The biggest focus, as expected is what the company will do to the 737 and 777 families (click here for more) - both of which saw record deliveries last year. The setting of the 737 and 777 Advanced Development teams headed by Mike Bair and Lars Anderson point to a dual examination of midlife upgrades to both airplane families, as well as weighing up the possibility of all-new replacements.

Boeing had noted at last summers Paris Air Show (and on numerous other occassions too) a variety of options to enable the 777-300ER to be improved against the perceived threat from the A350-1000, which to date has suffered sales stagnation with little customer interest in the type while the 777-300ER is available.

With Airbus poised to make an annoucement on its new engine efforts for the A320 family, the failure of the CSeries to gain any serious market traction after six years on sale means that Boeing will not be rushing to make a decision on the 737 until the end of the year.

Image courtesy of Boeing

A summary of the call can be found below:

·         Aim to achieve BCA/DSS balance

·         Well into flight test programs (FTP) of 787-8 and 747-8F

·         787 will change the way people travel

·         Focus on execution, functional excellence and growth

·         Engineer leadership for better program oversight

·         Aim to avoid issues seen on 787 in future

·         Brought back icons of Boeing company

·         Focus on business development

·         Backlog circa 3,400 airplanes

·         Traffic growth continues to climb

·         Airlines back in the marketplace by 2012

·         787 gonna be a challenge (for 2010)

·         Aggressive FTP in front of us

·         Aim to fly 787s for 90hrs/week

·         Ramp up to 2.5 787s by Aug 2010

·         Ramp up to 10/month by 2013

·         Gonna make darn sure we meet commitments

·         787 not profitable enough for the investment made into it

·         Improving productivity will help profitability

·         Decoupled FTP for 787 and 747-8F

·         Staffed for both programs

·         Didn’t feel it got enough value for potential orders in 2009

·         737 & 777 foundation of BCA

·         737: soon be crowded marketplace – no longer a duopoly

·         Do we re-engine, do we go with all new airplane?

·         Do not want a “me-too” airplane (in 737)

·         Focus on value, not price

·         Talking with all engine makers

·         787 technology scaled down & applied to 737

·         No 737 decision at Farnborough

·         Want to be in first place

·         Have to deliver airplane that delivers more value

·         Guarantee that wont happen (i.e. exiting the single aisle market)

·         Need to address ageing workforce

·         Good variety in model mix

·         737 Sky Interior debuts with FlyDubai in October

·         777 – looking to improve fuel burn, MZFW

·         Looking at options for engine capability for Rolls-Royce/General Electric (on 777)

·         787 – strong market demand

·         More confidence to meet guarantees for customers

·         Good info flow between 787-8 and 787-9

·         Working to take weight out of 787-9, further block point improvements on 787-9 to cut weight

·         40% of flutter tests completed

·         Achieved Mach 0.97 in a dive – “solid as a rock”

·         Remained pressurised at 6,000ft when at 40,000ft

·         Month-and-a-half of contingency in FTP

·         ZA003 flies this Sunday (March 14^th 2010)

·         747-8F – three weeks late into FTP

·         First flight of third 747-8F on March 15^th, 2010

·         First flight of fourth 747-8F on March 17^th, 2010

·         747-8F got both range and payload

·         Decision on 747 production rate this summer

·         Remains sold out through 2012

·         777 rate decision due next month

·         Execution on 787 and 747-8F

·         Retired risks, lots of risk still ahead

·         Solid teams in place

·         Both 737/777 gonna be under attack

·         Looking to expand margins on 787 and 747-8F

·         Rebuilding market leadership

·         Aim to deliver more airplanes in FY11 than Airbus

·         Anticipate 777 orders in near term

·         Rate change effective in 2011

·         Need to be able to stay at higher rates

·         A350 will be a good airplane

·         Lots of good years of 777-300ER production

·         Better turnarounds on 787 in FTP

·         Type certification due to allow engineers/FAA on board during certification

·         Not many customers want to defer orders

By withdrawing from the competition, Northrop Grumman has forfeited its right to protest the decision making process - failure to participate gives it no legal standing to quip about the US Air Force’s RFP, much less get the RFP changed to ensure a level playing field, after feeling aggrieved that the A330 would not be rewarded for offering “more”.

