Icelandic becomes first regular airline to serve Antarctica

Icelandic 757 Antarctica

Icelandic Boeing 757 at Union Glacier Blue Runway, Antarctica. Source: Special to Leeham News and Comment.

Nov. 27, 2015: Loftleider Icelandic Airlines is the first regular airline to serve the world’s seventh continent, Antarctica.

Icelandic, a sister company to Icelandair and crewed by Icelandair, operated a Boeing 757-200 into the Union Glacier station last week, Nov. 17, on a proving run. The first passenger flight was yesterday. The 757 was configured for 52J/10Y seats; there were 50 passengers. The flight originated in Puntas Arenas, Chile.

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Bjorn’s Corner: Aircraft deterioration

By Bjorn Fehrm

By Bjorn Fehrm

27 November 2015, ©. Leeham Co: In an article yesterday, we looked at the economics of acquiring used aircraft for long range operations. We compare getting a second hand Boeing 777-200ER or Airbus A340-300 to operate as a long range complement to an existing network or to start a charter operation to destinations further away than previously possible.

The low fuel cost has made longer range destinations economical for a number of business models and the low capital cost and good conditions of these aircraft open new opportunities.

One of the things that must be considered in such analysis is the deterioration of the aircraft’s components. This will affect the aircraft’s performance in a marked way. In fact, an aircraft only has its factory advertised performance once in its life-time: at delivery.

Certain types of deterioration can be reset to zero by maintenance actions; others will not be reset completely by a visit to the maintenance shop. Let’s go through the different forms of deterioration that one normally caters for in performance calculations and how one go about to restore the aircraft’s operation as much as possible with scheduled maintenance.

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Used B777-200ER or A340-300?

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By Bjorn Fehrm


Nov. 26 2015, ©. Leeham Co: In recent articles we have latched on to the debate around the prices for used Boeing 777-200 aircraft. Contrary to the market appraising companies’ ideas about second hand values, our surveys show that not only the Airbus A340-300 is cheap in the market but the Boeing 777-200ER is also available at interesting prices.

This, coupled with sustained low fuel prices, makes for interesting opportunities. Charter destinations can be reached which were not possible with less competent aircraft and it is possible to lease or purchase these long range aircraft to backfill an expanding route network while awaiting or even postponing delivery of the latest technology aircraft.

We decided it was time to take a look at which of the two would be the better choice as a long hauler of 300 passengers to destinations of up to 5,000nm. We use our proprietary model to find out which one is the most suitable given different conditions, such as cabin makeover or not. We will also introduce aircraft deterioration to the calculations to map the reality of an older aircraft.

In this first article, we will establish the base values for the aircraft and find their cash operating costs. In a subsequent article, we will add capital costs where we will look at different purchase scenarios and refurbishing options and how these affect the overall direct operating costs.


  • The 777-200ER and A340-300 are very close in most dimensions.
  • The 777-200ER is the slightly larger and heavier aircraft. Thanks to more effective engines, it can compete on fuel costs.
  • When the other costs are added to make up cash operating costs, the higher weight and more expensive engines start to eat up any fuel cost advantages the 777-200ER has.

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Bombardier looks to the future

By Bjorn Fehrm

Nov. 25 2015, ©. Leeham Co: Bombardier (BBD) has not had an easy year. The stock plunged from just over $4 at the beginning of the year to a low of just over $1 today on the continuing of a cash crisis and what to do with the CSeries program.

The stock market wasn’t reassured by the annual investors day yesterday in New York City, even though some analysts were more positive. Robert Spingarn of Credit Suisse wrote:

“In addition to offering some level of financial forecast and visibility for the next 5 years, the most important thing BBD’s new management did at today’s investor event in NYC was to clearly demonstrate a much welcomed sense of leadership, organizational structure and accountability.”

We tend to agree with him and it was a leadership that described a plausible roadmap to a future. Bombardier could before the event relegate the question of the company’s immediate survival to the past, thanks to La Caisse de dépôt et placement du Québec (CDPQ) taking a 30% stake in the BBD Train unit.

