Caution flags waving as we enter 2012

As 2012 opens, we are concerned about the increasing signs global cargo traffic is softening.

Cargo traffic is typically a leading indicator of passenger traffic, both on the decline and subsequent rise. Cargo traffic fell 25% globally at the start of the Great Recession and passenger traffic soon followed. Cargo traffic began to recover before passenger traffic as the world edged out of recession.

But now, there are several indicators cargo traffic is softening again. IATA figures show traffic is on the decline. Additionally, there have been several developments at individual airlines.

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Odds and Ends: Starting 2012

Outlook for 2012: We’ve historically provided our outlook for the coming year by taking a look at the major airframe and engine OEMs. This year, our outlook is combined with that of Ernie Arvai and Addison Schonland over at AirInsight, which also looks at the Highs and Lows of 2011.

Boeing: The Seattle Times has a good year-end wrap up/2012 Outlook.

Boeing 787: Boeing did not make its target of delivering 5-7 787s in 2011. It only delivered two. Update, 9:45am: Blogger Airline Reporter says Boeing and ANA signed the paperwork on Dec. 30 for a third 787, arguably making this a third “delivery” but ANA won’t actually take possession until Jan. 4. We had asked Boeing Jan. 1 if any more deliveries had taken place in 2011 and a Boeing spokeswoman said Boeing would not confirm deliveries until the Jan. 5 update.

Bombardier: In part 3 of its look at 2012, AirInsight has a podcast with Bombardier talking about the CSeries.

Cathay Pacific: Aspire Aviation has an in-depth look at Cathay Pacific, including future fleet acquisition prospects. Daniel Tsang believes CX favors the Boeing 747-8I over the Airbus A380 at this point in evaluation, largely on great cargo capacity and a preference for frequency over passenger capacity.

Wichita (KS): December was a bad month for the aviation center in Wichita (KS). First came the news that Boeing may not finish the KC-46A tanker there and that the entire Boeing Wichita center may close. Then Hawker Beechcraft lost a USAF contract to Brazil’s Embraer. In fact, Hawker was excluded from bidding and is suing.

Leeham News: Our readership was up 62% in 2011 over 2010. Thanks to you all.

Our choice for momentous event: IAM-Boeing contract

Note: Highs and Lows for 2011: see AirInsight.

In our previous post, we gave readers a choice of the most momentous event for 2011 for Airbus and Boeing; and who was the most influential person for the year and what would be the predictive momentous event for 2012.

We agree with three of the four readers’ choice but disagree for the momentous vote for Boeing. We think it was the IAM-Boeing contract agreed to nearly a year ahead of the amendable date of September 2012. This agreement extended a new contract for four years and is heralding a new era of cooperation between the union and the company.

Here’s why we think this agreement beats out the 787, the readers’ choice, as Boeing’s most momentous event in 2011.

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Readers’ vote: What’s the most momentous event of 2011?

What do you think was the most momentous event for the following companies in 2011? And what do you predict for 2012?

Boeing aims to help airlines reduce fuel burn in flight

Here is a story we did for FlightGlobal Pro 20 Dec.

A little known programme offered by Boeing since October 2010 called InFlight Optimization Services offers airlines the ability to get up-to-date, en route weather and wind information that is more detailed than that offered by one’s own airline in order to reduce fuel consumption.

The programme is so new that only five airlines have subscribed to the service so far. Only two, Alaska Airlines and KLM, have authorised disclosure. Three are for Winds Updates and two for Direct Routes services.

The services are not limited to airlines operating exclusively Boeing aircraft. Alaska flies only Boeing 737s but KLM operates a mixed fleet of Airbuses and Boeings. While Direct Routes is available to any aircraft equipment with ACARS, the Winds Update currently is offered only to Airbus and Boeing aircraft, said Derek Gefroh, programme manager of InFlight. Emrbaer and Bombardier aircraft could come later.

Part of the emphasis on Airbus and Boeing aircraft revolves around the stage length operated. The longer the length, the more the benefit. Short block times typically have recent wind forecasts while the longer the block time, the older the forecast, particularly on overseas flights.

Airlines also want total fleet solutions, hence Boeing’s offering the service on Airbus and Boeing aircraft.

InFlight is designed to maximise fuel and flight efficiency through continuous real-time air, traffic, weather and aircraft data to find post-departure opportunities to reduce flight time and fuel costs. Boeing monitors the flight and sends real-time updates to the flight deck or the airline’s operations centre.

According to Boeing, citing studies, operations generally use about 10% more fuel than necessary. While KLM said the savings is as little as 0.1% per flight, cumulatively over a fleet and the course of a year, the savings can be significant.

The wind updates are, for now, focused on descent operations rather than en route winds. The wind updates combine with continuous descent and RNP (Required Navigation Procedure) to shave the time off the descents.

Gefroh said that wind data could be as much as 12 hours old when pilots prepare their flight plans. Real-time, en route information permits real-time adjustments as pilots prepare to descend from cruising altitude, typically about 20 minutes from landing.

As for direct routes, airlines for years have worked with Air Traffic Control to bypass waypoints under what is called a “Direct to” system. But Gefroh said that sometimes adverse winds could actually add time to a direct routing.

“For medium size operator, like an Alaska or one a bit larger, direct routes can provide them 40,000 minutes of annual flight time saved,” said Gefroh. This equates to 300 fuel-free flights per year. “The question is, how valuable is a minute?” Boeing estimates this at $25 for regional, $125 for a very large carrier or cargo airline, $50 minute for a carrier like Southwest Airlines and $100 for a US legacy airline.

