April 2008 Archives

Looking for more details about Embraer’s new Honeywell-powered Midsize (MSJ) and Midlight (MLJ) business jets? Then head to EBACE next month in Geneva. That’s where the Brazilian manufacturer plans to disclose pricing information and the name of the new jets, which will enter service in 2012 and 2013, respectively, filling out the company's business jet portfolio.

During a recent press briefing at Embraer’s Sao Jose dos Campos facility, Embraer VP market intelligence, executive jets, Claudio Camelier said the selection process for industrial partners is still ongoing, but that completions will be made at Sao Jose. Embraer is working to have a broad network of service centres in place for the MSJ and MLJ.

The company “learned a lot” with its E-Jets programme and “are going one step further with these [MSJ and MLJ) airplanes”, which will be its first fully fly-by-wire side-stick controlled business jets, and feature Rockwell Collins Pro Line Fusion avionics. About 20% of the total structural weight of the aircraft will be composite material.

So can we expect to see any of these enhancements on the future Embraer commercial passenger aircraft (which isn't expected until 2015)? “The lessons we learn in one program are taken to the next program,” says Camelier.

You may be wondering why Runway Girl has been looking a little blog-lean these days. She got knocked off the catwalk due to recent illness but is tying her stilettos back on. Now let’s try to fatten her up.

First order of business? Let’s talk about what’s happening to US regional carriers, and how they are being forced to swallow the pain that is trickling down from their major partners. Some of this is tackled in a new Flight double feature, written by myself and ATI US editor Lori Ranson.

But more evidence of a pending 50-seat glut has emerged in the last week. A further 51 of the 50-seat regional jets flown by ExpressJet for Continental Airlines are now subject for removal from its fleet starting in December of next year. ExpressJet has already seen 69 ERJ-145s culled from the contract.

As one pilot observer puts it: When major airlines contracted for 50-seat operations, just what the heck were they thinking? “And if the economics of 50-seaters are so obvious to all, what about the 37- and 44-seaters that enjoy the operating costs of the 50-seaters with only a fraction of the revenue benefits? Such poor equipment choices hasn't kept our managers from getting their PUP bonuses, however.”

Saab Aircraft Leasing (SAL) president and CEO Michael Magnusson tells me: “This is an issue I have been watching with interest for some time, and I have predicted this would happen as the fuel prices increases. Many keep saying markets outside Europe and US will absorb the glut but what they keep forgetting is that we need to keep in mind the quantities of aircraft involved. As the recent Flight International article clearly pointed out, the US fleet is 1400 30-50seat RJs, the European fleet is just 300 and Asia 100.

“In Mexico there are around 70 and then just a hand-ful in South America and Africa. Despite Embraer's assurance about Latin America there is not a single 50-seat RJ in airline service in Brazil!(just the Air Force).Conclusion, if the US fleet is reduced by 10-20% (which seems a realistic number), we are talking about up to 300 aircraft (the size of the European fleet today !), where are they going ???"

Magnusson adds: "I just do not buy this stuff about "markets outside North America and Europe will absorb them", they will not absorb such quantities, based on history so far.”

Life is not completely rosy for all turboprop operators of course. The Raytheon Beech 1900 turboprop is playing a quickly-diminishing role in US scheduled service following the wind down of a trio of operators, and as Colgan Air prepares to retire the type by the end of the year.

In fact, continued challenges at Colgan – which also flies Saab 340s and new Bombardier Q400s - and its sister, regional jet operator Pinnacle Airlines, have forced parent Pinnacle Airlines Corp to revise first quarter earnings estimates below consensus estimates by analysts.
Pinnacle now expects earnings per share in the quarter to fall between $0.12 and $0.15, “which is approximately $0.22 to $0.25 below” Wall Street estimates.

“Colgan’s revenue and non-fuel costs on its branded pro-rate flying have shown improving trends in the first quarter, but the improvements have not been enough to offset the high cost of fuel,” says Pinnacle.

At the end of the day, however, larger turboprops are appearing more secure these days. Speaking in February at the Singapore Airshow, Magnusson said that in the broader market the “supply of Saab 340As is shrinking steadily”, values are going up and “supply of Saab 340Bs is almost nil”.

