Should AA order more 738s or wait for 737 replacement?

[WorldTraveler]

AA should definitely stay away from the A333's - they don't have the range for anything other than mid-US to western Europe. or JFK-Europe. US doesn't even use them for PHL-ATH because it would require weight restrictions pretty much all the time on the westbound. A fleet composed of 738/9's, 78X's and 777's would cover pretty much all the flying AA is likely to do other than something in the 90-130 seat category (assuming that 50-70 seat segment is operated by a RJ operator).

Jim

Jim (BoeingBoy),
do you realize that there will be more than 8 markets served by the 333 as of this summer that will be longer than 5000 miles and all have block times in at least one direction greater than 10.5 hrs in at least one direction. The longest will be LAX-NRT on DL which has a block time westbound of 11.45. Given that DL also has 332s and has operated them for years on LAXNRT, why would DL put a 333 on it only to have weight restrictions when they can operate a 332 which does not have weight restrictions? (KE will also be operated LAXICN on a 332 this year and the longest 332 flight by block time is QF's LAXAKL at 13.5 hrs) Further, DL has the highest density of seats on the 333 of any of the operators with flights over 5000 miles. DL has operated ATL-FCO for the past 2 years and sells the entire 298 seats. Even though LH has a lower seat config, they also have other aircraft that should not need to be weight restricted.
Here are the list of markets:
DL ATLFCO, KIXSEA, LAXNRT
LH FRASEA, MIAMUC
OZ ICNSEA
WK CUNZRH, YVRZRH

But again, I never suggested AA should use the 333 for transpac use; I said that the 333 was more than capable of flying most of AA's LHR and S. America flights which are less than 10 hr or 4500 mile flights. If you look at the list of flights that meet that threshold and are operated by carriers around the world, the list is quite long and also includes AC, AY, CI, CZ, QF, LX, MU, QR, and SU.

I am not a salesman for Airbus. I am simply saying that the notion that fleet complexity runs up costs has to be weighed against the reality that aircraft like the 333 could dramatically reduce AA's costs - likely far more so than the value of operating a more "simple" fleet. AA's unions (or at least one) said that AA had wasted X amount of money by not replacing the M80s sooner and even AA did not make fair comparisons between M80 and 738 total costs. Given that there are 333 operators in the USA and they report their costs to the DOT, it is indeed possible to see that the 333 is a much lower CASM aircraft than any other widebody.

The AA union(s) could have just as easily asked why AA did not trade in their A300s for a fleet of 333s that could be used for midwest/eastern US to LHR as well as MIA-deep S. America.

Of course AA will have all of the fleet they need with the 3 types you mention, but they will never have ONLY those 3 types... there will be other fleet types
both older and newer than the 3 above during periods of transition. And that is also part of my point and even then, the 789 may not be the most economical choice for operating flights under 4500 miles - and it likely will be smaller than the 333.

Good business requires being open to consider all kinds of alternatives and to doggedly pursue each option - and then not be afraid to eliminate them based on good business sense and not emotion.
I'm not convinced that AA's decision to ground the A300s and to not consider other Airbus products - and its urge to get rid of the M80s - is driven somewhat by emotion.

I still say the fastest way to get Boeing to commit to a new narrowbody would be for AA and DL - among others - to get really serious about ordering the A320NEO.

Jimntx,
I have not been on a 150 seat DL M80 but given that they are removing a galley in order to make the space for extra seats, I'm not sure that the increased seating density is going to be that less comfortable. Given that the last 25 people on either AA or DL's M80s end up having to gate check their rollerboards, that problem is not going to get any better.

 

[FrugalFlyerv2.0]

But again, I never suggested AA should use the 333 for transpac use; I said that the 333 was more than capable of flying most of AA's LHR and S. America flights which are less than 10 hr or 4500 mile flights. If you look at the list of flights that meet that threshold and are operated by carriers around the world, the list is quite long and also includes AC, AY, CI, CZ, QF, LX, MU, QR, and SU.

