Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Engine makers tout “Plan A” but have “Plan B” backups in R&D June 23, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 27. June 20, 2025
- Pontifications: A Personal Note June 19, 2025
- Airbus books 142 firm orders as Boeing retracts from the Paris Air Show June 19, 2025
- AIN Media Group Agrees to Acquire Leeham News & Analysis June 17, 2025
Oil heading toward $40? Economist still thinks so, with caveats; and: NTSB issues 787 battery report, Azul’s A320/CFM order
Dec. 1, 2014: Adam Pilarski, an economist for the consulting firm Avitas, predicted several years ago that the price of oil would drop to $40bbl. Few believed him.
Oil hit $66 this week, on a steady decline over the past months, and, according to an article by Bloomberg News, could be on its way to $40.
Pilarski, who originally made his prediction in 2011 at a conference organized by the International Society of Transport Aircraft Traders (ISTAT). He predicted this price by October 2018.
In an interview with Leeham News today, Pilarski concurs that oil may hit $40 soon, though he believes the low end will be in the $40-$50 range. The low price will not for the reasons he outlined in 2011 and neither will it stay at or near $40 for long.
MTU investors day: views of its engine programs, future airplane timelines; separately, Embraer COO interview
Figure 1. Technical milestones have been passed on PW GTF programs for the applications on Bombardier, Airbus, Mitsubishi and Irkut airplanes and are approaching for Embraer. Source: MTU Investors Day. Click to enlarge.
Nov. 30, 2014: MTU Investors Day: MTU is a major participant in engine development and supplies, participating on the GEnx, GTF and GEnx program. It’s also a member of the joint venture in International Aero Engines and it’s a major player in the aftermarket Maintenance, Repair and Overhaul (MRO) sector, providing a serious competitive alternative to the aftermarket contracts offered by the engine OEMs. Its held an investors day conference Nov. 25. Highlights included:
- Milestones have been passed on the Pratt & Whitney Geared Turbo Fanengine for the Bombardier CSeries, Airbus A320neo family, the Mitsubishi MRJ and Irkut MC-21; and are on schedule for the Embraer E-Jet E2.
- The success of the GTF is requiring huge production commitments.
- The large number of airplane/engine programs require a major ramp-up of production during the next few years.
- The major investment in new engines is largely over for now, leading to the expectation of long-term revenue from MRO.
Odds and Ends: Storm Warnings; Boeing photos now available to everyone; CSeries; Movin’ on up
Nov. 26, 2014:Storm Warnings: We’ve made references in recent posts about airlines on our “Storm Warning Flag” list.
Our 2013 Top Customers and Storm Warning Flag list for wide-body airplanes. The Red are Middle Eastern airlines, blue from Asia and black from the US and Europe. Only one airline for wide-body orders was on our Storm Warning Flag list: AirAsiaX. Expansion and ordering we considered too rapid landed the carrier on the list. Sources: Airbus, Boeing. Click to enlarge.
In 2013, we compiled the Top Customers for Single-Aisle and Twin-Aisle Airplanes for Airbus and Boeing. Here’s our 2013 Storm Warning Flag list. The name comes from the flag, which signals Storm Warnings. This list was compiled before the 777X orders announced at Dubai were firmed up, so the yellow boxes show what the Top 10 Boeing rankings would be had they been. We considered the quantity of orders, the current operations, financial status and other factors in placing a carrier on our Storm Warning Flag list. The Wide-body list also illustrates the growing importance of the Middle Eastern airlines (consider that this was a year ago). The wide-body list is pretty stable.
Odds and Ends: Korean tanker competition sounds like US rerun; About that blister on the top of airliners; JetBlue explains bags, seats
Korean tanker competition: South Korean is holding a competition for an aerial refueling tanker and in many respects, it sounds like a rerun of the USAF competition between Airbus and Boeing.
In the US contest, major debates happened over Bigger vs Smaller between the A330-200-based KC-330 MRTT and the 767-200ER-based Boeing tanker, which ultimately won and which was named the KC-46A.
This article neatly sums of this same issue in the Korean competition. It’s a matter of greater range, more fueling capacity, vs “enough” and better airport access; and global compatibility.
About that blister: Have you ever noticed the big “blister” in the top of airliner
The “blister” on top of the fuselage contains internet connectivity antennae. The power line appearing to come out of the top of the blister is not part of this. Source: AirlineReporter.com
fuselages? This is for Internet connectivity, an increasingly popular feature on airlines as passengers bring their own Nookbooks, iPads and the like to watch movies or cruise the Net. But aircraft lessors apparently don’t find these features all that desirable and are increasingly talking about having airlines take them out at the end of lease terms. Mary Kirby of Runway Girl Network has this story on the esoteric topic.
