Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- How good is the COMAC C919? March 20, 2025
- Boeing CFO Brian West: OK on tariffs for now, backlogs and inventories help March 20, 2025
- Pontifications: Southwest’s core problems are not solved by business model changes-yet March 19, 2025
- Boeing 2024 Proxy Statement: Executive Compensation includes retirement gifts for Calhoun, Deal; housing support for Ortberg, Pope, and other stuff March 17, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 13. March 14, 2025
Pontifications: Passenger experience and the WOW factor
By Scott Hamilton
June 29, 2015, © Leeham Co. Back on June 1, I wrote in this column I had yet to experience traveling on the Airbus A380, which entered service in 2007. The A380 doesn’t serve Seattle, where I live, and I really didn’t have a desire to add hours and a connection to my travels just to fly the A380 if I could go non-stop. Note that this is precisely the argument advanced by Boeing, but this is a coincidence. I have yet to fly on the Boeing 787, either, and it does fly into Seattle from Asia.
A reader Tweeted to me his incredulity that in all these years I hadn’t flown the A380. I replied, All in good time. I knew when I wrote that I would be returning from the Paris Air Show on an A380 via Los Angeles. The time had come for me to experience the airplane. (Interestingly, Dominic Gates of The Seattle Times, unbeknownst to either of us, wrote he’s doing the same thing via New York on Air France. I would be flying Air France. Friends warned me that the passenger experience on Air France, however, was hardly what the A380 is all about.
They weren’t kidding.
I had been on the test A380 during static displays before, but never in a passenger-configured model. At the PAS, Qatar Airways had its own little air show, displaying more airliners than any OEM: the A319, A320, A350 and A380 plus the 787. The A350 and A380 were open to the press. As with anyone in the industry, I had long-heard of how the Middle Eastern airlines went over the top on outfitting their cabins, but I wasn’t remotely prepared for the Qatar A380. Walking on board, into the first class section, was a jaw-dropping “wow” moment.
Pontifications: National policy, national security
By Scott Hamilton
June 15, 2015, c. Leeham Co. The battle between the the Big Three US carriers, American Airlines, Delta Air Lines and United Airlines, vs the Big Three Middle Eastern carriers, Emirates Airline, Etihad Airways and Qatar Airways, was a big over-hang at the 71st International Air Transportation Assn. Annual General Assembly last week.
The US3 charge that the ME3 have received around $42bn in subsidies and claim continued government support put them at a disadvantage. Loads of information has been reported, with claims and counter-claims going back and forth. But the IATA conference attendees, including members of the media, were looking for sparks to fly between Doug Parker, CEO of American Airlines, who was on a couple of panels and who was voted president of IATA for the next year, Tim Clark, president of Emirates and Akbar Al-Baker, CEO of Qatar.
IATA: Lufthansa welcomes US carriers to Mid-East dispute
Carsten Spohr, CEO of Lufthansa Group
June 7, 2015: The chief executive officer of Lutfhansa Airlines said he welcomes the Big Three US airliners to the dispute over whether the Big Three Middle Eastern carriers are unfairly competing against legacy airlines.
Carsten Spohr, CEO of Lufthansa Group, told a press conference on the opening day of the IATA Annual General Meeting that LH has long been complaining about Emirates Airline, Qatar Airways and Etihad Airways and their aggressive expansion, first in Europe and now the US.
American Airlines, Delta Air Lines and United Airlines are challenging open skies and subsidies to the ME3.
Jet Airways, Kenya Airways dumping Boeing 777s
Jet Airways is disposing of all 10 Boeing 777-300ERs (five of which are already leased out) and Kenya Airways is disposing of three 777-300ERs, according to published reports from the regions.
The Jet aircraft are 2007 and newer; the Kenya aircraft are 2013-2014 aircraft.
Jet Airways, partially owned by Etihad Airways, wants to rid itself of the five 777s already leased to other parties. Kenya Airways can’t fill the -300ERs, according to a person familiar with the situation.
A Boeing spokesman said these late model aircraft coming to market won’t affect the company’s effort to sell new 777s as it works to fill the production gap between the Classic and the 777X.
On a recent earnings call, CEO Jim McNerney said the slots are essentially sold out in 2016, half sold out in 2017 and some 2018 slots have been sold. Through May 5, Boeing sold 25 777s this year, including 10 to United Airlines in a swap freeing up 10 Boeing 787-9s.
Pontifications: Qatar Air adds US service, US airlines ramp up whining
By Scott Hamilton
May 11, 2015: Qatar Airways is going to add service to three more US cities and the US airlines don’t like it. That’s too bad. We’ve heard this story before.
First, it was the proposed deregulation of the US airline industry. By the late 1970s, there hadn’t been a new scheduled airline certificated by the Civil Aeronautics Board since the end of World War II other than local service carriers. Non-scheduled airlines (non-skeds for short) and charter carriers received licenses for their lines of work, but every effort to obtain a scheduled certificate was defeated by those airlines already holding one. They didn’t want the competition.