Image courtesy of UnitedStatesTanker.com

While the USAF had decided to omit any direct links between the impending WTO ruling and A330, Northrop Grumman is acutely aware that the WTO presence undermined the A330’s presence in the competition.

The undisputable fact remains that the A330 was built using direct state aid whereas the 767 was not.

With Airbus still saddled with financial woes on the calamitous A400M and A380 programs, EADS has no choice but to fall into compliance with the WTO’s rulings and this would adversely affect its ability to price the A330 tanker competitively against the 767 to the USAF.

To that end, the untested partnership of Northrop Grumman/EADS also spells the virtual death of Airbus’ plans to shift A330 freighter production to the United States using taxpayer money.

If EADS submits a bid on its own, the whole proposition would take on a riskier turn for the US Air Force. The A330 tanker for the Royal Australian Air Force is late, vastly over budget and fuel offload rates through the boom have not shown the sort of consistency Airbus had hoped for. In contrast, the USAF would be hard pressed to ignore 767 tankers already in service with Japan’s ASDF, not to mention that EADS has no facility in the USA to produce and modify A330’s in the first place.

With Boeing the only participant in the competition, they’re able to go full steam ahead and perhaps finally deliver a tanker that the Air Force has sought so desperately for decades.

Although in light of Northrop Grumman’s posturing, whining and playing to the press in Alabama, you have to wonder why the Department of Defense didn’t sole-source the deal in the first place. Reverberations from the old lease deal were never pertinent to this RFP, just as it wasn’t in the last one.

For EADS, its American dream has turned into a major nightmare.

LEAP-X and GTF Will Both Feature

Higher Thrust-Rated GTF Engine To Follow

Airbus has all but decided to offer dual engine supplier choices when it announces later this summer plans to re-engine the A320 family.

The lead engine is slated to be CFM International’s LEAP-X followed by a higher thrust variant of the Pratt & Whitney PurePower PW1000G GTF engine. A higher thrust GTF engine would be available in 2016 to allow better performance for the A320 family - at present, the GTF engine that will enter service with Bombardier’s CSeries will provide between 21-24,000lbs thrust.

The decision to allow two engine types comes from operators demanding more than one engine choice as well as to leverage operational commonality with the existing A320 engines in service, split between CFM and International Aero Engines.

Image courtesy of Airbus

As Pratt & Whitney works to expand the engine core capabilities of the PW1000G engine, Bombardier is concerned that a higher thrust-rated GTF engine would undermine sales of its CSeries in favour of the Airbus A319 using the same engine - primarily because the latter offers a wider cabin, better short field performance, potentially lower cash operating costs, longer range as well as better residual value.

Pratt & Whitney’s venture with Rolls-Royce in IAE has yet to define a working arrangement that would either deliver a new engine or an agreement that would see the GTF sold through that partnership.

Unlike the rival 737, the A320 family would not require undercarriage modifications or lengthening to ensure adequate ground clearance for the bigger engines. Sources close to CFM confirm that “the possibility of the same engine entering service on competing airplanes (A320, 737 and C919) is unprecedented.”

Boeing meanwhile, affirms that it may make a decision on the 737 re-engine efforts toward the end of the year.

The COMAC C919 will be the first airplane to introduce the CFM LEAP-X engine in 2016.

Alongside the introduction of its “sharklet” winglets, Airbus is aiming to cut fuel burn for the A319, A320 and A321 families by between 15-20%. Service entry for the re-engined A320 would be poised for 2016.

Market Still Not Appeased By “PowerPoint Jet” CSeries

Bombardier may have racked up a vital order for its ailing CSeries program, but continued demand for the Airbus A320 and Boeing 737 families underscores the inherent reluctance by airlines to swap their fleets for it.

The CSeries fate, for now, rests with Republic Airways, holding almost half the entire order book. In the six years the airplane has been on sale, wide scale rejection of the CSeries proposition has continued to snowball. With the increased likelihood of new engines, the cost advantage the CSeries holds will be further eroded by the compelling economics and greater revenue-generating capacity the A320 and 737 have.

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What makes the whole picture even gloomier for Bombardier is that any larger, stretched CSeries variant would trade range for passengers - and without a new wing, it simply cannot compete with the larger A321 or 737-900ER on longer range missions.

