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Norwegian, others have vision; US airlines don’t

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Introduction

Dec. 5, 2016, © Leeham Co. Last weeks’ approval by the US Department of Transportation of a license for Norwegian Air Shuttle to operate long-haul, low-cost service to and from the US drew immediate fire from labor unions over anticipated US job losses.

Iceland’s Loftleider Airlines, one of the first trans-Atlantic low-cost carriers. Photo via Google images.

But their view is too narrow.

It means more jobs for Boeing and its supply chain, which are also heavily unionized. It means benefits to US exports.

But overlooked is the next evolution in long haul travel that starts next year.

Summary

Legacy airlines always object to new competition. It doesn’t matter when or from where.
Open skies and free market is a great concept—until someone actually takes advantage of it.
The 737 MAX and A321neo present new threats to US airlines.
Lack of vision and foresight are the US airlines’ own worst enemy.

Pontifications: Making sense of WTO Boeing subsidy case

By Scott Hamilton

Dec. 5, 2016, © Leeham Co.: Far be it from me to say, I told you so.

But I did.

When Washington State extended the Boeing 787 tax breaks in November 2013 to the 777X through 2040, I wrote and told everyone who would listen (and even those who wouldn’t) that the 787 tax breaks had been found illegal. So extending them was extending illegal tax breaks.

65 Comments

Posted on December 5, 2016 by Scott Hamilton

Airbus, Boeing

777X, 787, Airbus, Boeing, World Trade Organization, WTO

Bjorn’s Corner: Turbofan engine challenges, Part 5

By Bjorn Fehrm

December 02, 2016, ©. Leeham Co: We will now look at the combustor area in our series on modern turbofan engines. There is a lot of activity in this area, as it sets the level of pollution for the air transportation industry for some important combustion products.

We will also finish off the compressor part of our series by looking at the bleeding of cooling air for the engine and for servicing the aircraft with air conditioning and deicing air.

Figure 1. GasTurb principal representation of a three-shaft turbofan like our reference Rolls-Royce Trent XWB. Source: GasTurb.

The amount of air which is tapped from compressor stages for cooling and other purposes can exceed 20% of the core flow (some of the flow paths are shown in Figure 1). At that level, it has a marked influence on the performance of the engine. Read more

13 Comments

Posted on December 2, 2016 by Bjorn Fehrm

Airbus, Bjorn's Corner, Boeing, CFM, GE Aviation, Pratt & Whitney, Rolls-Royce

Airbus, Boeing, CFM, CFM56-5, GEnx-1B, GEnx-2B, Rolls-Royce

For Airbus and Boeing, it’s about Alabama, Alabama, Alabama

US Sen. Jeff Sessions (R-Alabama) is President-Elect Donald Trump’s choice for US Attorney General. He’s a close ally of Airbus. Photo via Google images.

Nov. 29, 2016, (c) Leeham Co.: When it comes to the prospect of imposing trade sanctions or retaliatory tariffs on Airbus for airplanes ordered by US customers, the European manufacturer has some advantages over Boeing few people apparently have thought about.

Alabama, Alabama, Alabama

One is called Alabama. It’s where Airbus is producing A320 family members for US customers.

Alabamans voted by 1.76-to-1 for Donald Trump. Sixty-three percent to 35%.

Donald Trump tapped Sen. Jeff Sessions of Alabama to be his Attorney General. Sessions was one of the first in Congress to endorse Trump. He served as an advisor throughout the campaign.

Sessions is a big supporter of Airbus.

Sen. Richard Shelby, the other Alabama Senator in Congress, is also a big supporter of Trump. And of Airbus.

It’s highly likely that Sessions and Shelby will bend Trump’s ear in favor of not levying tariffs on Airbus planes.

98 Comments

Posted on November 29, 2016 by Scott Hamilton

Airbus, Boeing

787, A320, A330, A350, Airbus, Alabama, Boeing, Donald Trump, Jeff Sessions, Richard Shelby, World Trade Organization, WTO

Airbus, Boeing claim victory in today’s WTO ruling over Washington State tax breaks

Airbus claims “knockout blow.”
Boeing claims “complete victory.”
WTO Summary of findings and ruling.
All the WTO documents are here.
Opinion: No sanctions will be levied on Airbus or Boeing.
Seattle Times on why nothing will happen with this ruling.
Airbus YouTube: WTO disputes in 3.5 minutes.
Scott Hamilton’s column in Forbes.

Nov. 28, 2016, © Leeham Co.: Airbus claims that in a huge blow to Boeing and Washington State, the World Trade Organization (WTO) ruled today that the $8.7bn tax subsidy package Gov. Jay Inslee and the state Legislature approved for the 777X program is a “prohibited subsidy.”

This is the most onerous finding of illegal subsidies under WTO rules, and one that is rarely determined.

Boeing said the WTO “today rejected virtually all of the European Union’s challenges to the Washington state tax incentives” and declared a “complete victory.”

