Mystery Photo #8

Ok, what airplane is this from? This should be pretty easy.

Mystery #8

Odds and Ends: PNAA Aviation Conference; AA-US merger review; UAVs in USA; SPEEA-Boeing; 2013, Part 2

PNAA Conference: The Pacific Northwest Aerospace Alliance holds its annual conference Feb. 12-14 in Lynnwood (WA), north of Seattle. This event is now the largest of its kind in the Pacific Northwest and the first or second largest of its kind on the West Coast. The top airframe manufacturers present, along with key aerospace analysts (including the ever-entertaining Richard Aboulafia) and key suppliers. There is a Suppliers Fair and this year for the first time a focus day on the airline industry. Follow PNAA @pnaalliance on Twitter.

American-US Airways merger review: This should be concluded within weeks, says AMR CEO Tom Horton.

UAVs in USA: Rules on the use of UAVs within the US are emerging and vary widely throughout the world.

SPEEA and Boeing: A reminder that SPEEA contract negotiations resume with Boeing next week on January 9. Based on conversations with SPEEA, we don’t expect things to go well. SPEEA told us–and pretty much anyone else–that it believes the gap between it and Boeing is so wide that it expects talks to break off quickly. A strike vote will follow and a target date for a strike is February 1. SPEEA filed another Unfair Labor Practice complaint this week over Boeing taking pictures of SPEEA marchers at the Everett plant.

The year ahead, Part 2: Earlier we posted our Leeham.net look at 2013. Here’s what we did for CNN.com, in a somewhat broader look.

Odds and Ends: Embraer v Bombardier; Boeing delivers 601 planes

Embraer v Bombardier: While Airbus and Boeing gain the most attention and headlines, there is another hotly competitive sector: Embraer and Bombardier in the 90-125 seats market. Bloomberg has this item examining the competition here.

Boeing Delivers 601 Aircraft: Buoyed by 46 787s, Boeing delivered 601 aircraft last year, which by this metric means Boeing will best Airbus. Airbus won’t announce its 2012 results until January 17, but is expected to finish with around 580 deliveries.

Boeing ended 2012 with 1,203 net orders, including 914 for the 737 MAX and 1,124 for the 737 family. Through November Airbus recorded 585 net orders. Even with the famed “fifth quarter,” when Airbus is known to announce a whole slew of orders that in the past has overcome Boeing’s apparent lead, we don’t see John Leahy pulling this rabbit out of his hat this time.

Just as 2011 saw Airbus record record orders with the A320neo success, Boeing’s total was boosted by converting commitments to orders. The MAX program ended the year with 1,064 orders. The A320neo has more than 1,500 orders through November.

Odds and Ends: Asia’s LCCs; Fiscal Cliff Deal; Boeing v Airbus; Desert Airplanes

Asia’s LCCs: Aviation Week has this lengthy piece about Asia’s Low Cost Carriers. Update: Financial Times has this in-depth look at AirAsia vs Lion Air. (Free registration required.)

Fiscal Cliff Deal: The can was kicked down the road and Wells Fargo has this assessment on the affect on the Defense Department:

Sequestration Postponed. The bill passed does not prevent the sequestration procedure from automatically reducing defense spending by $500B over the next ten years, including $50-55B of potential reductions from FY2013. Instead, it postpones the deadline for an agreement from January 2, 2013, to March 1, 2013,–a two-month extension. At that time, the DoD will have three weeks to determine how the sequestration will be implemented, with the reductions kicking in on March 27, 2013, rather than on the same day under the original sequestration legislation. The lack of planning time for the sequestration contributed to the uncertainty of its impact, which the new legislation appears to resolve.

Boeing v Airbus: It certainly looks like Boeing sold more airplanes in 2012 than Airbus, but the annual Airbus press conference is January 17 and you never know what last minute orders John  Leahy has up his sleeve. We doubt Boeing is celebrating just yet.

Desert Airplanes: It’s an old story for those of us who follow this sort of thing but the photos are always interesting. CNN has this story, with pictures, of where airplanes go to die.

Looking ahead to 2013 in Commercial Aviation

Last year yielded a few surprises in an otherwise predictable year.

Jim Albaugh shocked the aviation world when he retired unexpectedly at age 62. He was expected to remain in his position as CEO of Boeing Commercial Airplanes until mandatory retirement at 65.

EADS CEO Tom Enders unleashed a surprise merger proposal with BAE Systems. The deal didn’t work due to German government opposition, but he ultimately accomplished a governance restructuring—a key objective of the merger—that will reduce government meddling in the future.

Those were about it. Boeing’s much-anticipated Authority to Offer the 777X didn’t happen. ATO for the 787-10 was stealthily granted. Airbus and Bombardier, to no surprise, delayed the A350 and CSeries by a few months. Boeing came roaring back to become sales leader for the first time in about a decade, on the strength of 737 MAX sales.

What’s ahead for 2013? Here’s what we see.

