Pontifications: Emirates profits drop 83%, MC-21 and more news last week

By Scott Hamilton

May 15, 2017, © Leeham Co.: It was a busy news week last week.

  • Emirates Airline headlined its 29th consecutive year of profits, but downplayed an 83% decline.
  • The Irkut MC-21 moved to the tarmac, an indication first flight may be coming shortly.
  • Multiple media reports indicate that electronics flight ban from the Middle East may be extended in part to all of Europe.
  • Boeing suspended test flights on the 737 MAX after CFM discovered some quality issues in some LEAP 1B engines.

Let’s look at these events.

Emirates Airline

To no surprise, Emirates chose to emphasize the 29th consecutive year of profitability while down-playing the dramatic drop in profits.

This is nothing out of the ordinary. Companies often try to bury bad news in earnings reports. Once EK gets past the upbeat bullet points at the top of its press release, it does note that the Group’s profits fell by 70%. However, one must dig further to see that the airline’s profits fell by 83%.

EK’s lower profits have trended all year, so this final FY 31 March result isn’t a surprise. EK blamed Brexit, Europe’s challenges to immigration, terror attacks in Europe, new US travel policies and more for the declines.

The carrier retired 27 aircraft in the fiscal year.

Emirates is the flagship of the Middle East. It’s decline in fortunes is not good news for the region. Airfinance Journal’s Airline Analyst unit gives EK a financial score of 4.85 (Figure 1) on a scale of 8.

Click on image to enlarge.

Rival Etihad Airways is in such bad shape, its president and CFO have been booted. Qatar Airways gets a 6.77 score from Airline Analyst. Etihad is not rated.

Last month, LNC reported order deferrals by Emirates and Etihad.

Irkut MC-21

COMAC had the first flight May 5 of its C919 challenger to the Airbus A320 and Boeing 737. It looks like Irkut is getting close for the MC-21. Airplane #1 is now out on the tarmac. High speed taxi tests should come shortly, and this is typically within days of a first flight.

The MC-21 also competes with the A320 and 737.

We’ve seen the cabin mock-up of the MC-21 at previous international air shows. It’s slightly wider than the A320 and substantially wider than the 737. Passenger experience will be good. But it’s unlikely there will be widespread orders outside of Russia.

Electronics ban

The media Twittersphere went wild over reports that the US Department of Homeland Security is on the verge of extending the ban on laptops from the Middle East flights to Europe. The ban, apparently, would not extend to all other electronic devices larger than cell phones.

Effective date is unknown, but journalists were in an uproar over the prospect of laptop cabin bans in advance of the Paris Air Show.

From my perspective, I travel with a tablet, not a laptop, so based on the sketchy information right now, unless I go to the Middle East, I’d be OK.

But there are so many problems with a check-the-laptop requirement. First, this does nothing to prevent a bomb from being embedded into a laptop going into checked luggage.

I know, the luggage scanners are deemed to be the security device on this, but no system is infallible.

I don’t know if having a bomb-embedded laptop in a confined LD container is more or less dangerous than having one in a cabin. Maybe some of the more technically-minded readers can weigh in on this.

But there is no getting around the dangers of scores or hundreds of laptops with lithium batteries jammed in luggage. There have been plenty of examples of lithium battery fires (not the least of which were those in the Boeing 787). These are very dangerous events. It’s been tough enough for flight attendants to extinguish laptop fires in a cabin with multiple fire extinguishers and full access. Imagine a laptop fire starting in a cargo hold.

It only takes eight minutes for a fire to get out of control, according to an Airbus study. A plane needs to be on the ground in 15 minutes. You’re toast if a fire occurs while you’re over Hudson Bay….

It seems to me the greater risk is requiring baggage checking of scores of hundreds of laptops than it is playing the odds of a bomb. (Not that either is a choice I’d like to make.)

On the other hand, look at all the ancillary revenue the airlines will get from more checked bags.