JetBlue explains bags, seats: JetBlue is reducing seat pitch and adding bag fees. CFO Mark Powers explains these moves in a Bloomberg News interview.
Little progress on A330 production gap
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Introduction
With the end of the year a mere five weeks away, Airbus appears to have made little progress in closing its production gap for the A330.
Summary
- Airbus still has a gap of approaching 150 production slots at current and announced rates between now and the planned EIS of the A330neo in December 2017.
- Launch of A330neo helps, but does not cure production gap–especially between now and 2018.
- No Chinese order for A330 Regional after more than a year.
- AirAsiaX deferring orders–and will some CEO orders be swapped for the NEO?
Odds and Ends: No Boeing response to A321neoLR; After DL loss, Boeing wins Kuwait; It’s ‘huge’
No response to A321neoLR: Reuters reports that Boeing isn’t going to respond to the Airbus A321neoLR, the airplane intended to be a bonafide replacement for the Boeing 757.
“We are very happy with where the MAX 9 sits and feel the competition is simply doing things to catch up with it,” Randy Tinseth, vice president of marketing at Boeing Commercial Airplanes said, Reuters reports.
There’s really no other choice but to say Boeing is happy. As we demonstrated in our three-part 757 replacement series in October, the 737-9 can’t be made competitive with the A321neoLR. As Tinseth notes in the Reuters article, and which we covered in our three-part series, Boeing could put another fuel tank (as does Airbus in the A321neo) in the -9 to match the range. But what Tinseth did not note in Reuters (or at least it wasn’t reported if he did), and which we did write, the 737-9 comes up more than 15 passengers short of the A321neoLR and 20 passengers short of the 757–and it needs 12,000 ft of runway to take off with a full load.
Odds and Ends: JetBlue defers A320s; Delta’s A350 order; Another KC-46A delay?
JetBlue defers A320s: This US airline announced at its investors’ day that it is deferring Airbus A320s from this decade into next. JP Morgan had this commentary November 19:
JetBlue…announced a deferral of 18 A320-family aircraft from 2016-18 to 2022-23. While having a $900m positive impact on cap-ex through 2018, we believe the deferral should also limit near-term speculation on widebodies and Transatlantic expansion for several years. The reason? We believe the deferral was driven in large part by Airbus’ continued study of an ‘A321neoLR….’ Airbus continues to explore the development of a long-range version (3,900 nm) of its flagship narrowbody aircraft to serve as a fuel-efficient competitor to the Boeing 757-200W, with potential entry in to service by 2018-19. We believe such an aircraft would fit exceptionally well into JBLU’s longer-term expansion plans, though it does imply a Transatlantic future somewhere down the road, in our view.
JetBlue has expressed interest in entering long-haul, over-water routes, but it doesn’t have ETOPS qualification. If it were to do so sooner than later, it would have to either wetlease aircraft (as did WestJet of Canada) or lease the four-engine A340-300, a cheap lift with a modest capacity.
Lufthansa to use A340s in “lower cost” operation; our analysis against the 787
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By Scott Hamilton and Bjorn Fehrm
Introduction
Low cost long haul service is gaining traction, but previous efforts proved difficult to be successful.
Dating all the way back to Laker Airways’ Skytrain and the original PeoplExpress across the Atlantic, airlines found it challenging to make money.
More recently, AirAsiaX retracted some of its long-haul service, withdrawing Airbus A340-300 aircraft when they proved too costly. The airline recast its model around Airbus A330-300s as an interim measure, unable to fly the same distances as the longer-legged A340. AirAsiaX ordered the Airbus A350-900 and now is a launch customer for the A330-900neo.
Cebu Pacific of the Philippines is flying LCC A330-300 service to the Middle East. Norwegian Air Shuttle famously built its entire LCC long haul model around the Boeing 787, initiating service with the 787-8 and planning to move to the 787-9.
Canada’s WestJet is leasing in four used Boeing 767-300ERs to offer LCC service,
Legacy carrier Lufthansa Airlines plans to use fully depreciated A340-300s to begin “lower cost” (as opposed to “low cost”) long haul service. LH says the fully depreciated A340s come within 1%-2% of the cost per available seat mile of the new, high capital-cost 787s.
Summary
- AirAsiaX’s A340 LCC long haul service proved unprofitable. Can Lufthansa’s similar service with fully depreciated A340s work?
- Our analysis shows that it can. It can even support the lease rates that would be charged for a 10 year old A340 if the fuel price remains at the present level.
- When doing the research for this article and going through the results of our proprietary model we started to ask ourselves, is the A340-300 the ugly duckling of the airline market?