Odds and Ends: Why new planes are delayed; Hazy profile; first 787-9

It’s Actually is Rocket Science: It’s a clever headline from Bloomberg News, explaining why new airplane programs are delayed.

Focusing on smaller airplanes: Steven Udvar-Hazy, one of the craftiest executives in commercial aviation, is profiled in this LA Times story. He discusses his focus on smaller aircraft for his Air Lease Corp.

Boeing 787-9: Boeing rolled out the first 787-9 and is readying pre-flight tests.

Boeing photo

More analysis on DOJ vs AA-US: Here is Part 2 of Airchive’s analysis of the Department of Justice case seeking to block the American Airlines-US Airways merger.

Replacing the 747-400

Replacing the venerable Boeing 747-400s remaining in passenger service is a prime objective of Boeing and of Airbus. The business case for their respective 747-8Is and A380s rests in large part on this approach, though for Airbus the A380 business case also rests on passenger traffic doubling every 15 years and restricted airport slots.

Replacing the 747-400, in fact, doesn’t leave a lot of room. There are just 306 passenger models remaining in service, including VIPs and government uses, according to data provided Leeham News. There are another 23 747-400C (Combis) remaining in service.

747 In Service Chart

Data at July 2013.

Fully 42 747-400 passenger models are in storage. Many 744 “Ps” have been converted to cargo airplanes, supplementing new-build 747-400Fs (above). The 744Ps in storage and in service are obvious candidates for conversion to freighters, and there are a number of 744Fs in storage ready to return to service when the slow-moving global cargo demand recovers–which has proved to be a maddening slow process.

747 Stored Chart

Date as of July 2013

Airbus has been more successful selling its A380 to 747-400 operators than Boeing has in selling its 747-8I. Airbus has likewise been more successful at selling the aircraft to non-747-400 operators, though the customer quality in several cases was dodgy. Kingfisher Airlines has collapsed and it’s unlikely Hong Kong Airlines will take delivery of the A380, openly talking about swapping these orders for smaller aircraft.

And therein lies the rub.

747 A380 Fleets

Sources: Airbus, Boeing, Ascend at July 2013

Update: Typo on the Lufthansa remaining orders for A380s: 7, not 17.

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Odds and Ends: Lufthansa’s pending widebody order; MRJ v E-Jet E2; MAXimizing space

Lufthansa’s Pending Order: As we have written on previous occasions, Lufthansa Airlines has been preparing a large order for twin-aisle, twin-engine aircraft: 50 or more. We’d noted that the order was likely due in September.

Aviation Week has this update.

Mitsubishi MRJ v Embraer E-Jet E2: Flight Global reports that the Japanese OEM says the latest 15 month delay won’t hurt sales of the MRJ (to which one wag notes it’s not selling well anyway–there are only three customers), but what caught our eye is the Mitsubishi reference comparing the MRJ with the Embraer E-Jet E2. This is like the debate of new vs re-engine between Bombardier’s CSeries and the smallest Airbus and Boeing products.

MAXimizing space: Boeing shifted work around at its Renton (WA) factory as it prepares for production of the 737 MAX. The Seattle Times has a good wrap up.

China’s closed airspace hasn’t changed much in 20 years

China’s military continues to so control–and close airspace–in China that delays are rampant, this AP story reports. We’re reminded on the era when we were doing business in China, going there nine times in a 4 1/2 year period from December 1988-mid 1993.

Visiting a number of airlines there, one of which was operated by the military, along with CAAC, CASC and the McDonnell Douglas Shanghai factory, we were struck by the low aircraft utilization: only six or seven hours. Western standards were 10 or more. Even then, we were told, the military control of the skies was a key factor. The low utilization rate then clearly contributed to the need to buy more airplanes to meet traffic growth than was necessary. We haven’t seen any data on today’s utilization rate, but we have to believe this nexus remains.

Flying Chinese carriers then was pretty alarming at times. A ramp worker smoked while refueling a plane, with the refueling connection spraying fuel on the ramp. Carry-on baggage was in the aisle on take off. A person was in the lav on take off. We’ve read some stories in recent years that suggest not much has changed.

