At what price do used A380s make sense?

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Now open to all readers. (Feb. 15, 2015.)

Introduction
Leeham logo with Copyright message compactDec. 3, 2014: It’s been seven years since the first Airbus A380 entered service with Emirates Airlines. Tim Clark, the carrier’s president and chief operating officer, told Leeham News and Comment in September that when the A380s reach age 12-15, the period assumed for a useful life in the Emirates business plan, he’ll just send the airplanes to the desert and cut them up.

Aside from cargo conversions, for which the A380 is a poor candidate, is there an alternative for the secondary passenger market?

Summary

  • Secondary markets for Very Large Aircraft are problematic.
  • Reconfiguration, overhaul costs add huge dollars to the acquisition cost.
  • Is there a figure where a secondary market makes sense?
  • The value of a 12 year old A380 is….

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Boeing remains confident it will fill 777 production gap; cash flow to remain strong

Dec. 3, 2014: Boeing remains “confident” it will be able to bridge the 777 Classic production line at current rates to the introduction of the 777X in 2020, including some “feathering” of the two airplanes.

Boeing president and COO Dennis Muilenburg also said cash generation and free cash flow will remain strong even as Boeing invests in research and development, hikes stock dividends and buys back shares to boost shareholder value.

Muilenburg made the remarks today in a wide-ranging question-and-answer format during the annual Credit Suisse Global Industrials Conference in New York.

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Fundamentals of airliner performance, Part 5; Approach and landing

By Bjorn Fehrm

Dec. 2, 2015: The time has now come to cover descent and landing in our Leeham logo with Copyright message compactarticles around airliner performance. As many aspects of descent are similar to climb we will repeat a bit what we learned in Part 4:

  • For high speed operation the pilots fly on Mach as this gives him maximum information around possible effects on the aircraft when he is close to the high speed limit, the maximum Mach number. Beyond this the aircraft gets into supersonic effects like high speed buffeting or unsteady flight.
  • For operations under the cross over altitude for Mach 0.78 to 300 kts IAS the pilot flies on Indicated Air Speed (IAS) which gives him maximum information how the aircraft reacts should he go close to the aircraft’s lower speed limits.

Lets now start to go through the steps that our 737 MAX 8 performs after leaving its cruise altitude.

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Air Canada: 787s have 29% lower costs than older 767s (before the latter’s reconfiguration)

Dec. 2, 2014: Air Canada says its new Boeing 787s will have 29% lower fuel, maintenance and per-seat costs than the old Boeing 767-300ERs being replaced.

Part of this is because the 787s seat more passengers.

But the airline has found new life in the 767s through increased density, shifting them to its low cost carrier, Rouge, which has lower labor costs and overhead. Rouge’s 767s have 30% lower CASM costs than the same airplane at mainline Air Canada. Read more

Oil heading toward $40? Economist still thinks so, with caveats; and: NTSB issues 787 battery report, Azul’s A320/CFM order

Dec. 1, 2014: Adam Pilarski, an economist for the consulting firm Avitas, predicted several years ago that the price of oil would drop to $40bbl. Few believed him.

Oil hit $66 this week, on a steady decline over the past months, and, according to an article by Bloomberg News, could be on its way to $40.

Pilarski, who originally made his prediction in 2011 at a conference organized by the International Society of Transport Aircraft Traders (ISTAT). He predicted this price by October 2018.

In an interview with Leeham News today, Pilarski concurs that oil may hit $40 soon, though he believes the low end will be in the $40-$50 range. The low price will not for the reasons he outlined in 2011 and neither will it stay at or near $40 for long.

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Assessment of Lessors in Airbus and Boeing backlogs, narrow- vs wide-body

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Introduction

Nov. 30, 2014: Airlines now lease about 50% of their aircraft under a variety of mechanisms: operating, finance, leveraged and Islamic leases, just to name a few.

There are operating leasing, special purpose and “house” companies. There are leasing units of investment banks, insurance companies and a host of others.

Ireland is a popular leasing venue because of favorable tax laws.

