Leeham News and Analysis
There's more to real news than a news release.
Alaska Air’s brand refresh after 25 years
Jan. 25, 2016: Alaska Airlines announced its first rebranding in 25 years today, revealing a new livery and 
new logo font.
The airline is in a fierce battle with Delta Air Lines, as the latter develops Seattle into a major hub, adding domestic flights to feed its international routes. Seattle is Alaska’s principal hub and with its sibling Horizon Air continues to maintain a 51% market share. Read more
Pontifications: Shifting focus to Embraer
By Scott Hamilton
Jan. 25, 2016, © Leeham Co. Embraer announced last week it had cut metal on its first E195 E2, more than a month before the roll-out of the first E190 E2, scheduled for Feb. 25, at is Sao Jose, Brazil, plant.
The aggressive manufacturer of small(er) passenger jets is moving forward full speed toward its next generation of aircraft even as Airbus, Mitsubishi, COMAC and Irkut encounter one delay after another.
Minuscule demand for Boeing 747-8F
- See Scott Hamilton’s new column for Forbes on-line, It’s time for hard questions for Boeing.
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Introduction
One of Boeing’s white tail 747-8Fs. This, and another that has been stored, was painted in the livery of the Seattle Seahawks. Boeing photo.
Jan. 25, 2016, © Leeham Co. Boeing’s decision to cut the production rate on the 747-8 is not a surprise. It’s only a surprise that it took officials so long to do so.
The company continues to cling to the hope of a recovery in the global air cargo market to sustain the program. This is unlikely, however.
The business case for the 747-8F is minuscule.
Summary
- The metrics of the global freight market have simply changed too much.
- Load factors for freight remain stuck below 45%.
- Yields continue to be low.
- Shifting trends from main deck freighters to using lower deck space on the big passenger airlines continues to grow.
- Low fuel prices, temporary though they may be, diminish the new for new 747-8Fs.
- Low capital cost 747-400 Passenger models stored in the desert or soon to be exiting the world’s fleet, along with stored 747-400Fs, provide ample opportunity for cheap freighters.
Bjorn’s Corner: The coin has two sides
By Bjorn Fehrm
22 January 2016, ©. Leeham Co: Today’s Corner should have been about something else. But we learned yesterday that yet another order did not go Bombardier’s way, the 125 seat aircraft order of 40 units for United Airlines.
Normally I don’t care about who gets a single aisle order; the players that are active are all producing very good products and which one that gets chosen in not a big deal.
Boeing took this business with its smallest 737NG member 737-700. The 737NG was scheduled to take on aircraft like the CSeries and the re-engined A320neo while Boeing perfected a clean sheet single aisle for the end of this decade.
This corner is about national characters and what happens when this character gets under pressure. It’s also about the fact that the coin has two sides.
Boeing cuts 747-8 production rate, takes charge
Jan. 21, 2016, (c) Leeham Co. Boeing today announced it will cut the production rate of the 747-8 from the current 1.3/mo and the previously announced 1/mo to 0.5/mo, effective in September.
The previously announced rate reduction is effective in March.
Boeing took an $885m pre-tax charge ($569m after tax). the company had warned in SEC filings a forward loss could happen if the commercial markets didn’t pick up. Today Boeing said the global air cargo market hasn’t picked up, and in fact has reversed itself, falling off. Boeing was counting on the air cargo recovery to fuel a resurgence in the ailing 747-8 program.
Even at the reduced rate of one-half airplanes a month isn’t going to solve Boeing’s problem.
United chooses 737-700 over CS100 in big blow to Bombardier
Jan. 21, 2016: United Airlines elected to order 40 Boeing 737-700s instead of the Bombardier CS100, it was announced today. It’s a huge blow to Bombardier, which was hoping to land this order to give a big boost to the CSeries program.
The reasons are obvious, even to an outsider, and don’t speak to the attributes of the CSeries, which remain compelling.
Here’s what we believe was behind the United decision:
Analysis: Sukhoi’s regional jet SSJ100, Part 2
By Bjorn Fehrm
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Introduction
21 January 2016, ©. Leeham Co: The first part of our analysis, published Monday, looked at Russia’s first effort to design and aircraft to penetrate the Western airplane market, Sukhoi Superjet (SSJ100). We concluded that the SSJ100 regional airliner was a good effort.
The aircraft was essentially a Russian airframe with Franco-Russian engines, Western systems and Western avionics. For aircraft that are delivered to Western airlines, it also has an Italian-designed/produced interior.
The aircraft has been in successful deployment with Interjet of Mexico and has now been ordered by CityJet of Dublin. After having looked at base characteristics of the aircraft/engine and also analysed the fuel consumption, we now continue with developing the Cash and Direct Operating Costs of the SSJ100. We compare it with the market leader in the 100 seats regional market, Embraer’s E190.
Summary:
- The SSJ100 is competitive on fuel costs compared to the E190.
- Maintenance costs for SSJ100 is still hard to predict as there is still too limited operational experience.
- Capital costs are lower for the SSJ100. This means that Direct Operating Costs, DOC, are attractive for the SSJ100.
The fuel effect; or old is beautiful
By Bjorn Fehrm
19 January 2016, ©. Leeham Co: When Willie Walsh, the CEO of IAG, said that the Airbus A340-600 “is a fantastic aircraft at fuel below $60 a barrel but perhaps not at $120,” he put operational words to something the Growth Frontiers 2016 conference in Dublin had been grappling with since it opened on Monday morning.
What is going to happen now? Crude is falling below $30 a barrel and Jet fuel is below $1 a gallon. This must have an effect on how people decide, whatever the lessors and aircraft OEMs say.
And it had to be a senior airline CEO that broke the mantra that everyone was repeating: “We don’t see fuel prices having any effect on fleet planning for airlines.”
IAG is looking at leasing used A380s
By Bjorn Fehrm
18 January 2016, ©. Leeham Co in Dublin: Willie Walsh, the CEO of IAG (which is the holding of Brittish Airways, IBERIA, Vueling and Air Lingus) spoke at the Growth Frontiers 2016 conference in Dublin about how the new IAG has become more agile in following market changes to opportunistically increase its operational efficiency.
Walsh gave the example of IAG’s aircraft fleets where he announced that it is looking to lease five to six used Airbus A380s in addition to the ones that British Airways (BA) already have on order. These could be aircraft for BA only use but also for a joint BA and IBERIA operation.
Pontifications: A sea change at Boeing
By Scott Hamilton
Jan. 18, 2016, © Leeham Co. The surprise announcement last week of a tentative contract agreement between Boeing and its engineers union, SPEEA, was the best news coming out of the company that I’ve heard in years.