A long-time consultant in the satellite and telecom industries, Tim Farrar of Telecom, Media and Finance Associates has given some truly insightful perspective on the in-flight connectivity scene. In an October 2006 report, he predicted that it would be very difficult to resurrect the Connexion by Boeing service without a very large financial commitment from Lufthansa or other large airlines, and that a minimum cost of at least $80 million per year would be required to operate the service and provide near-global coverage.

Over the last eighteen months, many of these predictions have been borne out, notes Farrar in a new comprehensive study of mobile satellite services, which includes a hefty section on the aeronautical communications market. Tim was kind enough to send me the text. Here’s just a chunk of his take on the existing aeronautical MSS market.

1.1 The existing aeronautical MSS market

While the recent success of Row 44 at the expense of Viasat was perhaps unexpected, given Viasat’s prominence in mobile broadband, and previous involvement in Connexion, we understand that Viasat’s spread spectrum technology requires providers to dedicate a whole transponder to the uplink and downlink in each coverage area, whereas the HNS technology can operate within a partial transponder, depending on the demand in a given area. Thus the cost of providing coverage can potentially be lower, particularly for a startup provider.

It seems like only yesterday that a big, nasty glut of 50-seat regional jets was being predicted, and then didn't quite come to fruition. The threat foretold around the middle of this decade seemed to dissipate last year, as Independence Air's RJs found homes, and as reported in May 2007 by Darren Shannon at Flight International. Now that threat appears to be back with a vengeance.

One outspoken observer, consultant Mike Boyd of Colorado-based The Boyd Group says that in light of sky-high fuel costs, the current 50-seat market cannot be sustained. His firm has a very interesting news brief on the subject, the long and the short of which says there are “just over 1,600 RJ cabined airliners operating in the USA, all within the well-defined segment of small jet providers”. Mainline airlines today “are leasing out fleets of RJs that today represent several hundred units in excess of what the market can support”.

Based on the firm’s 2008-2017 “Fleet Demand & Trend Forecast”, there will be over 800 fewer of these RJs in the US skies.

Richard Aboulafia, VP analysis at Teal Group notes that with fuel prices so high, “even depreciated aircraft look quite expensive”.

There are lots of recent indicators of a 50-seat squeeze (Continental Airlines talking "better economics" with ERJ-145 operator ExpressJet, Delta/Northwest looking to optimize and rationalize, Chautauqua's culling of CRJ200s for Continental, and Delta's decision to drop a Mesa contract for ERJ-145 flying etc, etc).

Let's look again at that May 2007 article, and its final paragraph.

Yet the apparent attractiveness of the secondary market has yet to entice more investors, notably lessors, despite efforts by Bombardier. "The 50-seat market just isn't of interest," says John McMahon, chief of Irish start-up Genesis Lease, a company with close ties to GECAS and the owner of two Embraer E-Jets. "We really want to look at the larger end of the regional jet sector."

The first aircraft certified for ethanol operations, Embraer’s Ipanema, is quite a nifty sight to behold. During a tour of Embraer’s Sao Jose dos Campos headquarters and assembly facility last week, the company’s executives were generous enough to give a motley crew of journalists an up-close-and-personal look at the green machine, an agricultural aircraft that was wholly designed in Brazil.

The original low-wing Ipanema entered service in 1973, but the ethanol-fuelled version – of which there are now 196 in operation - was certified well over 30 years later. Of this amount, a total 41 Ipanemas constitute new-build aircraft and 155 are converted aircraft.

The Botucatu facility in Sao Paulo that manufactures the Ipanema is being expanded.

Okay, so can the ethanol used in general aviation operations be used for jets? Sorry. No. The mass and volumetric heats of combustion do not meet the needs of jet aircraft. It’s a low-speed bird after all. But a cool one nonetheless! Check out the latest official shots from Embraer, and a little personal one of a Kate Winslet-wannabe off the coast of Islabela in Brazil. And then read on for Embraer’s take on the biofuels that just might work for jets.

Embraer’s director of strategies and technologies for the environment, Graciliano Campos, says three sources for biofuel are showing the most promise to Embraer – Babassu, derived from a palm tree in Brazil; Jathropa, commonly referred to as the ‘plague’ due to the ease at which it grows; and algae.

The last of these, algae is “150 times more productive than any other biomass area” and has the potential to “win the technology race”, says Campos.

