Leeham News and Analysis
There's more to real news than a news release.
US Airways Execs talk to us about fleet plans, change fees and the AA livery
We had the opportunity to sit down for a one-on-two interview with Scott Kirby, President of US Airways, and Derek Kerr, EVP and CFO, during the annual media day. We covered labor, fleet planning, change fees and the new American Airlines livery.
When we talked right after the merger was announced, you indicated that all the labor problems at US Airways were solved and you had agreements with American’s labor groups. Yet I read about continuing labor issues. Bring me up to date about this.
Derek Kerr: I think what we’re talking about is we have a road to solve all the labor problems. The contracts have a methodology for the pilots and flight attendants for who we’re going to get there. The only thing we have right now is our ramp and mechanics. We don’t have a deal with our ramp and mechanics and we’re negotiating that today. That is in normal negotiations. We’re going through with a mediator. That really is the only area where we are working on from a stand-alone perspective to try and get a deal done with our group. It’s a little complicated because we are trying to work the two groups (TWU represents American Airlines, IAM represents US Airways-Editor.) From the standpoint of where we are today, we have to road to get the pilots done. We have the road to get the flight attendants done. We have the ramp and mechanics on [the American] side complete. We have a six year deal. We’re trying to get our group together with that.
American is taking about 65 A319ceos. US Airways has a large fleet. You indicated when we talked right after the merger was announced that you expected to use some of US Airways’ 319s on American routes, but at that time it was too soon to draw any conclusions about the integrated fleet plan. What is your thinking today?
Odds and Ends: $500k per plane to fix 787, says FAA; China’s Airbus order
Cost of 787 fix: It will cost nearly $500,000 per aircraft to install the battery fix in the Boeing 787, documents released by the Federal Aviation Administration indicate. The actual math is $466,666. Analysts believe the 787 grounding cost Boeing about $600m, which the CEO said yesterday was absorbed in the R&D budget. Jim McNerney also said there are no contractual obligations to compensate customers for the grounding, but something will likely be worked out.
LOT will resume flying the 787 June 5, it was reported today.
China’s Airbus Order: It appears China is satisfied with the European Union’s about face on carbon taxes. Readers may recall China opposed the EU’s attempt to levy taxes on foreign airlines over carbon emissions. China vowed not to buy any Airbus aircraft–particularly the A330–in retaliation. Several other countries opposed the tax, though these didn’t go so far as to boycott Airbus. Today an $8bn order for Airbuses, including the A330, was announced by China.
Reader confidence rising about Boeing battery fix for 787
Reader confidence has risen over the battery fixes designed by Boeing and approved by the Federal Aviation Administration for the 787 in our unscientific poll.
In the third of three polls we’ve conducted–one before details of a fix were revealed but after they were broadly outlined in the media; one right after the Tokyo press conference; and the latest after the FAA approved the design–a majority of the minority now say they are ready to fly the 787 once it is modified. The two previous polls revealed a majority of the minority were not ready to fly the airplane for up to two years.
It’s clear Boeing and the customers still have some confidence-building to do–but it appears progress is being made.
Odds and Ends: Boeing kills fish plan; Consultant still spooked by 787 fix; new 787 poll
Boeing kills fish plan: The Spokane Review has this story about Boeing killing a plan to further protect fish in the Puget Sound area. We knew of this effort in December. The proposed rules would require huge water detention ponds at Renton and Everett to retain stormwater runoff to prevent pollution in Lake Washington and Puget Sound waters. The dimensions were so large there was inadequate land available at Renton. At that time the size of the Everett hadn’t been computed.
If the new rules went into effect, we were told Boeing would have likely begun moving work out of Washington, costing jobs.
The Washington Department of Ecology, which was behind the move, is proving more and more schizoid in its approach to the environment. On the one hand, it proposes highly onerous rules such as this and causes headaches to the suburb in which we live over critical areas rules. On the other, it’s poised to approve a permit to another suburb that will allow direct injection of contaminated stormwater runoff into a drinking water aquifer.
This falls into the category of “what are you thinking?”
Spooked about 787 fix: Richard Aboulafia, consultant with The Teal Group who has done work for Boeing in the past (about five years ago), remains spooked about the fix, according to this article. Are our readers? We’ve done two previous polls, one before the Boeing fix was outlined, one immediately after. Now that the FAA approved the fix, we’d like to ask the following again.
Odds and Ends: Boeing earnings call; US Airways Media; 787 update Day
There’s a lot of news happening today and tomorrow.
NTSB Hearing: The NTSB hearing on the Japan Air Lines Boeing 787 battery fire is today and tomorrow. This can be followed live (and later archived) here.
Boeing Earnings Call: This is Wednesday, April 24. This can be followed here. Expect a fair amount of discussion about the impact of the 787 battery issues on earnings. Ordinarily we’d have our usual live running coverage but instead we will be at the…
US Airways Media Day: This airline has an annual media day and it was scheduled for today a long time ago. We’ve been a regular at this, and due to the pending American Airlines merger, apparently there is going to be big press demand: they had to move the venue from headquarters to a hotel location in Scottsdale. We’ll have several updates throughout the day.
787 Update: LOT Polish Airlines expects to return its two 787s to service in June; Ethiopian this month; the Japanese airlines could return the airplane to service this month but ANA plans up to 200 test flights first, so this will slip to May and perhaps June. It’s unclear when Japan Air Lines plans a return-to-service (RTS). Qatar Airways wants to RTS this month. United Air Lines appears planning next month.
NTSB hearing on JAL 787 battery incident today, tomorrow: live, 9am Eastern Time
You can follow the NTSB hearing on the Japan Air Lines battery fire on the web here. It starts at 9am Eastern Time. Mobile phone access is also available.
