More Airbus Orders; RAM Selects 787

Philippine flag carrier Philippine Airlines (PAL) signed an agreement with Airbus to buy and lease 18 A320 aircraft - nine brand-new and options for five more at an estimated cost of 840 million US. PAL will also lease two brand-new A320s and two A319s from GECAS, and deliveries will begin the second half of 2006 to 2008. PAL has needed to update its aging fleet for a long time, so this order is good for them. Useless trivia fact: PAL became the first airline to order Airbus - back in 1978. This is important for Airbus, because PAL's short-haul fleet has been pretty much Boeing.

Also Airbus has announced an order from Germanwings, a German low-cost carrier:

Germanwings, the rapidly-expanding Cologne-based low-cost carrier (LCC), has signed a contract for 18 Airbus A319s. The order follows an earlier announcement of the airline’s decision to further expand its fleet of Airbus single-aisle aircraft. The new aircraft are the first that Germanwings has acquired directly from Airbus, while the airline already operates a fleet of 19 A319s and three A320s.

The new A319s for Germanwings will feature a comfortable single-class cabin layout for a maximum of 156 passengers. The aircraft will be powered by V2500 engines from International Aero Engines. Germanwings will fly the aircraft from its bases in Berlin, Stuttgart and Hamburg as well as from the main hub in Cologne to more than 40 destinations all over Europe.

On the other side of the Atlantic, Boeing has announced that Royal Air Maroc (RAM) ordered four 787 Dreamliners with an option for one more. RAM will use them on North American, Middle Eastern, and African routes. RAM is, by the way, a loyal Boeing customer.

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Finnair orders 12 Airbus Aircraft

Today, Finnair, announced that they are going to be ordering 12 new aircraft from Airbus. The ordes consists of 9 A350-900's and 3 A340-300's. They also have an option for 4 additional A350's These aircraft are intended to evntually replace the MD-11 in Finnair's long-haul fleet, by 2012. Finnair is expecting that the A350's will be delivered between 2011 and 2013. Finnair hopes to continue to its fleet modernization through this aquisition. According to Finnair, the A350 will use only 66% of the fuel that the MD-11 is currently using. By ordering the A350 and the A340, Finnair will increase the commonality with the rest of their modern fleet of A320's

Personally, I think that the A350 will be a wonderful aircraft and will serve them for years to come. Unfortunatly, one of the true beauties of the skies, the MD-11 will have to be sacrificed because of this. Finnair is one of the last Western airlines to operate the MD-11 in commercial service. The thing that I find most interesting about this order is the A340's. I personally think that they must have been given a really good deal on the A340's, because if they are trying to conserve fuel, then, I think that the A330-300, with two engines would have been the more economical choice.

~MD-11

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Alliance Update

It's time for the bi-monthly Airline Alliance Update, so here goes:

Star Alliance has added zero members to the group.

SkyTeam celebrated its 5th anniversary - but like Star, no new members.

Oneworld announced recently that JAL (Japan Air Lines) will become a member. When fully inducted, it will become the alliance's largest airline in terms of group revenues. It will form the 'Oneworld Big Three' with American Airlines and British Airways. Royal Jordanian will be inducted in late 2006/early 2007. More recently, Hungarian's MALEV was invited to join, and that will be completed in about fifteen months.

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A320: Made In China

Like MD-11 has already pointed out, there is the remote possibilty of Airbus opening a factory in China. This facility will produce Airbus' popular A320 aircraft.

Chinese Primier Wen Jiabao was in Toulouse the other day, being shown the A380 by the bigwigs from Airbus. He also signed an agreement to consider the A320 factory. As of now, Airbuses are built in Europe: the A320, A330 and A340 in Toulouse, and the A319 and A321 in Hamburg, Germany. And Airbus has told China that it will allow it to build approximately 5% of the fuselage for the new A350.

Here's what MD-11 said:

I personally do not think that this is going to happen, because of how much the French and German governments own of Airbus.

