Pontifications: Southwest meltdown (its second in 3 months) is a day of reckoning; what will it do to fix it?

Jan. 3, 2023, © Leeham News: I’ve been employed by, consulting, or writing about the airline industry for 43 years.

By Scott Hamilton

I’ve seen plenty of times when flights were disrupted. There was 9/11, in which the US skies were closed for four days. It was a first. The COVID pandemic essentially shut down global traffic for months, another first. I’ve seen 40% of the US capacity operating in bankruptcy following the 1991 Persian Gulf War. There was SARS. The hijacking epidemic in the 1970s. The Palestine Liberation Organization hijacked four airliners at once and blew them up in the desert, fortunately having let passengers and crew deplane first.


See airport chaos:

 


But never have I seen the chaotic meltdown of an airline like that seen during the Christmas period of Southwest Airlines. On Boxing Day, the Luv airline canceled two-thirds of its flights. Its hubs in places like Baltimore and Chicago Midway were a sea of humanity and baggage. Southwest’s meltdown was simply unbelievable.

Yet, somehow, I wasn’t terribly surprised.

I’ve been watching Southwest for nearly five decades. I gave up flying it probably close to 20 years ago, even though I love Midway Airport (I still have family in the Chicago suburbs). Southwest has been on a long, long, long road to implosion for years.

Here’s why.

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HOTR: Compensation wins Southwest order for MAX

By the Leeham News Team

March 29, 2021, © Leeham News: Southwest Airlines today announced an order for 100 Boeing 737-7 MAXes.

The order was expected. The carrier also considered the Airbus A220-300. But any prospect of diverging from the 50-year relationship with Boeing was at best a crapshoot.

Despite the flowering language in the press release, the key reasons are buried.

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Did Airbus miss opportunities with Alaska, Southwest?

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By Scott Hamilton

Introduction

March 22, 2021, © Leeham News: Airbus lost an order from Alaska Airlines, which means the carrier will essentially revert to an all-Boeing fleet.

Alaska Airlines ordered more Boeing 737 MAXes instead of Airbus A321neos. Southwest Airlines appears ready to order the 737-7 MAX instead of Airbus A220-300s. Were these real opportunities? Photo by Boeing.

And despite the apparent high-profile loss of a potential order from Boeing loyalist Southwest Airlines, Airbus is holding its ground in the USA.

Did Airbus miss opportunities to gain ground?

It all depends on how you look at it.

Summary
  • Alaska Airlines chose to eliminate the Airbus A319s and A320s inherited with the 2016 acquisition of Virgin America. It’s not going to retain the orders for A320neos. And it passed on ordering more A321neos when it recently placed a follow-on order for Boeing 737-9s.
  • It looks all but sure Southwest Airlines will pass on ordering the Airbus A220-300 for its sub-150-seat fleet requirement. Boeing looks poised to win a big order from Southwest for the slow-selling 737-7 MAX.
  • Neither outcome, however, was unexpected.

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Heard on the Ramp: Boeing has its 777X sales challenges; Airbus A330neo appears to be next

Heard on the Ramp

We introduce today a new feature, Heard on the Ramp. This column contains news briefs LNA picks up in the market that aren’t expansive enough for stand-alone articles but which are items of interest. Publication will be on an as-needed basis.

By the Leeham News staff

March 10, 2020, © Leeham News: Last year revealed Boeing 777X order problems, with a small customer base and cancellations or deferrals. Perhaps this year will be the Airbus A330neo’s turn.

Out of 337 orders, 156 A330neos are with airlines in trouble or can’t take aircraft (AirAsiaX, Iran Air, HNA), or 46%.

This is without counting the second level of trouble airlines and lessor orders, which may have challenges placing aircraft in today’s unsettled market.

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Pontifications: Southwest to evaluate splitting airplane supplier next year

Oct. 28, 2019, © Leeham News: Gary Kelly, the chairman of Southwest Airlines, told CNBC Thursday that next year, the company will review whether to source airplanes from another manufacturer besides Boeing.

This, of course, means Airbus.

The prolonged grounding of the Boeing 737 MAX is the reason. Southwest says the grounding already has cost nearly $500m in lost revenues.

Kelly said the analysis won’t be for “smaller” airplanes, but he didn’t specify to CNBC what this means.

Southwest has 500 Boeing 737-700s seating 143 passengers at 30-31 inch pitch.

The Airbus A220-300 seats 145 at 32 inches in the Air Baltic one-class configuration.

The Embraer E195-E2 seats 146 passengers, but in a 28-inch pitch. At Southwest’s preferred 31-32 inch pitch, the E-Jet seats 132 passengers.

Since the context was the 737-8 MAX, did Kelly mean, not smaller than the -8? This isn’t known.

