Archive For The “Alaska” Category

Pondering the US DoC tariff on Bombardier

By |

If one limits the active airline passenger fleet In the United States to between 100-150 seats, then as of 2Q17 there were 1,671 aircraft.  Of these, 699 were Airbus, 794 were Boeing and 178 were Douglas.  Please bear in mind that even as we are in the 3Q17, the data is for the previous quarter.

Breaking this down further, the top eight airlines account for 93% of the fleet. The table lists the top ten, and the yellow highlights are airlines that have publicly opposed Boeing’s complaints to the DoC.  We should highlight at least one more, but cannot since this was not made public.

Looking at the market by model, we see the following.

Of the fleet, the Douglas aircraft are oldest.  Boeing is next.  Airbus has the youngest fleet.  Boeing’s tension about the sub-150 seat market is understandable.

Now take a look at this. This was Delta’s fleet at the end of 2Q17.  Is there any surprise they are moving on the CS100 and have an interest in the CS300?  Delta is clearly not enamored with the 737-700 or the A319.  Even its A320s are aging (ex-Northwest) and Delta has shown interest in the A321 and the 737-900ER which are outside this segment.  But there are 115 Douglas aircraft that are quickly approaching their appointment with the desert. Neither Airbus or Boeing offer what Delta wanted.

As Delta’s CEO said this morning on their earnings call:  “I think my words were very clear – we will not pay the tariff that are being discussed or debated. First of all, those tariffs are preliminary, as I mentioned. In our opinion, it is very difficult for Boeing or any other US manufacturer to claim harm with a product we purchased that they did not offer and that they don’t produce. In fact, they ended the production of the 717, which would be the closest, ten years ago. When we went through the RFP to select the C Series, Boeing competed very hard for the order. Except they were competing with not their own product but a Brazilian product, an Embraer product, that wasn’t even new, it was used E190’s, ironically from all places, from Canada. So, as you look through this and try to see how exactly a harm case is going to be developed, particularly to justify the type of tariffs that are being discussed, to us it’s unrealistic, a bit nonsensical. We’re working closely with our partners at Bombardier.”

In summary, we can understand Boeing’s concern about the sub-150 seat segment.  They have lost their traditional leadership role. Airbus has won business and its fleet is younger so less likely to be replaced for a while.  The Douglas fleet, a natural for Boeing to win, is not attracting Boeing orders.  Bombardier is a threat to Boeing and Airbus in the sub-150 seat segment.  So is Embraer, which will be coming into the 100-150 seat segment within 18 months.

The MAX7 (and A319neo) have not attracted a lot of interest. But the C Series and E2 have and will continue to do so.  In the US market, suing Bombardier does not look like winning Boeing any MAX7 orders. Southwest’s MAX deliveries will be MAX8s for a while still.  We wonder if they will ever take a MAX7.  American does not look like a MAX7 buyer, nor does United which changed its last 737-700 order.  Delta, we are quite certain, will not buy the MAX7.  In short, Ray Conners’ concern is a reality already.

In the US market, suing Bombardier does not look like winning Boeing any MAX7 orders. Southwest’s MAX deliveries will be MAX8s for a while still.  Southwest has 30 MAX7s on order compared to 170 MAX8s. We wonder if they will ever take a MAX7.  American does not look like a MAX7 buyer, nor does United which changed its last 737-700 order.  Delta, we are quite certain, will not order the MAX7.  In short, Ray Conners’ concern is the reality already.  The US market does not look like MAX7 friendly territory.

All the noise at the DoC claiming damage and a threat from Bombardier is too late.  Boeing lost the sub-150 seat battle before the Delta order for C Series.

Airbus has a strong portfolio over 150 seats and does not seem worried about Bombardier or Embraer.  Boeing also has a strong portfolio over 150 seats.  So what, exactly, is all the fuss about?  Boeing’s concern about the sub-150 seat segment is understandable (they are losing some business there) but seemingly irrational (they are winning big above 150 seats).

Read more »

SkyWest buys more E-Jets

By |

Embraer made another big win this morning with its E-175 in the US.  SkyWest is taking another 20 (a firm order).  Of these, 15 will be the 70-seat (Special Configuration) version which can be retrofitted to 76 seats.  The remaining five will be at the standard 76-seat configuration.

The deal means Embraer has won 45 E-175 orders this year from SkyWest.  The announcement offers no more details.  The thinking among industry people we spoke with is the 70-seaters may be headed to Delta’s regional service.  The other five may be going to Alaska.

Read more »

SkyWest order for 25 E175s

By |

Embraer and SkyWest announced a deal for 25 E175s.  Ten of these are 76-seaters for Alaska Airlines.  The other fifteen are for Delta Air lines but only have 70 seats.  The Delta aircraft are named E175 SC.  SkyWest notes the SC can be configured to add the extra six seats.

The Delta seating is interesting because their current E175s have 76 seats (12/52/12) as allowed by scope clause.  Delta’s scope clause limits the number of 76-seaters.  These 70-seaters are to replace the ExpressJet aircraft that will no longer serve Delta.

Read more »

A321neo first delivery and big expectations

By |

Airbus announced the delivery of the first A321neo today to US-based Virgin America – a brand soon to disappear into the ever-consolidating US airline industry.   Like all the Virgin American fleet, this one also powered by CFM.  In this case by the LEAP engine.  But we won’t see this livery for long.

“After Virgin America having been the first customer signing for the A320neo back in December 2010, we are today delighted to deliver the first A321neo to them,” said Fabrice Brégier, Airbus COO and President Commercial Aircraft. “With our largest, latest, most fuel efficient NEO Single Aisle aircraft we are turning a new page. The new A321neo powered by next generation CFM LEAP-1A engines guarantees new levels of efficiency and longer range to its operators, greater comfort to the flying public and less emissions and noise to the airport communities. Thanks to its cutting-edge technologies it is today the most eco-sensitive Single Aisle aircraft available.”

