Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
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Areas of investigation for Ukraine Airlines crash
By Scott Hamilton
Commentary
Jan. 8, 2020, © Leeham News: Some news reports of the Ukraine Airlines crash yesterday in Tehran linking the event to the Boeing 737 MAX crisis are irresponsible.
Ukraine Airlines Boeing 737-800. Source: Wikipedia.
The Ukraine airplane is a 737-800, a highly reliable aircraft with thousands in service around the world.
Drawing any conclusions about the crash at this stage and under the unique circumstances of open, armed conflict in the region is also irresponsible.
None of the news reports LNA has seen so far indicates possible radio communication from the pilot. The flight and voice recorders apparently have been recovered, but no information has been released of what information these contain. It’s unlikely any information has been downloaded at this point.
Here’s what investigators routinely consider in a crash investigation:
Congestion costs billions, but airlines show little concern
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Introduction
March 21, 2019, © Leeham News: There are many estimates for how much flight delays and disruptions cost airlines and passengers. But everyone agrees the total number is big—possibly more than $1bn for each major US airline each year.
In 2017, delays cost airlines and passengers $26.6bn, according to the FAA/Nextor estimate. That total includes direct cost to airlines and travelers, lost demand and indirect costs. Congestion at the three major airports serving New York City directly cost air carriers an estimated $834m a year, according to a 2009 report.
Chicago O’Hare Airport at 7pm, Sunday, March 17, 2019. Source: FlightRadar24.
Yet despite the high cost, flight on-time statistics are basically where they were 20 years ago. Moreover, there are no discernible positive trends in the data collected by the U.S. Bureau of Transportation Statistics.
Of course, airlines take steps to decrease or limit flight delays, and, of course, some things, such as severe weather, are out of anyone’s control.
At the same time, airlines have shown little interest in pushing for low-cost solutions to decreasing system-wide congestion. There is no clear or easy explanations for carrier’s lack of motivation. However, interviews with current and former airline executives, researchers and others highlighted a few key factors.
Summary
- Reducing air traffic congestion is a huge, hairy beast of a problem.
- That complexity makes it difficult to see system-based approaches.
- Airlines are concerned that competitors could benefit more from reduced congestion.
A simple solution to congested skies
By Dan Catchpole
Danieljcatchpole[at]gmail[dot]com
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Introduction
Feb. 14, 2019, ©. Leeham News: Flight delays cost the airline industry
Traffic back ups are increasing–so much so that Airbus has invested in improving air traffic management to avoid congestion affecting aircraft sales.
billions of dollars each year. They cause travelers untold aggravation and inconvenience every day. And the main culprit—air traffic congestion—is only going to get worse as Boeing and Airbus deliver tens of thousands of jetliners over the next couple decades.
Regulators, lawmakers and the aviation industry in the United States have settled on spending billions of taxpayer dollars on NextGen—after having already spent billions—to implement complex technical solutions to keep the skies safe and cut down on flight delays.
The Federal Aviation Administration (FAA) estimated in 2017 that implementing NextGen will cost roughly $35.7 billion by 2030–$20.6 billion from the FAA and another $15.1 billion from the aviation industry.
NextGen has moved with the swiftness of a sprawling, technocratic federal program—that is to say like an elephant at the ballet. It has endured delays and cost escalation, though these have not been crippling. However, it is years away from unclogging America’s congested air spaces.
Moreover, there are very real questions as to whether NextGen will be able to deliver all the FAA promises it can.
Summary
- Air spaces are getting more crowded, leading to greater flight delays.
- Airbus is concerned that congestion could hurt demand for jetliners, and is taking steps to improve air traffic flow.
- Substantial questions exist as to NextGen’s ability to unclog air traffic congestion.
- Taking a system-wide approach that taps into airlines’ desire to maximize profits could be implemented now, say proponents.
In new blow, Boeing defeats Airbus at American, sources say; AA says ‘no decision yet’
Boeing 787. Photo via Google images.
March 23, 2018, © Leeham News: In a new, albeit not unexpected, blow to Airbus, Boeing won a hotly contest competition at American Airlines between the A330neo and the 787, two sources say.
Bloomberg News reported Airbus lost the deal, earlier today.
LNC confirmed the decision with two sources. But Derek Kerr, EVP and CFO of American, told LNC no decision has been made, but an announcement could be coming by the first quarter earnings call if not before.
The competition originated with American’s long-publicized ambivalence over the legacy Airbus A350-900 order placed by US Airways long before the latter acquired American, a 787 customer of long-standing. With this deal, American will cancel the A350 order for 22 airplanes.
Pontifications: Twelve Years of Turbulence at American Airlines
By Scott Hamilton
Jan. 22, 2018, © Leeham Co.: American Airlines was the last of the big US legacy carriers to enter bankruptcy, in 2011.
Executives put up a valiant battle to avoid being dragged into Chapter 11, despite having two airplanes hijacked on 9/11. One was flown into the World Trade Center, the other into the Pentagon.