Suspending MAX test flights

Boeing last week suspended 737 MAX test flights just days ahead of the first delivery of a MAX 8. This follows notification by CFM that some critical parts from one of two suppliers for the LEAP 1B engines on the MAX fail to measure up to quality and could lead to cracking of a crucial component.

We don’t view this as a Big Deal. Testing is supposed to find these things, and the problem—as far as been publicly disclosed—is confined to one of two suppliers. Flight tests resumed two days later.

47 Comments on “Pontifications: Emirates profits drop 83%, MC-21 and more news last week

  1. I think a complete ban on laptops is long overdue–the al Shalab airliner attack in Africa should have settled this issue over a year ago. The real issue is should tablets, smartphones–and. all other digital devices also be fully banned? (i.e. Are their battery sizes capable of containing enough plastique explosive to take down an airliner?)

  2. Ordinary laptops in cargo holds will cause more destruction due to lithium fires than bombers with plastique will ever even attempt using carryons. A ban will also severely damage the industry.

    There are much better ways to detect bombers than what the TSA uses. They prefer to ban threats because they are incompetent at detection, allowing 90% of prohibited items aboard planes while inflicting unreasonable pain on travelers. Bomb sniffing dogs and behavioral observation works in Israel, the bomber capital of the world, without the interminable lines and intrusive pat downs we have to endure.

    The TSA loves machinery, even if it doesn’t work, and rejects anything that relies on judgement, even if it means hour long waits in lines. Political correctness demands blind inspectors. How could this go wrong?

    • The TSA incompetence you’ve mentioned is all the more reason for a total ban on ALL lithium battery-powered devices and batteries. I’ve always heard–and believe–the Israeli approach won’t “scale up”. (They’re only “defending” Ben Gurion…and Eilat?)

    • Peter, while I agree that Israel has a far more effective system, you clearly have never traveled from Israel if you don’t think they have “interminable lines”. there is a reason you are asked to turn up at Ben Gurion three hours before your flight.

      • And you have to not contradict the fact that if the TSA is incompetent (not necessarily wrong) then they would be equally incompetent at behavioral scanning.

    • you can’t be fired for machined results.
      using good ( er your own ) judgment is all risk and no fun.

      • Have you traveled by air in the United States since 9/11? In my experience flying domestically quite often, not one decision is made by a “machine”. TSA uses machines to gather image data that is then reviewed by a person who finally makes the decision. As far as I can tell, it is not much different for checked bag screening.

    • When you say ” TSA is allowing 90% of prohibited items aboard planes” I think you may be misusing the statistics. As best I know, this is the rate at which very experienced TSA staffers are able to get prohibited items aboard planes. I think it is excellent that they are carrying out these tests, and I’m sure it leads to reform of procedures in order to catch the more innovative ways the testers find to deceive the screeners.

      Of course, if these tests are nothing special, using techniques that are know and being checked already, then we all should have more concern.

      If these tests are being carried out by a “black hat” group it is much more reassuring.

    • I recently traveled to Japan and on my return leg I had to wait in the security line at NRT just as long as I typically have to in the various US airports I frequent. While it was a plus that they didn’t make me remove my shoes, I had to remove way more stuff from my backpack than I ever have to in the US. This was a way bigger pain than having to remove my shoes.

  3. It is all slightly different to when my brother brought me a large Machete in hand luggage from Costa Rica (I think) in his hand luggage back in the 80s. (Although my brother is extremely intelligent in qualifications he does lack a modicum of common sense).

  4. I am surprised that there hasn’t been more discussion about the safety risk CREATED by the laptop ban.

    I notice in UK Independent today that BALPA have warned of this danger:

    ” The warning was echoed by the British Airline Pilots’ Association (BALPA), which believes the danger of a blaze spreading in the aircraft hold could be greater than the security risk posed by electronic devices in the cabin.

    BALPA’s Flight Safety Specialist, Steve Landells, said: “There have been two crashes where lithium batteries have been cited in the accident reports.

