Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: Hawaiian orders A330-800, drops A350-800; A330neo market potential; Engines and Airbus
Hawaiian Air’s A350-800s: Hawaiian Airlines July 22 ordered six Airbus A330-800s and simultaneously dropped its order for six A350-800s. HA also took six purchase rights for the A338. Deliveries begin in 2019.
The A338 is slightly smaller, nominally at 252 seats, and has somewhat less range at 7,600nm than the 276-seat, 8,250nm A358, but only Hawaiian knows how much it needed the extra range. Losing the extra seats does give HA a hit to revenue potential, however. For wide-body airplanes, Airbus says each seat has the revenue potential of $2m/yr.
Offsetting the revenue loss is a far lower capital cost for the A338 vs the A358. Our economic analysis, based on technical specifications estimated before the Farnborough Air Show and before Airbus revealed data for the A338, showed the A338 pretty close to the A358 on a pure operating cost basis, not including adjustments for capital cost.
Odds and Ends: GAO report on ‘Boeing’s bank;’ C919; Airbus widebody strategy
GAO report on ‘Boeing’s bank:’ The US Government Accounting Office, a non-partisan investigating agency, completed a study of the funding and guarantees provided by the US ExIm Bank, which is under criticism from Congressional Republicans, and concluded non-US airlines do benefit from what amounts to subsidies.
These put US competitors at a disadvantage, GAO concludes. The full 29 page PDF may be found here.
The study period covered the global financial crisis, during which a good deal of private capital funding dried up. Airbus and Boeing each relied more heavily on export credit agencies for customer financing–ExIm in Boeing’s case and collectively European Credit Agencies, or ECAs, for Airbus.
The GAO found that ExIm funded or guaranteed financing for 789 Boeing wide body aircraft while the ECAs supported 821 Airbus wide-bodies.
Parenthetically, this statistic alone should demonstrate to Congress the need for ExIm to continue to be available for Boeing airplanes.
Air New Zealand shows off first 787-9
Air New Zealand and Boeing displayed the industry’s first 787-9, of which ANZ is the launch customer, in a media show-and-tell today.
ANZ touted its black-painted exterior and black-decorated interior for what it called a game-changing airplane that is better than the 787-8. Officials noted this is the first time an airplane stretch has more range than the shorter version.
Air New Zealand is the launch customer for the Boeing 787-9. It displayed the plane July 9 in a show-and-tell for international media. Photo by Scott Hamilton.
Boeing officials pointed to a more efficient production system, better engineering and lessons learned from the 787-8 program that produced an airplane that is expected to at least match the current dispatch reliability of the 787-8, if not better it, upon entry-into-service in the coming weeks. The 787-8 had a difficult EIS and a lower-than-expected dispatch reliability. Lessons learned should overcome all these disappointments.
Alaska-Delta Battle in Seattle comes at the expense of United, Southwest
National media and trade magazines are paying attention to the increasing battle between Alaska Air Group (Alaska Airlines and Horizon Airlines) and Delta Air Lines (including its regional airline partners) in the Battle in Seattle as the latter dramatically increases its presence here, but the focus appears to be on the wrong parties.
While the headlines and stories point to the “Delta challenge” to Alaska, a review of the traffic statistics and market share data provided to us by Sea-Tac Airport yesterday show that Alaska and its regional sibling, Horizon Air, and Delta with its regional partners are growing at the expense of United Airlines and Southwest Airlines.
Southwest Air’s expansion to resume next year, says CEO
Southwest Airlines plans to complete the integration of AirTran by the end of this year, positioning the carrier to resume expansion into new markets, says CEO Gary Kelly.
In an interview last week at WN’s Dallas headquarters, Kelly said the last of AirTran’s Boeing 717s will exit service by year end, leaving Southwest with a fleet of 690 Boeing 737-300s, -700s and -800s. There were 56 737-700s, 52 -800s, 30 -7 MAX and 170 -8 MAX on order at December 31 with more than 220 options for all types.
