Obama ditches “Air Obama” for American Airlines’ MD-80

Barack Obama, the President-elect for USA, traded his “Air Obama” or “O-Force One” (Boeing 757) that was used during the campaign for a chartered American Airlines Boeing Super-80 or MD-80. The aircraft was recently used to fly him from Chicago to Washington DC for his White House meetings.

Great advertisement for American Airlines

From ABC –

American won the round-trip charter contract in a competitive bidding
process done through a broker, according to airline spokesperson Mary
Frances Fagan. “We presented price package based on host of factors including type of
aircraft, length of time the airplane was needed, where the plane was
based, number of crew members involved, catering, fuel costs,” said
Fagan.American Airlines flight personnel staffed the cockpit and the cabin
for the trip to Washington and back to Chicago. Michelle Obama, who
accompanied the president-elect to the White House on Monday, flew
separately, according to staff members.

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V Australia postpones Launch

V Australia, Virgin Blue’s long-haul offshoot, was supposed to launch its service from Sydney to Los Angeles on December 15th, but due to the strike at Boeing headquarters has forced the launch until February of next year!

The airline has suspended advanced sale of tickets for travel December 15 2008 to February 28th 2009.

The strike is very unfortunate! The way the airlines work is that they use the delivery date for new airplanes to add new flights and sell tickets in advance. Any delay in delivery date means loss of revenue for the airlines. The aircraft manufacturer might have to pay delay costs to the airlines (depends on the contract). This seems to be a big opportunity for Airbus (Airbus had problems with A380 and A350 deliveries which now seem to be on track).  

From Herald Sun -

Virgin Blue
said Boeing had advised it of the delay and said it cannot predict the
duration of the dispute at its Seattle plant and therefore could not
guarantee the delivery date of V Australia’s launch aircraft.
V Australia has three Boeing 777-300ER aircraft in the advanced stage production at the plant.
Virgin
Blue said it had a revised the V Australia launch date and expects its
offshoot to commence services on February 28, 2009.

V Australia’s Executive GM Scott Swift said – (from here)

In a letter to passengers with tickets booked, V Australia executive GM Scott Swift said the carrier was “very sorry to have to tell you” of the deferred launch.

“Boeing has advised us that it cannot predict the duration of the strike. It is in these circumstances that we feel we have no choice but to delay our V Australia launch and have nominated a revised V Australia launch date of 28 February 2009 to protect the interests of our Guests,” said Swift.

“We are one of a number of airlines impacted by the strike. V Australia has three Boeing 777-300ER aircraft in advanced production at the factory. The strike has no bearing on services operated by Virgin Blue, Pacific Blue or Polynesian Blue,” he said.

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Boeing vs Airbus reasons to strike on Business Week

BusinessWeek has an article today on the employee situations at Airbus and Boeing.

The article summary is such (please do read it with the interesting comments) -
There are two companies A and B

Company A

• Struggling Financially
• Average raise for employees this year – 1.5%
• Plans to eliminate 1 in 5 jobs

Company B

• Recently offered 11% raise over the next three years
• Bonus – $5000 +
• 14% boost in company payments to the pension plan

Company B is Boeing and Company A is Airbus, and on September 5th 2008, “members of Boeing’s biggest union walked off the job, halting production and throwing the timetable for the already late-to-market 787 Dreamliner into confusion.“

The reason Airbus is in financial problems is because of problems with delay in Airbus A350 and A380 delivery schedules. The same problems that Boeing is going to face in the near future due to 787 delivery schedule delays.

Further, the airline industry is supposed to incur billions of dollars of loses this year, so the future for the airplane manufacturer might look even worse.

I do understand that Boeing employees would have gone through multiple pay cuts in their early years but it is important to realize that the airline industry has changed forever, where it is almost impossible to have high margins and great pays.

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Merger Update: British Airways and Iberia Airlines in merger talks

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Higher oil prices have driven airlines to different solutions like capacity reduction, merger related synergies, airfare increase, charging for the usual freebies, etc.

British Airways and Spain’s flag carrier Iberia (or Iberia, Líneas Aéreas de España, S.A. ) are deep in merger talks with Iberia “have taken direct/indirect 10% stake in British rival”. The merger is backed by boards on both airlines and will create the third largest airline in Europe (after KLM-Air France and Lufthansa).

So, as usual, I set out to find how the combined entity would look. Please be aware that I do not account for possible merger related capacity reduction (or airplane retirement) and unforeseeable changes.

