Northern exposure

STOCKHOLM - I’m in the middle of a two-week tour of European cities, and just wrapped up a visit to Sweden. Enjoyed some beautiful sunshine, although this time of year the sun barely gets above the horizon all day!

image/photo

Blue skies, short days in Stockholm.

I met with a small group of reporters here, and fielded a number of questions about the sustainability of our industry. There was lots of interest in the fuel efficiency of our airplanes. And I talked a bit about our efforts to invest in new technologies.

Late last week I spent a few days in Dublin, at the 10th Annual European Airfinance Conference. At the conference I was part of the always popular Airbus/Boeing panel discussion. It was standing room only. My guess would be around 600 people in the crowd - bankers, financiers, airline representatives and others.

I’d say the mood I’ve observed so far in Europe is upbeat and confident. But everyone is watching things closely, and there’s concern about the direction of the U.S. economy.

Word I’m getting from airlines is that they see their business as being strong for the foreseeable future - especially for international service. Financiers are indicating that money is available, but, as they put it, at a higher cost, due to the “U.S. credit crunch.”

I wanted to share with you some of the “burning questions” I’ve heard that sort of typify what’s on the minds of people here in Europe:

When will a 737 “replacement” airplane enter service?

Will the U.S. economy go into recession, and what would that mean for the rest of the world?

What about consolidation in the U.S. and Europe - who and when – and how will alliances be affected?

Are we at the peak of the cycle?

What are the new technologies, if any, in the A350?

When will the 787 fly?

Will the A380 be a market success?

Will the 747-8 Intercontinental be a success?

I’m off to Warsaw next, and then to Moscow. And in about a month I’ll be returning to a similar crowd here in Europe for the 22nd Annual Geneva Forum. It will be interesting to see the state of our industry at that time, whether the questions are the same, and whether there’s been a change in sentiment one month from now.

Comments (7)

Paulo M (Johannesburg, RSA):

In your industry, it's important that the markets for your products are healthy. When a market as big as the US softens, that has a direct effect on your company & industry. Obviously, expectations of major orders from the big US majors gets pushed out a bit, and deliveries to customers around the world may be delayed if the global economy really takes a knock.

G (France):

When the cost of money increases, speculation slows down and some bubbles burst.

Norman (Long Beach, California, United States):

I like that there is a lot of interest in Boeing
products in Europe as the orders keep coming in
from Europe like today with deliveries for
Norwegian Air Shuttle, and orders from Aero Logic,
and Air Europa, source Boeing.com.

With the current success of the B737 I don't see
a replacement for the airliner until at least the
later half of the next decade.

I think the US economy is in recession so as for orders for aircraft in the United States it is
minimal. My position on airline mergers and the
proposal of airline mergers is that I think it
works against the customer and in the long run against the airline, for example, for the customer
as airlines gobble up other airlines the quality of service goes down as for the airlines involved, a lot of layoffs are made and the airlines being acquired they are dissolved into oblivion - just look at the American Airlines and TWA merger in the long run flights from STL has greatly reduced and the TWA fleet removing all types except for the MD-80's and some 767's employee moral goes down. The prospect of a merger between UA/CO, DL/NW, CO/DL, or NW/CO.

Consolidation of airlines in the form of alliances
between European airlines and American airlines is
a good idea, for example if you wanted to fly from
Los Angeles, USA to Sofia, to Skopje, Macedonia,
you can fly United Airlines to London Heathrow then
transfer to Austrian Airlines at Heathrow then fly
to Vienna, Austria and then change planes and catch a flight to Skopje, all of this is possible with the
help of Star Alliance, without alliances traveling
will be far more difficult, my big concern is the fracturing of alliances particularly of the Star Alliance with the prospect of United leaving the
alliance as mentioned by some in airliners.net.

I expect this sales cycle to be strong for this year
as we have seen in January alone, even with the delays in the project and the wait to at least 2016,
the orders keep on coming for the 787 and the 777-300ER, and the 737 what will likely be the last generation of it's type.

Many of the technologies on the Airbus A350 will
be comparable to that of the B787, but the A350
is fundamentally different in size class it seems
to fit between the size of the B787 and the B777-300
I am still not sure if the the A350 will have a four
unit glare shield that some what resembles an earlier proposed version of the 787 or it will have
a six unit glare shield and somewhat resemble the
A380 if anything new in technology for the A350
it is expected to have a higher amount of composites
than the Boeing 787 but this was only announced when
Boeing announced the percentage of the composites
the 787 will have before that the A350 looked a lot like the A330 and had the same amount of composites the A330 has.

The Boeing 787 will enter service [in 2009] but it is hard to say exactly when the plane will fly because supplies
are not getting to the factory in a timely manor.

It will be hard to determine if the A380 will even
meet the break even mark now 420 units. Airbus still
remains optimistic of a high level of sales and has
even determined that they will sell over 800 units in the lifetime of the product. For now their is an expected sale of the A380 to Air India according to
airliners.net.

I hope against hope that the 747 Intercontinental
will become an eleventh hour success with the hopes
that Northwest Airlines, United Airlines, and Emirates Airlines will order some 747-8I's but most
of the news will be about airlines who have pre-
declined to order the 747-8I like Singapore Airlines, QANTAS, and British Airways. Unfortunately
a lot of airlines will associate the 747-8 by it's
airframe that was designed over forty years ago.
The 747-8 cargo version has fared better luck in sales, and at that this is the first 747 stretch ever that will see the light of day. If the 747 is
to remain in production it will be solely as a cargo plane - interestingly enough its original purpose
as it was proposed by the aircraft manufacturers and airlines in the late sixties as it was planned that
supersonic airliners like the Boeing 2707 and the Concorde would be in service around the world and seen and flown on by regular passengers, this was the purpose of how the cockpit was placed above the
main passenger cabin.

The Boeing concept for the Yellowstone 3 project will as proposed as replacement for the passenger 747, but I still support the 747-8 Intercontinental as I have seen how the plane will look like on Boeing web site The shape of the future- NewAirplane.com.


Chris C (South Africa):

There certainly is a huge amount of interest regarding the phenomenal 747-8Intercontinental. We are all eagerly awaiting the follow on orders and additional airline customers for this efficient airplane! It’s a great airplane, and will have a vital, yet small niche role, to fulfil for at least the next two decades. Therefore, will the -8 be a success? Absolutely.

T. Cook (Mt. Vernon, WA):

Has the last passenger 767 been delivered? It must be coming up or already happened.

-----

Well, actually no. We still have 17 767-200ER and 767-300ER passenger airplanes on order for future delivery. The 767-300ER, 767-300F and 767-400ER are all still being offered, with current customer interest focused on the 767-300ER and the 767-300F.

Thanks for the question,

-- Randy Tinseth

JohnK (Eugene, Oregon):

Most often airlines would not consider a projected economic downturn as a reason to delay placing orders for new planes. There is such a delay between placing the order and getting the planes delivered, any economic problems would likely be over before the planes are delivered.

If they don’t place the order in a timely manner, they will still need to replace older planes and expand routes. Then it will be too late to place an order and have the planes delivered when they are needed.

Howard (LA, CA):

I see you've cleverly avoided answering any of the questions on this post. Great work.

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