Overview

With the spurt of 737 MAX sales over, narrow-body sales competition between Airbus and Boeing should return to normalcy. Will twin-aisle sales become the next growth market because of the first flight of the A350 and the program launch of the 7870-10? Will ATO of the 777X evolve into a program launch as well? Will Bombardier’s first flight of the CSeries and subsequent testing validate its claims for the new technology airplane and finally spur a large number of sales of the “show me” crowd?

Here’s our OEM-by-OEM rundown.

Read more

2012’s Most Influential Person in Commercial Aviation

In 2011 John Leahy of Airbus was voted the most influential person. Who do you think is the most influential this year? We’ll hide the results until the voting is complete.

APA speaks about potential American-US Airways merger

From the Allied Pilots Association leadership to its membership:

Fellow pilots,

The APA Board of Directors reconvened today at 9 a.m. at union headquarters as part of the ongoing four-party negotiations between American Airlines and US Airways management, APA and the US Airline Pilots Association (USAPA) on behalf of US Airways’ pilots.

These negotiations are aimed at reaching a Memorandum of Understanding (MOU), or interim agreement, to address each pilot group’s respective concerns if the two carriers proceed to merge. The MOU would serve as the transition agreement and would also include improvements to our newly ratified collective bargaining agreement.

Some have suggested that the only way APA should “agree” to a merger is to first negotiate an integrated seniority list with USAPA. Major corporate mergers involving represented employee groups don’t work that way. No legal mechanism exists that would allow union-represented employees to interfere with a major transaction such as a merger. With McCaskill-Bond the law of the land, unless management predicates a merger on an integrated seniority list—much as we saw at Southwest in their acquisition of Air Tran–we are left to pick up the pieces after the merger has occurred.

While APA’s institutional position has consistently been one of support for a merger between the two carriers within bankruptcy, support for a merger at this juncture is not unanimous within the union. Likewise, AMR management has not embraced the concept of expediting a merger before restructuring concludes and clearly wants to retain control of the corporation and consider a merger on their terms following exit from bankruptcy. Keep in mind that AMR management has executed four different mergers—beginning with Trans Caribbean and ending with TWA—while completely disregarding the impact on our pilots’ seniority. I doubt that pilot seniority is anywhere near the top of their concerns right now. Likewise, I doubt that  pilot seniority would be a key consideration if they were to execute a merger with US Airways, JetBlue or any other carrier following an independent exit from bankruptcy.

Instead, what we’re seeing is likely a deliberate attempt to sew fear amongst our pilots in an effort to derail consensual merger talks. A small group of pilots, with assistance from AMR management and a former CEO [here and here], has been advancing the notion that an integrated list should be a precondition to any further consideration of a merger. Their motives are crystal clear: hold on to the reins of power and control any merger on their terms. To be clear, fundamental capital transactions such as a merger involve a large number of parties. By virtue of the 13.5 percent equity stake we now hold as part of our ratified agreement, APA can exert influence over various aspects of a merger as a major stakeholder in AMR. However, we don’t have the ability to stop the clock and make everyone else wait while we sort through all of the issues associated with an integrated seniority list. To suggest otherwise is disingenuous, and simply ignorant of the law and the facts.

Our advisers have indicated that if we do not finalize an MOU in the very near future, in all likelihood there will be no merger before American Airlines exits restructuring. An MOU specifying wages and working conditions for the pilots, along with interim seniority protection in the form of fences, would enable creditors to identify synergies that would result from a merger of the two carriers. Absent an MOU, the financial benefits of a merger would remain unclear.

We all understand that seniority is extremely important to our careers. Of course, your seniority number is irrevocably tied to the airline you work for, so it’s likewise critical for your employer to be able to compete and thrive. The analysts who study our industry and make judgments about which airlines are best positioned in the marketplace have been virtually unanimous in the view that a merger with US Airways represents the best way to address our airline’s current deficiencies. Make no mistake—a merger of some sort is inevitable. The questions before us: Who do you want at the helm and do you want the ability to have some control over the process? In a post-bankruptcy merger, we would have little ability to influence any potential leadership changes at American Airlines and would represent nothing more than a speed bump.

It’s worth revisiting some of the reasons why the APA leadership decided several months ago that despite the inherent difficulties, a merger with US Airways represents the best path to a reinvigorated American Airlines and, by extension, a brighter future for us all. With the mergers of Delta-Northwest and United-Continental, American Airlines now stands at a distant third (and, by some measures, fourth in the U.S. industry) in terms of our revenue base and route network. A merger with US Airways is essential for both carriers and represents the quickest way to recapture the critical mass essential to competing effectively with those two carriers.

We have seen a model for a successfully arbitrated seniority integration at Delta-Northwest using fences and a ratio methodology based on a percentile seniority list ranking. Also, if an American Airlines-US Airways seniority integration were to be arbitrated, our attorneys have indicated that the ongoing seniority dispute between “West” and “East” at US Airways would be settled as part of the process and should not have any negative impact on an arbitrator’s decision under the McCaskill-Bond statute.