    “An incident in the cabin would be spotted earlier and this would enable the crew to react quickly before any fire becomes uncontainable.”

    The Trump administration claimed that the move was a result of intelligence gained in the failed SEAL raid in Yemen that resulted in the death of a Navy SEAL. IMO opinion they brought in these stupid measures as a way to cover up the failed Yemen mission.

    • PDA hardware stored in belly freight allows unchecked access to same. Hand selfcarried stuff never leaves the oversight of the owner.

  5. The electronics ban in the cabin is just pure nonsense. I totally agree that it creates new risks with battery fires in the cargo hold.

    Plus I wonder how many laptops get stolen or damaged and the passenger gets no adequate compensation.

    Plus, how will they draw the line? Is a Microsoft surface a tablet or a notebook? There are so many different types of electronics, I would believe it’s impossible to draw a clean and logical line of what is allowed and what not. And wouldn’t that just open the doors for some new threats? Assume a terrorist checks two or three large notebooks with fully charged batteries to the cargo hold. Wouldn’t it be possible to damage the batteries somehow so that they will get on fire? Possibly a low tech device that does that job which is checked together with the computer?

  6. “On the other hand, look at all the ancillary revenue the airlines will get from more checked bags”

    and IFE revenues since people can no longer bring their videos with.

    and alcohol, since if you can’t work, you might as well drink 🙂

    this is just more politically motivated security theater that does nothing at all to make us more safe, but plays well to the racist rubes.

  7. Since every airliner terrorist event in history was a 22-32 year old Muslim male, why can’t we just have logical screening based on the demographic that matters?

    I suppose some 9th circuit jurist would claim that is too hurtful but it might be cheaper and more effective for all parties I’d guess.

      • Well played. I should have characterized my assertion as “every single terrorist airliner incident affecting an American originating/bound flight over the last 40 years.”

        • Well, the US is just shooting itself in the foot with its politics now seemingly resembling cultures that most Americans once regarded as conspiratorial or paranoid.

          https://www.thenation.com/article/the-most-exceptional-thing-about-america-is-our-paranoia/

          https://www.theguardian.com/travel/2017/feb/01/should-travellers-boycott-the-us-trump-america

          During President Trump’s first tumultuous days in office, the web-based flight booking service Cheapflights has seen UK-based searches for US flights drop by 25%, with much of that decline coming after the latest travel ban furore. According to some reports, travellers are cancelling US trips.

          It looks suspiciously like travellers are voting with their feet and turning their backs on the US. The potential loss in revenue for the country is significant: Euromonitor figures show British travellers numbered some 4.5 million in 2015 while other fast-growing markets, notably the Chinese (2.5m) and German (2.2m), also look vulnerable. And now there are calls from around the world for tourists to boycott the US. So, should we?

          • The Guardian would say that. Unpopular as Trump is, UK residents are avoiding the US because of unfavourable currency movements.
            The torture that the US authorities inflict on visitors and transit passengers must be having a long-term effect.

    • Since every airliner terrorist event in history was a 22-32 year old Muslim male…

      The terrorists will adjust, and start recruiting women and men under age 22.

  8. One of the lessons of the Swiss MD11 fire was that you put the aircraft down immediately.

    If you are in the middle of an ocean you ditch.

    That is also one of the almost iron proof argument on MH370 not having a fire, both that aircraft do not survive that kind of even and the pilot would have been heading down to land, not maintain altitude.

  9. President Trump didn’t come up with the laptop ban, btw. I’m gonna go out on a limb and say intelligence services saw planning for such a bomb. Judging by the lack of incidents (or fires) I’d say it’s worked so far. Tourism concerns (which are quite overwrought; The Guardian’s legal/political analysis of US law should be taken with less than a grain of salt, whilst the anecdote about a Yemeni tourist/migrant is laughable at best) should take a very, very distant back seat to security/safety, in my view, regardless of whose feelings are hurt.

    If there’s a conspiracy theory crowd, it’s among the left today, seeking conclusions as to nefarious international plots with little to no supporting facts.