When the move toward deregulation occurred in the 1970s, only United Airlines and the original Frontier Airlines supported it. United, then the nation’s largest carrier, had been rejected by the CAB for every major route expansion while UA’s competitors received new route awards. UA thought deregulation was the only way to expand. Frontier, a local service carrier that had become a “regional” airline by then (as designations evolved), also saw expansion opportunities. Read more
Boeing 777 production gap remains challenging
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Introduction
May 5, 2015: c. Leeham Co. The order for 10 Boeing 777-300ERs last month by United Airlines was a welcome addition to the backlog for the Classic line, but it remains a struggle for Boeing to obtain enough orders, or convert options and LOIs, to bridge the production gap to the entry-into-service for the 777-9, currently planned for 1H2020.
Boeing would like to advance the EIS to late 2019, but this may be challenging.
Boeing currently has a backlog of 271 Classic 777s (including the UA order). Through the end of 2019, Boeing needs to deliver 466 Classics if it is to maintain the current production rate of 100 per year. Boeing is sold out this year, largely sold out next year, half sold out in 2017 and some delivery slots are taken up in 2018, according to CEO Jim McNerney.
But the need for more Classic sales doesn’t end on 12/31/19 because of the normal production cut-over and ramp-up of a new airplane type.
Summary
- Through 2019 Boeing needs to sell and/or convert options for 195 777 Classics, or an average of 43 per year from May 1.
- “Feathering” in production from the Classic to the 777X increases the challenge.
- Production rate cut remains inevitable, in our estimation.
Tipping point for supply/demand? We don’t think so
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Introduction
April 28, 2015, c. Leeham Co. Goldman Sachs over the weekend issued a research note, Is the new aircraft supply/demand equation nearing a tipping point?
GS cited the recent United and American airlines actions involving the Boeing 787 and Boeing 777 and other fleet activity or inactivity at Lufthansa Airlines and Virgin Atlantic as harbingers for its thesis.
Goldman has a Sell rating on Boeing stock, based on its belief the demand is leveling off and announced production rate increases by Airbus and Boeing will lead to oversupply.
Summary
- Goldman sees recent fleet actions indicating a softness in demand, driven in part by lower fuel prices.
- United, Lufthansa actions delaying retirement of older aircraft cited.
- Virgin Atlantic decision on Boeing 747 replacements delayed, says Goldman.
- We see other reasons for the above and no meaningful impact.
- Key wide- and narrow-body campaigns pending.
Pontifications: “Everyone” deferring Boeing 787s? Not hardly.
By Scott Hamilton
April 27, 2015: c. Leeham Co. With the announcement on the 1Q2015 earnings call that American Airlines is deferring Boeing 787s, I received an inquiry from a media person: what is it with the 787 that “everyone” is deferring the airplane?
I found the question puzzling.
True, this comes on the heels of United Airlines swapping 787 orders for 777-300ER orders, but this hardly counts as “everyone.” And the reasons for the maneuvering was well-stated and for very different reasons. Read more
Pontifications: USA to the World: “We want to fly everywhere. Period.”
By Scott Hamilton
- Two of the Big 3 Middle Eastern carriers launched a PR counter offensive in Washington DC today. Below are my thoughts.
I haven’t weighed in on the current battle between the Big 3 US airlines and the Big 3 Middle Eastern carriers because it’s largely beyond the scope of LNC. But I like commercial aviation history, so I thought I’d bring up a little.
In the era immediately post-World War II, when third, fourth and fifth freedom rights were being negotiated between the US and the Rest of the World, there was a member of Congress, Claire Luce Booth of Connecticut, summed it up nicely: “American postwar aviation policy is simple. We want to fly everywhere. Period.”
Redefining the 757 replacement: Requirement for the 225/5000 Sector, Part 5.
By Bjorn Fehrm
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Introduction
11 March 2015, c. Leeham Co: After having analyzed the different alternatives which would be available to Boeing for its Middle Of the Market, MOM, studies and having singled out the most competitive configurations, we will now add revenue to the equation. In the work to establish Cash and Direct Operating Costs for the aircraft, we saw which variant had the best cost for a certain capacity and utilization. We could not see which aircraft would be the most profitable however; this requires that we bring in the revenue side.
Revenue management analysis of different aircraft types on an airlines network is a science in it selves. Sophisticated fare class strategies with connected marketing activities makes such studies elaborate and beyond the scope of our analysis. Our primary goal is to understand the difference in operational efficiency of a single versus dual aisle aircraft with the same seating capacity. For this, a simpler average margin concept will work that shows us the effects of single versus dual aisle for aircraft margins in the MOM segment.
Summary
- We select based on Cash and Direct Operating Costs the best aircraft for the different market segments.
- To understand the revenue earning capability of the different alternatives we introduce a revenue model which takes into account aircraft utilization.
- With the costs and the revenue side represented we can develop a good understanding for the cross over between single and dual aisle for MOM.
- We will use this knowledge as we subsequently look into Airbus response to what Boeing would bring to the market.