Pontifications: Measured comments and “useful” information

By Scott Hamilton

March 5, 2018, © Leeham Co.: Nothing is as frustrating to a journalist as interview a great subject who doesn’t offer up anything especially useful.

I had a brief sideline interview with one such person at the US Chamber of Commerce Aviation Summit 2018 last Thursday in Washington (DC). Great guy. Not much information.

Brad Tilden, CEO of Alaska Airlines, wasn’t going to be drawn into a discussion of two hot topics facing his carrier. Tilden had just come off an airline CEO panel, where he in his typical Boy Scout charm and enthusiasm opined about the state of the industry, praised the progress of the integration of Virgin America into Alaska and commented on a host of issues. But two topics didn’t come up.

I asked him about the competition vs Delta Air Lines in Seattle, where the two airlines are locked into a major market share battle. I also asked him about the fleet planning now that Alaska operates the Airbus A319, A320 and A321neo inherited from the acquisition of Virgin America. Alaska hitherto has been an all-Boeing 737 operator and recent, Ray Conner, former CEO of Boeing Commercial Airplanes and a good friend of Tilden, joined the Alaska board of directors.

Alaska vs Delta

“I think we’re doing great,” Tilden said of Delta’s challenge. “Our whole attitude about this is competition makes you better. We’ve used the competition to double down on being the very best airline we can be.”

Alaska is expanding its North Satellite terminal at Sea-Tac. The satellite will have 20 gates when the project is done, from 16 today. The carrier, with its sister company, Horizon Air, also has the entire C Concourse and some gates on another, for a total of about 33 gates, depending on the flying, Tilden says.

Delta is the leading driver in the airport’s expansion of its International terminal. Delta several years ago also asked the airport for a total of 33 gates.

Asked to comment on the apparent parity, the normally articulate Tilden stumbled, finally saying, “I don’t want to talk about a number (Delta will have). We’ve got a 52% or 53% share there. I do not want to be quoted talking about them.”

Fleet planning and Airbus

Tilden was no more forthcoming about planning for the combined Airbus and Boeing fleets. In the past, Tilden strongly hinted the Airbuses would go. But LNC has pointed out the leases for the smaller Airbuses extend to 2024 and the leases for the 10 new A321neos (four of which have been delivered) are 12-year leases committed by Virgin before the merger. Virgin has 30 A320neos on order, which Alaska said can be canceled for a relatively small forfeiture of deposits (in the $24m range, if I recall correctly).

Thus, it appears Alaska will be flying the Airbuses at least through 2030. The carrier is currently evaluating the operating economics of the Virgin fleet and comparing them with Alaska’s 737s.

Alaska ordered 37 Maxes, well under what it needs to replace the 737NGs as they age. Virgin operates more than 60 leased A319s and A320s, so it, too, is under-ordered.

There is a big opportunity for Boeing and Airbus to win a major order for more than 100 airplanes from Alaska. Boeing, with its typical arrogance, is certain it will win. Given Tilden’s tilt toward Boeing, the odds seem to be in Boeing’s favor. With the addition of Conner to the Alaska Board, the odds seems to increase.

Tilden, however, wasn’t forthcoming when I asked how he liked the A321neo so far.

Super proud of Boeing

“I think the important thing to say is we’re super, super proud to have the Boeing product,” he said. “The 737 is running great. We do have some Airbus airplanes now as a consequence of our acquisition of Virgin America. We’re still getting to know the airplanes.”

With Conner now on the Board, does this mean Boeing is a lock for future orders?

“The responsibility of the company and the Board is to make the right long-term decisions for the fleet,” Tilden said. “We don’t want to make fleet announcements before we make fleet announcements. I will say we’re thrilled to have Ray on the Board. He’s an extraordinary guy.

“I don’t think we have anything useful to say about the fleet,” Tilden said. I’d agree with that.

I asked Tilden what he thought about the prospective Boeing NMA/797. Once again, Tilden wasn’t helpful.

“I don’t want to be quoted about that,” he said. “I don’t know enough about it. You can quote me saying that.”

