Leeham News and Analysis
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Narrowbody Aircraft Retirements
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By Vincent Valery
Introduction
June 15, 2020, © Leeham News: Last week, LNA analyzed the accelerating widebody fleet streamlining by airlines. We now turn our attention to the narrowbody market.
Numerous airlines, including American and Lufthansa, announced the early retirement of single-aisle aircraft since the beginning of the COVID-19 outbreak. However, the retirement of entire narrowbody types has been a rarer occurrence among carriers.
LNA analyzes retirement prospects for Airbus A320, Boeing 737, 757, and MD80/90/717 family aircraft.
Summary
- A market dominated by two types;
- More variety among older aircraft in service;
- Streamlining on core narrowbody fleets;
- Regional breakdown for the oldest types in service.
How much of International passenger flights can be paid by belly cargo? Part 2.
By Bjorn Fehrm
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Introduction
June 11, 2020, © Leeham News: As international passenger traffic slowly recovers, how much of the cost of flying passengers on the international routes can be paid by the freight under the floor?
We discussed the base parameters to answer this question in last week’s article. Now we calculate the revenues from passengers traffic and Cargo and compare them with the operational costs.
Summary:
- The high freight prices make it possible to resume international passenger flights without losses on routes where there is substantial freight demand.
- As belly freight capacity comes back to the market the freight prices will decline, but by then the passenger load factors should be on the way up.
An accelerating widebody fleet streamlining, Part 2
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By Vincent Valery
Introduction
June 8, 2020, © Leeham News: Last week, we saw that earlier generations of widebody aircraft had significant range restrictions. Airlines with sizable long haul operations had to operate multiple aircraft types to serve different markets.
With the innovation of common pilot type rating and increased range of smaller widebody aircraft, airlines can now serve all their long haul destinations with far fewer types than in the past.
In the context of muted passenger traffic in a post-COVID-19 world, airlines will be under pressure to become more efficient and streamline operations. We will analyze the consequences for current twin-aisle programs and the fleet situation at large carriers.
Summary
- Accelerated retirement of old and large aircraft;
- Winners and losers among widebody programs;
- Some airlines are more streamlined than others.
How much of International passenger flights can be paid by belly cargo ?
By Bjorn Fehrm
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Introduction
June 4, 2020, © Leeham News: Air cargo prices are at an all-time high. The air cargo demand is down 28% compared with the same time last year, but the capacity has disappeared faster. Half of the world’s cargo was flying in the bellies of passenger aircraft, and as these were grounded, 50% of the world-wide cargo capacity went missing.
Airlines have taken the seats out of passenger jets and now fly them as belly freighters with light pandemic protective gear cargo in the cabins on special authorization from the authorities. This has alleviated the capacity crunch somewhat but demand and capacity still don’t match. As a result, cargo prices stay high.
As international passenger traffic slowly recovers, how much of the cost of flying passengers on the international routes can be paid by high priced freight in the bellies of the aircraft?
Summary:
- While domestic passenger traffic shows the first signs of recovery, international traffic will take long to recover.
- At the same time, cargo prices are two to three times higher than normal for international routes within Asia and between Asia and the US or Europe.
- How much of the bills for flying international passenger traffic in the recovery period can be paid by cargo in the bellies of these jets?
Mitsubishi’s options for the SpaceJet
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By Scott Hamilton
Introduction
June 2, 2020, © Leeham News: Mitsubishi Heavy Industry (MHI) yesterday closed the acquisition of the Bombardier CRJ program.
There are 15 CRJs in backlog to complete. But the purpose of the acquisition was to give MHI a global product support system for the SpaceJet.
With the aviation world still reeling and confused by the “suspension” of the SpaceJet program, what are the options going forward?
MHI last month announced it was suspending indefinitely development of the M100 SpaceJet. MHI said it will reevaluate the market demand of the M100. It suspended further flight testing of the M90 SpaceJet. It says it will proceed with office “validation” of the M90 for certification. Facilities in the US and Canada devoted to the SpaceJet program are closing. About half the workforce devoted to SpaceJet in Nagoya, Japan, is being reduced.
Customers that signed MOUs for 495 M100s and which have firm orders for some 200 MRJ90s (the previous brand for the M90) are in limbo. Suppliers are in limbo. MHI’s failure to communicate with them leaves a planeload of questions and no answers.
MHI’s move clears the way for Embraer to have a monopoly in the regional jet space. Unless—unless MHI restarts the SpaceJet program on its own or partners with another company to make a commitment to developing a new airliner.
LNA noted when the Boeing-Embraer joint venture collapsed that this presented opportunities for MHI and Boeing to renew and expand their previous relationship for the MRJ program. Here are some possibilities facing MHI.
Summary
- Kill SpaceJet entirely.
- Restart SpaceJet.
- Resuscitate the agreement for Boeing to support the MRJ program, updating it to the SpaceJet.
- Resuscitate and expand the previous agreement, strengthening the development SpaceJet and co-marketing by Boeing.
- Create an entirely new cooperative agreement, vastly broadening and strengthening decades-long ties between MHI and Boeing. LNA sees this as including SpaceJet and an entirely new family of aircraft replacing the 737 MAX.
- An expanded, broader agreement could even include development of a new “NMA Lite.”
- Finally, buy or create a JV with Embraer Commercial Aviation.
An accelerating widebody fleet streamlining, Part 1
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By Vincent Valery
Introduction
June 1, 2020, © Leeham News: As airlines slashed capacity in the aftermath of the COVID-19 outbreak, some took the opportunity to accelerate aircraft retirements.