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Preferred 737 MAX return to service timeline for Airlines

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By Vincent Valery

Introduction  

Oct. 21, 2019, © Leeham News: As Boeing sorts out final requirements with regulators for the 737 MAX return to service, preparations to resume deliveries are in full steam.

The company is hiring scores of temporary workers to return grounded and built but not yet delivered airframes. A note from Alliance Bernstein estimates that Boeing will be able to hand over 25 aircraft per month on top of those that come off the assembly line.

After taking hefty losses and having lost its most robust cash flow source for almost a year, Boeing will want to hand over as many aircraft to airlines as fast as possible.

Do all 737 MAX customers, likewise, want their aircraft back in service as soon as possible?

Summary
  • National regulators will drive return to service timeline;
  • Passenger demand variations;
  • 737 MAX exposure by region;
  • Demand peaks might dictate who flies first;
  • Maintenance, compensation, and other considerations.

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Boeing suppliers ramp up schedule for MAX: 52/mo by July, 57/mo by August

Source: Boeing.

April 29, 2019, © Leeham News: Boeing reduced the production rate on the 737 line in mid-April from 52/mo to 42/mo in response to the grounding of the airplane by regulators worldwide.

The company and others said they didn’t know how long the airplane would be grounded.

But Boeing told suppliers to keep producing parts, components and the fuselage at rate 52.

The announcement was made April 5. At the same time, Boeing gave suppliers the rate ramp-up schedule.

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Impact of MAX grounding emerges with earnings reports

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Introduction

April 29, 2019, © Leeham News: With first quarter financial results beginning to be reported, the impact of the grounding of the Boeing 737 MAX is beginning to emerge.

Boeing 737 MAXes stored at Everett Paine Field. Photo by Jennifer Schuld.

The first out was from Boeing itself, followed by a few of the airlines that operated the MAX before it was grounded March 13.

Boeing reported the grounding cost it about $1bn, for just the two weeks the airplane has been on the ground.

Norwegian Air Shuttle, which was using the MAX on new trans-Atlantic services, lost millions of dollars.

American Airlines will take a $350m hit from the groundings.

Southwest Airlines surprised many with a stronger-than-expected first quarter despite having 34 MAXes on the ground and a cost of $200m.

Air Canada extended the removal of its MAX fleet from its schedules another month, to Aug. 1.

Summary
  • JP Morgan doesn’t predict deliveries resuming until the fourth quarter.
  • The investment bank sees 200 MAXes in inventory accumulating and cash losses of $1.5bn per month while the plane is grounded.
  • Wall Street hopes that 2020 will be a normalized year.
  • If simulator training is required by regulators before the MAX can return to service, JP Morgan estimates more than 4,400 pilots need to be trained.

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Latest engine problem means NMA EIS slides

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Introduction

April 22, 2019, © Leeham News: If there remains any doubt that Boeing’s prospective New Midmarket Airplane (NMA) won’t be ready for entry into service (EIS) by 2025, it should be dispelled by now.

The grounding of the 737 MAX March 13, which is likely to continue well into the summer, will delay any launch of the program—should Boeing proceed.

The Board of Directors is unlikely to approve Authority to Offer (ATO) the NMA for sale as long as the cash flow for the MAX is outgoing and not in-coming.

Although this has its own impact on the NMA timing, it’s not the critical factor.

Last week, it was revealed that the CFM LEAP engine on the MAX (and the Airbus A321neo) has a problem called coking, which led to the contained engine failure of a Southwest Airlines MAX being ferried from Orlando (FL) to Victorville (CA) for the grounding of the Boeing airplane (see here and here). It’s the latest in a long line of engine maker problems with their current generation of powerplants.

This issue is unrelated to the MAX MCAS grounding. It also affects some engines on the A320neo family.

Summary
  • CFM is considered the favorite to power the NMA.
  • All four engine makers remain under stress and recover modes.
  • Rolls-Royce dropped out of NMA competition in December.
  • LNA reported in March 2018 the engines needed to be the focus for the NMA launch. See here and here.

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Training is a factor in the MAX crashes

 

By Scott Hamilton

April 15, 2019, © Leeham News: This column will no doubt light up the blog-o-sphere.
There’s been a major debate going on since the crash of Lion Air JT610, the Boeing 737-8 MAX that immediately became a huge controversy.

Boeing immediately blamed the pilots. So did some pilots of some US airlines, who said if the Lion Air crew had just flown the airplane, it wouldn’t have crashed. It was a training issue, some said.

Having got tremendous blow back over Lion Air, Boeing publicly held its tongue when Ethiopian Airlines flight ET302 crashed five months later.

Still, Boeing officials quietly still said there was nothing wrong with the airplane.
Some US and Canadian pilots maintained, publicly and privately, that a lack of training and pilot skills in the Third World was responsible.

They’re not entirely wrong.

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