Archive For The “Hawaiian” Category

Pondering the US DoC tariff on Bombardier

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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).

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The Single Aisle Segment – some perspective

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Premium #303 – Old aircraft and the example of Delta Air Lines

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Cancellation fees

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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…)

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Premium #237 – Hawaiian and the A380

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US airline profitability and fuel hedges

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As fuel costs have come down we have seen the US airline industry report record profits.  But how is the impact playing out?  We created the following chart to illustrate this using the Boeing 737-700 and a few airlines as an example. (more…)

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