The next decade will see all-new Airbus and Boeing narrowbody offerings - further decimating the longevity and market value for the CSeries family. There’s no doubt the CSeries is gunning for a niche market that the A318 and 737-600 were both unsuitable for, but the CSeries alone is not the reason why market rejection has been so widespread.

The Pratt & Whitney PurePower PW1000G GTF engine is also under close scrutiny. Stepping back from broad claims of 20% fuel burn reduction, Pratt & Whitney is now only offering “loose estimates” based on limited stage lengths with no reference to passenger/cargo loads.

Concerns about the GTF engine core producing much less thrust than the current CFM International CFM56 and IAE V2500 engines poses questions about growth variants to power all-new narrowbody jets in the future. Questions about the gearing lubrication, higher than advertised maintenance costs and as one airline calls it “inadequate engine cooling” has brought about the same level of criticism seen on the PW6000 engine debacle.

While the CSeries basks in a rare moment of glory, Airbus’ John Leahy is absolutely correct when he says he doesn’t “see a very strong threat” from the CSeries - the vast number A320’s and 737’s both on order and delivered over the last half-decade reinforce his statement.

More airlines are demanding newer A320’s and 737’s that offer more commonality with their installed fleets, offering far better residual value and greater levels of performance and comfort in contrast to the 5-abreast configuration the CSeries is stuck with.

The A320-200 and 737-800 are very big sellers - they outperform and present better solutions to airlines needs than the CSeries. Airbus and Boeing have allowed Bombardier to step into the 100-130 seat market rather than concede it and the current orders for the A320-200 and 737-800 demonstrate that their size is what the market wants - the CSeries is too small to compete.

The COMAC C919 presents a bigger threat to the A320 and 737 than does the the CSeries, particularly as Airbus and Boeing secure and rely on large orders from within China. And in the face of fervent support by Air China and China Southern Airlines, the real worry is losing future A320/737 business to the C919.

CityJet has recently joined in as one of the first regional/short haul airlines to drop its business class in favour of premium economy.

As noted before, the tectonic shift away from premium cabins continues to make its presence felt across airlines.

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British Airways third quarter earnings showed an 11% drop in yields, Qantas’ yield plummeted 23% (YoY) while fare sale discounting has thus far stemmed volume from falling further. IATA’s states that December 2009 saw an increase in premium traffic year-on-year but fails to account for the huge drops seen prior to the global financial crises.

Yes, premium traffic rose, but this is a blip, not an upward trend and remains far below levels seen in mid-2008.

The reality is that as more customers seek bigger and better bargains, legacy carriers such as Qantas are now trading yield for volume in an effort to make airplanes like the A380 work for them. The oft-touted “65% break even” remark made by Airbus John Leahy is clearly at odds with what’s happening in the market place - indeed, had it not been for Jetstar, Qantas’ earnings would have been even weaker, particularly as its low cost off-shoot sucks traffic away from its parent.

Gone are the days of luxurious travel, and in its place, premium economy has risen to the forefront for customers willing to pay that little bit extra for comfort, but not much more than that as airlines attempt to derive revenue through ancillary cabin amenity charges.

As airlines drive costs down, reconfigure airplanes and engage in more cut-throat, volume chasing price competition, how long will it be before airlines take a leaf out of Air New Zealand’s page and drop First Class altogether?

CFM LEAP-X Engine To Power Next Generation 737 Family

Fuel Savings Of 15% Targeted

Sources close to CFM International have identified the upcoming LEAP-X to power the Boeing 737 family, which ironically will also power the rival Comac C919 jet in 2016.

The timeline calls for a late 2010 launch for the new engine/airframe combination, followed by full engine demonstrator tests in 2012. First flight aboard GE’s 747 flying test bed would occur in 2014 ahead of service entry in 2016.

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While Airbus has been trialling Pratt & Whitney’s PurePower PW1000G GTF engine aboard its A340-600 test bed for almost two years with no conclusive decision to commit, the failure by Pratt & Whitney and Bombardier to accumulate sizeable orders for the CSeries, as well as questions about the actual decreased fuel burn rate, gearing overheating and higher than expected maintenance costs has prompted Boeing to stick with CFM International rather than risk a venture with an engine that offers no commonality to the existing Next Generation 737 fleet or go down the expensive route of having a second engine alternative.

