Leeham News and Analysis
There's more to real news than a news release.
How good is a used 767-300ER, Part 2
Subscription required
Introduction
By Bjorn Fehrm
Dec. 21 2015, ©. Leeham Co: Last week we started our Boeing 767-300ER article series around acquiring used twin-aisle 767 aircraft to upgrade 757-based long haul services, like Canada’s WestJet has done. We compared the aircraft and looked at the base data for the aircraft in article one.
Now we continue by analyzing the Cash Operating Cost (COC) of the aircraft in a typical long haul configuration, using our normalized seating. We are assuming that the 767 and the 757 are a half-life state between overhauls of engines and airframe.
Our benchmark aircraft is an Airbus A330-200 which is flying in a mainline airline. Here we assume that it is 25% deteriorated since new for engines and airframe.
Summary
- The 767-300ER and A330-200 differ in fuel and crew costs per seat mile but are close in most other cost items for COC.
- The 757-200W has lower fuel operating and crew costs than a 767 for the sectors it can perform. It is more expensive in maintenance and landing/underway fees on a per-seat basis.
- Overall the 767 is sufficiently within range of the A330-200 for cash operating costs so that when we add capital costs, it could be close to a draw.
- Finally, we will look at the earnings capabilities of the aircraft by adding standard yields for the payloads the aircraft can carry.
Bjorn’s Corner: Twins or quads?
By Bjorn Fehrm
11 December 2015, ©. Leeham Co: The debate over two or four engines for long range aircraft is as old as the jet airliner. A number of myths have been pedaled over the years over the virtues of the one over the other. The myths have even been presented by airline CEOs as “facts that are known in the industry.”
Having done several in-depth comparisons of two-vs-four engined long range aircraft, we can’t find the patterns that these myths propel: that a quad is less efficient than a twin and should have higher maintenance costs. What we see is that it is all dependent on what one compares and to what technology generation the one or the other aircraft belong.
When we didn’t get the same results as the myths on a number of areas, we started to wonder what could have created the myths in the first place. Looking at what four engined airliners could have been the source of the rumours, we started to see a pattern. It was a pattern of apple-and-oranges being compared and wide ranging conclusions being drawn.
Here is what we found. Read more
Used B777-200ER or A340-300, Part 3
Subscription required
Introduction
By Bjorn Fehrm
Dec. 9 2015, ©. Leeham Co: We have now covered the Cash and Direct Operating Costs (COC, DOC) for our acquired and refurbished Airbus A340-300E and Boeing 777-200ER. We will now finish the article series by looking at the earnings capability of the aircraft and compare these to the cost.
We will start by examining the payload carrying capability of the aircraft over different stage lengths by means of the aircraft’s payload-range diagram. Any excess payload capability over a cabin filled to a normal load-factor will be used to add cargo to the revenue stream.
Finally, we will value the payload according to the market’s standard yields for Business, Economy and Cargo payload. With the revenue from our long range mission, we can then establish mission margins and see which aircraft is suitable for what mission type.
Summary
- The 777-200ER and A340-300 are very close in operating costs in their base versions.
- With the use of payload-range curves for the aircraft we can see that the 777-200ER not only has a higher passenger capacity (six seats, stretched to 30 with the refurbishment), it can also take more payload weight.
- Excess weight capability can be used to load cargo but only if there is space available for the cargo modules when passenger bags has been loaded. We check if this is the case.
- Finally, we check if the higher purchase price and conversion cost for the 777-200ER can be covered by its earnings advantage.
Used B777-200ER or A340-300, Part 2
Subscription required
Introduction
By Bjorn Fehrm
Dec. 3 2015, ©. Leeham Co: Last week we started our article series around acquiring used twin-aisle aircraft to start new long haul services or boost an existing network. We focused on Airbus’ A340-300 and Boeing’s 777-200ER, two capable long haulers, both with a capacity of around 290 seats, using our normalized two class cabin. We wanted to understand which one would have the lowest operating costs over a network which has flights up to 12-13 hours.
We analyzed the Cash Operating Cost (COC) of the aircraft in their standard configuration in Part 1. We could see that their COCs are similar. We now study the aircraft’s capital costs. These will include a necessary cabin makeover where we will use the chance for the 777-200ER to convert it to a 10 abreast aircraft in economy. We aim to amortize its higher acquisition cost by spreading these over more passenger seats.
Summary
- The 777-200ER and A340-300 are very close in Cash Operating Costs in their base versions.
- The 777-200ER has a market valuation which is more than double that of the A340-300. Recently this level has declined but the acquisition cost of a -200ER is still higher than the A340-300.
- We use the potential of 10 abreast in economy to see if we can even the per seat cost of the two by spreading the higher costs of the -200ER over more seats.
Used B777-200ER or A340-300?
Subscription required
By Bjorn Fehrm
Introduction
Nov. 26 2015, ©. Leeham Co: In recent articles we have latched on to the debate around the prices for used Boeing 777-200 aircraft. Contrary to the market appraising companies’ ideas about second hand values, our surveys show that not only the Airbus A340-300 is cheap in the market but the Boeing 777-200ER is also available at interesting prices.
