Leeham News and Analysis
There's more to real news than a news release.
Bjorn’s Corner: The challenges of airliner development. Part 7. Transport Category Aircraft
By Bjorn Fehrm, Henry Tam, and Andrew Telesca
June 11, 2021, ©. Leeham News: Last week, we scaled a nine-seat aircraft to a 19-seat aircraft and examined some of the pros and cons of such a change. The aircraft are certified to the 14 CFR Part 23 rules in the US, labeled “Normal Category Aircraft“.
This week we scale the aircraft up one step further to understand product certification and operation rules for the larger Transport Category Aircraft (14 CFR Part 25) class.
The Bombardier Global 7500 is a Transport Category Aircraft (Part 25) as its gross weight is over 19,000lb. Source: Bombardier.
Cheap aluminum widebodies may finally enable long-haul LCC profitability
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By Judson Rollins
Introduction
June 10, 2021, © Leeham News: Residual values and lease rates have plummeted to record lows for previous-generation widebodies like the A330, 767, and 777. Inventories continue to build around the world, and prices appear set to fall even further.
At the same time, business travel ground to a near-halt in most regions. Even in countries where domestic leisure travel rebounded, like the US or China, average fares are down 20%-40%.
Southwest Airlines describes itself as a “low-fare carrier.” With business and premium-cabin traffic expected to take 3-4 years to return and be permanently impaired to some extent, every airline may be a low-fare carrier for years to come.
With higher-density seat configurations, more flexible scheduling – and, most importantly, the lower capital costs of used aircraft – new low-cost carriers (LCCs) could break even on long-haul routes with materially lower revenue than their predecessors.
This confluence of events has created a once-in-a-generation, perhaps once-in-a-lifetime, opportunity for new airlines to achieve a sustainable cost advantage over legacy carriers weighed down by capital-intensive aircraft, expensive crew contracts, and record-high debt service costs.
Summary
- Previous long-haul LCC startups failed due to insufficient capital, overextended operations, fares too low to cover costs.
- Ultra-low lease rates make used A330s cheaper to fly than new-technology aircraft.
- Lower costs, surgical route selection level the long-haul playing field.
- Legacy hub-and-spoke model will be weakened by “overflight” routes.
- Low capital costs mean used airplanes need only be flown when demand warrants.
Podcast: 10 Minutes About the United-Boom SST agreement
June 8, 2021, © Leeham News: United Airlines and the start-up company, Boom, last week announced an agreement by which UAL will acquire up to 50 Boom Overture SSTs.
T
here are some conditions Boom must meet before United will accept any airplanes. Furthermore, Boom must raise a lot of money to complete development.
In today’s episode of 10 Minutes About, LNA discusses the commercial agreement and just a few of the issues facing development of the Overture.
Related articles:
- Will Boom succeed where Concord failed?
- Is Boom good business for Virgin Atlantic?
- The Boom SST engine problem, Part 1
- The Boom SST engine problem, Part 2
- The Boom SST engine problem, Part 3
- The Boom SST engine problem, Part 4
- The Boom SST engine challenges, summary
- 15-Part Series on the proposed Supersonic revival
The impact of higher inflation on OEMs and Airlines
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By Vincent Valery
Introduction
June 7, 2021, © Leeham News: As the world economy recovers from its sharpest shock since World War II, an unwelcome side effect started appearing: higher inflation rates.
One Hundred Trillion Zimbabwean Dollars Note, issued during a period of hyperinflation in the country
The Consumer Price Index (CPI) in the USA increased by 4.2% year-over-year in April 2021. The leading causes of the increase are higher commodity prices and worker and material shortages in the US economy.
Aside from temporary commodity-induced spikes, inflation rates have stayed moderate over the last 30 years. However, numerous countries (including the USA and Europe) experienced persistently high inflation rates throughout the 1970s and early 1980s.
It is premature to say whether the latest spike is temporary or will persist. Should the latter happen, it would have profound consequences for the commercial aviation ecosystem. LNA analyzes the potential implications for OEMs, airlines, and lessors of such a scenario.
Summary
- Inflation 101;
- Winners and losers in high inflation environments;
- Consequences for OEMs;
- Impact on airlines and lessors.
Pontifications: Qatar, United, Boom, Airbus and Aerion
By Scott Hamilton
June 7, 2021, © Leeham News: It’s been a busy couple of weeks in commercial aviation, with several reports last week alone.
- Qatar Airways expresses interest in Boeing 777X-F and Airbus A350F.
- United Airlines announces a “commercial agreement” with Boom Supersonic to purchase 15 Overture jets and option 35.
- Boeing exploring reinventing the 757.
- Airbus moves toward a new wing for A320 family.
- Aerion Aviation terminates program, shuts down. May 21.