Many analysts believe that American Airlines finds itself in its present predicament because of an excessively cautious approach to consolidation during the past several years. Instead of vigorously pursuing Northwest Airlines as a remedy to American Airlines’ deficiencies in the Asian network, they sat on the sidelines as the rest of the industry flew by. How much longer should we wait before deciding that something needs to happen to fix American Airlines’ revenue and network disparities? Merging within bankruptcy also affords APA opportunities to “re-attack” sooner rather than later to capture additional contractual value in the form of a transition agreement/MOU for our members. On the other hand, a “wait and see” approach would ensure that American Airlines exits Chapter 11 restructuring as an independent carrier with our newly ratified contract. At that point we would have no mechanism for making any near-term contractual improvements, and little ability to influence the management structure or strategic direction of the corporation.

If the four parties agree to an MOU/transition agreement, we would proceed to the next phase of the process, which would involve the creditors assessing the financial benefits of a merger. If a merger meets with their approval, a series of additional steps would have to occur before a merger is approved and the new company exits restructuring, including consideration by the two companies’ boards of directors; antitrust review by the federal government; and approval of a plan of reorganization by the Unsecured Creditors’ Committee and the bankruptcy court.

Upon exit from restructuring, an application for single-employer status with the National Mediation Board must be made, which would take approximately six months. Once single-employer status is declared, we would go through a process to determine the bargaining agent for the pilots. After that we would begin negotiating a joint collective bargaining agreement (JCBA), which would focus primarily on reconciling and integrating the US Airways pilots into the American Airlines operation. This JCBA must be completed within 24 months of a plan of reorganization being approved. If not, it would be submitted to binding arbitration for any remaining open items. Seniority integration negotiations would then commence. In the interim, we would operate in accordance with the protections stipulated by the MOU, including fences and provisions to ensure that pilots on the American Airlines seniority list would operate any aircraft delivered as part of the previously announced aircraft orders.

Fellow pilots, we understand your keen interest in the ongoing MOU negotiations, and we will continue to provide updates as developments warrant.

Thank you for remaining engaged in determining our collective futures.

In unity,

Keith Wilson

First Officer Dennis Tajer

Allied Pilots Association (APA)
APA Industry Analysis Committee – Chairman
APA Communications Committee

Leeham on-line poll: 61% expect no contract agreement with SPEEA, Boeing; 57% expect strike

We put two polls into the public domain this week, asking whether SPEEA and Boeing will reach an agreement next month; and if not, will SPEEA strike (a target date is Feb. 1).

The results are in: 61% expect no agreement when talks resume Jan. 9 and 57% expect SPEEA to strike. (These figures reflect results as of this writing. The data may change after this post because polling is still open.)

The percentages are a significant drop from the 96% vote that rejected the Boeing contract offer in October, but it should be noted there is no new offer on the table for SPEEA members to read and evaluate.

Additionally, this poll is of our readers and not specific to SPEEA.

Clearly the expectations are not good.

SPEEA’s executive director, Ray Goforth, is on record expecting talks to fail immediately when they resume because the gap between the union asks and the Boeing positions are so far apart. A strike vote will be solicited once talks break off.

Unlike the IAM 751, which requires a two-thirds affirmative vote for a strike, SPEEA requires only a simple majority.

“We have no specific target [for a strike vote] other than that,” Goforth tells us. ” SPEEA is a democratically run union.  Decisions are made by majority vote as supplemented by broad consultation with the membership (townhall type meetings, polls, feedback from the elected councils).
“In the run-up to the October 1st vote the Boeing management negotiating team confidently predicted that the contract would be adopted because they knew what the employees wanted better than the union,” Goforth wrote us.
“Today, we at hearing the same language from Boeing management.  Today, we are experiencing the same dismissiveness and disregard from Boeing management.
“Boeing management is still proposing across-the-board pay and benefit cuts for engineers and techs while increasing compensation for themselves and the shareholders.  We expect any such proposal to be rejected by the membership.”

Predict: What will be the most momentous event of 2013?

2013 stands to be a pretty eventful year, and we’ve listed thoughts for you to vote on. We’ll hide results until voting is complete.

Now a key question: SPEEA and Boeing are on a collision course. Talks resume Jan. 9, but SPEEA already is on record believing talks will immediately collapse. A strike date of Feb. 1 is targeted, but membership has to take a strike vote before a walk out can occur. It’s your turn to vote:

If a contract agreement is not reached, will SPEEA actually go on strike or will talks continue?

2012’s Most Momentous event: were readers correct?

A year ago we asked the following question and received the results. Now that 2012 is all but over, do you agree with your own forecasts?

What is the most momentous event you predict for 2012?

Answer Percent
Boeing doesn’ t ramp of 787 as expected 28%
Airbus slips its schedule for the A350 23%
Boeing meets ramp up expectations for the 787 12%
Airbus stays on schedule with the A350 11%
US Airways makes a bid for American Airlines 10%
Bombardier has first flight of CSeries by year end 9%
American Airlines tells US Airways to sniff its own exhaust 4%
Bombardier’s first flight for CSeries slips into 2013 2%