Modifications to the landing gear are being examined, including lengthening of all the 737’s landing gear to allow for greater ground clearance to accommodate the larger engine. Changes to the pylon design too will provide further clearance allowing Boeing to explore minimal undercarriage length adjustments to keep costs down and speed up development.

A decision to incorporate the WheelTug electric drive system alongside the LEAP-X engine has not been made.

The LEAP-X engine for the 737, while sharing core system commonality with the incumbent CFM56-7 engines on the existing installed world fleet, is hoping to cut fuel burn by up to 15% with a similar cut in maintenance costs resulting in longer on-wing life between service intervals.

Thrust ratings of between 24,500lbs to 30,500lbs will be on tap in contrast to the 27,300lbs that will be delivered on the newer CFM56-7BE that enters service next year, itself promising up to a 2% reduction in fuel burn, including 1% derived from aerodynamic changes to the 737 fuselage. The lower maximum thrust rating on the Pratt & Whitney engine is also a driver behind the LEAP-X getting the nod on the 737.

With gaps in the 737 delivery window between 2013 and 2016, strong deliveries in 2009 as well as forecast this year, there will be pressure on Boeing not to churn too much of its backlog to the new re-engined 737 variants as it continues to hold production rates on its best selling airplane.

The LEAP-X engine will power the 737-700, 737-800, 737-900ER as well as the 737-based Boeing Business Jets.

747-400BCF Squares Off Against Its Sibling, The 777F

The new, advanced and highly-efficient 747-8F is clearly the ultimate large freighter airplane due to its unsurpassed economics, capabilities and profit potential. With a revenue payload capability of 133,900kg at “real-world” market load densities of 158.6kg/cubic meter, the -8F is clearly at the pinnacle in the large freighter airplane market. The 747-8F complements the 777F in a neat fashion, and together, these two technologically advanced freighter airplanes will arguably be the benchmark, or cornerstone, for the large freighter airplane market for decades to come.

However, whilst the business cases for Boeing’s two new large freighter airplane offerings is solid and secure, and promises to have a bright future despite a few recent order cancellations, the business case for their 747-400 Boeing Converted Freighter (BCF) Program may appear to be weaker and less certain than at the time of official launch. As of 1st January 2010, Boeing had secured 49 orders from 9 customers for the 747-400BCF, but with the market size forecast reduced by some 26%, or 121 airplanes, to 340 airplanes as well as the dearth of business at competing customers conversion centres on 747-400 passenger to freighter conversions, is the outlook for this market bleaker than originally thought? Boeing points out that despite a slow down in order activity for their -400BCF program, due to the significant global recession that (arguably) peaked in 2009, they have made significant progress on reducing the time from customer order to redelivery for the -400BCF. This means that with a shorter lead time operators are able to plan the introduction of the -400BCF more closely than with a new production built large freighter airplane.

This in turn, Boeing believes, will see the -400BCF staying strong due to more timely availability.  Perhaps another question facing current and prospective -400BCF customers, and other -400 converted freighter customers, is whether these -400s create genuine, long-term return on investment, or whether the 777F and/or 747-400F/ERF/-8F would be the better longer term solution for the air freight solutions?

Boeing is among the first to realize the complexity of the decision facing airlines. “As every carrier has unique business goals, customer sensitivities and regional requirements, they usually make freighter choices based on factors beyond just acquisition or operating costs including market distance and yield, fleet integration, utilization and other more specific considerations,” notes Jim Edgar, Boeing regional director for Cargo Marketing.

In simple terms, the -400BCF does indeed seem to have a good long-term value. History has shown that despite brand-new, fuel efficient and more capable 747-400Fs being available, the 747 Classic passenger-to-freighter modification programs coexisted with the -400F for more than a decade. Between 1993 and 2004, a total of 123 Classic 747s (78 being 747-200s) were converted to freighters. In comparison, in the years between rollout of the first -400F (February 1993) and the last -400F, Boeing secured 126 firm orders for the standard -400F and 40 firm orders for the longer-range, higher gross weight and more capable -400ERF. Boeing projects that the -400BCF will coexist well with the 777F and 747-8F in the large aircraft freighter market over the next decade at least. Further, the -400BCF could be the ideal replacement for the still more than 70 747Classic freighter airplanes still in operation today as well.

