Leeham News and Analysis
There's more to real news than a news release.
Farnborough Air Show, July 15: VLA program analysis: A380, B747-8I, 777-9, [and the wishful thought of an A350-1100]
Fabrice Bregier, CEO of Airbus Commercial, threw cold water on the prospects of an A380neo and an A350-1100, the latter to compete with the Boeing 777-9.
Bregier’s position on the A350-1100 leaves Boeing with a monopoly at the 400-seat marker. Boeing doesn’t view the 777-9, which nominally seats 407 passengers, as part of the Very Large Aircraft sector which begins at 400 seats. Rather, Boeing lumps the -9 into the medium-twin aisle sector (300-400 seats).
While Airbus continues to struggle with sales for the A380, Boeing doesn’t much talk about the 747-8I anymore, focusing primarily on the future potential of the 747-8F. Boeing bravely talks about the prospect of four or five customer sales for the 747-8I this year, including a strong wishful-thinking of an order from Emirates Airlines (president Tim Clark says he’s not interested).
American easing away from continuous hubbing, returning to peak banking
American Airlines will ease away from the continuous hubbing that smooths operations at key airports, increases aircraft utilization and cuts costs as it returns to the peak-and-valley hub-and-spoke system adopted decades ago under former CEO Robert Crandall.
Although this will mean higher costs and big gaps in airport activity, the increased revenue potential–called the power of the hub under Crandall–will offset the increased costs, says Derek Kerr, CFO of American.
We were at American’s Leadership Council meeting for 1,500 employees yesterday. The meeting itself was off the record but we talked with Kerr afterwards on the record.
Kerr, CFO at US Airways prior to the merger between AA and US, said that the continuous hub can’t connect as many passengers as the traditional hub, leaving revenue on the table. Continuous hubbing allowed a 45 minute ground time, which is too short–an hour is needed to maximize connections.
Re-hubbing will occur this year at Chicago, Miami and Dallas.
Southwest Airlines was a pioneer in continuous hubbing, though it wasn’t called this until perhaps a decade ago. Southwest essentially rolls the airplanes up, deplanes, enplanes and departs. At its origin, long before carry on bags, bag fees, security issues and other factors arose, Southwest “turned” its planes in as little as 10 minutes. Today turns are 30 minutes or longer, in part as planes get larger and carry-on bags slow the enplaning process. Still, Southwest eschews the term hubbing and indeed its connection percentage is far lower than American and other traditional airlines.
The de-hubbing is just one step the US Airways management team is taking to remake American following its emergence from bankruptcy last year and the merger in December.
Airbus Innovation Days, Part 3: the A320neo
Klaus Roewe, SVP of the A320neo Family:
There are 2,700 A320neos in the backlog. Roewe provided a program update during the Airbus Innovation Days. Here is a paraphrased synopsis.
- The first flight remains on target for 3Q2014. Final assembly began in the spring.
- No further modification will be required to meet the target of 15% fuel burn improvement.
- The GTF has been delivered to Toulouse; the LEAP-1A is in testing at the CFM factory.
- Production rate is shown at 46/mo from mid-2016 through 2019. We are investigating rate 50 and above.
- Within the supply chain, the first NEO components are 70% better than target. More than 2,000 lessons learned from the A380 and A350 are incorporated into the NEO program. We are already testing control laws for the neo, a lesson learned from previous programs.
- Airbus has discussed with regulators to determine that evacuation of the A320 for up to 200 passengers is possible but a configuration of 189 passengers is more feasible.
- Maximum capacity A321neo (240 pax) reduces per-seat fuel cost by 6%.
- Slim line seats at 28 inches feels like 30 inch seat pitch.
- A321neo could carry 25 more passengers on a 2,500nm route departing Phoenix or Las Vegas, two hot airports that were challenging for the A321ceo (based on the CFM56 engine).
- We are “well below” weight targets.
- Meeting 95% commonality target.
- There has been an increase of airlines configuring the A321 with more than 200 seats from 5% to 40%, which drove the larger-capacity design of the A321neo.
- Flap extension will go up from 27 degrees to 34 degrees, and some changes to spoilers will be incorporated into the neo.