Back to the Future with PeoplExpress
PeoplExpress, a fast growing no-frills carrier of the 1980s, is returning in name only. A new company, wet-leasing planes from another airline, uses the old name and the most of the old business plan to start service soon from Newport News (VA).
But in an erroneous set of conclusions, some are calling the business plan a radical departure from today’s airlines. In fact, the bare-bones, no-frills service offered by the new PeoplExpress was used by its forerunner and is truly the model for today’s Ultra Low Cost Carrier (ULCC), long before Ireland’s Ryanair and the USA’s Spirit Air adopted the model.
You pay for everything: soft drinks, checked baggage, and so on. There have been refinements since then, expanding the fee-based formula of the original PE, but fundamentally the ULCCs of today are based on the PE of yesterday. The new PE simply follows the ULCC approach.
The new PE will wet-lease Boeing 737-400s from a Las Vegas airline, Vision. Jeff Erickson, former CEO of Midway Airlines, Reno Air, Atlas Air and TWA, is the CEO of PE. We’ve known Erickson for more than 20 years. If PE is well-funded (and we don’t know the finances), we believe Erickson can indeed find a niche for the carrier as legacy airlines continue to give short shrift to smaller markets. Newport News doesn’t strike us as an obvious place to headquarter or hub an airline, but this decision was made before Erickson came on board.
Odds and Ends: MH370 tracking; Garuda rules out A380, 747-8; last 747-400 flight; E-Jet vs Turbo-props
MH370 tracking: With Britain’s Immarsat and the Air Accident Investigation Board key to determining the general location of Malaysian Airlines Flight MH370, The London Telegraph has one of the best narratives of of the behind-the-scenes story of how this came about. The London Independent also has a good story. And here is a story that explains the difficulties of searching in remote oceans.
- Update, 10:30am PDT: Aviation analyst and former pilot John Nance is profiled in this Puget Sound Business Journal account that includes’ Nance’s theory of MH370. It’s an intriguing theory. He believes this was a deliberate act–either terrorism or murder-suicide–and that once the flight settled out southbound from Malaysia, it was set on auto-pilot and all aboard, including the pilot, were killed by asphyxiation. The airplane flew until it ran out of fuel and crashed into the Indian Ocean; he even gives a speed and angle-of-attack estimate.
Garuda rules out A380, 747-8: The Australian reports that after planning to order either the Airbus A380 or Boeing 747-8 last year, officials have ruled this out.
Last 747-400 flight: Japan’s All Nippon Airlines plans to complete its last Boeing 747-400 flight this month, ending an iconic era in the country where 747s once ruled the skies.
E-Jet vs Turbo-Props: At the ISTAT conference last week, we reported that Embraer says its E-175 E2 is more efficient than similarly sized turbo props on missions of more than 250 miles. This story in The Economic Times of India follows through on this theme.
Alaska CEO Tilden talks about airline, surviving mega-carrier competition
Alaska Airlines CEO Brad Tilden was keynote at the Pacific Northwest Aerospace Alliance Day One conference Feb. 4. He spoke about the airline’s transformation into a carrier that survived without filing for bankruptcy; and against Delta Air Lines’ latest competition in Seattle.
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Airbus A330-800 and -900neo, first analysis
Airbus cleared the air about the A330neo, which we concluded was a must last December, and made the 2014 Farnborough Airshow go off to an exciting start. A lot has been speculated about the A330neo, and in the end it did come out a bit stronger than what most had anticipated. Some of that is marketing but a lot is real, and here we give a first assessment of what was launched.
Let’s start with the specifics as given by Airbus and Rolls-Royce today in presentations and discussions. Here are the A330-800neo and -900neo’s main features: Read more
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Posted on July 14, 2014 by Bjorn Fehrm
Airbus, Airlines, Boeing, EADS, Farnborough Air Show, Leeham News and Comment, Rolls-Royce, Uncategorized
777X, 787, A330, A330neo, A350, Airbus, Boeing, Rolls-Royce