Ironically, Boeing has pitched both the 747-400BCF and the highly-efficient 777F as ideal, low-risk replacements for older generation tri-engine and quad-engine freighter airplanes. Ultimately, this has seen the 777F and 747-400BCF entering a showdown that’s set to last for many more years. The 747-400F/-ERF and 747-8F are differentiated from this duel as they offer the unique nose-loading capability, greater payload capabilities and, in the case of the -8F, hugely superior economics. For example, the -400F/-ERF offer 14% better fuel burn/tonne compared to a 747-200F over a 3,000nm trip, whereas the -8F offers a staggering 29% better fuel burn/tonne against the -200F over a similar distance. The -400BCF, on the other hand, offers only an 8% reduction in fuel burn/tonne over the 3,000nm trip compared to a similar capacity -200F. For a customer needing an airplane with a maximum revenue capability of around 105,000kg, the 747-400BCF and 777F fall directly into this bracket. Make no mistake, the -400BCF is an incredibly good airplane, but it’s come up against an even better airplane in many cases in the form of the 777F.

Providing cargo capacity normally associated with larger airplanes, the 777 Freighter can fly 4,885 nautical miles (9,052 kilometers) with a full revenue payload of 226,740 pounds (102,830kg), whilst the -400BCF will be hauling some 107,842kg (237,750Ibs) of revenue payload over 4,091nm (7,580km). Both fly at a similar Mach0.845 econ cruise speed. Clearly, if range is not the requirement, the -400BCF offers compelling attributes, but if an airline wishes to fly a similar payload compared to the -400BCF payload, much further at considerably improved economics, then the 777F is an attractive option. Whilst payload configurations vary, both the 777F and 747-400BCF are closely matched, with the former having a total of around 23,000cubic feet of cargo volume, and the latter some 25,000cubic feet of cargo volume. The 777F offers extremely attractive economics against the -400BCF, but the -400BCF offers attractive acquisition costs.

The big question: Brand-new 777F or older, yet similarly capable, 747-400BCF?

There’s no disputing the fact that the -400BCF offers attractive payload/range capabilities, and coupled with lower acquisition costs than new factory built freighters, the -400BCF is an ideal airplane for many freighter fleet solutions. But, with a revenue payload of only 5% greater than the 777F, a question mark hangs over the viability of the -400BCF in a market place that’s intensely focused on operating the most fuel-efficient freighter airplanes.

“Even with this decline [in air-freight] that we’ve seen, which is now 20%-plus year-to-date, we’re still looking at a very large freight market [in the future],” remarked Bill Flynn, Atlas Air CEO and President. “We still believe there’s a compelling need for modern, efficient freighter assets as the market and economy recovers. And, as the market recovers, the fuel [price] will go higher, or seek levels consistent with demand, and we think that’ll position the 747-400F and 747-8F, very effectively and efficiently.”

Cargolux’s CEO, Ulrich Ogiermann, has emphasised on several occasions that the 747-8F was chosen due to its superior operating costs, class leading fuel-efficiencies and capabilities. “They {customers} will want to be sure that if they have to fly goods, they fly them in the most fuel-efficient aircraft, and that aircraft is the 747-8F,” commented Ogiermann. Further, shippers are becoming increasingly more vigilant of the carbon-footprint of flying freight by air, and are demanding only the cleanest, greenest and most capable airplanes. “Corporations will want to be as green as possible we don’t want to be ¬flying 10 year-old aircraft with yesterday’s engines. We want aircraft with next-generation engines, the largest payload and the best fuel efficiency,” said Atlas Air’s CEO, William Flynn as one of the reasons why the airline opted for up to 26 Boeing 747-8Fs instead of additional -400BCFs.

The -400BCF will find its market niche as either a freighter airplane that’s intended as interim lift, or “bridging” capability whilst a customer waits for new 777Fs or 747-8Fs to be delivered, or as an ideal freighter airplane for an airline requiring 747 freighter capacity and improved efficiency but whom are not able to foot the bill for new built freighters. Also, in the conversion market, there are always carriers that try to “time” the market — awaiting a “bottoming” of aircraft values to obtain the asset for the least possible cost. Additionally, as the freighter market upswing continues in 2010 and beyond, operators will also be all to keen to lap up additional lift capability, and with quicker order to redelivery times for a -400BCF compared to a new production built freighter, and a huge pool of over 400 747-400s, there’s a significant availability of airplanes as well at very low prices.