Back then, getting into China had limited options. We flew to Tokyo and pretty much had to take Air China into Beijing. A direct air route would go over Korea. We couldn’t go through North Korean air space and apparently flying over South Korean to China was then forbidden, so we had to route south around the Korean peninsula, adding a great deal of time to the flight.

The McDonnell Douglas Shanghai factory was primitive even by standards of the day then, well before robotics and moving production lines. The factory was producing one MD-80 a month and the planes were essentially hand-built. This antecedent might be why the MD-80-looking ARJ21 is having such difficulty. The factory drew so much power that parts of Shanghai went brown-out or black-out during the day, an issue presumably long-since overcome in the Shanghai power grid.

The MD-80 plant was supposed to be MDC’s “in” to gain market share. While selling something like 40 MD-80s/90s (if memory serves) to China via this plant, the venture clearly was a failure and the Chinese used the operation to learn a bit about commercial aviation. Embraer had an ERJ plant in China for the same purpose, and likewise came up short of its goal while the Chinese benefited more. The Airbus plant in Tianjin seems to have been more successful, but we don’t think it’s coincidence that the COMAC C919 looks a lot like the A320.

Odds and Ends: New upgrades for the B-52; MRJ delay confirmed; EIS estimates for new airplane programs

Upgrades for the B-52: The USAF and Boeing are upgrading the Boeing B-52 bomber to further extend the service life. The LA Times via the Seattle Times has this story. This is remarkable; the B-52 was designed in 1948 to be the USA’s aerial backbone against the Soviet Union in the Cold War. It bombed Iraq in the 1991 Gulf War and continues to out-perform the B-1B bomber, which was supposed to replace the old gal, nicknamed by some as BUFF.

More on MRJ Delay: Mitsubishi made it official: the MRJ 90 passenger regional jet will be delayed another year. There are several stories via Google News; this Reuters piece is typical. Aviation Week has a good timeline recap.

Here’s how pending new airplane programs now appear to line up for Entry into Service:

Original Current
CS100        Dec-13        e4Q2014*
MRJ       4Q2013           2Q2017
ARJ21           2006  Good Question
C919           2016           2018–>
A320neo Oct-15 Oct-15
737-8 Jul-17 Jul-17
777X e12-2019**
EJet E2           2018               2018
* One analyst suggests early 2015
** Market Intelligence estimate.

We don’t have enough visibility on the Irkut MS-21 for inclusion in the Table.

Here’s a real oddity: A man in underwear broke into the German Chancellor’s airplane.

American-US Airways: Airchive has this long analysis (and it’s only Part 1 of 2), taking a look at the DOJ complaint. It’s 15 pages even after copy-and-paste into Word and re-sized to 10 point type.

Odds and Ends: Plane Business analysis of AA-US merger; Air Canada’s single-aisle competition

AA-US Merger: Plane Business made available Aug. 21 its previous analysis of the proposed American Airlines-US Airways merger outside its paywall.

The analysis of the government’s analysis is pretty devastating to the government’s case. Read it and judge for yourself.

American’s general counsel, meanwhile, writes (in a report in The Dallas Morning News) that there is no Plan B to exit bankruptcy if the merger with US Airways is successfully blocked by the Department of Justice. Instead, AA would have to create a new bankruptcy-exit plan and return to all creditors and the court. This would take probably another couple of years, making it one of the longest (if not the longest) Chapter 11s in airline history–with all the related uncertainty to those affected by a Chapter 11. This is unfair to creditors and employees, and it will also wipe out any gains shareholders obtained in the current plan.

The DOJ clearly failed to take into account these impacts.

Air Canada eyes CSeries: The Globe and Mail reports that Air Canada is considering the Bombardier CSeries to replace the aging Embraer E-190 and Airbus A319 fleets. We expect the competition to be fierce: Airbus will certainly do what it can to block this sale (through pricing, no doubt) and we wouldn’t be at all surprised if Brazil would offer export financing for a replacement E-Jet fleet–something Bombardier can’t match because of the so-called Home Country rule prohibiting government financing for home-country airlines.

And then there is Boeing. The entire Airbus fleet is getting long in the tooth and our market intelligence tells us Air Canada is running a full narrow-body competition between Airbus and Boeing.

A re-fleeting decision is expected by year-end.