He confirms that Embraer is involved in all three projects. The company this year is investing a total $250 million into development of technology and pre-competitive technology, which includes biofuel studies, he says.

Analysts, pundits, bloggers, journalists, unions and fellow airlines have all got something to say about the decision by Delta Air Lines to merge with Northwest Airlines, and the SkyTeam members’ promise not to initiate involuntary furloughs or close any of their hubs. But what do employees think? Do they buy it? Check out any aviation forum and you’ll see plenty of chat from the front lines. But if you’ve only got a few minutes to spare, and you’d like a little insight from a major US airline pilot, I suggest you read the following.

Steve, a Boeing 777 pilot who is not a spokesman for either company or their unions, says: “I'm a little bit surprised to see the Delta/Northwest deal come down. I think it's going to take at least three years for them to realize ANY benefit from the merger, and very possibly it's going to be a failure just like every other merger since deregulation, except for Delta/Western. I've been through three failed mergers in my career....what our brilliant managers do is keep the acquired carrier's most valuable asset-their employees-and dump everything else. Since TWA was a larger airline than Air Cal or Reno, it's just taking a little longer....

“As I see it, Delta/Northwest has about as little fleet commonality as you could get, the pilots are MILES apart on an integration concept or common contract, heavily unionized Northwest has little common ground with largely non-union Delta, and all the key cities want the combined carrier to continue having a huge presence in their locale. Will they keep two majors hubs open in Detroit and Cincinnati? I’d think not. Last summer I flew up to Grand Rapids. We and United had Eagle jets to Chicago, NW had Eagle jets to MSP and DET, and Delta had Eagle jets to CVG and ATL. I’d bet $100 that one of those won't be operating by a year from now...”

Copyright Joe Walker

Delta and Northwest do have a few things in common. Pilot deals reached a few years ago by the Air Line Pilots Association (ALPA) at both carriers firmly broke through the 50-seat barrier that once consigned their regional affiliates to operate small, less economical aircraft. The benchmark inched up to the 76-seat level. Stay with me here; I'm not heading off on a complete tangent. If Delta and Northwest complete their merger, will we see lots more 76-seaters operated by the "new" Delta (Northwest unit Compass Airlines, for one, is having a good time with E-Jets). Will Northwest replace its DC-9s with more of these birds?

In an article written last week from Embraer’s Sao Paulo headquarters, with the headline “Non-traditional markets for 50-seaters help offset North American decline", I referred to scope clauses as “artificial” constraints.

Not so, insists my new pilot friend. “Contrary to popular belief, there is NOTHING artificial or restrictive about a scope clause in a labour contract. Without a scope clause, management would be free to outsource any and all flying with any and all airplanes, to the direct detriment of all the pilots on the property,” he says.

“Airline managements have not been shy about outsourcing, all around the world. Delta, for example, outsourced their entire major maintenance, laid off 9,000 mechanics, and the ‘Jet Base’ at the east end of Atlanta Hartsfield now has about 25 mechanics per shift working there. And managers wonder why workers feel like they need a union.”

But does scope really let the market play out? Why do pilots deserve any more job protection than the rest of us? Any journalist today will tell you just how few are the protections in a world of bogging mania. The pilot argument, of course, is that mainline carriers sustain regionals, which on their ownsome/lonesome (think Independence Air) cannot survive.

“As far as US Regionals are concerned, the 50-seat and smaller airplanes are not economically viable as a stand-alone entity because of very high seat-mile costs. The only way a 50-seat or smaller jet works is if they are heavily subsidized by a mainline carrier. And the folly is that airline management continues to write HUGE monthly checks to regional carriers for expensive lift specifically for the purpose of trying to weaken their pilot's union,” says Steve.

“If an economically viable small jet airplane should someday come along, there is no restriction whatsoever on any person starting their own airline and flying them anywhere in the country save a small number of slot-restricted airports. And at those, the Government's long-standing position has been to take slots away from incumbents to allow start-ups to operate.”

Think of it another way, urges our pilot friend. “Let's say your boss hires another person at half your salary and gives that person all the story assignments. Then you get laid off due to lack of work. And you don't have a scope clause.”

Hmmmm. On second thought, can I have a scope clause, please?