 One particular -400BCF customer, Air China, who operates a small fleet of 3 747-400Fs, has remarked that the commonality between the -400BCF and -400F is a key quality for their freighter fleet needs. “Our 747-400BCFs will provide increased efficiency compared to our 747-200Fs and bring greater operational commonality with our newer 747-400 Freighters,” said Air China Cargo Vice President Xiao Ping.

Boeing predicts that over the next 20 years the freighter market will require 340 converted freighters with a payload capability of 80,000kg and greater. Whilst the 747-400BCF will be the largest airplane in this particular market, it’ll share the spoils with the MD-11BCF and possibly any planned 777BCF. However, with very few MD-11s remaining to be converted, their impact on this market is minimal. The proposed 777-200ER BCF, however, will become a more prominent airplane in this market, but with a payload capability “in the lower end” of the large freighter market, the -400BCF will still be well differentiated and larger. If anything, the 777BCF will serve to be an ideal replacement for the MD-11BCF and compliment to the 747-400BCF. What differentiates the -400BCF further in this market is the fact that with well over 50% of the world’s air-freight capacity being flown in 747 freighters, the -400BCF has better commonality attributes in this market that could make the airplane a more favoured option as the 747 is the benchmark for the large freighter airplane market.

As for the 777F, Boeing predicts that market size over the next 20 years to require 490 new built freighters, with the 777F sharing the spoils with the out-of-production 747-400F/ERF and the in production 747-8F. With the 747-8F having secured 76 firm orders by 1st January 2010, and the 777F close behind at 68 firm orders, of which 16 had already been delivered, the market acceptance of these two new, 21st-century, highly-efficient and capable Boeing freighters has been stupendous. Whilst 2009 was a tough year in the air freight business as air freight traffic plummeted due to the significant world recession, the -8F only lost 2 firm orders in the form of leasing giant Guggenheim Aviation Partners reducing their order from 4 firm to 2 firm. The 777F, however, lost 5 orders during the year, highlighting the difficulties in the present air freight market. The -400BCF, meanwhile, logged no new conversion orders.

Whilst the -400BCF maybe the underdog when compared to the 777F, a noteworthy point to also highlight is that with the -400BCF added into the mix, Boeing is able to offer greater flexibility and options to airlines to meet their needs. “We know that one freighter won’t meet the needs of all carriers. With our team’s deep knowledge of the air cargo market and our experience in providing air cargo lift, Boeing is able to offer a complete line of freighters, production and conversion, to meet the broad and varied needs of the market,“ comments Boeing’s Edgar. Boeing’s large freighter aircraft are the industry leaders, and offer the highest load densities, best economics and best flexibility of any other competing freighters.

With the 747-400BCF, Boeing is also offering customers a greater availability of freighter airplanes to meet their needs, hence Boeing’s drive as offering the -400BCF as a “Life-cycle Solution”. And with Boeing being the OEM for the -400BCF, customers are assured of receiving value for money as the -400BCF is treated by Boeing as a new production built freighter as well.

What remains to be seen, however, over the next few years is whether the large airplane conversion market will really be as large as currently predicted, or whether the airlines will rather opt for the lowest-trip cost freighter or lowest tonne/mile cost freighters in the world, the 777F and 747-8F respectively, in larger volumes than the current forecast.

Click Image To Enlarge

The 747-400BCF is a great airplane to replace older generation large freighter airplanes, such as the 747-200F, and thus it’ll find a small, yet vital market niche to fulfil in the next few years. However, with the growing capabilities of the 777F and it’s virtually identical payload capabilities and significantly superior economics, the -400BCF could be marginalised even further into the future as airlines turn their long term focus to increased productivity and eco-friendly initiatives. Where the clear water really is, is between these freighters and the 747-8F. With 16% more cargo volume, coupled with being 17% more fuel efficient and 16% lower tonne/mile costs than the -400ERF, the -8F is set to rule the upper end of the large freighter airplane market for decades to come.

A large production freighter is quite a large investment, with a list price ranging from US$250 - $300 million.  While top carriers are able to make this investment, there are a number of smaller carriers unable to do so — and many of these are the same carriers that have “hunkered down” during the recession - to survive and save the limited capital that they have.  Additionally, acquisition cost may be a reason that leasing companies are evident among the 747-8F/777F customer base.  They see a need for efficient lift in new production freighters that not all operators can afford at the moment.

