Recently in Fleet Category

Air New Zealand is now toeing Boeing's line about the 787-9 delivery schedule after being put in the docket by the airframer for issuing harsh words about the embattled aircraft programme.

To recap, last week in Sydney Air NZ chief financial officer Rob McDonald said his carrier expected to deploy the 787-9, for which it is the launch customer, in 2014, some 2-3 years later than promised. "It would be an understatement to say we are frustrated and disappointed," McDonald said.

Boeing had last advised ANZ, the launch customer of the stretched 787, that it would receive its first of eight aircraft in late 2013 or early 2014. An Air NZ spokesman said that date slipped to an undetermined period in 2014 that it is still in discussions with Boeing about. The year 2014 "is as specific as it gets", the spokesman said.

McDonald said Air NZ was "in discussion" about delivery dates and compensation. He remarked: "We always seem to be having discussions."

Earlier this week news trickled out of Boeing refuting Air NZ's remarks. Boeing's remarks reached a climax during the company's quarterly earnings call, although according to the call's transcript Boeing chief executive Jim McNerney was from confident about the matter:

I don't know where this 787-9 rumor. I guess there was -- I guess in New Zealand there was a -- just like in maybe the same press that you're looking at, there was a comment that there was a worry that the 787-9 was pushed into 2014. I'm not sure where that came from. But our ramp plans on the 787-9 are in place, it's going well....So the 787-9, just to refresh, the 787-9, our guidance is end of '13, okay? That's a delivery. Air New Zealand is one of the very first customers to get the 787-9. And it takes a while to induct these things in the service, so I don't know if whether there's a disconnect between when we deliver it and the time he [McDonald] takes to get in into the fleet or not. I don't know what he meant by that. But we have not changed our schedule.

Today an Air NZ spokesman dispelled Boeing's suggestion of a "disconnect" between delivery and entry into service dates, saying "Entry into service is normally a few days after delivery."

As for a delivery date, the same spokesman who said 2014 was "as specific as it gets" had a curiously similar message to Boeing's. "We've always been expecting delivery in late 2013 or early 2014. It hasn't changed."
 
But then he adds, "Our expectations are early 2014 for delivery."

So there you go. Air New Zealand will gladly reiterate Boeing's statement about receiving its first 787-9 in 2013 or 2014. But Air NZ does not believe it.

Air New Zealand's Boeing 747-400 fleet is getting a stay of execution thanks to a fresh delay to the 787-9.

The 747 fleet was due to be retired by the end of next year but will now remain in service until the carrier's first 787-9 is delivered sometime in 2014, chief financial officer Rob McDonald said.

Air NZ will keep an unspecified number of its current five 747-400s, as well as 767-300ERs.

While ANZ would prefer to retire both types, McDonald said keeping the 767 is more ideal. "Our 767 fleet is very sound and relatively low-cost and performs its mission really well."
In comparison to ANZ's 777-300ER, McDonald said the 747 uses 30% more fuel to carry approximately the same number of passengers but 40% less cargo.

Despite that, McDonald is adamant keeping the 747s and 767s is appropriate.
"It's better to do that and wait for the 787 than get a lot more aircraft that aren't as suitable as the 787s," he said. "You might get an early lead for a couple of years but you might not have the right plane in 20 years."

Read more here on Air New Zealand's growth strategy and mitigation plans for 787 delays.

Qantas expects 2018 to be the latest year by which it will retire its 26-strong Boeing 767 fleet.

The indicative timing was the only forward projection of the airline's fleet disclosed to a recent Macquarie conference.

A Qantas spokesman says the carrier could look to retire its large-capacity domestic workhorse earlier than 2018 if deliveries of 787 Dreamliners and other new aircraft hold up.

Qantas has 50 787 aircraft on order, 25 of which are currently destined for Qantas mainline and the rest for Jetstar. The 787s are expected to largely replace Qantas's 767 fleet, although chief executive Alan Joyce has threatened aircraft could be cancelled--but that appears to be hot air rather than a real possibility.

Qantas currently operates 26 767-300ER aircraft, 10 of which Qantas says it leases while it owns the remaining 16. Seven aircraft were formerly with British Airways and have RB211 engines while the other 19 frames have CF6 powerplants, according to Flightglobal's ACAS database.