Not so long ago, I received a note in my inbox informing me and the rest of the Flight staff that 30-year veteran Graham Warwick was leaving the company to take on a new challenge. Seeing the news in writing was rather jarring for me. I’ve had the pleasure of working with Graham for nine years (several of those at Flight’s US branch in DC), and I wasn’t quite sure how to react. So I didn’t. No message of "congratulations" or “good luck” was sent. No query as to why he’d leave was made. How do you say in an email that you are in complete awe of a person?

“I work with Graham Warwick of Flight.” I’ve said those words so many times, in explanation and in boast. Last week I had a chance to tell Graham in person how I feel and share a few drinks with the Flight team. It was a magical night - one that will not be forgotten. Who could forget? The Woracle was in attendance. Second nature to me now…

On 31 March 2004 Mexicana won the distinction of becoming the first operator to voluntarily drop out of the Star Alliance. The carrier’s termination from the grouping came after Mexciana decided to end its long-time codeshare agreement with Star member United Airlines.

Fast-forward a few years, and the big question about where Mexicana would end up has been answered. Yesterday, the carrier accepted a formal invitation to join the Oneworld alliance.

Due to this development, I'm happy to announce that the Runway-Girlfriend-For-A-Day award goes to mister “anonymous” blog poster, who on 12 March made a comment that if he was a bookie, he’d be “slashing the odds on Mexicana” to join Oneworld.

Please step forward and accept your prize. I’ve got a load of laundry with your name on it.

While you’re folding neatly, I’d like to ask you about Brazilian carrier TAM (which flew my butt from JFK to Sao Paulo on Tuesday). I arrived at JFK from Philadelphia on a Bombardier CRJ200 operated by Delta subsidiary Comair. I didn’t need to re-check my bag at JFK through to Sao Paulo. Delta had already done that for me at Philly through the magic of interlining. But an agent at the Philly desk – who will remain nameless as I forget his name - seemed to think that TAM has designs on joining SkyTeam.

So I ask you mister anonymous (and your friends), do you think TAM might join SkyTeam. What about Star? That grouping’s CEO Jaan Albrecht, while at an event in Istanbul to mark Turkish Airlines’ new membership into Star, hinted that TAM would soon be unveiled as the alliance’s latest member. Star’s members are forming bilateral partnerships with TAM, often a precursor to formal alliance membership.

Okay, so back to the Oneworld announcement. It was made yesterday during a ceremony in Los Angeles attended by CEO Manual Borja with his counterparts from all ten of Oneworld’s established member airlines. Mexicana’s subsidiary Click Mexicana will join at the same time, as an affiliate member.

Oneworld says the process will take between 12- and 18 months to complete. Iberia will assist the process as sponsor of Mexicana.

“Mexicana is now moving into the next phase of our development strategy. Joining the world's leading quality airline alliance will enable Mexicana to build on our excellent relationships with our established partners American Airlines and Iberia,” say Borja.

I had a great chat yesterday with Pratt & Whitney about the geared turbofan (GTF), which is really starting to look dressed to impress these days.

Pratt VP of next generation products Bob Saia told me that later this month executives will meet for a review with airlines, including a 15-member steering committee for the GTF.

The review comes just before the engine maker moves into formal engine design. "We will be in that design phase in the latter half of this year. We are very close to the end of that programme process. We are exactly on plan," says Saia.

“We have a lot of results now in the engine tests we’ve done but we really want to share that with them [the airlines] and get whatever feedback they give us, and we’re pretty close [with them] as we’ve had a lot of dialogue,” adds Saia.

Pratt's GTF has already been picked to power the MRJ and proposed CSeries. Japanese carrier All Nippon Airways recently placed a firm order for 15 GTF-powered MRJ90s with options for 10 more, representing the first order for the high bypass GTF. First delivery is scheduled for 2013.

On a side note, this photo (while in need of better resizing by moi) is one of very latest to be released by Pratt.

German designer and developer Qest recently announced it will bring to market a bi-directional aeronautical antenna to support Ku-band services and ensure it can “immediately” meet current requirements of satellite operators.

The news came about six months after the company unveiled a new airborne broadband antenna that can enable both Ku-band and L-band services. The hybrid concept will not be abandoned, assured Qest sales director Michael Stobinski in a recent interview with me. But the market “may not be ready for combined service”.