The duel between the 747-400BCF and 777F as airlines weigh in options of opting between the two, or indeed opting for both, is however, far from over.

By: Christopher Cook
Commercial Pilot
Johannesburg, South Africa

All images/data courtesy of Boeing

Weak Premium Demand Forces Qantas Into A380 Seating U-Turn

Singapore Airlines Continues To Lose Money Despite Operating “Profitable” A380

It’s all very well claiming that the A380 is “stealing” market share from competitors, however, in the absence of a few key markers, the marketing hype is at odds with reality.

The erosion of premium traffic and Qantas’ decision to reconfigure its A380 fleets with fewer First Class seating underscores how none of the current four operators are making money with their “Whalejet” A380’s. Emirates and Singapore Airlines routinely fly their A380’s into London Heathrow with premium cabins with less than 50% of the seats filled. Of the occasional flights that do have slightly higher occupancy, much of this is attributable to discounted fares, further pressurising passenger revenues.

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Further, many of the carriers that Airbus’ A380 Director of Product Marketing, Richard Carcaillet noted who are supposedly “losing” market share are actually cutting capacity, boosting load factors and cutting operational costs. Singapore Airlines, on the other hand, has been removing the bulk of its 747-400 fleet and increased capacity during offsetting, but has taken capacity out of its wider route network overall - however, booking data does not translate into profitability.

While the A380 struggles to “break even” at John Leahy’s oft-touted, less often achieved benchmark of 65%, the likes of Qantas who are now bizarrely chasing low yield traffic to fill “bums on seats” on the A380 puts it head to head with low cost off-shoot, Jetstar - which ironically saved Qantas from sporting a loss!

A glancing look at Singapore Airlines’ third quarter earnings shows a decline in passenger revenue YoY, passenger yield fell by 2 cents during the same period and passenger revenue in the 9 months to December 2009 showed a huge 13% decline - all during the tenure of the A380 within its fleet.

Hardly stealing market share for profitability, is it Mr. Carcaillet?

Of course, the bigger challenge for Airbus is to double the deliveries in 2010 after moving the goalposts four times last year - all that against the backdrop of the huge loss the program sits in as the chorus of investors question just how much longer the ailing A380 can survive whilst being breastfed.

It’s really not very good - securing just 202 orders in a decade; a decade which included the biggest order boom in over 60 years which the A380 (and Bombardier wannabe-seen CSeries) have missed in capturing any significant portion of.

But one could surmise that this is one of the benefits of being an entity propped up by the state…

First Flight Comes As Iconic Jet Enters Fifth Decade

747-8 Intercontinental Roll Out & First Flight Early 2011

After successfully completing taxi tests, the first 747-8F took off on its maiden flight, kicking off a 3,700 hour certification effort with first delivery to Cargolux due in the fourth quarter of this year. The first 747-8F took off just one day short of the forty-first anniversary of the first 747 flight.

Images Courtesy Of Boeing

While the cargo market remains fragile, the 747-8F has benefited by being in a virtual monopoly position with no direct rival as well as seeing existing 747-400’s that have been withdrawn from service not coming back or being converted into freighters amidst high fuel prices.

Major assembly of the first 747-8 Intercontinental occurs late in the second quarter/early third quarter and is due to roll out during early 2011, with first flight penned for the first quarter of 2011 ahead of first delivery to a VIP customer in Kuwait.

Lufthansa will take its first 747-8 Intercontinental shortly thereafter, again in the fourth quarter next year.

Two 747-8 Intercontinentals will form part of the certification efforts, with three being used for the 747-8 Freighter.

The first test 747-8F, RC501 will complete around 610 flight test hours along with 800 ground test hours.

RC521 will complete around 570 flight test and 525 ground test hours, with RC522 completing 435 flight test and 820 ground test hours as part of the certification program.

Future Products Could Be Based Outside of Washington State

Sole-Source Engine Application Most Likely Options For Both Jet Families

The announcement of various leadership changes alongside the formal start of the Advanced 737/777 Product Development teams points not only to the direction of more serious discussions to update or replace two of Boeing’s biggest sellers in recent years, it also kicks off a second competition as to where the eventual production site(s) may be.

