Leeham News and Analysis
There's more to real news than a news release.
Odds and Ends: MH370 Update: Australians think hypoxia most likely, others still point to pilot misdeeds; and more
MH370: Australian investigators, having reevaluated evidence of missing Malaysian Airlines MH370, conclude that crew hypoxia may be the most likely reason the flight disappeared. But even within the Australian government, this is not a unanimous conclusion, and it’s certainly not within the international community. The captain of the flight is the chief suspect, according to other reports.
Boeing cost cuts: Ray Conner, CEO of Boeing Commercial Aircraft, explained Boeing’s cost-cutting approach in Washington State and with suppliers and plead for understanding, reports the Seattle Times. Conner also termed the potential loss of ExIm Bank funding as a “huge blow,” should Republicans in Congress succeed in killing the program. Closing ExIm would give Airbus a major advantage, he said.
Airbus funding: Airbus and a company in the Middle East have created an Islamic funding structure to help finance Airbus aircraft in the region. With the Middle Eastern carriers becoming more and more important in global aviation, expanding this area as a funding source naturally follows. Islamic financing is not new, but it’s been a narrowly-based source of funding.
Asiana crash finding implicates Boeing somewhat, but our view is this is a pilot issue, plain and simple
The National Transportation Safety Board (NTSB) yesterday lay the Probable Cause of the crash of the Asiana Airlines Boeing 777 last year at San Francisco as pilot error, but in the process implicated a “complex” auto-throttle system as a contributing factor.
Not surprisingly, Boeing disagreed (“respectfully” so), nothing that 55m flights in the 777 had occurred without incident.
While we are not at all surprised at Boeing’s position (we would have been surprised had it been otherwise), we side with Boeing on this one.
We will grant that perhaps the auto-throttle system might be tweaked to make a safe airplane and safe system even better, incorporating an aural warning when necessary. And perhaps the training procedures could be made better and more clear. But in the end, it remains the responsibility of the cockpit crew to monitor instruments and speak up when things aren’t as they should be.
In this case, the flight was also under visual flight rules (VFR). So, the pilots should have been:
- Looking out the window to visualize the approach;
- Monitoring the airspeed and altitude instruments, among others; and
- Speaking up. Most importantly, the third pilot did see something was wrong but didn’t say anything. Culturally, it is common in Asia for subordinates to defer to the Captain. But it’s lousy Cockpit Resource Management.
If the pilots had been doing their job, the plane almost certainly would not have crashed. The auto-throttle may have led the pilots to a false sense of security, but in the end they didn’t fly the airplane.
That’s was caused the crash.
Southwest Air’s expansion to resume next year, says CEO
Southwest Airlines plans to complete the integration of AirTran by the end of this year, positioning the carrier to resume expansion into new markets, says CEO Gary Kelly.
In an interview last week at WN’s Dallas headquarters, Kelly said the last of AirTran’s Boeing 717s will exit service by year end, leaving Southwest with a fleet of 690 Boeing 737-300s, -700s and -800s. There were 56 737-700s, 52 -800s, 30 -7 MAX and 170 -8 MAX on order at December 31 with more than 220 options for all types.
Challenge 777X tax breaks, “correct” US ExIm Bank Boeing funding, says Airbus CEO
Challenge Boeing 777X tax breaks and adjust the US ExIm Bank rules.
This is the view of Airbus CEO Fabrice Bregier.
We had the opportunity for what amounted to a one-on-one, on-the-record discussion with Bregier during the Airbus Innovation Days media briefings two weeks in Toulouse. We sat at Bregier’s dinner table, which although filled with media, was in a noisy setting, allowing us to have some elbow-to-elbow conversation on a variety of topics that couldn’t be heard in the din.
Southwest sticks with continuous hub/point-to-point as core business strategy
American Airlines plans to shift from continuous hubbing at three of its major cities–an operational process where flights flow throughout the day–to return to traditional peak-and-valley hubbing. But Southwest Airlines, despite many significant changes to its business model over the years, will stick with continuous hubbing which has been at the core of its business model since the airline was founded in 1971.
After attending the American Leadership Council Wednesday in Dallas, we went across town on Thursday to talk with Gary Kelly, CEO of Southwest Airlines. One of the first things we asked him was about the American shift, which we wrote about yesterday.
American easing away from continuous hubbing, returning to peak banking
American Airlines will ease away from the continuous hubbing that smooths operations at key airports, increases aircraft utilization and cuts costs as it returns to the peak-and-valley hub-and-spoke system adopted decades ago under former CEO Robert Crandall.
