Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 5. January 17, 2025
- What’s the future of the Boeing 787-8? January 16, 2025
- FAA understaffing affects air operations oversight; NTSB falls short, too January 13, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 4. January 10, 2025
- The market is ready for a 787F. But is Boeing? January 9, 2025
Six year turnover in sale/leasebacks put supply-demand balance at risk
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Introduction
August 24, 2015, © Leeham Co. When airlines like Indigo of India, Air Asia, Norwegian Air Shuttle (NAS) and Lion Air have outstanding orders for Airbus A320s and
Boeing 737s that number in the hundreds, far more than operations and growth appears ready to support, the deals raises the natural question: What are they thinking?
As LNC’s Bjorn Fehrm explained Friday, one aspect of these big orders is to “flip” the aircraft every six or seven years, a time that roughly coincides with the maintenance holiday/warranty period. Sale/leasebacks are used to finance these huge purchases.
The practice is hardly new. The USA’s JetBlue Airlines, Ryanair and others practiced this flip for years.
Carriers like the new LCCs mentioned above not only plan to do so to avoid major maintenance costs, but also to fuel their growth. In the case of Lion Air and NAS, these companies also plan to lease out aircraft to other airlines.
But there remain risks involved for the companies and for the industry.
Summary
- The growing practice of flipping aircraft every six or seven years presents risks to lessors.
- Indigo Airlines has 96 aircraft in service, 430 on order.
- Select LCCs in Asia, Europe, India have 1,000 A320s, 737s on order.
Bjorn’s Corner: Sale/Leasebacks
By Bjorn Fehrm
21 August 2015, ©. Leeham Co: IndiGo Airlines firmed up Airbus’ largest aircraft sale by unit numbers in the week. The order is for 250 A320neos. This means the airline goes from 180 A320neos on order to 430. The airline is just finishing off its first order with Airbus for 100 A320ceos, the final eight being delivered over the next months.
How can an airline that did not exist 10 years ago order 430 A320neos?
There are a couple of things that makes this possible, one of them being the Sale/Leaseback. Before we go to Sale/Leaseback and how this enables this magnitude of business, let’s take a quick look at IndiGo. It has certain similarities to other airlines that also close large aircraft deals.
Bjorn’s Corner: Holiday times
By Bjorn Fehrm
14 August 2015, ©. Leeham Co: It is holiday time in Europe and a lot of the European industry is shut down for summer break. This includes the Airbus Final Assembly Line (FAL) in Toulouse. Industrial holiday shut down or not depends a lot on the country’s industrial history.
Traditionally industry has closed shop for the month of July in the north of Europe and August in the south. For production-heavy industries with a lot of personnel in assembly work this is still the case. Examples are manufacturing industries like the auto industry, electromechanical goods industries and also the European aircraft industry.
For raw material industries, it depends if the manufacturing process can be interrupted for the three to four weeks a summer holiday would span. For many process chains, this is not possible. I earned my school summer break money on such an industry, replacing the worker that took his three or four weeks off.
Other parts of the world do not have summer breaks where the industry closes the doors and things go quiet. An example is the US, where, for example, Boeing produces aircraft 12 months of the year. Available vacation days are less than in Europe, typically two to three weeks against the typical four or five weeks in Europe. US vacations are usually taken spread over the year and the company normally doesn’t shut down production during the summer period. Read more
Bjorn’s Corner: Why is the real range of an airliner always shorter then what the OEM says?
By Bjorn Fehrm
07 August 2015, ©. Leeham Co: Now that we have explained the range consequences of weight and fuel limited airplane operations, we might as well explain the last important part of the range of an airliner: Why the practical range is always shorter than what the OEM says.
When an airliner OEM gives the design or brochure maximum range of an aircraft, they do that with an aircraft in a “show-room” configuration and which is loaded with a filled cabin only; no cargo is included in the calculation. Further, in the cargo area, there is only bulk-loaded passenger bags. Container loading of the bags would have cost tare weight for the containers used and weight is to be avoided when stipulating the maximum design range.
In practice, we would have to consider tare weight for bags containers and possible cargo when discussing what practical range an airline can plan for a certain aircraft model. But this is far from the whole story. Here is what has to be considered in addition.
Bjorn’s Corner: After weight or fuel limited we examine weight or volume limited
By Bjorn Fehrm
31 July 2015, ©. Leeham Co: Last week we explained what fuel limited meant and how that differs from an aircraft that has big enough fuel tanks so it can operate weight limited for its missions.
This was for fuel and it dictates to a large degree how the aircraft will behave on long range missions. When we block off seats to fly further, is it to allow more fuel in our tanks or is it to make the aircraft lighter to fly further with tanks already filled to the brim.
A similar phenomenon appears when we load the aircraft with its payload; an aircraft can take-off volume or weight limited. Here is how it works.
Bjorn’s Corner: Weight or fuel limited, what is this all about?
By Bjorn Fehrm
24 July 2015, ©. Leeham Co: In recent articles around the Ultra Long Haul (ULH) needs of Singapore Airlines, there have been many references to aircraft being either fuel or weight limited. It is not so evident what this all means and what the practical consequences are of one or the other limitation.
Let’s go through what it all means with a practical example and show how it will affect the performance of the aircraft and what one can do about it.
As an example we will pick Boeing’s ULH 777-200LR. It is known as the Worldliner since it can connect almost any two cities in the world with its ultimate range of 9,300nm. In practical use, the Worldliner has often been configured for less range. In such configurations it runs out of fuel tank space before it reaches its Max Take-Off Weight. This is “fuel limited.” Here is how it works.
Bjorn’s Corner: hot summer, hot engines
By Bjorn Fehrm
17 July 2015, ©. Leeham Co: It is summer in south of Europe and we have had over 30°C/86°F for weeks. It makes one realize the conditions where the engines have to work over their flat rating point in the Middle East.
Aircraft engines are a bit fidgety. They don’t like temperature although they are made to sustain that their hottest parts, the nozzle and first turbine after the combustor, gets scalded to 1700°C/3,092°F or more.
Go down to the very back end of the engine and we come to where the key engine parameter, EGT (Exhaust Gas Temperature), is measured. It determines a lot of things, among them the time the engine stays on wing. Things are typically 700°C/1,832°F cooler here and this is where a reliable temperature measurement probe can be placed. Based on its values, the total health of the engine’s core is determined. It is also a key input whether the engine shall be throttled back in a hot take-off like in the Middle East.
Bjorn’s Corner: Electrical flight, how real?
By Bjorn Fehrm
10 July 2015, ©. Leeham Co: We have just witnessed the first solar electrical aircraft, Solar Impulse 2, cross the ocean from Tokyo to Hawaii. Today, Friday, Airbus Group will cross the English Channel with a battery powered electrical aircraft, the E-Fan.
How real is electrical flying? Real enough to make demonstration flights like the one to Hawaii and to Calais. Both these aircraft are technology demonstrators but it is symptomatic that they do these hops now, 2015.
Airbus Group’s E-Fan aircraft is preparing to cross the English Channel. Source: Airbus.
We live in the years when electrical cars have gone from exotic one-offs to serial produced products, still expensive but more and more practical. Why should not the aircraft industry follow? Read more
Bjorn’s Corner: Bandit mask explained and nonexistent IFE boxes.
By Bjorn Fehrm
2 July 2015, ©. Leeham Co: Having aircraft as your interest exposes you to thousands of photos of your favorite subject. In general I find exterior photos of airliners a bit dull; there is no variation in their configuration or physics except for the livery of the operator. Some photos are a bit extra though. Read more