This year sees flight testing of the improved CFM56-7BE on board the Next Generation 737, delivering up to 2% better fuel burn (alongside aerodynamic improvements). Both Airbus and Boeing have thus far been reluctant to commit to all-new replacements and with Boeing confirming last week that it is actively considering a new powerplant for the 737 more than raises the stakes.

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Airbus has thus far held off from offering the Pratt & Whitney PurePower PW1000G engine on the A320 and despite its stating that modifications to the 737 will accommodate this or a competing engine, it is unlikely that Boeing will “rush” to offer it either. Part of the reason stems from the poor-selling CSeries, to be powered by the same Pratt & Whitney PurePower PW1000G engine - selection by Airbus or Boeing would almost certainly provide an unwitting shot in the arm for sales for a rival jet - rather, Airbus and Boeing will work with existing engine makers to develop an improved interim solution that negates the current customer base from going to the CSeries.

However, given the abject failure of the CSeries to snare any orders away from the hot-selling Airbus A319 or Boeing 737-700 means that desire to get new engines may not be as pressing as some make it out to be - and with Airbus introducing new winglets to the A320 family, the business proposition of the CSeries gets even worse.

On the 777, things are a little different.

Bringing former 777 VP Lars Andersen back into the fold has been met with great optimism. His tenure over the 777-200LR and 777-300ER programs certainly makes him the perfect candidate to oversee the next phase of development of Boeing’s biggest twin jet.

The biggest question perhaps doesn’t relate to whether there is a 777 update or replacement - the driver, aside from customer requirements, will be the challenge/threat that the Airbus A350-1000 poses. With just 75 orders from four airlines, design definition of the big Airbus twin jet remains some distance away, however, the new 777 development team will almost certainly be looking to an all-new replacement ahead of mid-life update.

Part of that will be driven from a materials expertise standpoint based on experience with the 787 family. Alongside that, Boeing’s purchases of the Vought operations and Alenia’s stake in Global Aeronautica gives the company access to autoclave curing technology from which it can “grow” a bigger fuselage. Wing work experience with Mitsubishi on the 787 will almost certainly be replicated for any new 777 replacement - further decreasing Boeing’s dependency and/or exposure to industrial action by unionized employees in Washington State.

Throw into the mix employees based in South Carolina who are familiarised solely with new materials and manufacturing techniques, the productivity efficiency can be migrated to a bigger fuselage - all of that alongside Boeing’s existing patents of monolithic barrel fuselage construction for passenger jets seating up to 600 passengers, the omens look far more favourable for a clean sheet design. It is entirely feasible that the 747-8 family too, will be supplanted by an eventual 777 successor.

Make no mistake - there is certainly no shortage of takers wanting a new and improved 777. Emirates, the biggest 777 customer, has made clear that the A350-1000 will not be able to haul as much freight as its existing fleet of 777-300ER’s, as well as questioning the capability of the big Airbus twin to operate at the hotter climate of Dubai with a full payload during the peak summer season due to the lower thrust engines in contrast to the 777-300ER.

At the same time, Boeing hopes to extrapolate efficiencies in the 787-8 model with weight savings to incorporate into the 787-9 - the goal of course is to lure the existing base of 777-200ER operators toward that model instead of the A350-900, sized slightly above the 787-9. For now, it’s the upper end of the 777 market that Boeing seems to want to protect - the 787 certainly has the lower end covered in plying for business against the A350-800 and baseline A350-900.

The one common feature that may indeed unite the 737 and 777 replacements will be engines - in that a sole-source supplier will be the way forward. This recipe has worked well for the 737 to date, as well as the 777-200LR and 777-300ER. Rolls-Royce has also scored a big success by being the defacto sole engine choice in the absence of GE on the Airbus A350XWB. In a bid to keep a lid on costs for OEM’s, this sole-source option has far more merit than it does disadvantages.

Irrespective of whether the 787 enters service this year, payments from deliveries starting in 2011 onwards, coupled with Boeing’s strong cash balance means it will have at its disposal a significant portion of investment for both 737 and 777 updates or new product replacements.

The real question is whether customers want something updated or completely new, as well as deciding if a new or update model should arrive first in the form of the 737 or the 777.