Archive For The “Spirit” 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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Two More US Airlines Support Bombardier v. Boeing in Trade Dispute

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Two more US Airlines have asked US authorities to reject the complaint by Boeing against the Bombardier CSeries.  Spirit Airlines, which operates 112 Airbus aircraft, and Sun Country Airlines, which operates 22 Boeing aircraft,  both wrote letters against Boeing’s complaint and in favor of the CSeries.

Spirit’s CFO, Edward Christie, wrote that “Spirit believes that Boeing’s complaint is an inappropriate way to block the entry of Bombardier’s CSeries into the US market.”  He further notes that if Spirit were to purchase aircraft in the 100-140 seat class, Airbus and Boeing would not be considered, since they do not manufacture aircraft of that size. He went on to say “If Boeing’s complaint prevails, Spirit would be deprived of access to aircraft that would provide significant benefits to US travelers.”

Sun Country’s CEO, Jude Bricker,  stated that “American travelers have the right to access the benefits of all aircraft, whether they are from Boeing, Airbus, Bombardier, Embraer or any other aircraft manufacturer.”  He indicated that the punitive measures claimed by Boeing would amount to a “tax for American travelers” and could result in an increase in the price of certain tickets.

The Department of Commerce is expected to announce September 25th whether or not it will impose punitive measures against Bombardier.   Just last week Marc Allen, the president of the international division at Boeing stated that the company had no intention of withdrawing the complaint.  Ottawa has threatened to abandon its multi-billion interim buying plan for 18 Boeing Super Hornet combat aircraft.

Late last month, six Senators and members of the House of Representatives from Kansas and West Virginia wrote to US authorities reminding them of the economic impact Bombardier facilities have in their districts in the US, and potential negative consequences should the measure go through.

The Bottom Line:

While most industry analysts believe Boeing doesn’t have a leg to stand on, as it makes no competing aircraft in the CSeries size category, this decision will be political rather than logical, so anything can happen.  We will just have to wait and see what happens next.

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An Analysis of A320neo Flight Operations through February 2017

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We undertook a review of A320neo flight operations.  There were 71 A320neo aircraft in operation at the end of February.  An analysis of the 28,105 flights scheduled provides some interesting insights.  With recent news reports suggesting difficulties with engines, we decided to look through the data to determine how severe any problems are.

The vast majority of fights were completed as scheduled, with 134 cancellations.  That amounts to  0.5%, with a 99.5% completion rate.  In the databases available to us, there is no explanation for why a flight was cancelled but simply that it was.  The cause of a cancellation could be due to weather, or due to a mechanical malfunction.

Of the 134 canceled flights, 100 were on P&W powered aircraft and 34 were on CFM powered aircraft.  The P&W powered aircraft had a 0.543% cancellation rate and the CFM powered aircraft had a 0.35% cancellation rate.  The Pratt & Whitney GTF powered aircraft had 18,404 departures versus 9,701 for CFM International LEAP powered models.

Recent news reports about A320neo problems comes from India.   What does the data show?  Among the various airlines, IngiGo’s A320neos are the busiest, holding the top 11 places for most departures.  Yet IndiGo has had no flight cancellations in 10,115 departures.  Go Air, by contrast, has 57 cancellations among 2,635 departures.  Sorting the flight data by airline and engine type, the following statistics arise.  The performance at Go Air stands out as odd, especially given the strong performance at IndiGo.

The Indian press reported, in some detail, the engine incidents, which appear to be real issues, including one recent incident with IndiGo which cites specific engine components.   The following chart illustrates the rapid rise in flight operations of the A320neo.

The following chart illustrates cancellation rates over the same period.

The Bottom Line:
The A320neo is off to an excellent start, with good initial reliability on both engines.  P&W’s difficulties with production have been well documented, and the company is progressing in its recovery plan.  The additional problems revealed earlier this week appear to focus primarily on one airline, which accounts for 57% of the flight cancellations but only  14.3% of departures.  With the limited data available to us, we cannot draw a definitive conclusion regarding the reasons for cancellations, but we do expect reliability improvement as both engines continue to mature.


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A320neo – US experience through January 25, 2017

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The A320neo has been a very popular aircraft program.  Airbus has won 3,626 A320neo orders (over 5,000 neo models ordered) for the program since it was first offered.  How has the aircraft been doing in US service so far?  We looked at data on the US fleet.

Here is what we know about the number of flight hours of the nine US-based A320neos flying through January 25th 2017.


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

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Spirit takes first A320neo delivery in the United States

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Spirit Airlines accepted the first A320neo delivery in the United States with an aircraft on lease from AerCap. This is the first of five scheduled deliveries, with four additional options for Spirit.

Ted Christie, Spirit’s Chief Financial Officer stated “ The state-of-the-art technology will burn less fuel and lower our operational costs. We continue to lead the industry in both reducing our carbon footprint and providing ultra-low fares on air travel. Spirit is thrilled to be the first carrier to bring this innovation to the U.S.”

The A320neo provides the combination of a mature airframe with new technology engines, providing benefits of new technology while minimizing changes to the airframe, providing benefits in commonality and maintenance costs. The A320neo has about a one year lead over its competitor, the Boeing 737 MAX, due to enter service in the third quarter of 2017.

Spirit chose the Pratt & Whitney PurePower 1100G engines for its aircraft, more commonly known as the GTF, and also becomes the first US customer for that engine. There has been a lot of reporting on slower than planned deliveries of the GTF engine. But what hasn’t been reported on is how well the engine is performing in service.

The GTF is the first engine in recent memory not only to beat its customer commitments, but also to beat its performance targets.  Engine makers typically have two sets of performance numbers – a public target of what they expect the engine to perform at maturity, and a guarantee or customer commitment that they will stand behind, and pay penalties should they miss them. There’s often a 2-3% difference in fuel burn between target and commitments or guarantees, a significant difference.

Some industry observers tend to blend the two, and don’t realize that an engine can still meet its airline commitments but does not meet its performance targets.  In the case of the GTF, it met or exceeded both its targets and commitments right out of the box.  That doesn’t happen very often.

Dispatch reliability for the engine is also quite exceptional, exceeding 99.9% from the introduction with both the A320neo and C Series according to industry sources. At the UTC press day in June, the GTF had reached a reliability level of 99.7%. With a number of early nuisance failures now corrected, the expectation is that dispatch reliability could rise above its current level of 99.9% by year end. That equates to mature reliability from a brand new engine; a rare occurrence.

The Bottom Line
For those airlines lucky enough to be operating the first A320neos with GTF engines, they have the benefit of strong performance and mature reliability, validating their choice of aircraft and engine. While production delays are unfortunate, it appears the A320neo and GTF engine are worth waiting for.

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