While the A333 may be obtained at a steep discount from Airbus, and is beloved by EU carriers especially from those countries whose governments held a stake in Airbus, I think you're over-rating it (most likely because DL now some in their fleet). I would guess that CI, CZ, MU and SU operate the A330 because they got a deal from Airbus (to spite Boeing) that they could not refuse. Even AC, while it was a Crown Corp. in the 1980s and bribed into ordering Airbus products could not wait to get rid of their A340s and A330s. AC is down to half a dozen or so A330s, while keeping 25+ old 767-300er and making the B777 its premier long haul aircraft.

 

[FWAAA]

DL, I believe, is stating that the seat pitch is not being reduced as they add seats to the M80. The extra space comes by removing the rear galley and adding a single large galley up front. Since the M80 is usually used on flights less than 3 hrs for DL (average is probably a little longer for AA), there is not the need for the size of galleys that DL has carried on that aircraft since it entered service.

AA removed those rear galleys a while back and added the extra seats that you say DL is about to do. The difference between AA's 140 and DL's soon-to-be 150 is that DL features two extra coach rows forward of the emergency exits, giving DL those 10 extra seats. When AA rolled back MRTC, it retained that spacing on some airplanes in certain parts of the cabin. For the MD-80s, AA did not add back the row it removed forward of the emergency exits, retaining a vestige of MRTC. On 777s, the mini-coach cabin aft of business and forward of the 3L doors also retains its MRTC seat pitch.

As a tall person, 31 inch coach pitch is a miserable (and painful) experience.

 

[FWAAA]

AA should definitely stay away from the A333's - they don't have the range for anything other than mid-US to western Europe. or JFK-Europe. US doesn't even use them for PHL-ATH because it would require weight restrictions pretty much all the time on the westbound. A fleet composed of 738/9's, 78X's and 777's would cover pretty much all the flying AA is likely to do other than something in the 90-130 seat category (assuming that 50-70 seat segment is operated by a RJ operator).

Might this be similar to the US 762 "lack of range" situation we discussed a while back? I couldn't believe that the 762s at US couldn't fly long-range flights but you pointed out that the US versions are not rated for the same high MTOW as the 762s at AA or CO. The Airbus .pdf I linked above shows more than a dozen different A333 versions (different MTOW). Perhaps US purchased a version that just isn't up to the task?

 

[jimntx]

Jimntx,
I have not been on a 150 seat DL M80 but given that they are removing a galley in order to make the space for extra seats, I'm not sure that the increased seating density is going to be that less comfortable. Given that the last 25 people on either AA or DL's M80s end up having to gate check their rollerboards, that problem is not going to get any better.

Sorry, World...not buying it. Not even renting it for the day. We are down to only 1 galley in coach which is as deep as 2 rows of seats on the AB side of the MD80. Those 124 seats we have in coach allow no leg room other than bulkhead and exit rows previously specified. 150 seats--assuming your F/C is the same as ours (16 seats)--means having 134 seats in a space that doesn't really accomodate 124 seats. It's going to be miserably uncomfortable. (We've even removed the closet at the back of F/C already. The former TW MD80's still have a closet in F/C, but that is because they don't have the large closet at the forward entry door.)

Unfortunately, when we pioneered MRTC, the flying public made it abundantly clear very quickly that they were not willing to pay for the extra space. They expected the space to be provided free of charge. They certainly complained long and loud when the MRTC experiment ended, and we went back to the old config.

Or, has DL come up with a stretch version of the MD80? Like the stretch limo I saw here in Dallas one night that had a VW bug front end and rear, and seating for 16 in between.

 

[Frank Szabo]

I do not believe AA is putting any MD 80's back in service they are however bringing them to Tulsa for lease return checks AC 451 recently finished one 290 is in work right now to be donated to a school and 562 & 563 will be in by May for lease return that said anything is possible but what you see in Tulsa is most likely lease return work.

Mr. Pit Bull - They don't repaint the Red, White and Blue stripes for a lease return - blue, white, blue are the parking and lease return colors.

 

[FWAAA]

Unfortunately, when we pioneered MRTC, the flying public made it abundantly clear very quickly that they were not willing to pay for the extra space. They expected the space to be provided free of charge. They certainly complained long and loud when the MRTC experiment ended, and we went back to the old config.