Older generation twin-aisle aircraft, notably the Airbus A340, older A330s, Boeing 747 and 767, have exited numerous carrier’s fleet early. Several Airbus A380 operators put their Superjumbos in long-term storage, wondering whether these will ever fly in passenger service again.
Major crises tend to accelerate existing trends. The move away from large twin-aisle aircraft is a case in point. In the context of subdued demand for several years, airlines will be under pressure to reduce expenses. Streamlining fleets is an obvious target.
The Airbus A320 and Boeing 737 families dominated the single-aisle market for decades. The picture has historically been far more fragmented for twin-aisle aircraft. Airbus and Boeing still have three widebody aircraft families apiece with significant numbers of passenger aircraft in service.
LNA analyzes in two-part articles why the picture will likely change for the widebody market in the 2020s. In the first part, we will take a historical detour to analyze why twin-aisle fleets are still so fragmented nowadays.
Summary
- Range going hand in hand with aircraft size;
- Change in the 1990s;
- Superjumbo gamble backfires;
- Full widebody fleet streamlining becomes a reality.
What’s the gain of flying a smaller single-aisle during COVID-19 recovery?
By Bjorn Fehrm
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Introduction
May 28, 2020, © Leeham News: As flying recommences after country lockdowns, the fill factors for the flights will be low for an extended period.
Airlines and the OEMs are anticipating the low load factors. For instance, Delta has not deferred any Airbus A220 deliveries but is postponing deliveries of larger aircraft. How much of an advantage is a smaller aircraft when opening up the traffic again?
We compare the operational costs of the Airbus alternatives. The cost of flying the A220-300 is compared with the A320neo.
Summary:
- The A220-300 is about 25 seats smaller than the A320neo. It’s smaller airframe makes for lower fuel costs and airway/landing fees.
- There are savings on the crew side as well, as both flight and cabin crew costs less.
- Finally, modern systems, a composite wing, and a fuselage made of advanced materials promise lower maintenance costs than the A320neo.
Mitsubishi SpaceJet retreat is the best news for Embraer in months
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By Scott Hamilton
Analysis
May 25, 2020, © Leeham News: Mitsubishi Heavy Industries (MHI) surprising retreat from its SpaceJet regional airliner program is the best news in months for beleaguered Embraer.
This takes pressure off the Brazilian manufacturer and gives it time to regroup after Boeing jilted it at the alter by walking away from a proposed joint venture.
Going into storage: four Mitsubishi MRJ90s at Moses Lake (WA). Photo: Mitsubishi.
MHI’s actions leave Embraer with a monopoly in the 76-100 seat arena vs new airplanes. The M90 SpaceJet is not a viable competitor to the E175-E1 or the struggling E175-E2. Embraer’s competition will be its own used jets, plus used Bombardier CRJ-700/900s.
Summary
- Closing US operations entirely. Closing the recently opened engineering center in Montreal
- Continued operation of the CRJ product support center in Montreal or relocation to Nagoya uncertain.
- Major cost-cutting drive.
- MHI wants to certify M90, then consider whether to proceed with M100.
- M100 has MOUs for 495 aircraft.
- MRJ90 was not certifiable due to design deficiencies.
- Redesigned M90 meets certification requirements.
- M90 is economically uncompetitive with E-Jet.
- COVID-19 upends entire airline industry, casting doubt in MHI’s commitment to SpaceJet future.
Better to bring capacity back with a 777-9 or 787-10 if we fly 777-300ER today?
By Bjorn Fehrm
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Introduction
May 21, 2020, © Leeham News: We looked at the economics of extending the lease of a Boeing 777-300ER or taking an ordered 777-9 here.
If traffic post-COVID-19 on the routes we fly stays down for long, should we change the order to a 787-10? What are the trades between staying with the 777-300ER, taking the 777-9, or stepping down to a 787-10?
We use our airliner economic model to find out.
Summary:
- The 787-10 is the safe choice if the fill level for our routes will stay below its passenger capacity for a longer period.
- This choice is valid for a JFK to Heathrow route. The 787-10 has a shorter range than the 777-300ER and 777-9, so a 787-10 alternative is only possible for routes within its capacity.
Lessor exposure to Airbus, Boeing wide-bodies
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By Scott Hamilton
May 18, 2020, © Leeham News: As airlines park or retire thousands of aircraft, lessors with wide-body airplanes are most at risk.
Single-aisle airplanes are easier to re-lease and more in demand when traffic recovers. Reconfiguration and maintenance costs, if required, are 
reasonable by aviation standards. Cabin reconfiguration may run up to $1m. Airframe and engine MRO costs for Airbus A320s and Boeing 737s typically are in the low millions, depending on condition.
MRO and reconfigurations costs for wide-body airplanes, on the other hand, can cost more than a new A320 or 737. GE Aviation GE90s on Boeing 777-200LRs, -300s and -300ERs are notoriously expensive. MRO for Rolls-Royce wide-body engines is costly under RR’s contract packages.
Reconfiguration costs for A330s, 777s and A380s can run up to $30m, depending on the initial operator and who the second (or third) one will be. Therefore, HiFly did not reconfigure the ex-Singapore Airlines Airbus A380 it acquired after SQ retired the airplane.
LNA analyzed the number of wide-bodies owned by lessors. There are more than 670 Airbuses and more than 600 Boeings.