The oldest frame currently in service, VH-OGB, was built in 1988 while the newest, VH-OGV, was built in 2000, according to ACAS. All together two frames were manufactured in the late 1980s, seven from the mid 1990s until 2000, and the rest in the early 1990s.

Globally, American Airlines, British Airways, Delta, and United operate 767-300ER fleets of similar vintage. Recent orders for new passenger 767-300ER aircraft have come from ANA, Azerbaijan Airlines, LAN, and an unidentified customer.

By 2018 Qantas also plans to operate 20 Airbus A380s, 9 747-400s, 20 A330s, and 74 737-800s while Jetstar is expected to operate 15 787s and approximately 100 A320s. Note these figures were prior to Qantas announcing last month a trimming of its short-haul fleet in the near future.

Although the Qantas Group's domestic network--mainline and Jetstar--is not as glamorous as its international network, it is profitable and, along with the frequent flyer programme, props up Qantas's loss-making international network. It thus seems especially concerning when Qantas announces, as it did today, that it will curtail Qantas and Jetstar's domestic growth from 8% to 5.5%, cancel or defer 12 aircraft between now and end FY2012, and reduce the number of leased aircraft next financial year.

But Qantas has been brought back to the reality of another domestic downturn and having an overly ambitious expansion plan. Although Virgin Australia in May 2010 downgraded its financial outlook on account of a weakening leisure market, Qantas this February pressed ahead with aircraft acquisitions, despite in the previous few months experiencing earthquakes in New Zealand, cyclones in Queensland, and floods elsewhere in Australia.

Qantas announced that the end of FY2013 Qantas mainline would lease five additional Boeing 737-800 aircraft and extend leases on a further two. Jetstar saw even more growth with new leases on 10 A320s and lease extensions on 11 A320s (plus a new A330-200 for its international division).

The disparity between Qantas and Virgin was further evidenced a month later when Virgin announced it would post an annual loss. In the same market, how could one airline be signing for aircraft while another expects a loss of A$30-80m? Virgin is incurring costs as part of its business transformation, but Qantas was too bullish on a resilient market while also banking on filling the void Virgin would create by going after a greater share of the corporate market.

Qantas's reckoning appears to have been that Virgin's cost would rise with its transformation, which would make its leisure seats more expensive and thus ripe for Jetstar to capture while Virgin's premium product would also see costs increase, making Qantas's business product more viable to Virgin passengers.

As Qantas chief executive Alan Joyce said when announcing the leases in February: "We see great opportunities for Jetstar, particularly in the domestic market as our competition changes their focus. It is an opportunity Jetstar is seizing."

It has so far ended up being a non-opportunity. Virgin's simplified fare structure has relatively maintained fares, although they could rise--creating the opportunity Qantas saw--as Virgin keeps spending and settles in to its new position once the new brand launch excitement dies down. Virgin's business transformation, as detailed to a Macquarie investor conference, calls for the airline to re-position itself this and next financial year and then start to achieve better yields in the 2012-2013 financial years timeframe.

Trimming overly-ambitious growth is better than cutting moderate growth, which could explain Qantas emphasizing in a statement its "strong funding position": cash balance over A$3b, and, Qantas says, being the highest-rated airline in the world with a BBB/Baa2 investment grade rating. Qantas all but says it will still be fine after trimming growth.

The downturn is not confined to Qantas and Virgin. Tiger Airways during its annual results conference last month announced it would maintain capacity in Australia this year as its Australian division incurred a loss. "That was primarily due to the weather events that we saw in Australia from December through February," chief executive Tony Davis remarked at the time. But since then, Tiger's decision to axe Australian routes show it too is seeing a downturn, and not just a one-off bad period from natural disasters.

To add context to the Qantas Group's figure of now taking delivery of 34 aircraft in FY2012 instead of the 43 previously planned, in February Qantas expected to take delivery of six 737-800s by the end of FY2011 and a further 15 737-800s in FY2012, when Jetstar would also take delivery of 15 A320s.

Finally, Qantas trimming its domestic fleet is noteworthy given Joyce's comments last week Qantas would consider cutting its international fleet, whatever merit the proposition has.

The prospect of Qantas culling kangaroos in the form of new aircraft deliveries warrants a closer look.

As Qantas chief executive Alan Joyce told The Australian, "everything is on the table" when it comes to reviewing the airline's loss-making international operations, including aircraft deliveries. "We have to review the capital we are putting into it because the business is not performing."