That's not quite how it went down. AA never attempted to charge any extra for its tickets during the short-lived MRTC era. The goal was to drive incremental sales of tickets which would increase AA's overall yield. MRTC was begun in early 2000 and the domestic fleet was converted by the end of the year - the international fleet was complete by the summer of 2001, along with the TWA fleet. And as soon as MRTC was completed, September 11, 2001 happened and in the ensuing travel downturn, AA lost billions of dollars for the remainder of 2001 and throughout 2002.

By 2003, in desperation for more revenue, Arpey began dismantling MRTC and claimed that its elimination would result in about $150 million in incremental annual revenue. The first phase, the AB6 and 757s, were worth about $60 million a year, and eliminating it on the remainder of the fleet would bring in about $90 million a year. Pocket change, of course, for a $20 billion+ airline. And paltry compared to the incremental revenue that could be gained by keeping some MRTC (ala UAL's E+) and charging more for it, as UAL has proven.

I've heard (dunno if it's true) that Arpey (who is not all that tall) was dead-set against MRTC but, of course, he wasn't the 6'3" CEO at the time - Carty was. Not all that surprising that one of his first strategic moves was to dismantle his boss's innovation.

 

[WorldTraveler]

As always, this has turned into an interesting thread....

I think both the MRTC and the decision to remove it were right - problem is that AA has been afflicted w/ a really bad case of timing in strategic initiaitves in the past 10 years. MRTC could have commanded revenue premiums but demand softened so much in late 2000 w/ the dot.com collapse and post 9/11 that AA couldn't get the revenue premiums to justify it. Further, as you know, removing seats drives up CASM... so as AA added seats back in a weak revenue environment, it did help to deliver cost reductions but added to the difficulty in adding demand in a weak revenue environment.

I don't know for sure but would bet that DL's M80 seats are not the same as AA's - and DL's are probably newer and thus thinner, also allowing DL to put more seats on the same plane w/o reducing personal space. Many of DL's initiatives to add seats have included replacing older generation seats. I too am interested in the comfort levels on the 150 seat M80 and DL's personal stretch version of the same aircraft (AKA M90) which will get 160 seats - but the "coffin" at the back of the a/c behind the galley is eliminated so that is a big plus for 15 passengers.

Since UA just announced that Economy plus is staying and will be part of the combined UA/CO operation, the pressure seems to be on AA to offer something comparable. I'm guessing DL has done the analysis to say it isn't worth it on the domestic fleet - or at least that the greatest revenue benefit comes on the int'l side.

Like DL, the M80 serves many of AA's top business markets to/from ORD/DFW which means the aircraft can still be profitable because of the higher fares those routes command compared to other aircraft types that serve leisure destinations like the Caribbean and long haul markets like the transcons.

I know that there are plenty of allegations that Airbus has bought its business, esp. in the US, thru low priced, subsidized planes. While I fully support American workers and the US economy (and it should be noted that many Boeing planes have a number of foreign components incl. from Japan while Airbus buys many US components for its aircraft), airlines including AA need to do what is in their best financial interest and leave the political/multinational fights to other people. Airline workers make too little money to have to subsidize anybody's prices because of trade barriers/violations. Boeing and Airbus have plenty of political support as well as a whole lot more money; airlines can't get anyone in Washington or Brussels to do anything other than throw on more regulations and add costs. Airlines need to do what is in their best interest and let A and B fight it out among themselves.

The whole point about the 333 discussion is that fleet compexity does lower costs and add revenue generating capabilities. For now, AA's widebody int'l fleet is essentially 763s and 772ERs. CO and DL both chose to add the 764 in between their smaller 767s and the 777 and the 764 is a lower cost solution and works well for flights at 10-11 hours. It is smaller than a 772 so isn't ideal as a replacement for AA's 772s even where the 333 could operate.

But anyone who has read me on this or other forums knows that I have also argued that NW should have bought the 777 years ago in order to build out the Pacific. NW considered the 772ER but said it was too much airplane for NW's TATL system - and they were right. But in the process of finding the right plane for the Atlantic, they were left w/ the 744 as their only 12+ hr aircraft, making it impossible to develop new Pacific routes or to serve thinner routes from the midwest (NW's bread and butter) to Asia. They recognized that and signed up early for the 788 but that plane has been delayed so much and probably still will not fly the routes NW needed to fly. Not surprisingly, all of the new routes DL has opened from the DTW to Asia have been on the 777 and then on the 763 from the west coast. Both airplanes are very good at developing new routes... but NW didn't have those a/c (the 332 could have done about the same thing as the 763 but NW didn't start developing the west coast as DL has). I would also go so far as to say that if NW had the 772ER 10 years ago, they might not have needed to have sold out because they could have developed the Pacific on their own. The fact that DL decided before the merger closed that the 788 would not be part of the DL fleet and that DL had every intention of telling Boeing that it wanted damages and to be released from the contract.