Although this will mean higher costs and big gaps in airport activity, the increased revenue potential–called the power of the hub under Crandall–will offset the increased costs, says Derek Kerr, CFO of American.
We were at American’s Leadership Council meeting for 1,500 employees yesterday. The meeting itself was off the record but we talked with Kerr afterwards on the record.
Kerr, CFO at US Airways prior to the merger between AA and US, said that the continuous hub can’t connect as many passengers as the traditional hub, leaving revenue on the table. Continuous hubbing allowed a 45 minute ground time, which is too short–an hour is needed to maximize connections.
Re-hubbing will occur this year at Chicago, Miami and Dallas.
Southwest Airlines was a pioneer in continuous hubbing, though it wasn’t called this until perhaps a decade ago. Southwest essentially rolls the airplanes up, deplanes, enplanes and departs. At its origin, long before carry on bags, bag fees, security issues and other factors arose, Southwest “turned” its planes in as little as 10 minutes. Today turns are 30 minutes or longer, in part as planes get larger and carry-on bags slow the enplaning process. Still, Southwest eschews the term hubbing and indeed its connection percentage is far lower than American and other traditional airlines.
The de-hubbing is just one step the US Airways management team is taking to remake American following its emergence from bankruptcy last year and the merger in December.
Next new, clean sheet airplane around 2030, says Airbus
Airbus currently is planning for the next new, clean sheet airplane around 2030 and now are focusing on incremental improvements to the existing product lines, officials said at the Innovations Days annual media briefing last week in Toulouse.
Fabrice Bregier, CEO of the Airbus commercial aircraft unit, said that “innovation is on a case3-by-case basis,” with a successor to the A320 family requiring an engine “with great benefit.” He did not define this, but previously Airbus indicated a successor needs a combined 30% airframe/engine improvement to make an entirely new airplane design worthwhile.
Airbus Innovation Days, Part 5: wide body twin development
Kiran Rao, executive vice president, strategy and marketing.
Rao discussed the wide-body strategy for Airbus at Innovation Days on Wednesday. The following paraphrasing synopsizes his remarks.
- More than 3,500 wide bodies have been sold by Airbus, starting with the A300B2, the first wide0body twin.
- 1,200 wide-bodies are in backlog. A330: 250-300 seats; A350: 280-370 seats; A380 more than 500 seats (two-class, long range layout).
- Airbus officials, including Rao, continued to promote the company’s 18-inch seat campaign, comparing the A-Series against the Boeing 777/787 17-inch 10 abreast and nine abreast respectively.
- Boeing has to go 10 abreast with the 777 “because the economics don’t work at nine abreast.” Boeing had to go with nine abreast on the 787 rather than eight abreast because the “economics don’t work” compared with the A330 otherwise.
- Economics is the “most important criteria” and the “Airbus aircraft come out ahead.”
- Rao claims the A330 has lower maintenance costs, lower airport, lower navigation and lower capital costs. The A330 has simpler systems so costs less to maintain, particularly on the engines. The A330-300 is slightly lighter than the 787-9.
- For the first time we’ve heard, an Airbus official referred to the “A330ceo.”
- Each seat for a long-haul operator is worth $2m per year, so an A350-900 vs a 787-9 with 35 more seats can generate $70m more revenue per year.
- The A350-1000 has a 15% COC per trip and a 5% COC per seat advantage, Rao says. Assumptions: 4,000nm, $3/gal, 2 class configuration, 369 seats for A350, 405 seats for 777-9.
- 777-9X is inefficient without the stretch and a longer wing. It has inferior comfort, Rao says.
Airbus Innovation Days, Part 4: A330neo announcement at Farnborough not a sure bet; CEO questions market forecast
- Bregier sees hundreds, not 1,100-1,200, market potential for A330neo–perhaps not enough to justify program.
- A330neo needs to match operating cost of 787-8, officials say.
- New engines will up maintenance costs.
Airbus officials say they are still evaluating whether to proceed with the A330neo, and that an announcement at the Farnborough Air Show next month is not a given.
John Leahy, COO-Customers, ticked off the considerations during the Airbus Innovation Days this week in Toulouse. These are corporate and strategic issues. A more tactical issue is what impact re-engining will have on maintenance costs, says Kiran Rao, EVP of Strategy and Marketing.
In his presentation, Rao said that the A330ceo has lower maintenance costs than the Boeing 787 (something Boeing would likely dispute), with engine maintenance costs being a notable factor.
In a sidebar press scrum after his presentation, we asked Rao about this. If the neo is equipped with either (or both) the Rolls-Royce Trent 1000 TEN or GE Aviation GEnx, or derivatives, what would the impact be on the claim of maintenance cost advantage?