Only two months later, American lost a third airplane in an accident.
Delta, Northwest, US Airways and United airlines all filed for Chapter 11 after 9/11; there were several other airlines to do so. Not all survived.
American did, merging with US Airways as part of the former’s bankruptcy reorganization.
AA’s former general counsel, Gary Kennedy, teamed with the aviation reporter for the Dallas Morning News, Terry Maxon, to tell the story of Twelve Years of Turbulence, The Inside Story of American Airlines’ Battle for Survival.
The book is available now.
Pontifications: The pricing jigsaw puzzle
By Scott Hamilton
May 22, 2017, © Leeham Co.: The prices airlines and lessors pay for their airplane purchases have long been of intense interest to just about everybody associated with the airline industry.
The manufacturers want to know what their competitors are selling the planes for.
The airlines want to know what their competitors pay for their airplanes. The same is true for lessors and their competitors.
(Airlines are less interested in what the lessors pay; they are only interested in what they must pay the lessors to lease the airplanes, and aren’t really concerned about the lessors’ costs.)
Appraisers want to know the prices of new aircraft, and prices on the secondary market, to have a basis for predicting base and current market values today and 25 years in the future.
The credit rating agencies want to know that values of the airplanes to rate financing deals.
WestJet’s 787, international strategy fraught with risks
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Introduction
Boeing 787-9. WestJet ordered 10 and placed an option for 10 more. Deliveries begin in 2019. Boeing photo.
May 8, 2017, © Leeham Co.: WestJet, Canada’s #2 airline behind Air Canada, is making dramatic departures from its low-cost, low-fare strategy since the company began operations in February 1996.
The company earlier announced it will form an Ultra Low-Cost Carrier (ULCC). Last week came an order for 10 Boeing 787-9s and options for 10 more. Deliveries begin in 2019.
Summary
- WestJet is taking on Air Canada and its LCC unit, Rouge, in LCC and long-haul LCC markets.
- “Too much going on to get comfortable,” writes analyst.
- Capital costs will go up significantly.
Pontifications: Branson gets pissy over dropping the Virgin America name
By Scott Hamilton
April 3, 2017, © Leeham Co.: Sir Richard Branson came to Seattle last week to promote the new service by Virgin Atlantic Airlines to London. In a hissy-fit, he promptly pissed on Alaska Airlines for the business decision to drop the Virgin America brand in 2019.
Alaska, of course, acquired Virgin America last year. The acquisition didn’t sit well with Branson, who nevertheless made out well in the deal.
Although Alaska officials said they would decide later whether to retain the Virgin brand, only those with wishful thinking gave any chance of this happening.
Richard Branson in Seattle for Virgin Atlantic’s new service to London. USA Today photo via Google.
Branson certainly knows this. In 1997, Virgin Group acquired the low fare carrier Euro Belgium Airlines for $60m and promptly dropped the name in favor of Virgin Express.
VE lasted only nine years; it ceased operations in 2006 when it was sold and merged into the new Brussels Airlines.
Branson’s whining over Alaska’s decision to operate the merged operations into the Eskimo’s image smacks of hypocrisy.
Let’s also remember that his Virgin Atlantic is 49% owned by Delta Air Lines, which is building a hub in Seattle in competition with Alaska. The fight between Alaska and Delta is sometimes bitter.
Branson’s criticism of Alaska might have as much to do with Virgin Atlantic’s partnership with Delta as it does his own bruised ego.
Major fleet decisions may not be positive for Airbus, Boeing
Pontifications is off this week.
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Introduction
March 20, 2017, © Leeham Co.: There are some major fleet decisions that will probably come down the pike this year at American, Delta and United airlines. Not all of them are going to be viewed positively by Airbus and Boeing.
There is also a serious warning sign emerging from the Middle East that could have serious, negative impacts on Airbus and Boeing.
Summary
- American Airlines doesn’t want its Airbus A350-900s any more. Consolidation with US Airways appears to have made these surplus.
- Delta Air Lines, which so far eschewed any orders for the Airbus A320neos and Boeing 737 MAXes, is understood to be readying a Request for Proposals to be issued this year.
- United Airlines doesn’t want its Airbus A350-1000s any more. Picking up cheap Boeing 777-300ERs appear to have made these surplus.
- Emirates Airlines, reacting to Brexit and Donald Trump’s travel bans, is undertaking a full business review in response to a sharp drop in bookings.
Boeing’s tactical option for MOM sector
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Aug. 14, 2017, © Leeham Co.: It’s not a done deal yet—the business for the so-called Boeing 797 remains a challenge. But the consensus is that Boeing will launch the program next year, for an entry-into-service around 2025.
Boeing 797 concept. Source: Boeing.
Yet there are airlines that say they don’t want to wait that long for a new airplane.
What are their choices?
Read more
7 Comments
Posted on August 14, 2017 by Scott Hamilton
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