I, however, believe that the Europeans would be glad to ink this deal with the Chinese. France, for one, has been pushing for the repeal of EU embargoes placed on China for civil rights violations. Germany has agreed with this too. And everybody knows that in ten or twenty years from now, China will be where the money is - if not a lot sooner.

Boeing knows this too, and it's been racking up impressive orders from the Chinese for 737s. Cathay Pacific also ordered the 777 recently as well. If Airbus wants to keep up with Boeing, they're going to have to cozy up to the Chinese. And a good way to do this is to cut a deal like this with them. If Airbus - and the French and German governments - get their foot in the door in China before Boeing - and the United States - do, the implications could be severe for the Americans.

Bottom line: I believe Airbus will get the green light to do this. It's nothing really big, too - just 5% of the fuselage of the A350 - so workers in Europe shouldn't get too mad. But there's just one problem with the A320 factory: they might not be able to sell the Chinese-built A320s to the United States. I don't know what the policy is on this, and if anybody does know, I'd appreciate it if they'd tell me. But I'm sure that the Bush Administration wouldn't be too keen on seeing United or jetBlue take delivery of Chinese-made aircraft, especially when Bush is trying to turn around the US' whopping trade deficit with China.

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Airbus in China

There have been rumors that Airbus is looking into opening a factory in China, as well as an article by Bloomberg about the issue. This factory would produce the A320 series of aircraft. I think that this is partially due to a large backlog on the A320's as well as Airbus wanting to win a lot of the orders in the growing Chinese airline industry, which have recently been going to Boeing for their 737NG product. I personally do not think that this is going to happen, because of how much the French and German governments own of Airbus.

~MD-11

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Aeroflot To Create Affiliate In St. Petersburg

Anyone who follows this will know that I like to follow the Russian aviation industry. If you don't know this already, you know it now. That said, Aeroflot Russian Airlines announced today that it will set up an affiliate in St. Petersburg.

The move will "strengthen its positions on the international and domestic markets", according to its Board of Directors.

Air traffic at St. Petersburg-Pulkovo Airport (Аэропорт Пулково) is second only to Moscow. No idea as to what the new airline will be called. But Aeroflot has a measly percentage of domestic traffic - not measly, maybe, but not as big as you'd think, somewhere around 11% - so perhaps it wants to regain some of the prestige of the Soviet days. We'll see.

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Bleeding After Bankruptcy

It's my guess that Grinstein at Delta and Steenland at Northwest haven't been feeling too well as of late. Their airlines are bleeding red ink - especially at Delta, where the situation is critical. They put their airlines into Chapter 11 of the U.S. Bankruptcy Code on the exact same day. Perhaps they thought Chapter 11 would solve some of their problems. Perhaps they looked at United, which filed in December 2002 and is going to emerge soon. UAL projects $1 billion in profits by 2007 - which is optimistic at best in my opinion, but that's another post.

But interestingly enough, it may be the fact that it avoided bankruptcy a year ago that is hurting it so much today. In October 2004, management at Delta won over $1 billion in pilot pay cuts and an additional $1 billion in other costs. But with its losses now totaling $11 billion since 2001, things are going to have to change fast, and waiting a year might turn out to be too long. Things get worse, too. Its pilots are threatening to walk the picket lines, and they've learned lessons from United's trip through bankruptcy, where management in Chicago squeezed out a ton of concessions.

Delta has three ways out of this mess. The first is to do what United did - be nice to the unions. Or you can do the 'screw them' approach, like Northwest, which is to impose pay cuts. The final way is to continue what it's doing, and go under in a bit. But if the alarm bells aren't ringing in Atlanta, they should be now. Delta has lost $1.1 billion in bankruptcy, and that's been in the last two months. Someone over there's got to wake up and smell the jet fuel, so to speak, which is also dragging down income. If Delta doesn't change, they're likely to go under quick. |B762

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