Odds and Ends: Frontier Airlines, first 737 at rate 35, Embraer

Frontier Airlines: At the Paris Air Show, Republic Airways Holdings ordered 80 A319/320neos with CFM LEAP engines, and the order was touted as the death knell by some for the Bombardier CSeries–also ordered by Republic for Frontier (40+40). As we wrote at the time, the Airbus/CFM deal was clearly a financial bail out for Frontier, which leased Airbuses from GECAS and had maintenance agreements with CFM. The leases and maintenance agreements were restructured for the ailing airline, and Airbus agreed to contribute a modest amount of cash to the airline.

We were of the opinion then–and are more convinced now–that Frontier won’t survive t0 take delivery of either the Airbus or Bombardier orders. It’s squeezed between United and Southwest airlines at Denver and between Southwest and Delta at Milwaukee. This article in the Denver Post neatly summarizes the current situation.

Will Frontier’s likely demise kill off the CSeries? Not hardly. We would be willing to bet BBD is double-booking these order positions. Doing so against weak airline orders is common practice among the OEMs.

737 rate ramp up: While we were traveling, Boeing produced the first 737 at the ramp-up rate of 35 per month. The company is going to 42 per month by 2014. Officials will decide by late 2012 or early 2013 whether to push the rate to beyond 42 (50 is most often discussed, but 60 is also in the mix). Renton has the ability to accommodate 62 737s: 60 commercial models and two 737-based P-8A Poseidon patrol airplanes. Or the current plant could go to three shifts and weekend work to push out more with little investment. And Jim Albaugh, CEO of Boeing Commercial Airplanes, told the Credit Suisse conference we attended last week that further improving lean production could increase the rate, too.

Embraer: Embraer continues to study whether to stretch the E-195 to around 133 seats, an official said at the Credit Suisse conference. As a re-engined airplane, the airplane will have a new wing. It will likely not have US trans-con range; EMB believes with 90% or so of the operations less than trans-con, this range isn’t needed. Stay tuned.

4 Comments on “Odds and Ends: Frontier Airlines, first 737 at rate 35, Embraer

  1. It seems EMB chose to miss the boat, as the trans-con US market is huge.

    Even though Boeing can easily push the B-737 line to about 60 per month, why put that kind of strain on suppliers when you know the MAX is coming and it will have to be built along side of the NG and C-40A, P-8A/I, and AEW airplanes. The same also applies to Airbus, who can match the 60 A-32Xs per month, but will put the same strain on its suppliers.

    As far as talking about F9, why beat a dead horse (pun intended)? F9 is screwed, the OEMs know it, the passengers know it, and Wall Street knows it. About the only people who don’t know it work for F9 and a few of the Airbus cheerleaders (although the majority of the Airbus cheerleaders do know and accept it).

  2. BTW, the Denver Post story completely misses the point on F9. The airline is heavierly in debt, and getting deeper in debt. The don’t know how to buy fuel, and they don’t know when to stop ordering new airplanes. With 60% or more of their business at one airport (DEN) they are suseptical to an air fare war from UA, WN, or AA, or all three.

  3. The best bet would be for a three way merger between Frontier, Virgin America and Jet Blue. Probably wont happen without an outside investor buying stakes in all three companies. These three are very similar in terms of service level, aircraft, and rather few overlapping route. They’d a huge reduction in overhead plus it would give them the scale and routes to more effectively compete against the big 3.

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