The Big Four airframe OEMs have long sold aircraft directly to lessors, and the emerging airframe OEMs, COMAC and Irkut, have seen orders placed by emerging lessors in their home countries. ATR, the turbo-prop OEM, also has received orders from lessors.

Today we look at the lessor relationships with Airbus and Boeing.

Summary

  • Lessors represent a significant, but still a minority, part of the Airbus and Boeing backlogs.
  • Widebody airplanes constitute a small portion of lessor orders.
  • Boeing has more widebody lessors orders than Airbus.
  • Airbus has a larger lessor order book than Boeing.

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MTU investors day: views of its engine programs, future airplane timelines; separately, Embraer COO interview

GTF Milestones Nov 2014

Figure 1. Technical milestones have been passed on PW GTF programs for the applications on Bombardier, Airbus, Mitsubishi and Irkut airplanes and are approaching for Embraer. Source: MTU Investors Day. Click to enlarge.

Nov. 30, 2014: MTU Investors Day: MTU is a major participant in engine development and supplies, participating on the GEnx, GTF and GEnx program. It’s also a member of the joint venture in International Aero Engines and it’s a major player in the aftermarket Maintenance, Repair and Overhaul (MRO) sector, providing a serious competitive alternative to the aftermarket contracts offered by the engine OEMs. Its held an investors day conference Nov. 25. Highlights included:

  • Milestones have been passed on the Pratt & Whitney Geared Turbo Fanengine for the Bombardier CSeries, Airbus A320neo family, the Mitsubishi MRJ and Irkut MC-21; and are on schedule for the Embraer E-Jet E2.
  • The success of the GTF is requiring huge production commitments.
  • The large number of airplane/engine programs require a major ramp-up of production during the next few years.
  • The major investment in new engines is largely over for now, leading to the expectation of long-term revenue from MRO.

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Happy Thanksgiving, 2014

Today we’re watching the Seattle Seahawks…Go Hawks!

We’re off until Monday.

Odds and Ends: Storm Warnings; Boeing photos now available to everyone; CSeries; Movin’ on up

Nov. 26, 2014:Storm Warnings: We’ve made references in recent posts about airlines on our “Storm Warning Flag” list.

Top 10 TA 2013

Our 2013 Top Customers and Storm Warning Flag list for wide-body airplanes. The Red are Middle Eastern airlines, blue from Asia and black from the US and Europe. Only one airline for wide-body orders was on our Storm Warning Flag list: AirAsiaX. Expansion and ordering we considered too rapid landed the carrier on the list. Sources: Airbus, Boeing. Click to enlarge.

In 2013, we compiled the Top  Customers for Single-Aisle and Twin-Aisle Airplanes for Airbus and Boeing. Here’s our 2013 Storm Warning Flag list. The name comes from the flag, which signals Storm Warnings. This list was compiled before the 777X orders announced at Dubai were firmed up, so the yellow boxes show what the Top 10 Boeing rankings would be had they been. We considered the quantity of orders, the current operations, financial status and other factors in placing a carrier on our Storm Warning Flag list. The Wide-body list also illustrates the growing importance of the Middle Eastern airlines (consider that this was a year ago). The wide-body list is pretty stable.

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Fundamentals of airliner performance, Part 4

By Bjorn Fehrm

Nov. 25, 2014: In our article series around the performance of a modern airliner we have now come to the climb after takeoff. Leeham logo with Copyright message compactWe started with cruise as this was simplest because the aircraft is flying in steady state, then we looked at the modern turbofan and how this is affected by both altitude and speed. We then examined how this affects the takeoff and today we continue with the climb after takeoff.

Before we start, let’s sum up a few points we need for today:

  • Drag is the one thing we always need to be aware of as this regulates how much excess power we have in different flight situations and therefore if we can stay on our altitude or climb.
  • Drag diminishes with altitude as the airs density diminishes and thereby our dominant drag component, air friction against our aircraft’s skin. This is the major component of the aircraft’s dominant drag, parasitic drag.
  • Our lift force is generated by forcing air downwards and this causes induced drag as this downwash cost energy to generate and maintain. Induced drag is mitigated by a wing with a large span.

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