These efforts are an outgrowth of a five-year research-and-development programme by Boeing to find efficiencies in the Air Traffic Management system. But improving ATM is a federal and international effort. The US plan, NextGen, could be as much as 20 years to fully implement. Airlines need savings now.

Looking ahead to 2012 by AirInsight, Pt 2: Airbus

In the second of a series, AirInsight has this podcost with Barry Eccleston, president of Airbus Americas.

EADS-Airbus investors forum

EADS and Airbus wrapped a two-day investors forum today. The PDF slide presentations are up on the web; the actual webcasts apparently won’t be posted until next week.

There is a enormous amount of information to slog through, even without hearing the webcasts.

Southwest launches 737-8, bypasses 737-7 for now

Here is an article we did yesterday for Flightglobal Pro’s subscription service.

The Southwest Airlines order on 13 December launching the 737 Max programme is a launch of the -8 version. The carrier, which has substitution rights between the -7 and the -8, has chosen to bypass the -7 for now.

Brian Hirshman, SVP Technical Operations, told Flightglobal Pro on 15 December that the carrier is up-gauging its fleet, which it began doing this year with acquisition of the 737-800 for the first time. Southwest, throughout its history since is 1971 birth, has relied on the 737-200/300/500/700, preferring smaller sized aircraft and high frequency as its business model.

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FedEx orders 27 767-300Fs, defers 11 777Fs

Flight Pro (aka Flight Global) has reported FedEx ordered 27 Boeing 767-300Fs for delivery from 2014 through 2018 but at the same time deferred 11 777Fs within the 2013-2018 period as cargo demand softens.

The 767s will replace MD-10s, which are more than 40 years old.

Airbus had pitched the A330-200F but it was considered “too much airplane” for FDX. FDX also evaluated the potential 767-400F, but a FDX official told us at ISTAT Barcelona Boeing did not want to proceed with this new variant and risk impacting the USAF KC-46A tanker development. The KC-46A is a derivative of the 767-200, called the 767-2C.

Southwest press conference on 737 MAX order

Southwest Airlines held a web press conference (with written question submissions the staff can screen in advance–bad idea) on its new 737 MAX order. Here are highlights:

Gary Kelly, CEO

  • Only four 737 MAX delivered in 2017. Just 15 the following year. (From press release.)
  • Christmas came early to Southwest. [Last time Kelly said that was when he proposed moving from Sea-Tac to Boeing Field in Seattle. Got his head handed to him in the local opposition. Editor.]
  • We have seen tremendous advances with technology.
  • COO Mike Van der Ven led effort.
  • This is coming at just the right time. One of the main challenges we face are high fuel costs. We are very much in need of new technology to reduce the fuel burn and reduce environmental impact.
  • This supports our financial strategy.
  • Commonality major point.

Jim Albaugh, CEO of BCA.

  • [Albaugh looks a lot happier at this press conference than he did at the American Airlines one.]
  • Southwest is a special customer and we have a special relationship.
  • This is the first definitive agreement we signed. Southwest will get airplane #1 when it rolls off the line in Renton.
  • [With Southwest getting only 4 airplanes in 2017, this suggests a late 2017 EIS.–Editor]
  • 948 commitments now, projects 1,400-1,500 by the end of next year.
  • I don’t have the real thing but I have a model for you and a video.
  • [Video shows MAX will winglets, not the oft-speculated raked wingtips.]
  • This is largest order in Boeing’s history.

Kevin McAllister, VP Sales and Marketing for GE, representing CFM.

  • Southwest formally launches the LEAP-1B.

Mike Van der Ven, COO.

  • This allows us to accelerate the retirement of older airplanes.
  • Have 150 options to expand as well.
  • Our choice guarantees WN a single fleet type well into the next decade.
  • 16-18% fuel burn improvement over 737 Classics.
  • We’ve been in conversations with Boeing for several years.
  • Efficiency improvements allow up to improve without complexity.
  • Compared with A320neo and both did the job but 737 MAX was our choice.
  • Cost is $1.2bn for all outstanding orders (including those existing before today). Per year.
  • Airplanes still being defined.
  • 717s in leases 2017-2020+ and will work to see what the alternatives are but will operate through lease terms if we have to.
  • Primary factors of fleet commonality and gauge of 737-8 (more seats), lighter airplane vs A320.
  • We like the GTF technology but this comes as a package and CFM has millions of flight hours behind it. GE and CFM have been very good in past in delivering products on time and meeting specifications.

Brian Hirshman, SVP Technology, WN

  • We did extensive analysis vs A320neo and felt 737 MAX better suited.
  • Plane works better at Chicago Midway Airport, among other issues.
  • MAX would have to fly the same mission as NG and are satisfied it would do that.
  • We wanted as much commonality as we can.

John Hamilton, Boeing 737 chief engineer.

  • The airplane is fairly well defined. Will reach final configuration in 2013. It’s well enough known that WN and Boeing had confidence to go forward at this time.
  • MAX will have capability to have increased payload-range vs NG.
  • Airport performance was important, especially at key airports.
  • We will make sure we get Southwest what it wants.
  • We both would have liked a new airplane, but when you look at lessons learned [from 787] it was more challenging to bring to market in the timeframe customers wanted.

Chaker Chahrour, EVP CFM

  • Core is optimized for MAX for best overall fuel burn.
  • We believe we have much more credible technology than GTF. We have tremendous amount of confidence in our technology and at the end of the day it will be the most economical.