    • @texl1649

      Well, Scott doesn’t like/allow political debate and discussion. So, let me just say this; the US has two parties, the conservative party and the really conservative party — and it shouldn’t be too difficult to grasp that the paranoid style* in American politics is alive and well in the really conservative party.

      * https://en.wikipedia.org/wiki/The_Paranoid_Style_in_American_Politics

      Meanwhile, there seems to be a drop in international tourism that’s predicted to cost the US billions of dollars.

      https://goo.gl/JRb0Uw

    • “President Trump didn’t come up with the laptop ban, btw. I’m gonna go out on a limb and say intelligence services saw planning for such a bomb.”

      texl1649,
      You’re right, but it is more than just planning for such a bomb, it is planning for such an attack. Based on what I’m hearing, I strongly suspect that actual technology was found. This I know for sure though, the intelligence community is the impetus for this ban, not politics. That is not to say that this ban isn’t being used for political purposes.

      • @Mike Bohnet

        Is that the same intelligence community which assumed in 2002/2003 that Saddam Hussein had reconstituted his nuclear weapons programme, had biological weapons and mobile biological weapon production facilities, and had stockpiled and was producing chemical weapons?

        https://fas.org/irp/offdocs/wmd_report.pdf

        • Nope, it’s the same one that assured us that Assad had gotten rid of all his chemical weapons.

          • Or maybe the one who tried to convince us that the Benghazi attack was a spur of the moment thing caused by an offensive video.

          • Oh really?

            Tom, it’s easier to understand the simple (Benghazi) than the complicated (Iraq). On the scale of misleading the Republic into acting against its best interests, however, Iraq is a million times more shocking, exactly as you suggest.

            There’s another issue, somewhat sensitive. A lot of us (me included) supported the war in Iraq because we believed the WMD argument, especially after Colin Powell embraced it. So it’s a trifle embarrassing for the masses to acknowledge we were manipulated. For those who lost life or limb, embarrassing is hardly an appropriate expression.

            http://foreignpolicy.com/2016/01/18/why-do-so-many-americans-care-more-about-benghazi-than-about-the-iraq-war/

          • OV-099,
            It doesn’t surprise me in the least that the article you chose to post presumes to know that I care more about Benghazi than the Iraq war. My feelings and opinions on the Iraq war are complicated and not appropriate to share in this forum. Friends of mine who fought in Iraq and I as a US citizen actually have skin in that game. Do you?

          • @Mike Bohnet

            Again, Scott doesn’t like/allow political debate and discussion, so I’ll try to be brief. 😉

            1.) Benghazi attack, why mention it? It’s not relevant to the topic in question. IMHO, the Iraq War and ISIS, on the other hand, is relevant because the laptop ban is supposedly based on “precise intelligence” about an ISIS plot and a seemingly wildly excessive response from the Trump administration banning personal electronic devices from passenger cabins. Ignoring the fact that regulators have called for personal electronic devices to be carried in the cabin, this seems to be the first time such measures have clashed so directly with security considerations.

            2.) What is typically forgotten, or intentionally ignored, is that armed reactionary groups such as ISIS were born out of the destabilisation created by the US invasion of Iraq — an “unintended consequence”. Iraq became a magnet for hard-core jihadists who thrived in the vacuum that existed after the forcible toppling of the country’s secular government and the deliberate destruction of the Iraqi state apparatus, while life for Iraqi people became a living hell with the carnage continuing to this day.

          • OV Why mention Saddam, what does it have to do with the current ban?
            As for ISIS being born out of US action that is just a partisan canard. The middle east has hated the US long before they ever went there. ISIS was born of disunity in the terrorist broad tent. This rift would have been there regardless of US actions.
            Still blaming the US for the rise of terrorism is quite convenient for the dictators of the world who see their ranks dropping like flies.

          • “the dictators of the world who see their ranks dropping like flies.”

            If only this were true.