British Airways in BLUE and Iberia in RED -

• Headquartered – Waterside, Harmondsworth, UK and Madrid, Spain
• Destinations – 147 + 115 (+19 future) =252 (+19 future) - OVERLAP
• Frequent Flier Program – Executive Club, Premier + Iberia Plus = ?
• Alliance – Oneworld
• Hubs – London Heathrow Airport, London Gatwick Airport, Barajas Int’l Airport
  
• Fleet – Airbus A318, A319, A320, A321, A380-800*; Boeing 737, 757, 767, 747, 777, 787* + Airbus A319, A320, A321, A340; McDonnell Douglas MD-88
• Fleet Size – 235 (+62 orders) + 152 (+19 orders) =387 (+81 orders)
  
• Company Slogan – Upgrade to British Airways + With Iberia , you’re more = Upgrade with more???

Since, British Airways is a bigger airline, there might be a possible BA head over the combined airline. Willie Walsh as CEO???

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Middle East – Where airlines don’t care about saving money!

All over the world – in Europe, Asia*, Americas, Africa and Australia, airlines are struggling against rising fuel costs, trying to find opportunities to cut costs and make more money. But there is one region where fuel is not a concern and money is not an issue, the middle east. Airlines in middle east – Etihad, Qatar Airways, FlyDubai (startup airline by Emirates starting in 2009) and Emirates seem to be dropping billions to buy newer and bigger jets as seen at the Farnborough International Air Show.

The buy list for Etihad Airlines (orders worth $43 billion)

• 20 Airbus A320
• 25 Airbus A350 (with options)
• 10 Airbus 380 (options of 10 more)
• 35 Boeing 787 Dreamliners
• 10 Boeing 777

The buy list for FlyDubai (worth $3.78 billion)

• 54 Boeing 737-800

Though it does raise questions in minds, does these orders have a strategic value or are just crazy ambitions of these fast growing airlines? Does it really make sense?

From Business Week -

“Money is clearly no object for these guys. But where exactly are they
heading? You had to wonder when FlyDubai’s top managers, in response to
questions at a Farnborough press conference, said they didn’t know yet
what destinations they would serve or how their $4 billion aircraft
order would be financed. “We are developing plans,” FlyDubai Chief
Executive Ghaith al Ghaith said”
“Etihad’s goals are a bit clearer. As flag carrier for the United Arab
Emirates, it wants to create a global airline hub in Abu Dhabi to
jump-start growth and tourism there – just as neighboring Dubai has
done with its own airline Emirates. But can the region really support
two hubs less than 100 miles apart?”

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Jet Fuel: Greener Future Ahead?

Lufthansa, Europe’s second largest airline. has announced plans to mix biofuels with conventional jet kerosene as part of their environmental strategy.

Main points from their announcement -

• Lufthansa intends to use as much as 10% biofuel (made from non-food sources, not algae) by 2020.
• They also aim to cut carbon dioxide emissions per km flown by 25% by 2020

With the current market, by 2020 with a possible $1000+ per gallon, I am not sure if any commercial airline will survive. How about a nuclear power as currently used in space flights?

Current Initiatives on Alternative Fuels -

• Virgin Atlantic successfully flew a Boeing 747-400 (without passengers) from London to Amsterdam with 1 of the 4 fuel tanks filled with biofuel made of babassu pil and coconut oil. The test was done in partnership with – Boeing, General Electric and Imperium Renewables. (more read here)
• Airbus with Rolls-Royce staged a joint test on Feb 1st 2008 of a gas-to-liquid fuel on a Airbus A380.

Seems like a Boeing-GE (US) vs Airbus-Rolls Royce (EU) race with the whole world to benefit .

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Boeing – More Dreamliner Delays?

BusinessWeek has an article on the new delays.

• Boeing 787 Deliveries will not start until late 2009 (or later)
• The deliveries were already 10 months behind schedule
• Customers are unhappy, and are likely to start talks regarding financial compensations (including International Lease Finance Corporation, world’s largest aircraft lessor by value, with 74 plane orders, Qantas Airways with 65 orders, etc.)
• Airbus had got a lot of heat for their delays with A380 aircrafts.
• Problems attributed to “Assembly and Design Issues” – Being had to redesign the center wing box (critical part of the plane where wings are attached).

Personally, I think that if the delays keep growing, Boeing might have to bear a steeper loss, since all the early customers might ask for the revenue lost for the lost time. The airline schedules are mostly planned in advance around the new deliveries, and each loss means loss in potential revenue and other logistics with workforce trainings, etc.

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