It’s always good to talk with Tilden, if in this case not especially productive.

Southwest and 737-7s

Last week, LNC reported that Southwest Airlines CEO Gary Kelly expects the airline fleet eventually will comprise about 60% of smallest 737.

An ex-Boeing salesman is skeptical. Anytime a smaller airplane is deferred, he says, by the time the build date approaches, market demand invariably prompts the customer to up-gauge to the next size.

For Southwest, this would be the 737-8. It also will represent quite the leap in size. In WN’s configuration, the 737-7 will seat 155. The 737-8 seats 175.

31 Comments on “Pontifications: Measured comments and “useful” information

  1. Interesting is that WN looks like fitting out the 737-7 with 31″ pitch while the 737-8 at 32-33″, this will also require 4 FA’s for the MAX7?

    Is this implying that WN is actually planning to use the 737-7’s on shorter routes that requires faster on board service and quicker turnaround times. Sector costs of the -7 should be slightly lower than the -8 and with a small (2T) lower MTOW should have marginally lower airport fees that could add up in a large fleet?

    If you look clinically at it, an CS300 with a single class layout with 145 seats at 32″ pitch like AirBaltic and if you don’t need 3000+Nm range must be a very plausible alternative to the 737-7.

  2. Scott, as you know of course, it’s a public company. I think you can thank the lawyers for your frustration, not Brad.

    • I also think you can’t expect someone to have assessed the A321NEO particularity with no real time of service/experience with the Aircraft at the corporate level.

      Did they have any options on that commitment?

    • (Yawn.) The interviewee is nothing like Scott Kirby from UA. Kirby gives away just enough little gems of useful information during interviews/calls to add value and keep things interesting.

      Parker and Bastian are reasonably interesting interviewees as well.

  3. When there is a merged airline with an inherited mix how easy is it to switch? Specifically with regard to pilots what is the depth of retraining required from Airbus to Boeing or vice versa?

    • If you look at Alsaka’s fleet and orders the 30 x 320NEO’s scheduled for delivery from 2020-2022 must probably be the biggest “problem” for them. Nor sure if this will happen, the 5+5 A321’s also seems not to have the numbers warranted in a “large” fleet.

      To be honest, I can’t see any Airbus aircraft left in the Alsaka fleet in 5 years from now?

      • When Alaska bought VirginA. they knew exactly what they are getting – i.e. they knew before the purchase the situation with leases/orders and it did not stopped them.
        We all do well know it is complicated and costly to make such a change.

        Looking around at other purchases, the fleet always stayed as was and was integrated.

        We all do know that the economy of the planes itself are more less the same and highly competitive…. so I strongly doubt we will see those Airbuses go. It would be just money splashed out.
        New order is of course something else and I do believe that all depends on the level of aggression the sales team come with.

        • Was just wondering what the impact of Mr. Conner will be, the A321 will fit into an Alaska fleet but they bought “heavy” into 737-9xy’s (~110);

          737-900 (12),
          737-900ER (67 +13 on order),
          737-9 (17 on order).

          • The 900/9 works for AK as an up gauge aircraft.

            They have used it to clear out Anchorage during some shutdowns (shifting it off other routes).

            It seems to be a nice adjutant to the 800/8 fleets if you are all 737.

            The A321 is a league of its own and seems well worth not just keeping but expanding.

            Its still more capable than the -10.

            The A320NEO would seem to be an issue of how good a deal they are and if they have initial feeling for the A321 and how it works for them.

          • To be clinical (with an AB cap on) I would say convert the 30x320NEO orders to 20-30x321N’s and convert the 17×737-9’s to 737-7/8’s to replace the current leased 319/320’s.

            An 30-40 strong 321NEO fleet will have merits on its own to give capacity for higher density routes and be able to serve as “freighter back-up” with its LD3-45 containers on routes it serves. And that’s it for AB, the rest Boeing?

          • Kind of where I have been thinking them going, good idea on doing swaps.

            Up-gauge the A320 to the A321 agreed.

            Up-gauge the 737-8s to 9s and shift the 800-8 to the A320 routes.

