Odds and Ends: Air France/KLM trims cargo fleet; ExIm Bank countdown; BBD v EMB; More

Air France-KLM trims cargo fleet: Steve Wilhelm of The Puget Sound Business Journal reports that Air France-KLM group is sharply trimming its cargo fleet, with the company declaring the capacity continues to shift to the belly capacity of passenger airplanes. This further validates what we have been writing for some time and, in our view, further bolsters our argument that the demand for new-build, dedicated freighters continues to fall. This in turn means Airbus won’t see recovery for the A330-200F nor will Boeing see recovery in demand for the 747-8F or 777-200LRF.

ExIm Bank Countdown: September 30 is the date the US ExIm Bank runs out of money. Although there is talk of a short-term extension of a few months (conveniently taking it past the election and perhaps defusing some of the Tea Party angst over the agency), Emirates Airlines said it will still buy Boeing airplanes even if ExIm isn’t renewed.

This can’t help Boeing’s argument that ExIm should be retained.

Left unsaid in Emirates’ statement, however, is something we heard in the market: Boeing’s deal for the 150 777Xs with Emirates nearly fell apart over the ambiguity over the Bank. We’re also told Boeing agreed to backstop the Emirates deal.

Neither Boeing nor Emirates comment on financing support.

Bombardier vs Embraer: Here is an interesting thought piece on the financial returns of Bombardier vs Embraer. One obvious error in the article: Malmo Aviation didn’t cancel its order for the CS100; it just decided not to be the launch operator.

Neither do you: Flight Global writes this about the end of plans between COMAC and Bombardier to have a common cockpit between the C919 and the CSeries:

“Basically in the development of the C919, Bombardier is not involved,” says [CAAC}. “They have experience in building regional jets, but not so much in narrowbodies.”

We can’t help but think the Chinese learned what they wanted to learn and moved on.

787 safety: This is one of those stories for which we have skepticism but which is already getting enough press that we don’t feel we can ignore it. Al Jazeera America has a special Wednesday night about the safety of the Boeing 787. AJM previously did an investigation of the safety of the Boeing 737. The Seattle Times has an early review. We’ll hold our opinion until after watching the program.

Ryanair finally orders 737 MAX: Once Boeing announced the launch of the 200-seat 737-8 MAX at the Farnborough Air Show, an order from Ireland’s Ryanair was only a matter of time. It became official today: Ryanair ordered 100+100 of the new version, the 737 MAX 200.


30 Comments on “Odds and Ends: Air France/KLM trims cargo fleet; ExIm Bank countdown; BBD v EMB; More

  1. Why doesn’t Emirates openly support the importance of Exim bank?
    I’d suppose large blue chip customers will get favorable financing anyway, even by Boeing itself if Exim Bank should be closed.
    For other airlines that picture may be different. Airbus may then be the only game in town for those. I think the Airbus guys are not stupid and would use that monopoly situation to charge some price premium. For Emirates its always good to have the competition pay more for the planes which makes it easier to dominate the market.

  2. Great quote by the CAAC-guy. Would love to understand what the exact difference between a narrowbody (which isn’t strictly defined but rather includes all aircraft that are not widebodies) and a regional aircraft (which strictly means all aircraft for regional (smaller 500nm) operations). A sharp view shows that the C-Series is not a regional jet, and that all BBD aircraft are narrowbodies. Further, China hasn’t put any of both into service yet.

    That Al Jazeera thing: the amount of whistleblowers increases with number of employees, especially in a hire’n-fire environment. People without understanding of the different layers of safety in aircraft design and operation know that it requires quite some rubbish work to become unsafe. And usually, the more severe problems are invisible to the average shop floor guy (like design flaws, material damage in production). FAA says B787 is safe, and I would credit them more knowledge than AJ. By the way, the FAA has a whistleblower program in place. Probably better to call there than at AJ. Here is the link, just Google’d it.
    So, forget about it quickly!

    • “So, forget about it quickly!”

      No. I am not going to just “forget about it”. I am going to watch the documentary and determine for myself the potential validity of what is being said.

  3. With regards to the Al Jazeera special, I suspect many of the quality concerns are connected with Boeing’s “traveled work” policies, and that many of the criticisms are based on various misunderstandings of this practice. That said, I would probably be wise to withhold comments till I’ve seen the documentary and heard Boeing’s response. What worries me, though, and has for some time, is the apparent slipping morale of Boeing’s workforce. Perhaps its troubled labor relations is eventually starting to yield detrimental consequences on a deeper level. On the other side of the Atlantic, by contrast, Airbus is one of the most attractive employers in France. I personally believe that the ability to “summon people to their nobility” is an essential ingredient of leadership, in any organization, and Boeing has historically had this ability and it’d be a shame if that would change.

  4. Congratulation to Boeing. This Ryanair’s MAX 200 order IMO exposes a major weakspot/gap in Airbus narrow body portfolio. 200 Seats/ 4 cabin crew in a reasonable economy class layout. The A320 is significantly smaller (174-180), the A321 significantly bigger (>220). So Boeing hopefully was able to negotiate a reasonable price too.

    Both the Boeing 737-8 and 737-9 passenger capacity wise fall inbetween the A320 and its 7 meters/rows longer sister. O’Leary told them so years ago.


    200 Seats / 4 crew members isn’t a niche market either, Boeing can harvest more single class RFQ’s. Jetblue, Easyjet and AF also asked Airbus for a (realistic) 200 solution, a 4 meter/row A320 stretch IMO.