Joyce makes clear it is aircraft destined for its international operation that could face the axe. So Qantas's outstanding order for Boeing 737-800 aircraft, 23 according to Flightglobal's ACAS database, are safe, as to be expected since the carrier is selling its 737-400 fleet. The 44 A320s on order for Jetstar are also safe.

That leaves the A380 and 787 deliveries on the block. But Joyce told the Australian the carrier will take fully delivery of its 20-planned A380 fleet, so the remaining 10 A380s face no risk. As for the Group's 787s, the first trove of deliveries, 787-8s, will go to Jetstar from 2012. As 787-9s come off the Everett and/or Charleston lines around 2014, they will be delivered to Qantas and Jetstar, who will then send its lower-performing 787-8s back to Qantas for domestic use where payload and range restrictions are not as significant.

Jetstar desperately needs the 787s to profitably open up European routes from Singapore since it faces competition from AirAsia X, who is looking at serving more European cities from late next year, and Singapore Airlines' new LCC. It will also need the 787-9's better performance, so it is implausible to see cancellations on the initial batch. While later 787s could theoretically be cancelled, as Qantas did in 2009, one hopes that by 2014 Qantas has its international operation in order and needs the aircraft. If not, Qantas would still be pressed to relinquish undoubtedly a steal of a sale: a 787 for less than US$76 million.

So Qantas cutting aircraft? Unlikely.

Hot air to bring the unions to table? Likely.

American Airlines says its suboptimal long-haul fleet and pilot contract restrictions prohibit it flying to Australia.

The oneworld partner discussed its network strategy in its application to the US Department of Transportation for approval of a joint business agreement with Qantas.

AA says the six Boeing 777-300ER aircraft it has on order (thrice the number it had on the books in January) "are not yet committed to particular routes" but "given that American is currently short on long range aircraft to serve its existing routes, American will be carefully considering where these assets will be deployed and how they will be configured".

Furthermore, AA says:

the terms of American's current collective bargaining agreement with the Allied Pilots Association would not permit service to Australia/New Zealand. That agreement contains a 14:30 flight time limitation. According to block times published by Qantas, service from Sydney to Los Angeles has an elapsed time of 14:35 to 15:00 depending on equipment type flown. Service from Sydney to Dallas/Fort Worth has an elapsed time of 15:25.

But as colleague Dan Webb points out on Things in Sky, AA can request exemptions from its pilots union as their agreement "contains language governing extended long-haul flying...on a city pair-specific basis only, which means airline management must secure an agreement with APA".

AA secured such an exemption for its Dallas-Beijing proposal (which did not materialize), and furthermore, as Dan points out, AA's Chicago-Delhi route has a block time of 14 hours and 40 minutes, five minutes longer than the 14:35 Qantas block time cited.

Regulators say permission to coordinate business, be it this proposed JBA or other anti-trust immunity cases, should be granted to carriers who show a commitment to the respective market and will bring public benefit. While there may be some benefit, is AA really showing its best commitment by saying new, range-opening aircraft are better used elsewhere and failing to disclose the full extent of its agreement with pilots?

The carriers are trying to brush off the notion of AA not serving Australia, but it is a significant matter and needs close scrutinizing by the DOT and ACCC.

Qantas and AA previously applied to the ACCC in an application that made it explicitly clear, but did not explain why, American Airlines would not enter the trans-Pacific route--sometimes saying so twice on one page. The application concluded the two "are not true competitors on the these routes and there can be no detriment to competition resulting from the implementation of the Proposed JBA."

Approval for the JBA, which targets schedule and fare coordination, would grant AA not just advantages of codesharing but also many of the benefits of serving the route without actually flying it. That seems to give AA no reason to enter the market, which invalidates their "no detriment" argument about the JBA.

...Qantas is only interested in the freighter versions.

As we reported last week on Air Transport Intelligence:

Qantas is mulling a plan to lease Boeing 747-8 or 777-200LR freighters, according to sources familiar with the matter.

The lease would likely be for a single-digit number of aircraft and will be announced in the coming months. It is unlikely to signal interest in passenger variants of the two aircraft.

The carrier is understood not to be interested in the Airbus A330-200 freighter.

"We are always looking at potential fleet options," a Qantas spokesman says, declining to comment further.

Qantas currently wet-leases three 747-400 freighter aircraft from Atlas Air, from whom it could call on for additional capacity.