So fleet choices do have significant long term implications for airlines... and in the M80/738 choice for AA, part of the consequence for AA continuing to remain warm to Boeing and to continue ordering the 738 might reduce AA and other airlines' abilities to get a better airplane rather than the same tube which Boeing has been using for narrowbodies since the jet age began and engine technology that has not changed in quite some time either.

 

[eolesen]

I predict that AA will be forced to copy UA's E+ unless the CO management terminates that successful program.

I don't know that I agree with your prediction, but UA just announced internally that they're holding onto Y+ and expanding it to the CO aircraft... starting in January 2012.

The announcement dodged the question of first class remaining on the international fleet. My guess was they'd ditch F and keep Y+ but it's possible that DL also forced their hand a bit.

 

[WorldTraveler]

It wasn't just an internal memo; they issued a press release.

And yes, it is possible that DL knew it needed to do something and doesn't want to add the complexity of FC - which is highly cylical and restricted to a handful of markets that can make it work. DOT data doesn't break out average fares by class but overall DL's average fares are competitive w/ AA and UA in competitive markets so I don't see any need for DL to add int'l FC.

I suppose it's possible AA might now follow but I have a hard time imaging what someone in AA sales tells a client who says that they can premium coach seating even without a business class upgrade (which DL and UA might be stingier about giving as long as they believe they can get better premium cabin revenue). Seems to me that not having a competitive product will be a disadvantage to AA... unless AA keeps FC after UA drops it and then AA uses BC to trump business class and FC to trust BC (which they could do even if UA keeps FC).

I honestly would be surprised if UA keeps FC - and given that AA doesn't have it in every int'l longhaul market, the decision really comes down to LHR/NRT/GRU/EZE/China (maybe a few more) where AA really could get the FC revenue.

 

[BoeingBoy]

The whole point about the 333 discussion is that fleet compexity does lower costs and add revenue generating capabilities.

While in theory having the right number of seats on every flight every day lowers segment cost, extra fleet complexity drives CASM up by a not insignificant amount. Take WN with effectively a single fleet type - in theory they have to train a pilot twice between hiring and retiring. After the US/PSA/PI merger US had at least 2 airplane types for almost every capacity range. A bid with 10 retirements would mean training between 200 and 300 pilots. At around $10,000 per pilot sitting in a classroom or simulator instead of out moving airplanes, that's a tremendous cost before even mentioning spare parts for each of those fleet types.

Higher revenue comes from having spare capacity on a route. If a 126 seat plane is flying full most of the time putting a 112 seater on that route leaves revenue on the table while a 144 seater has room to grow the market.

US' 333 have trouble with ATH-PHL weight restrictions enough that they use the 762ER on that route (and as FWAAA mentioned the US 762's don't have the range of the later versions or 763). But I believe US was one of the initial U.S. customers for the 333 so maybe later versions have more range. For US' fleet, starting with the 333 with the shortest range, then the 762ER's and then the 332's.

Jim

 

[aapitbull]

Mr. Pit Bull - They don't repaint the Red, White and Blue stripes for a lease return - blue, white, blue are the parking and lease return colors.

Well as I pointed out in my post aircraft 290 is in work now and since it will be being donated to a school they will repaint red white & blue for donation I know of 2 or 3 recent donations off the top of my head. since you seem to have a interest in these planes might I suggest you go to any computer at work and type in the following address http://opp.aa.com then click on the "Aircraft Delivery and Retirement Schedule" on the lefthand side and you can see for yourself which planes are retired watch this list for any being put back into service, there are currnently more than 50 MD 80,s in the desert a quick scan of the Pulse Line dock plan shows none of these planes returning from the desert between now and mid 2012 I do see 432 lease return check on 1/1/12 562 7/15/11 4um 2/23/12 4ul 3/18/12 feel free to check it yourself.