            Forget the -10.

            AK does do some freight from Seattle to AK, have used the service many times. Might be the right spot for A321.

  4. A question for Mr. Hamilton or anyone else who might know. Has Southwest stated what the seating configuration and seat pitch will be on their 737-7’s? Is the statement in the above post that 737-7’s will have 155 seats in Southwest’s configuration based on some statement that has been made by Southwest, or is it just an educated guess about what configuration Southwest will use?

    The quote below from the CNBC article at the link after the quote states, without providing a source, that Southwest intends to put 143 seats on its 737-7’s.

    “Southwest debuted the 737 Max 8 last year in the 175-seat configuration, with 32 inches of legroom. The airline intends to fly the smaller Max 7 with 143 passengers.”

    https://www.cnbc.com/2018/01/03/southwest-airlines-wants-larger-boeing-737-max-8s-soon.html

    • I think we can be pretty sure it won’t be 155 as anything above 151 warrants an additional flight attendant (I Think it was you who posted that info in a comment on Another trend recently…?).

      My guess is that they will stick with 149 or thereabouts.

      • From the Department of Nitpicking – I believe that the max seating capacity for three flight attendants is 150, and that a seating capacity of 151 would require 4 flight attendants. Below is an excerpt from 14 CFR 121.391.

        (4) For airplanes having a seating capacity of more than 100 passengers – two flight attendants plus one additional flight attendant for each unit (or part of a unit) of 50 passenger seats above a seating capacity of 100 passengers.

      • According the Cheapflights article at the link below, Southwest’s 737-700’s have a 31 inch seat pitch and their 737-800 and 737-8’s have a 32 inch seat pitch. If one assumes that Southwest uses the 31 inch seat pitch of its 737-700’s (143 seats) on its 737-7’s, then one gets an estimate of 143 plus 2 rows of 6 = 155 for the seating capacity of its 737-7’s. If one instead assumes that Southwest uses the 32 inch seat pitch of its 737-800’s and 737-8’s on its 737-7’s, then I calculate a likely seating capacity of 149, just under the limit for three flight attendants. I second mneja’s guess of 149 for the likely seating capacity of Southwest’s 737-7’s.

        https://www.cheapflights.com/news/airline-legroom-guide

    • If its 155 seats it could indicate a change in the 737-7’s role play in the WN’s fleet or is it part of a “densification” program that could filter threw to the MAX8’s?

      • Hello Anton,

        My guess is that it is far more likely that the 737-7’s will switch from the 31 inch seat pitch of Southwest’s 737-700’s to the 32 inch seat pitch of Southwest’s 737-800’s and brand new 737-8’s, than it is that Southwest will reduce the seat pitch of its brand new 737-8’s to what it uses on its oldest 737’s, i.e. the 737-700’s.

        • Keeping the 737-7’s below 151 seats will make sense. Previous reference to 143 seats will have its benefits in comfort, on-board service and turn around times.

    • I would think this provides a perfect opportunity for SWA to try out their version of a set of Spirit Air’s Big Front Seats., Scott, do you have any thoughts on this, or heard any rumors on same?

      • I like that idea. Seems to make sense at the front of the 737 where the fuselage narrows.

        If Southwest go with 149 seats, will they plug one set of wing exits and gain the space of about a seat?

  5. Alaska might keep the A320’s and especilly the neo’s for SFO and LAX to US East Coast and maybe run som of them hard in Alaska using its container capability even send some off for cargo conversion.

      • AK has committed to dedicated 737F (converted 700s )

        I don’t see them adding a different cargo type.

  6. The issue isn’t the planes themselves but the expensive lease rates I thought from Virgin America.

    No way southwest goes over 150 for the max7.

  7. AS would do very well to keep the A320 in its fleet, as it will smooth the eventual merger with B6. :-/

    In all seriousness, their CA expansion is turning into a slow motion train wreck, and the DL competition in SEA only continues to increase. I really like the airline (MVPG 75K) and hope they are successful, but it’s increasingly difficult to see how they can compete with the US4.

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