36 Comments

Posted on November 28, 2016 by Scott Hamilton

Airbus, Boeing

777 Classic, 777X, Airbus, Boeing, Fabrice Bregier, Gov. Jay Inslee, Michael Luttig, Tom Enders, Washington State, World Trade Organization, WTO

Full Airbus, Boeing statements on WTO ruling

Nov. 28, 2016: Here are the full statements from Airbus and Boeing about the WTO ruling today finding Boeing received prohibited subsidies from Washington State for the 777X development:

Pontifications: A fresh perspective at Boeing Commercial is sorely needed

By Scott Hamilton

Nov. 28, 2016, © Leeham Co.: Boeing last week named an outsider, Kevin McAllister, as the chief executive officer of Boeing Commercial Aircraft (BCA).

I think this has the potential to be an invigorating move.

McAllister comes to BCA from his position as CEO of GE Aviation Services.

I don’t know McAllister and have no opinion whether he will be good, bad or mediocre. But I do like the idea of bringing an outsider in to run BCA. (My insider favorites were Stan Deal and Beverly Wyse.)

Here’s why.

31 Comments

Posted on November 28, 2016 by Scott Hamilton

Airbus, Boeing, GE Aviation, Middle of the Market, Pontifications

737-9. 737-10, 737-900ER, 777-10, A321NEO, Airbus. Boeing, Bernstein Research, Clint Eastwood, Dennis Muilenburg, Doug Harned, Firefox, GE Aviation, Kevin McAllister, Middle of the Market airplane, Ray Conner

Emirates feels low-cost, long-haul competition

Note: Nov. 24 and 25 are Thanksgiving Holidays in the US. Our next post will be Monday.

By Bjorn Fehrm

23 November 2016, ©. Leeham Co: Emirates Airline president Tim Clark says the carrier “has to change its approach to long-haul pricing to combat increasing competition” after presenting a half year 2016 profit which plunged 64% on 9 November.

The reason is that traditional mainline carriers are entering the low-cost, long-haul market in addition to the established LCC entrants: Norwegian Air Shuttle, AirAsiaX and Wow Air.

Figure 1. Emirates long-haul A380. Source: Emirates.

Emirates will add new low-cost fares to keep its growing fleet of Airbus A380 and Boeing 777 filled. Clark states this is necessary and that the airline will not back down on its plans for additional aircraft. It will be a period “of fierce competition as more and more international network carriers are entering low-cost, long-haul,” declares the COO.

What has changed? Isn’t Emirates the Kings of competitive long-haul travel? Read more

17 Comments

Posted on November 23, 2016 by Bjorn Fehrm

Airbus, Airlines, Boeing, Emirates Airlines, Etihad Airways, Germanwings, Qatar Airways

.AirAsia X, 777, A380, Airbus, Boeing, Emirates, Jetstar, Norwegian, Qantas, Scoot, Singapore Airlines

Pontifications: Airbus, Boeing still can sell planes to Iran Air

By Scott Hamilton

Nov. 21, 2016, © Leeham Co.: The vote last week by the US House of Representatives to block Airbus and Boeing from selling airplanes to Iran Air doesn’t do this, even if the US Senate goes along and if President Obama changed his mind to veto the legislation and signed the bill instead.

The House bill only prevents US-sourced financing.

60 Comments

Posted on November 21, 2016 by Scott Hamilton

Airbus, Airlines, Boeing

747-8, 777-300ER, 777X, Airbus, airlines, Barack Obama, Boeing, Donald Trump, Dubai Aerospace Enterprise, Iran, Iran Air

Is a Boom SST good business for Virgin Atlantic?

By Bjorn Fehrm

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Introduction

November 21, 2016, ©. Leeham Co: The emergence of Boom Technology and Virgin Atlantic’s plans to offer supersonic business class passenger traffic over the Atlantic is intriguing.

Figure 1. Boom Technologies Boom Mach 2.2 airliner with 45 seater. Source: Boom

Enough of the business plans and data around the aircraft are known to enable us to do a first economic analysis.

There will have to be a lot of assumptions in such an analysis but having modeled around 100 different airliner types economics’, we have some data to base our assumptions on.

We think the accuracy will be enough to get a first feel if the Virgin Atlantic venture is tight on margin or a slam dunk (should it become reality).

Summary:

The operating costs of a supersonic airliner will center on fuel and maintenance.
These costs will be considerably higher than for a normal widebody airliner.
The Virgin Atlantic venture targets the higher yield of a business passenger to cater for these costs.
We check if this is true and if a SST venture is good use of invested capital.

Leeham News and Analysis

There's more to real news than a news release.

Leeham News and Analysis

Norwegian, others have vision; US airlines don’t

Introduction

Summary

Pontifications: Making sense of WTO Boeing subsidy case

Bjorn’s Corner: Turbofan engine challenges, Part 5

For Airbus and Boeing, it’s about Alabama, Alabama, Alabama

Alabama, Alabama, Alabama

Airbus, Boeing claim victory in today’s WTO ruling over Washington State tax breaks

Full Airbus, Boeing statements on WTO ruling

Pontifications: A fresh perspective at Boeing Commercial is sorely needed

Emirates feels low-cost, long-haul competition

Pontifications: Airbus, Boeing still can sell planes to Iran Air

Is a Boom SST good business for Virgin Atlantic?

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