This will inject US$1.5bn to the company cash in addition to the $1bn that the Province of Quebec previously agreed to inject in the CSeries program. Both investments are scheduled to close in the first quarter. The conference could therefore be focused on a presentation on how to transform the company for 6% annual compound growth and acceptable profitability in all its business units until 2020. Read more

State investment in Bombardier further mockery of WTO

Nov. 24, 2015, (c) Leeham Co. With the $1bn investment by the Province of Quebec in the Bombardier CSeries program, another example of government funding emerges in commercial aviation development.

Setting aside whether the investment might be challenged before the World Trade Organization—and whether this makes good business sense for Quebec—the move makes a mockery of the entire concept of avoiding government support.

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The turbo-prop conundrum: small market, high costs

ATR Turbo-prop. Photo via Google images.

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ATR and Bombardier are incumbents. China has a home-market offering.

Indonesia and India want to create a product.

It’s the 60-seat and up turbo-prop market.

It’s too many companies chasing too-small a market.


  • The 20-year demand for 60-99 seat turbo-props is small.
  • Developing a new, clean-sheet design is costly.
  • There is a solid demand for an inexpensive 19-34 seat turbo-prop—but nobody is interested.

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Pontifications: “I’m glad you’re not going far.”

Hamilton KING5_2

By Scott Hamilton

Nov. 23, 2015, (c) Leeham Co. An Airbus A321 is blown out of the sky over Egypt.

Two Air France jumbo jets are diverted due to bomb threats.

ISIS stages multiple, simultaneous attacks in Paris. Additional attacks are thwarted. Police raids in Belgium take place.

ISIS is declared a clear and present danger in Europe and the US.

The worries on a global basis are obvious. Being far more parochial, given the focus of LNC, what is the impact and potential impact on commercial aviation?

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Bjorn’s Corner: Production rates

By Bjorn Fehrm

By Bjorn Fehrm

20 November 2015, ©. Leeham Co: Emirates Airline CEO, Tim Clark, is quoted as having said “it takes them forever to get this thing up.” He was talking about the Airbus A350 production rate and his reasons for delaying Emirates’ decision on what to buy for the airlines medium range needs. Clark said Emirates wants more aircraft in operational use before they can evaluate the operational characteristics of the A350.

Emirates want to see at least 20 aircraft in operation and right now it is about seven to nine that fly every day. Actual deliveries stand at 10 with one month to go before the first anniversary when deliveries started (the first A350-900 was delivered to Qatar Airways on the 22 December 2014).

Looking at how many aircraft that are actually flying, one can agree with him. It seems actual production rate is more like one per month rather than the three to four a month that Airbus talked about at the first delivery ceremony.

So why is this? Is the production of A350 therefore in serious trouble? What is taking them so long? Has Emirates pointed to a weak part of the A350 program?

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Bombardier-Quebec investment another step in securing future

Nov. 19, 2015: The $1.5bn investment by Caisse de dépôt et placement du Québec to take a 30% stake in Bombardier Transportation, the rail business, is another step in the financial restructuring of the distressed company.

This brings to $2.5bn Bombardier has funded in recent months. The Province of Quebec previously agreed to invest $1bn in the CSeries program.

CDPQ is a long-term instutional investor that manages funds primarily for public and private pension funds.

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Europe’s airlines: LCC, the winning formula

By Bjorn Fehrm

Nov. 18 2015, ©. Leeham Co: Easyjet revealed record numbers yesterday with pretax profits now at 14.6% of a year turnover of £4,686m. The load-factors for their aircraft are at a record 91.5% on a 12 month basis, with an increase of 1.5% for the period. The return on employed capital has increased to a high 22.2% from 20.5%.

The LCC now transports 69m passenger per year and continues to increase its capacity and efficiency. Airbus yesterday announced that easyJet has signed a firm order for a further 36 A320 Family aircraft, taking its cumulative order for the type to 451. The agreement for six A320ceos and 30 A320neos makes easyJet one of the world’s biggest airline customers for the A320ceo Family with 321 ordered and also for the A320neo, with 130 on order.

Earlier in November Ryanair had announced their record results, further manifesting their investment grade rating. At the same time Europe’s largest airlines, Lufthansa and Air France-KLM, are engaged in difficult negotiations to reduce their personnel costs, a mission riddled with strikes and confrontation. The once reliable Lufthansa is no longer.

What is the reason for this divergence in the market? Read more