  10. Delta flight in December of 2016. Imagine if this had happened in the hold, with no way for FAs to access three halon and two water extinguishers, much less the containment bag and cooler of ice.

    “While en route from Honolulu, HI to Atlanta, GA a fire was discovered in an overhead bin near seat 3J. The crew extinguished the flames, which were coming from a laptop. Three halon type fire extinguishers and two water type fire extinguishers were used. The laptop then was placed in a containment bag in a cooler with ice and monitored for the remainder of the flight. The flight continued to Atlanta and landed without further incident. The aircraft was inspected where minor damage to the overhead bin was found. Airline maintenance replaced the overhead bin.”

    List of events the FAA was aware of up to March 2017: https://www.faa.gov/about/office_org/headquarters_offices/ash/ash_programs/hazmat/aircarrier_info/media/battery_incident_chart.pdf

  11. Some interesting information came out in the years following the PanAm 103 downing:
    – The bomb contained about 500g of semtex (a relatively small amount of explosive) and had been concealed inside a portable radio recorder. In turn, this had been placed in a suitcase full of clothing, which had been packed with many others in one of the metal-skinned luggage containers in the belly of the 747 at LHR.
    – Tests later showed that, had the suit case containing the bomb been placed in the middle of the container and, in turn, the container been one placed in the centre of the hold, the explosion should have been sufficiently cushioned for its effect to have limited to within the hold and with flight safety not catastrophically affected.
    – Even had the bomb been placed in a container nearest the skin of the aircraft and positioned within the container to the side closest to the skin of the aircraft, the rupturing of the 747’s skin should not, of itself been, sufficient to down the aircraft. Rather, the bomb needed to be positioned close to a structural member of the fuselage. The combined effect of a structural member failure, skin rupture, air pressure differential and the forward velocity of the aircraft working together to rip the nose entire off the aircraft as a result of the smallish initiating explosion.

    Applying the above as a filter to our present considerations:
    1. It would not be possible to construct and hide an IED even with half the charge of the Lockerbie bomb within my 2016-model ThinkPad laptop whilst leaving the computer in a working condition. My ThinkPad is large in comparison to most current portable computing and communication devices.
    2. A small device carried in the cabin is equally unlikely to down a large commercial aircraft – but much more likely to cause one or two deaths, injuries, possible violent cabin depressurisation – and the mother of all bad days for all on board left living to tell their tales. This is all a terrorist group needs to do. Inspiration of fear of the what might be, amplified through 24/7 news media that needs shock/horror reportage to fill its coffers.

    It is to assuage the fears of the general public and never to allow it to be said that our elected politicians had failed to exercise every possible constraint on personal liberty in the attempt to reduce casualties. Don’t blame the politicians, poor things who only seek our votes at the next elections. We, the people, should blame only ourselves if freedom is constantly eroded in our name, in a vain search for the myth of some entirely safe existence.

    • Another thing to consider: A small device in the cabin can be positioned by the perpetrator to cause maximum structural damage to the aircraft. The position of the small device in the hold is determined somewhat randomly. In the past couple of decades there has also been a lot of work done on designing LD containers to mitigate blast effects.

      I would say 500 g (1.1 lb) is pretty large for a concealed bomb. It is almost as large as the standard M112 demolition charge (1.25 lb). I agree that any bomb that could be practically concealed in a laptop would have to be much, much smaller, too small to be effective without optimal positioning. Thus, these devices pose a much greater threat in the cabin than in the hold.

      • The point here is chance for a battery fire is much, much higher than chance for a bomb. And it’s easy to create a device that shorts an unprotected lithium ion battery which can set fire to surrounding items. It’s easier to scan for explosive than finding the true purpose of an electronics device. So forcing these device into the hold will cause increased risk.

        • That is not the point that Kerensky was making, at least as far as I could tell. I don’t see where he mentioned battery fires in his post. I was responding to his post and asserting that a small bomb, not a battery, is much more of a threat in the cabin than in the hold.