MRJ First Flight Delay: It’s been widely hinted, but now a supplier told Flight International that the first flight of the Mitsubishi MRJ is delayed to the end of 2014.

CSeries edges closer to first flight, as payoff for gambles await Bombardier and Pratt & Whitney

The Montreal Gazette did a little digging with Canadian regulators and came up with this interesting piece, deducing the first flight of the Bombardier CSeries will come within the “next 11 days” (the story was dated Aug. 19).

The Gazette also reported that the CSeries test program will extend to May 2015. Bombardier says this includes the CS300, which has an entry-into-service timeline roughly 12 months after the CS100. On Aug. 19, several Canadian media reported a new analyst note concluding that EIS of the CS100 will slip into early 2015, something we also suggested in an earlier post. The Gazette also quotes from the analyst note.

Bombardier has completed slow speed taxi tests (noted in our morning post of Aug. 19). Bombardier’s dedicated CSeries website is here and a number of YouTube videos are here.

The first flight, of course, while a major milestone is only the beginning of a testing program that BBD says will take a year and some believe will take longer. Since this is the first clean-sheet design in the 100-149 seat category (or even up to 200 seats) since the development of the A320 in the early 1980s, and it is the first airplane with the Pratt & Whitney Geared Turbo Fan engine, there are enormous stakes riding on the program. The CSeries is a huge gamble for Bombardier, its bet to move from the regional jet era it invented to mainline jets, into a sector largely abandoned by Airbus and Boeing but which has drawn fierce reaction from Airbus with aggressive pricing for the larger A320.

For Pratt & Whitney, the CSeries flight test and subsequent EIS is the culmination of a research-and-development gamble of more than 20 years to regain its once-dominant place in single-aisle aircraft power supply.

Since CFM retained the exclusive supplier agreement for Boeing on the 737 MAX, and because CFM so far has won about half the orders for engines on the A320neo, PW won’t reclaim the dominant position it had in the early years of the jet age. But With the A320neo, PW has half the orders, a vast improvement in market share from its IAE V2500 engine on the A320ceo family. But PW’s GTF gamble with CSeries led to the selection by Airbus for the neo, and along with the Mitsubishi MRJ sole-source engine supplier followed by a shared source on the Irkut MS-21 and more recently the sole source on the Embraer E-Jet E2, PW is clearly back as a major player.

Bombardier’s flight tests will validate (one presumes) the promises made by BBD and PW for the engine-airframe combination: the quietest engine, the most fuel efficient engine, the most economical engine-airframe combination.

The Boeing 787, for all its difficulties, brought a new level of excitement to aviation with its ground-breaking technologies. The A350 XWB didn’t have the same panache, coming behind the 787 as it did. If the CSeries lives up to its promises in flight testing, we believe the orders will start coming. The aviation industry has become the State of Missouri motto, “Show Me,” as a result of the program delays at Airbus, Boeing and now BBD. We look forward to a program that goes smoothly after first flight.

Key leaders hit back at Boeing “exodus” assertions; CSeries competition for the Big Two; A380 uses; Boeing hikes prices

Boeing’s WA ‘exodus’: Three key leaders in Washington State responded to the drumbeat from State. Sen. Mike Hewitt (R-Walla Walla) that Boeing is in an “exodus” from Washington. Read the article here.

We agree that the use of the term “exodus” is overblow, as we wrote in previous articles here, here and here. We also believe that the greatest threat to Washington’s future in aerospace is when Boeing designs clean-sheet replacements for the 777 and 737, as which point we think there is a real chance these new designs will be built at Boeing’s growing Charleston (SC) complex.

But this bickering between Hewitt, on behalf of the the State’s Republican party, and the Democrats gets Washington nowhere.

At least the Democratic gubernatorial administration has come up with a plan for Washington’s aerospace, although we’ve noted we think it falls short of being bold and innovative. Hewitt and the Republicans haven’t come up with anything except criticism.

The State is undertaking two more studies (on top of at least four we can remember) to come up with ideas about what needs to be done. There are several industry organizations and experts that could be tapped to provide ideas, which the state is not using: the Pacific Northwest Aerospace Alliance, the Pacific Northwest Defense Coalition and INWAC in Eastern Washington, just to name three. The state-appointed Washington Aerospace Partnership doesn’t have a single industry representative on it, which is astounding, but it could come up with suggestions for economic development since the membership is overly weighted with these organizations.