"We have placed our first three deliveries with British Airways and are in talks with a number of additional existing and potential new customers regarding these attractive, next-generation freighters," an Atlas Air spokeswoman says. "We have received a great deal of interest in these game-changing aircraft from these parties, and we look forward to announcing the placement of aircraft with them at the appropriate time."

Qantas has seen strong freight volumes and yields, particularly on the carrier's five-weekly service between China and the United States.

Perhaps on the mind of aircraft spotters is what livery the potential new freighters will sport. They may have the same partial Qantas livery that the group's new 767 freighter sports. Chief executive Alan Joyce explained of the 767 freighter's livery: "Because it's a separate company, we decided just to have it as a white tail with the Qantas logo...we haven't had any freighters before painted in Qantas colours so we wanted to have something as a step towards Qantas but not going to the same passenger scheme."

You can see some attempted Qantas 747-8F mock-ups here.

While perusing Air New Zealand's entertainment booklet on my way back from New Zealand last week to visit the carrier's new Aviation Institute, I saw this page--and had a revelation.

This humble graphic listing the carrier's fleet offers the most simplistic explanation to date of why the Boeing 777-300ER aircraft is perfect for Air New Zealand but not Qantas, a statement heretical to the chorus of outsiders insisting Qantas should have ordered the triple-seven.

On top is the old and four-engined 747-400. Below is Air NZ's replacement for it, the new and twin-engined 777-300ER. What the 747's two extra engines and 12% higher fuel burn, by Air NZ's calculation, primarily offer is a mere 41 extra seats.

Note that since the 777-300ER has a higher proportion of premium seats (28%) than the 747 (23%), if the 747's configuration was adjusted to match the -300ER, economy seats would be replaced with a smaller proportion of premium seats, thus decreasing overall seat count (by about 15 seats, my back of envelope calculation suggests) and bringing the 747's capacity even closer to the 777-300ER's.

So why is the 777-300ER not right for Qantas? For Air NZ, the 777-300ER is the largest aircraft they need going forward. Qantas, however, needs more capacity. Enter the A380, an aircraft Qantas has consistently filled to Los Angeles, Singapore, and London. Offering the 777-300ER, an aircraft with fewer seats, on key and slot-restricted routes is not justified.

Then enters the argument the 777 could serve secondary Qantas routes, such as Australia to Asia and from Asia to smaller European cities. But there the 777 is too much aircraft. The mainland Chinese carriers, as well as Cathay Pacific, primarily operate the A330 into Australia. Soon Malaysia Airlines will start replacing the 777 on Australian routes with the A330 (a move a few years behind AirAsia X).

Even better than using the A330 instead of the 777 would be the 787, which Qantas would have been doing by now if it were not for programme delays.

So while perfect for Air NZ, the 777 for Qantas is either too little or too much, and not just right.

Although the Qantas Group operates 21 Boeing 737-400 aircraft, it only needs to inspect four of those aircraft for fatigue cracks following an airworthiness directive issued after a Southwest 737-300 developed a five foot hole in-flight. (Note: no Qantas aircraft have been grounded.) Why does Qantas only have to inspect four aircraft?

The US Federal Aviation Administration airworthiness directive, which has also been issued by CASA, calls for inspections on 737-300/400/500 classic aircraft that meet specific criteria outlined in a Boeing service bulletin:

1. The airframe is line number 2553 through 3132, delivered between 1993 and 2000
   
2. The airframe has more than 30,000 cycles
   

Boeing has identified 175 such aircraft worldwide.

Five Qantas 737-400 aircraft have affected line numbers. Of those five, VH-TJU and -TJW have exceeded 30,000 cycles, according to Flightglobal's ACAS database. (Update: a Qantas spokeswoman says she believes only one aircraft has exceeded 30,000 cycles). Two additional aircraft, -TJX and -TJY are just below 30,000 cycles. The fifth, -TJZ, is in storage. Jetconnect aircraft are not affected.

Qantas aircraft with 30-35,000 cycles must be inspected within the FAA airworthiness directive's more lenient 20 day period. Affected aircraft with over 35,000 cycles must be inspected within 5 days. Those with fewer than 30,000 cycles must be inspected between the sooner of 20 days from the directive or before 30,000 cycles are accumulated.

Qantas' four 737-400 aircraft in service average approximately 5.2 cycles a day, according to calculations from ACAS data.

Qantas does not expect any service disruptions resulting from the inspections.