Virgin America currently operates a fleet of 63 A320 family aircraft comprised of A319ceo and A320ceo aircraft powered by CFM’s CFM56-5B engines.  The new A321neo will be the largest aircraft in Virgin America’s fleet, featuring 185 seats – a 24% higher capacity at same comfort levels than its current A320s. Inside the cabin, Virgin America flyers will continue to enjoy three custom-designed classes of service, touch-screen personal entertainment and an on-demand food and cocktail menu on every flight in addition to power outlets at every seat. The aircraft is expected to enter service on May 31, with its inaugural flight from San Francisco International Airport (SFO) to Ronald Reagan Washington National Airport (DCA).

So much for the official wording from the press release.  More intriguingly,  are we seeing the first of a highly disruptive aircraft enter the US airline industry?  If we believe everything Airbus tells us, for sure.  But Airbus also has market facts to back this up – the A321neo is a best seller now.  Alaska Airlines, the new owner of Virgin America, is an all-Boeing airline.  They are not committed to keeping the Airbus fleet yet.  But this A321neo may be the crucial item to change that view.   If the A321neo delivers on its promises, Alaska will find it has an aircraft that can fly far (corner-to-corner in the USA, not just transcon), with great loads all year.  It may demonstrate to Alaska that it is indeed more capable than the 737-900ER and probably even more capable than the forthcoming MAX9.  Other airlines that have ordered the A321neo certainly are of this opinion.

Alaska is Seattle-based, and that means it lives under the huge shadow from the local OEM.  Boeing and Alaska have a long history together, except for a brief dalliance at Alaska with McDonnell Douglas.   While the A319 and A320 in the current Virgin America fleet might not strike Alaska as especially attractive, the A321neo is a new class of capability.  Essentially Alaska is acquiring 757-like capabilities with it.  And the 757 developed an almost mythical reputation after its production ceased.

Alaska Airlines has a fine reputation for efficient flight operations and they will monitor the A321neo’s performance closely.  If this aircraft does what it promised, we might see a change of mindset in Seattle.  When Alaska bought the MD-80s it was a shock to Renton. Alaska may be loyal, but they are not beholden.  Airbus could, possibly, inflict another shock with the A321neo.  There are lots of keen eyes on this one.

Read more »

Cancellation fees

By |

Airlines have embraced ancillary fees as a way to make up for low fares. One of those fees was the “Reservation Cancellation/Change Fee”.  Air travel is an activity that comes with many disruptive factors, as anyone can testify.  The US airlines embraced a series of fees. Take a look at how popular this fee has become. (more…)

Read more »

Bombardier CSeries momentum

By |

It has taken a long time to get here, but things may be moving faster than many realize.  Bombardier has, for a long time, spoken of the CSeries target customers “waiting in the wings”.  It was an awkward statement, because those hiding in the wings did it very well and for far longer than anyone expected. Most of all Bombardier.

2016 has been a far happier time, even if it has been expensive.  Air Canada and then Delta selected the CSeries.  Meanwhile it appears Bombardier is going to get government support, even though this will attract the attention of competitors who will almost certainly reach for the WTO stick.

In 2015 Bloomberg had a story about a key CSeries target, jetBlue.  The story indicates the fragile nature of any discussions, with “no comment” from both sides.   Back in 2013, jetBlue had voiced concerns about their E-190 costs.  This concern points out a key item – the risk of being a launch customer.  Being a launch customer requires a lot of resources, just in case.  Its more than parts provisioning – the airline’s crews (flight and maintenance) need to be highly competent and able to quickly correct the glitches that come with every new aircraft.  Note how gingerly Lufthansa is rolling out the A320neo.  Few, if any, airlines have more or better qualified and trained crews to ensure sustained flight operations.

Now there is more news about jetBlue and Bombardier. Once again, neither firm is saying anything.  But where there is smoke…  We have heard about jetBlue looking at the CSeries for some time.  Given the airline’s “lessons learned” from the E-190, it is unlikely the airline would be a launch customer again .  Although the E-190 is a fine aircraft and Embraer has sold well over 1,000 of the various E-Jet models, jetBlue seems jaundiced.  We suspect they are now looking seriously at the CS100 to replace the E-190.  SWISS is getting ready for the CS100 and will likely wring out every glitch.  There shouldn’t be many since both Bombardier and SWISS’ F&R testing generated 100% dispatch reliability.  Air Canada decided to replace its E-190s (and A319) with CSeries, which is a decision support for jetBlue.  Now that Delta selected the CS100 (and won’t use the E-190), this is further risk reduction for jetBlue.

Selecting the CSeries now means jetBlue is not the launch customer and allow for delivery slots by 2019 or earlier. Besides the CS100 offers disruptive range for its seat capacity.  Even with this range, the CS100 is small enough to cover any E-190 market jetBlue flies now.  It is also the quietest commercial aircraft, which should make it popular in California where jetBlue is growing its network to offset losing Virgin America to Alaska.  In short, for jetBlue, the CS100 looks like the right tool.

The CSeries seems to be gathering momentum.  Even long time program critic Richard Aboulafia appears to have had a change of heart.  With each positive piece of news one gets the sense that CSeries may now be (at last) on its way to getting the respect it deserves.  It is, in technical terms, already a fine aircraft.  As will be its real market nemesis, the Embraer E2.  Airbus and Boeing appear to be focusing on the 150+ seat market.  Which should allow Bombardier and Embraer to move into the 100-150 seat segment.

Read more »