Ku-band is used for a fast downlink of large data quantities to the aircraft, while L-band serves as uplink channel and supplementary or fallback downlink channel. The original Qest offering “was the product we took to make our public appearance – at the World Airline Entertainment Association [conference and exhibition] in Toronto”, says Stobinski.

From an efficiency standpoint, a hybrid offering makes sense as it does not stretch the system. But after a number of talks with different market players, it was clear the market may not be ready for such an offering because of the current infrastructure design, says the Qest executive.

Rather, Qest is seeing strong demand – especially in North America – for a pure Ku-band offering. “We have started development,” says Stobinski. “We believe at a certain point in time, the green light, it would need nine to 12 months to get the product ready.”

What is this event he calls the green light? “I’ve got the feeling some suppliers developed antenna, [and] then went out to the market and said 'here'. Qest is taking another approach. We don’t develop our product for certain readiness. Basically, to have a functional system in Ku-band, everybody has to be involved in the development (antenna makers, platform manufacturers, satellite operators). This is something the market is learning.”

Qest is talking to all major IFE players. It is not yet in a position to make retro-announcements but demand in North America, as well as Europe, is being seen. “I’m pretty much convinced the Europe will catch up and start thinking about Ku-band, and bring some new thoughts on a combined antenna," says Stobinski.

Meanwhile, Stobinski “absolutely” sees hybrid happening eventually as airlines “start to make up their minds and see the advantages form a technical point of view and a commercial point of view”.

“We think L-band alone would not be enough. Certainly, for SMS, it’s perfect and in terms of cost of installation, it’s perfect. Lots of airlines are flying with L-band, but here at Qest, we do not believe L-band will be enough.”

In the past the US FAA had to release an emergency airworthiness directive (AD) or even a really interesting standard AD in order for press to get jump-up-and-down excited about the agency’s routine recommendations to airlines, operators, manufacturers and parts suppliers about aircraft maintenance and the like. But now, at a time when maintenance practices are under significant regulatory scrutiny in the USA, a regular ole unapproved parts notification (UPN) from a local Flight Standards District Office (FSDO) gains high-profile notice and the story can unfold quite fiercely from there.

Take, for example, yesterday’s saga, which is still playing out today. The Wall Street Journal reported that the FAA has found evidence an AAR maintenance facility in Miami improperly maintained and approved for return to service Boeing 707, 747, 757, and 767 series main landing gear (MLG) truck beams. Before we delve into the details, let’s remember that about ten of these types of notices are issued to various firms per year, and generally go fairly unnoticed.

In the latest UPN, AAR Landing Gear Services’ application of Boeing “color 707 gray gloss enamel” inside the surface area of the truck beams is being called to task. The FAA also says AAR Landing Gear Services failed to document – and approved for return-to-service - Boeing 757s with the application of the enamel inside the surface area of the truck beams, contrary to manuals and an alert service bulletin directed by a 2001 airworthiness directive (AD).

The actions of that AD, applicable to certain 757-200 and -300 series airplanes, were intended to prevent stress corrosion cracking, leading to fracture of a MLG truck beam during ground operations, which could result in either reduced controllability of the airplane or a fire, according to AD.

Here is a pretty comprehensive report from Danish authorities on what happens when corrosion cracking occurs - from its report on a 2001 incident.

But to be clear, while the FAA is encouraging inspections, the agency’s UPN does not require taking any corrective action nor does it change the time a landing gear with painted interior surfaces can remain in service nor does it require the removal of any landing gear from service, notes AAR.

Even the airline that experienced a recent landing gear failure as a consequence of a truck beam fracture - while the 757 was parked - seems to be downplaying the event. “We had a truck beam fracture in the landing gear and the aircraft settled," says US Airways.

"As a result, we inspected five other 757s that had gear work performed by the same vendor, and we replaced some of the truck beams based on the indicators we were using."
“However none of the other aircraft ended up having a similar problem. And we (as well as the rest of the industry) did receive an Unapproved Parts Notice from the FAA but since we already inspected and replaced the truck beams we’re already in compliance.”

So what does this all mean to AAR, which was on a very-recent high after reporting double-digit sales growth for the 2008 fiscal third quarter in all four of the company’s sectors. Is the stock now undervalued and is it time to buy?

The photo of the truck beam failure above is NOT a photo of the cited US Airways 757 incident, but rather one of the many items you can find in that Danish report.