This, coupled with sustained low fuel prices, makes for interesting opportunities. Charter destinations can be reached which were not possible with less competent aircraft and it is possible to lease or purchase these long range aircraft to backfill an expanding route network while awaiting or even postponing delivery of the latest technology aircraft.
We decided it was time to take a look at which of the two would be the better choice as a long hauler of 300 passengers to destinations of up to 5,000nm. We use our proprietary model to find out which one is the most suitable given different conditions, such as cabin makeover or not. We will also introduce aircraft deterioration to the calculations to map the reality of an older aircraft.
In this first article, we will establish the base values for the aircraft and find their cash operating costs. In a subsequent article, we will add capital costs where we will look at different purchase scenarios and refurbishing options and how these affect the overall direct operating costs.
Summary
- The 777-200ER and A340-300 are very close in most dimensions.
- The 777-200ER is the slightly larger and heavier aircraft. Thanks to more effective engines, it can compete on fuel costs.
- When the other costs are added to make up cash operating costs, the higher weight and more expensive engines start to eat up any fuel cost advantages the 777-200ER has.
Pontifications: Is the end in sight for program accounting?
By Scott Hamilton
Oct. 26, 2015, © Leeham Co.: Is the end of program accounting, the staple of The Boeing Co. profit and loss reporting, on its way out?
It is in Europe, where it is called contract accounting, the end of its use is required by January 1, 2018. (LNC’s Bjorn Fehrm has talked about contract accounting in the past.) Companies have the option to eliminate it in 2017.
The fundamentals between contract and program accounting are similar: defer costs of the goods or services, and recognize profits sooner.
Europe’s International Financial Reporting Standards (IFRS) 15 says this has to stop.
Bjorn’s Corner: Engine rubbing
09 October 2015, ©. Leeham Co: Last week an Airbus A320neo prototype with Pratt & Whitney’s (PW) GTF had a problem while testing hot and high conditions at Al-Ain airport in Abu Dhabi. The engine suffered a rubbing problem and PW and Airbus decided to replace the engine before returning the A320neo to Toulouse.
I had the opportunity to discuss what happened with PW people at ISTAT this week and decided it makes for a good follow up to our two other engine Corners to write about what happened and how serious it was.
The problem was compressor blades rubbing against the compressors stator wall. PW knew that this engine individual could have that problem. They saw when assembling the engine it was a bit tight in the compressor area. PW said they told Airbus there was a risk with this particular unit, and sure enough, there was rubbing to be seen when they boroscope checked the engine after the test.
Here what it was all about and what to do about it. Read more
Bjorn’s Corner: Engine ratings
By Bjorn Fehrm
02 October 2015, ©. Leeham Co: After the article about the role of bypass ratio on a turbofan’s efficiency, we now look at other aspects of civil turbofan engines that are worth some light. It’s about how the engine OEMs create different versions of the same engine to cater for different aircraft variants.
The aircraft OEMs create different size variants from the same base model of aircraft by means of stretches. There is no better example of that than the Boeing 737. Over the years it has had more than 10 major versions. For the present in-service series, 737NG, there is three official variants, from the -700 to the -900ER. Originally it also had a smaller -600 variant.
These require engines from 20klbf to 27klbf. How this is achieved and what it means for engine characteristics and reliability is the focus of today’s Corner. We will also compare it to a typical long range engine, the Rolls-Royce Trent 1000/7000, which powers the Boeing 787 and Airbus A330neo.
Evaluating airliner performance, Part 2
By Bjorn Fehrm
Subscription required.
Introduction
Sep. 24 2015, ©. Leeham Co: In the second part of our series about comparing and evaluating economic and operational performance of airliners, we look at the parts beyond fuel that make up the Cash Operating Costs (COC) for an airliner.
While fuel consumption, crew costs and aircraft maintenance costs can be evaluated in a way which closely resembles reality, other costs in the COC are too complex to model in their true form.
This is the case for underway or airway fees, landing fees and station fees. Here, just about every country/airport in the world has taken the liberty to invent its own charging principles and formulas. With several hundred different formulae for these charges, the way out is to use industry-accepted approximation for these costs.
Summary:
- We establish how crew cost are modeled for our evaluation missions, taking into account the complex world of work time regulations for pilots and cabin crew.
- We also describe how we handle airframe and engine maintenance costs and how these get allocated to our missions.
- Finally, we describe how the complex underway and landing/station costs are modeled with the accepted approximations these require.
Bjorn’s Corner: USAF Tanker program
By Bjorn Fehrm
25 September 2015, ©. Leeham Co: When Scott Hamilton asked me to give my view on his article “Pontifications: Duelling refuelling tankers” I accepted. I was not involved in the project and was only following it casually over the years.
I will also not give my view on what would have been the most suitable tanker for the US Air Force. I simply don’t have the relevant military competence for that, having never operated my fighters with aerial tanking nor been in an aerial tanker aircraft.
Where I have relevant competence is in writing military specifications for important aircraft procurements and the excerpts I have seen from the tanker RFQ on key specification points don’t impress. Let me explain.