    • What you said in term of size may be true to some extend but a) it is not really reflected by the market and b) it is also notorious that Airbus has for many years refused to sell to Ryanair (and apparently is still doing this)

    • O’ Leary: “Look at the economics of the 737, the 800 [series] has 189 seats. The [Airbus] A320 has 180 seats. And those nine extra seats when you’re flying them eight times a day, 365 days a year are a compelling competitive advantage for Boeing.”


    • Boeings press release, cashing in on the capacity advantage of the 737-200 (-8) over the A320.

      Based on the 737 MAX 8 airframe, the 737 MAX 200 can accommodate up to 200 seats by incorporating a mid-exit door increasing the exit limit. The airframe is 2.2 meters longer than the A320neo, giving customers more flexibility and space in the cabin, and offering a better solution at both the heart of the single-aisle market (160 seats) and at maximum passenger configurations.


    • I agree that 199 pax is a sweet spot, at least given current cabin crew requirements. I would love to know how much Ryanair actually is paying. Surely this time Boeing will have a reasonable mark-up.

    • Also, the A319neo and 737max7 could use a 2m stretch, otherwise they are as dead as the A358.

  5. Good update as usual, thx.
    The link for “Emirates Airlines said it will still buy Boeing airplanes even if ExIm isn’t renewed” is the same as the one for AF’KLM, can you fix it please?

  6. The major story today is the revelation of the new masterplan for the Al Maktoum International Airport at Dubai World Central (DWC) and which will be designed to accommodate more than 300,000,000 passengers in 2050.


    The solution takes the form of a modular design consisting of adjacent triple plus-shaped concourses which optimise connectivity and passenger convenience. During the first phase of the development, to be delivered by the early 2020s, two triple plus concourses will be constructed. Each of these will comprise 100 contact stands, the majority of which will be A380 capable (Code F).


    So, 200 contact stands in 6-8 years for EK**, the majority of which will be A380 capable. Let’s say that 75 percent are A380 capable — or 150 contact stands in phase 1, but only third of which would be used by A380s at the opening — and finally, for the sake of argument, that only one third of EK’s A380 fleet is in Dubai at any one time. That would mean that in 2022 the new airport would easily provide for a 140-strong fleet of A380s, and hundreds more after that. In fact, EK could IMJ possibly be operating more than 500 A380s by the end of the 2030s.

    **Assuming that Emirates will be moving to the new airport in 2022, at the latest.

  7. Regarding peculiar new business models in aviation, Ryanair is interesting and very innovative indeed. The feature crucial to the operations of Ryanair is the air stairs, which allow Ryanair to use makeshift airfields away from urban areas.

    As an example, suppose Ryanair would start a service to Seattle, WA. They would then arrange meetings with Bowers Airport, Pangborn Memorial Airport, Okanogan Legion Airport, Yakima Air Terminal, Chehalis-Centralia Airport, et cetera, and argue the following business case: “We can supply you with 20,000 tourists per year, corresponding to about $20 million worth of lodging, meals, souvenirs, and other goods and hospitality services, and you can have all of this for the very reasonable price of $10 million per year.” They would then effectively stage an auction, and fly to the highest bidding airport. Within a month, they would open a service to “Seattle Yakima”, “Seattle Pangborn”, “Seattle Okanogan”, or similar.

    The problem with the business model is that the towns and municipalities that pay for Ryanair’s services before long realize that the people who fly with Ryanair at $1 apiece, often youngsters, usually don’t spend a lot on hospitality services and such, and the arrangement is subsequently discontinued. For a number of years, Ryanair can strike similarly structured deals with other high-bidding airports, but I sincerely doubt whether they can continue such a rotation indefinitely. To be honest, I seriously question whether this business model is sustainable in the long term, other than as a European niche phenomenon.

    • Ryanair’s destination “Hamburg Land” aka Lübeck Blankensee LBC/EDHL is a very good examples in that respect. They seem to have teminated activity ahead of an ownership change ( to some hardnosed chinese investor ) in August.

      • The notorious example of that was “Copenhagen”, which was actually Malmo, over the sea and in a different country.

        • Town State of Hamburg to Federal State Schleswig Holstein.
          69 versus 71 km, a draw, OK? ,-))

        • 69km through a biggish town, over a long toll bridge and into the green fields to reach malmö Airport will take you significantly longer than 34 minutes. More like 80+ minutes.

    • The other problem is that European equivalents to “Seattle Yakima”, “Seattle Pangborn” etc break EU competition rules by providing incentives to Ryanair. They dress it up as destination marketing where the marketing agency “happens” to be a subsidiary of Ryanair. The marketing agency doesn’t compete aggressively on price so it contributes a large part of Ryanair’s profits.

      • To be fair to Ryanair, having revenue streams that aren’t readily disclosed to end customers is not uncommon in the tourism industry. For instance, I believe renting shopping and dining space is one of, if not the, principal revenue source for airports, as opposed to transportation. As another example, I believe most people who use the “free” services of Google probably don’t understand what Google’s revenue streams look like. But to use this revenue model in the aviation industry like Ryanair, having token airfare and obtaining principal income from back-door revenue streams of questionable ethic and moral standing, – I really can’t see it ever becoming more than a niche phenomenon.

        But then on the other hand, who am I to judge business models or predict the future? I wish Ryanair good luck, and let the chips fall where they may.

      • You’ll probably find an even longer transit down under in Australia.
        But this is Europe and not the boondocks 😉

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