The fuel effect; or old is beautiful

By Bjorn Fehrm

19 January 2016, ©. Leeham Co: When Willie Walsh, the CEO of IAG, said that the Airbus A340-600 “is a fantastic aircraft at fuel below $60 a barrel but perhaps not at $120,” he put operational words to something the Growth Frontiers 2016 conference in Dublin had been grappling with since it opened on Monday morning.


What is going to happen now? Crude is falling below $30 a barrel and Jet fuel is below $1 a gallon. This must have an effect on how people decide, whatever the lessors and aircraft OEMs say.

And it had to be a senior airline CEO that broke the mantra that everyone was repeating: “We don’t see fuel prices having any effect on fleet planning for airlines.”

Read more

ISTAT Europe 2015 in Prague: LCCs and Turkish airways take over Europe

By Bjorn Fehrm

06 October 2015, ©. Leeham Co: The global airline industry is on a steady course as a whole, but there are dramatic changes within Europe as low cost carriers, plus Turkish Airlines, redraw the competitive landscape.

China’s current economic softness raises concerns, with an independent analysis concluding that economic growth here is 2%-3% instead of the announced rate of 7%-8%.

Still, the mixed messages given at the annual ISTAT meeting in Europe this week didn’t put a damper on the mood of 1,200 delegates here in Prague.

  • The airlines are fine for 2015 as the fuel price is low but what about 2016? China is braking to a halt and Asia is getting infected? Will the infection spread? Will the airlines return to bad results?
  • What about the European airline industry? Can the low costs units of IAG, Lufthansa and Air France-KLM compete with the up-and-coming LCCs? Who is king of long haul travel out of Europe?
  • What about the order glut? When Asia slows, will the order bubble break?


Read more

Evaluating airliner performance, Part 4

By Bjorn Fehrm

Subscription required.


Oct. 05 2015, ©. Leeham Co: In the final part of our series about comparing and evaluating economic and operational performance of airliners, we will combine the different Cash Operating Costs (COC) with the capital and insurance costs to form the Direct Operating Costs (DOC).

We will also look at typical values for the different costs that make up the DOC for a single aisle Boeing 737 or Airbus A320 aircraft and a typical dual aisle Boeing 787 or Airbus A330neo aircraft.


  • We describe the cost that form an aircraft’s capital costs and how these differ between an ownership or a lease model.
  • When forming the Direct Operating Cost (DOC). The low fuel price of $1.50 per US Gallon has lowered the fuel’s part of DOC to around 20% for single aircraft and 30% for dual aisle aircraft on their typical mission types.
  • This means that other costs types in the DOC gets a more dominant role. We show which are the costs to look out for.
  • Finally we give the typical CASM (Cost per Available Seat Mile) values for single and dual aircraft in the market.

Read more

ISTAT Asia day two: home for the elderly


May 12, 2015, c. Leeham Co: As you would have guessed we are talking Asian civil airliners, where planning in the region for the fast growing older generations is inadequate. This was the subject of several sessions during day two of the ISTAT Asia (International Society of Transport Aircraft Trading) conference in Singapore.

The problem is new, as up to now a newly established airline fleet in Asia has not had any numbers of older aircraft. But the expansion over the last 20 years is now producing the first transition waves of aircraft and the planning around the problems this generates is inadequate.

The result will be surprising write-downs of airline assets as aircraft being replaced cannot be transitioned out at booked residual values. The scale of the problem was highlighted by a survey of the 500 gathered ISTAT industry experts. The question posed to them was “There are 4700 aircraft coming up for replacement until 2033, has Asian airlines planned adequately for this?”:

  • 49% of the delegates responded a few airlines have.
  • 45% answered there are only some that do it.
  • 5% of the delegates answered most airlines does it.
  • 2% thought all Asian airlines have done it.

Read more

ISTAT Asia: Asian airline market update


May 11, 2015, c. Leeham Co: We are participating this week in the ISTAT Asia conference in Singapore where IATA and different panels gave an interesting update on the Asian airline market. This is the fifth year that an ISTAT (International Society of Transport Aircraft Trading) conference is held in Asia and participation has virtually doubled from last year to 500 delegates.

IATA’s Conrad Clifford opened the event with the following overview about the Asian market for airline passenger travel:

  • The IATA 20 year forecast growth for the region is 4.9 % annual growth, making it the largest world-wide passenger market by 2030.
  • The domestic markets of China and India grew with 11% and 20% respectively in 1Q2015. The US market in comparison grew 3%.
  • The growth in the region makes China the world-wide largest domestic passenger market by 2030, surpassing the US with India in third place.
  • The highest growth markets are China, India and Indonesia. Countries like Thailand and Malaysia are struggling with low demand at present.

Read more

Airliner retirement age in the wake of low fuel prices

By Bjorn Fehrm


March 31, 2015: We have received an update for Avolon’s “Aircraft retirement and storage trends” whitepaper from September 2012. In the age of changing fuel prices it makes for interesting reading as the author, Avolon’s Head of Strategy Dick Forsberg, includes the effects of fuel price changes in his analysis.

The analysis uses data from Ascends database up until 31 Dec 2014 to make its conclusions:

– Retirement age for jets remain stable with 60% of mainline aircraft still active after 25 years.

– Regional jets retire earlier, the 60% active age is 20 years.

– Behind early retirements of certain aircraft is first of type versions which have limitations in airframe or engines.

– Old aircraft and those who are stored more than two years don’t make it back from the desert.

– With continued low fuel prices deferred retirements would increase but still constitute less than 10% of new aircraft production. Read more

Rolls-Royce and the leasing market

By Bjorn Fehrm

22 Jan. 2015: When talking to leasing companies at the annual Growth Frontiers 2015 conference in Dublin, Rolls-Royce is the engine manufacturer that is perceived as the least desirable on their airplanes.

This has no reliability or performance background, Rolls-Royce has a good reputation for producing solid and reliable engines which serves their operators well. It is rather the success of Rolls-Royce’s after market program, TotalCare, which is the at the root of the Leasing companies problems with Rolls-Royce.

Read more