And by the way Mr Pit Bull would be my dad!

 

[WorldTraveler]

Jim,
I am very glad that you mentioned WN because it perfectly proves my point.
1. IIRC, WN intentionally made its 73G cockpits backwards compatible with earlier generation 737s which did lower pilot training costs but undoubtedly also increased maintenance costs and removed some of the capabilities that the 73G otherwise would have.
2. WN is not an international carrier where the difference in a/c capabilities is most dramatic. Even as WN expands its network, it will have to add complexity. Their decision to add the 738 came specifically because they wanted to go after new revenue and while the 738 is of the same family as the 73G, it is a different aircraft and not everything can be substituted... there are costs to adding complexity to go after new revenue.
3. For how long will WN ask for and Boeing grant WN's request for maintaining cockpit compatibility for new generation aircraft. WN has been a proponent of a 737 replacement from Boeing but are they really going to put 60 y/o technology in a brand new a/c - and is Boeing going to engineer the aircraft to give it to them?
4. WN recognized that there was significant revenue that it could gain by acquiring FL - which incidentally has 2 a/c types and even the 73G doesn't have the "dumbed-down" cockpit so WN already has a/c differences they have to learn to work with. Clearly WN's board decided entering ATL and growing to a much larger presence on the east coast was far more valuable than maintaining WN's single cockpit.

Now specific to the AA widebody discussion, I also mentioned the 764 which has a high degree of commonality between both the 767 family and the 777 with which I believe the 764 can be made cockpit compatible - which I believe CO did. DL wasn't apparently aware of the concept of cockpit compatibility when it ordered its 764s so it has 763s 764s and 777s each with unique cockpits - and yet they still have embraced each aircraft type.

Even with the differences between DL and UA's diverse fleet, there are commonalities. Even with different engines, UA's 763s share many parts with CO's 762s and 764s than not; DL's PW powered engines on the 763 fleet are common/of the same family with NW's 744s and 330s.

But DL has also used the diversity of its fleet to develop maintenance capabilities for insourcing.... in fact, supposedly, DL is even now trying to reopen Airbus maintenance capabilities including being able to insource some of the capabilities that are necessary to support DL's diverse fleet.

And you know that part of Airbus' engineering and marketing claims from the beginning is that their aircraft are all cockpit compatible which does reduce training costs.

But the question regarding how long WN will ask for and Boeing will grant backwards compatibility also raises the issue I noted which is that transitioning between fleet types WILL result in multiple types being present in the same class of aircraft. Yes, AA could replace its entire M80 fleet and gain commonality but is there not a cost of having separate fleets now? And is not very possible that AA's final M80s might still be in service by the time the desired 737 replacement enters service.

Finally, the question still remains as to why other airlines that are much smaller than AA can have more diverse fleets and generate greater revenue growth. DL and UA both have more diverse fleets and greater revenue growth. While fleet isn't the whole story, having the right aircraft to serve a diveristy of network needs does make it a whole lot easier to enter markets. AA's int'l revenue is more heavily focused on a handful of cities -moreso than any other airline - LHR, CDG, NRT, GRU, EZE and yet AA has not generated the kind of revenue growth as other airlines. AA could maintain its present fleet and network but it is clear that other carriers are willing to inject complexity in order to go after additional revenue - and their strategies are working.

 

[WorldTraveler]

deleted - duplicate

 

[Frank Szabo]

Well as I pointed out in my post aircraft 290 is in work now and since it will be being donated to a school they will repaint red white & blue for donation I know of 2 or 3 recent donations off the top of my head. since you seem to have a interest in these planes might I suggest you go to any computer at work and type in the following address http://opp.aa.com then click on the "Aircraft Delivery and Retirement Schedule" on the lefthand side and you can see for yourself which planes are retired watch this list for any being put back into service, there are currnently more than 50 MD 80,s in the desert a quick scan of the Pulse Line dock plan shows none of these planes returning from the desert between now and mid 2012 I do see 432 lease return check on 1/1/12 562 7/15/11 4um 2/23/12 4ul 3/18/12 feel free to check it yourself.

And by the way Mr Pit Bull would be my dad!

OK - I'll back off that.

That's what I was told by a mekanik that, evidently, didn't quite get the picture.

My bad.