Let’s stop the bickering, roll up the sleeves and get to work coming up with a forward-thinking, bi-partisan aerospace plan for Washington.

CSeries Competition: The Puget Sound Business Journal has this article looking at the competition the Bombardier CSeries will give the incumbents.

Meanwhile, Bombardier has undertaken low-speed taxi tests for the CSeries. This is, of course, a prelude to first flight.

A380 deployments: This article goes down the list of Airbus A380 operators and how the aircraft are deployed and configured.

Boeing raises prices: Boeing hiked the list prices slightly of its commercial airplanes. Here is a report comparing Boeing’s new prices with Airbus.

Odds and Ends: Lorenzo weighs in support AA-US merger; lawsuit could delay AA RJ replacement; 93% airport concentration

Lorenzo supports AA-US merger: In a radio interview with Bloomberg news, Frank Lorenzo supports mergers in the US airline industry and the proposed one between American Airlines and US Airways. Lorenzo is the former CEO of Texas Air Corp, and Continental Airlines. Lorenzo said labor, shareholders and stakeholders would lose if the Department of Justice prevails in its effort to block the merger.

DOJ lawsuit might impact Bombardier: An analyst for a Canadian investment bank thinks the DOJ lawsuit could delay an order by American to replace some of its regional jet fleet. The Scotia Capital analyst covers Bombardier, so his focus is on the impact to this company but Embraer is competing for the business, too.

93% Airport Concentration: While DOJ whines about the prospect of the New American Airlines controlling 69% of the slots at Washington Reagan National Airport, the Dallas Morning News cites a report that 93% of the airport traffic at three airports is controlled by the combined Southwest Airlines-AirTran company.

Our own Milestone: Today we surpassed one million views in a single year, running about 55% YTD ahead of last year.

DOJ lawsuit vs AA-US reads like political document

Note: Some articles of interest:

  • Robert Crandall, former CEO of American, has this op-ed piece in The Wall Street Journal (via Google News, so it should be accessible to Readers).
  • With the concentration of airline service that the US Department of Justice is so worried about, this article argues that foreign carriers should be allowed to operate US domestic service.

The lawsuit filed by the US Department of Justice against the proposed merger of American Airlines and US Airways reads more like a political document than a legal brief.

It’s clear the true intent is to force American and US Airways to divest slots at Washington Reagan National Airport. But in throwing in the proverbial kitchen sink, DOJ has made a mockery of its own case.

DOJ claims more than 1,200 city pairs will be adversely affected by the merger, with most of these being connections since the non-stop overlapping routes number only about a dozen.

But lots of the city pairs cited by DOJ are pretty obscure. Just to pick a dozen examples:

DOJ Examples of Connecting Routes
1 Austin, TX-Palm Springs, CA*
2 El Paso, TX-Kahului, HI
3 Columbus, OH-Fresno, CA
4 Des Moines, IA-Kahului, HI
5 Kapaa, HI-Tucson, AZ
6 Albuquerque, NM-Salinas, CA
7 Albuquerque, NM-Kapaa, HI
8 Charlotte, NC-Grand Junction, CO
9 Charlotte, NC-Durango, CO
10 El Paso, TX-Salinas, CA
11 Charlotte, NC-El Paso, TX
12 Harrisburg, PA-Fayetteville, AR

Some of the cities listed in the DOJ complaint (like Salinas, CA) aren’t truly served by airlines but rather by nearby airports (in this case, Monterey (CA). In another, Palm Springs (CA) is actually shown in the complaint being served by Riverside (CA). DOJ seems obsessed with city pairs involving Kapaa (HI) and El Paso (TX). Figuratively speaking, the three people per year flying between some of the city pairs cited by DOJ are really going to drive the market (queue the sarcasm).

DOJ appears to be really stretching in its attempt to make an anti-trust case.

DOJ’s lawsuit is replete with uninformed and ill-informed assertions that in aggregate make it clear the department simply doesn’t understand the dynamics of the airline industry.

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