          I don’t think that the people who post here and on other aviation related sites are the first ones to consider using a battery as a tool to start a fire on an aircraft. If it was that easy, effective and hard to detect, I think we would’ve seen this happen already.

          Lithium-ion battery fires are not like paper, gas, or wax fires. The high temperature portion of the combustion typically happens inside the battery structure resulting in product gasses that are considerably cooler once they exit that structure than you would find in a typical external flame. It might be harder than you think to start a fire in a tightly packed case where oxygen circulation is limited when the ignition source is not extremely hot. Obviously it is possible to start a fire with a burning Li-ion battery, but I’m not at all sure how reliable it would be as a weapon.

          • Well, having seen the LI ion fires, the world cool does not come to mind.

            When they go, they go seriously and they rupture. Its not like the 787 battery that has been separate, compartmentalized and contained as well as vented to the outside.

            Putting one of those devices in a cargo hold does not require deliberate action to make it an extreme hazard.

            Putting lots of them in there guarantees a fire sooner or latter.

            And as they found with the space shuttle, you don’t guess your O rings are good to 25 degrees, you prove it before you do it.

            Same with this, you better prove its not going to propagate and then you get into the guessing game. Two computers back to back, one two or 20 in a cargo hold, not in a container (single aisles)

            We have seen what happens when you “Guess”

          • TransWorld,
            Who is guessing here? I was just trying to point out to Tuan the problems with trying to utilize Li-ion batteries to deliberately start fires in a cargo hold. I never claimed it couldn’t happen.

            As someone who has done extensive development work over the years with various propellants, explosives, reacting metal powders, and both fusion grade and high pressure (gun igniter) plasmas, I know better than to claim that I know the level of safety risk that Li-ion batteries pose without actually studying the issue in detail. Back when the 787 was experiencing battery fires, I read quite a few papers on the fire safety of Li-ion batteries as well as more detailed technical papers on the combustion process inside the battery itself. That is where I learned about some of the differences between a burning Li-ion battery and the propellant/explosive combustion that I’m much more familiar with.

            It seems to me you and others are making pretty big guesses about the relative safety risk of batteries in the cargo hold verses bombs in the passenger cabin based on little more than your own experiences. Can you actually quantify those risks in order to do a proper trade-off, or are you just applying you own eye test? I don’t have the proper info myself to make such a judgement but I’m sure there are people that do.

          • Yeah, you’re right, that’s not his point. It’s mine 🙂
            I’m wondering if anyone try to set this up: put a six cells pack in a suitcase with clothes, put the suitcase in middle of a container, and short the battery. What’d be the result?

          • @Tuan
            > ‘I’m wondering if anyone try to set this up: put a six cells pack in a suitcase with clothes, put the suitcase in middle of a container, and short the battery. What’d be the result?’>

            It requires only a little knowledge for you to answer that yourself. A fire will be started, smoulder and most probably self-extinguish due to consumption of the available oxygen.

            You can try this in your back yard but, for the truest result, remember to pack your suitcase in a metal-skinned container filled with other suitcases with harmless ‘personal’ contents. Or will reason alone (a thought experiment) take you to the answer you seek?

  12. Knock off the stuff about Benghazi, Trump and the other off-point political stuff. Y’all know better than to have this here.

    I’m tired, crabby and on four hours of sleep. Shape up or I’ll close comments.

    Hamilton

    • I apologize for my contribution.

      Hopefully your lack of sleep isn’t due to a recent flight back from East Asia, say, in the back of a 10 abreast 777. I had that experience recently and the only thing that made it bearable was the empty seat next to me.

  13. Ok – time for a conspiracy theory.
    The entire device ban is an assault by a group against the Gulf airlines. Somehow or other, all Gulf airline passengers travelling to the US is affected, due to the hub nature of Qatar, Etihad and EK. Duh.
    So no names, no pack drill… just saying.
    Notice the profits drop by the Gulf Airlines lately? Big planes flying almost empty?

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