Odds and Ends: Boeing’s presence in Seattle; 747-8 future; Japan awaits 787 NTSB hearings; Airport delays
Boeing’s presence in Seattle: Bill Virgin, a respected local journalist and observer of aerospace and manufacturing, wrote this column for the Tacoma News-Tribune looking at Boeing’s future presence in the Seattle area.
The points Virgin raise are valid, and in total have been discussed for years here. We raised some of these points as far back as April 2009 in a speech to a local economic development group.
Parochially, of course, we want to see Boeing stay here. Putting on our business hat, we can make a solid argument for Boeing’s diversification. We see Charleston becoming to Everett what Hamburg is to Toulouse: a major, major manufacturing center and aerospace cluster.
We are firmly convinced that when the day comes Boeing designs an all-new airplane to replace the 737, South Carolina will be its assembly home and Renton’s facility will close, to be given over to mixed use development along the lines of what’s called Renton Landing. Boeing’s “move to the lake” has been years in the planning and years in the making. We don’t believe it is over.
What about Everett? We see the future of Everett solid for at least a generation and probably a lot longer, at least until the 787 production begins to wind down. Local politicians fear Boeing will assemble the forthcoming 777X somewhere else. We don’t think so. The 777 tooling is here, the skilled workforce is here and it wouldn’t make sense to build a derivative elsewhere, just as it didn’t make sense to build the 737 MAX anywhere but Renton. Furthermore, we firmly believe the 777X will kill off the nearly morbid 747-8I. This will free up space to build the 777X here.
747-8 Future: The Puget Sound Business Journal last week published a long story about the inter-relationship between the 777X and the 747-8I, an its impact on the struggling program. On the same day the story was published (Friday), Boeing announced a production rate cut in the program from 2/mo to 1.75/mo. We had expected a deeper cut. One consultant we spoke with on Friday suggests Boeing will do what it can to keep the 747-8 alive pending recapitalization of the 747 at the USAF–in other words for Air Force One and the Doomsday aircraft. We’ve been saying the former for quite a while but had not thought about the latter. But there are only four aircraft. Still, the prestige of having the 747 as Air Force One is worth a lot.
The PSBJ article is here: PSBJ 747 041913
Japan Awaits Hearings: Japanese regulators are waiting for the Boeing 787/Japan Air Lines hearings by the National Transportation Safety Board this week before deciding whether to approve a return-to-service by the aircraft, according to this news report.
Airport Delays: You can track airport delays resulting from controller layoffs here.
Working together in Boston
I’m going to exercise my blog-owner prerogative to make a major deviation from the aerospace focus to talk about the Boston Marathon events.
The government response to what happened was superb. There can be no other word for it. There have already been a number of stories about the disaster response planning by Boston and how it provided instantaneous response to the injured. Lives were saved because of the rapid-response.
The ability to identify the suspects—not only in the videos but within hours their names—and then track them down is astounding. Certainly citizen cooperation made this possible. NBC News reported the FBI had about 25,000 hours of video to review provided by security cameras and citizens. How this could have been done in such a short period of time is bewildering. I haven’t seen anything to detail how many hours of video actually was reviewed before the suspects stood out, but according to news reports the key video came from a security camera mounted on the roof of a store.
Video Surveillance
Here is Seattle, there is a debate currently going on about the police erecting video cameras along an area called Alki Beach. Civil libertarians are concerned about invasion of privacy and police misconduct. Given the history of Seattle Police in recent years abusing civil rights, the concerns are particularly on-point here. But the video presence in Boston, contributing to the swift identification of the Marathon Bombers, certainly raises a solid argument for installing these.
There is a national debate over whether law enforcement should be allowed to use drones, or Unmanned Aerial Vehicles. The critics cite the same civil libertarian concerns as they do with the street cameras. While there has been no indication I’ve seen that UAVs were used in Boston, it was clear that helicopters were.
I have a hard time understanding the difference between “plain view” observation by helicopters, cameras or UAVs. UAVs, which are cheaper to buy and cheaper to operate than helicopters, could easily have aided law enforcement as they searched for the Marathon Bombers, vastly increasing their reach. Whether it would have made a difference in faster apprehension (which was pretty fast as it was) will forever be speculative. But “plain view” is “plain view.” UAVs don’t change that.
Government in General
Survivalists and many politicians like to bash government as being Big and Bad. There is plenty to criticize about government, and I’ve been known to do so on more than one occasion. But I served on appointed city boards for eight years and with this experience came both the good and the bad. The good is understanding that, for whatever differences in philosophy that often lead to sometimes bitter debate, those serving in government want to make things better—however “better” is defined by competing interests. The bad comes from the inefficiencies, bureaucracies and sometimes plain incompetence.
Local, State and Federal governments came together in Boston to respond to the initial tragedies. Then they came together to identify the bombers. Then they came together in one of the largest manhunts in American history. Government at its best.
But the very government agencies involved face huge budget cuts because of Sequester and a view by Republicans that all taxes are bad. If nothing demonstrates that taxes are needed to fund government, Boston certainly does.
I’m not a blind-eyed defender of taxes or of irresponsible spending. But will there ever be any event to wake up Washington (DC) that common sense must prevail? Citizens of all stripes and ideologies worked together in Boston. Common sense and common purpose prevailed there. Wouldn’t it be nice if the politicians in Washington acted as well as Boston?
Odds and Ends: How Alabama won Airbus; ANA 787 test flights
How Alabama won Airbus: Bloomberg News has this story detailing how Alabama persuaded Airbus to located an A320 plant in Mobile, after losing the tanker competition.
ANA to conduct 787 test flights: The Japanese airline, which currently has more Boeing 787s than any other carrier, will conduct up to 200 test flights before returning the 787 to service, according to this Reuters report.