelly rightly points out that Boeing is talking about having something for its customers in 10 years and comments that: “When you talk about something that’s 10 years from now, that’s not a solution, that’s an idea.”
I couldn’t agree more.
The Airbus A320NEO isn’t going to be a 737 killer by any stretch. In that respect, Boeing doesn’t have much to worry about. But Gary Kelly is right, Boeing hasn’t got anything on the table. The next generation 737s started to roll out of the factory in 1996 and that isn’t all that long ago if we were talking about a new aircraft. But the next generation 737 line weren’t “new” aircraft. They were evolutions of the original designs.
It’s true that engine technology is needed but nobody is really driving that technology all that much so far. Both Airbus and Boeing continue to look at new engines as more an annoyance than a need. The A320NEO isn’t a Boeing 737 killer but a new single aisle short to medium haul aircraft from Boeing is most definitely an A320NEO killer.
It concerns me that all we’ve heard from Boeing is that their customers aren’t asking for new engines because it’s clear that airlines aren’t asking just for new engines but new airplanes. And Boeing is behaving a bit too arrogant with respect to their customer base in my opinion. I wasn’t much of a fan of the Bombardier CS300 so far but now I kind of hope it makes it and it’s a bit of a Boeing killer.
If Southwest wants a new, efficient (as possible) airliner, it’s time to get to work. Because of Southwest wants it, I guarantee you that every large operator of the 737 wants it too. With fuel prices as high as they are and due to be higher in the future, even a 10 to 15 percent efficiency gain is something an airline can’t afford to ignore or defer.
November 30, 2010 on 1:00 am | In Airline News | No Comments
The Nordic airline, Scandinavian Airline(SAS), is looking to modernize a good portion of its current fleet of 737 and MD-80 aircraft and Bombardier is reportedly favored to win with its CS300.
SAS owns a pretty varied fleet which includes both Airbus A320 series aircraft as well as old and new generation 737s (including the unpopular 737-600). A more harmonized fleet would help.
The problem is, SAS doesn’t necessarily need aircraft that are necessarily big players on medium haul routes. While it does need some higher capacity aircraft for leisure destinations, it needs smaller capacity aircraft in bigger numbers for frequency.
The CS300 has a nominal maximum range of at least 2200nm and that’s enough for SAS’s world in Europe. That would allow them to serve all of europe from their hubs of Copenhagen, Stockholm and Oslo or any of their other focus cities as well. Take a look at what 1900nm range gets you from Stockholm by clicking HERE.
It’s notable that this airline is the only airline that found a real use for the 737-600 and bought 28 of them. They also have a number of -500 models as well.
The Cs300 would probably fit well into their strategy and offer them a light aircraft with good capacity for flying frequency in their stronghold(s). They would get an efficient engine for this kind of flying as well.
My guess is that the Boeing aircraft will go away completely over time and SAS will buy more Airbus aircraft for routes requiring more capacity. Boeing just doesn’t have anything in its product line up that fits the SAS model.
A lot of people believe the CS300 isn’t going anywhere and even I wondered but it seems to me that this might be just the kind of niche Bombardier needs to serve.
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?
August 15, 2010 on 1:00 am | In Airline Fleets, Airline Service | No Comments
In a month, Frontier will have withdrawn the remaining Bombardier Q400 aircraft from the Lynx fleet and I continue to think that my have been a mistake.
Lynx routes will be operated by Republic Airlines E170 jet aircraft. I get that “pure jets” remain somewhat attractive but I think the Q400 will have been shown to have earned more profit on those same routes. I get that Republic needed to find a use for some of their aircraft, too, but I continue to believe that retaining the Q400 would have proven profitable.
Yes, I’m repeating myself. It was a small fleet but a fleet that fit extremely well. In addition, the Lynx outfit was one of the things that really caught Southwest Airlines’ eyes during bidding this time last year. If you’re catching SWA’s eyes, you *must* have something going for you.
It’s interesting to me that despite the emphasis on finding lower costs, so many airlines continue to ignore the turbo-prop. Yes, Continental has it for its regional flights on a large(ish) scale but that’s about it if you ignore Horizon Airlines.
The fact that Alaska/Horizon Airlines is making pretty good money from them and on segments that, frankly, are a bit long for the Q400, should be signaling something to other airlines. But those airlines remain tone deaf and I think that’s a shame.
I look at the flights that American Eagle flies regionally from DFW and it makes me cringe to see those old ERJ-140 aircraft going to Texas and Oklahoma and Lousiana destinations that could be served so much more efficiently with a Q400 or ATR-72. The same is true for the Chicago area.
I honestly believe that the airlines are the only ones afraid of these aircraft, not the customers. Imagine how much more competive one might be using them, however. Low fares are the key, not a jet engine.