Some of these reports were new and interesting Others were over-hyped and fluff.
Let’s run them down.
HOTR: 500 “destinations” for Boom goes bust
June 4, 2021, © Leeham News: “Overture can connect more than 500 destinations.”
That’s what United Airlines said in its press release this week about its “commercial agreement” with Boom Supersonic. UAL “ordered” 15 Overture airplanes with an option for 35 more.
“More than 500 destinations” leaves a lot of room for interpretation. LNA understands this to mean 500 cities. If UAL and Boom meant “city pairs,” then this commonly used term should have been used.
The common dictionary definition is “the place where someone is going or where something is being sent or taken.”
Examples used in the definition are, “The Virgin Islands are a popular tourist destination,” or a “holiday destination.” More on point, one example used is quite common in airline lingo: the term “final destination.”
So, this lends to the interpretation “500 destinations” means 500 “cities.”
Well.
Bjorn’s Corner: The challenges of airliner development. Part 6. Adding seats.
By Bjorn Fehrm, Henry Tam, and Andrew Telesca.
June 04, 2021, ©. Leeham News: Last week, we examined operating and product certification rules related to 9-seater air taxis and commuters. We took the example of the new Tecnam P2012 Traveller to study the certification rules for a 9-seater. Now we upsize the aircraft to understand the pros and cons of adding extra seats.
The Viking Twin Otter, the only in-production 19-seater. Source: Viking Air
Boeing, Alaska team for next round of ecoDemonstrator research
By Scott Hamilton
June 3, 2021, © Leeham News: Boeing and Alaska Airlines today outlined a five month ecoDemonstrator program in a series of tests designed to “green up” commercial aviation.
Boeing partnered with airlines and suppliers beginning in 2012. Alaska is the eighth airline to participate. A Boeing 737-9 will be the current platform.
Boeing will flight test 20 technologies and ideas with Alaska beginning June 29 and ending Dec. 2.
Not all ideas fall strictly within “new technologies.” Some are weight-reduction initiatives that aggregate to lower airplane weight, which in turn reduces fuel burn. This in turn reduces carbon emissions.
But other ideas directly go to environmental efforts addressing noise, emissions and now COVID infectious worries.
Widebody availability set to surge; could new entrants take advantage?
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By Judson Rollins
Introduction
June 3, 2021, © Leeham News: Lessors are expected to write down the value of their widebodies as the long-haul travel slump appears set to extend well beyond this year, LNA reported last week.
A tidal wave of excess widebodies has reduced ownership costs to historic lows. Prices will only go lower as lessors finally initiate distressed-asset sales, and lease rates will continue to fall as used widebody inventory grows.
A confluence of factors, topped by the availability of lower-cost used widebodies, could increase the cost advantage of low-cost carriers over legacy competitors – at the same time reduced business travel and lower yields reduce the gap between legacy and LCC unit revenue.
Summary
- Widebody availability is set to increase steadily throughout the decade.
- What airplanes are likely to be most attractive?
- Sustainably lower costs could enable low-cost carriers to overcome a shrunken “revenue gap.”
Mitsubishi’s MHIRJ expanding MRO floor space by 100,000 sf
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Now open to all Readers
By Scott Hamilton
Part 2 of 2. Part 1 appeared here.
Introduction
June 1, 2021, © Leeham News: It’s been one year today since Mitsubishi Heavy Industries (MHI) closed the acquisition of Bombardier’s CRJ program and global aftermarket support system.
In that year, MHI “suspended” development of the M90/M100 SpaceJet regional airliner, reduced funding by 99% and all but shuttered its business. The entire airline and aerospace supply chain industry believes MHI won’t restart the program.
But the Bombardier aftermarket business, renamed MHIRJ Aviation Group, appears to be thriving. MHIRJ expanded, opening a consulting business.
MHI also invested $20m in the expansion of its West Virginia and Arizona CRJ MRO lines. The company celebrates the expansions next month.
A small amount to be sure, but it nevertheless reversed the lack of monies by the nearly bankrupt Bombardier.
“We have the biggest regional MRO network in the world out of Bridgeport, West Virginia, and Tucson, Arizona,” said Ismail Mokabel, Senior Vice President, Head of Aftermarket. At both sites, MHIRJ can run about 30 simultaneous aircraft or equal lines of maintenance at any given time, he said.
MHIRJ is adding another 100,000 square feet of space, expanding two new hangars that will be up and running within the next 12 to 18 months. The contract was signed May 27.
Summary
- Regional airline aftermarket MRO business fell 35%-40% during the COVID-19 pandemic.
- MHIRJ profit-and-loss already is at pre-COVID level.
- The company will develop performance improvement packages for CRJ.
- May expand MRO services to other aircraft types after 2023.