This week’s featured link
December 2019 Letter – richardaboulafia.com
I keep wanting to write about the ever-worsening situation at Boeing, but I just don’t pay close enough attention to the aerospace side to be able to add enough value on the minutiae. I will certainly have more to say when it comes time to start reintroducing the airplane into service, but for now, I can only sit back and be amazed at how things continue to get uglier and uglier for Boeing. This letter from Richard Aboulafia is a good one. I still just can’t put into words what a horrible situation Boeing has created for itself.
Two for the road
Flybe: Government strikes a deal to rescue troubled airline – BBC.com
Thomas Cook and Monarch are left to die, but Flybe gets to live thanks to the British government. Why? Well, Flybe is a huge regional operator which provides a vital service to people around the UK. Without Flybe, many communities are hit really hard. Thomas Cook may have stranded vacationers in big cities, but it wasn’t going to cause as much disruption as if Flybe fails. So now, the government is helping and Virgin Atlantic pours more money into the bottomless pit. This is a temporary stopgap, but it’s not going to make Flybe a winner. It’s just going to delay the inevitable… short of a radical turnaround.
American’s New Boston Service Is A Direct Shot at Delta – Fly Data Guy
American has quietly announced a little growth in service from Boston, setting the stage for a skirmish with Delta and JetBlue. Here’s a good, geeky, in-depth look at some numbers in these new markets.
It’s going to be a long weekend waiting for the CF analysis of JetBlue’s significant pullback in LGB! The end is near?
Good letter from Aboulafia. Can’t agree more with his sentiment. The sad thing is that over the past 15 years Boeing has spent more on stock buybacks than what it costs to develop a new clean sheet aircraft design. The excuse that it “costs too much” to actually engineer something new is absurd. Boeing got caught in the same trap as many other publicly traded companies borrowing cheap money to buy back shares and goose stock. While that might be good for insiders with stock options it doesn’t help anyone when the company loses sight of what their purpose is. As a result Airbus will be the dominant player in this duopoly for likely a generation to come. Some vision a few years back and Boeing could arguably have a new clean sheet replacement for both the 737 and 757. Instead they have a modernized version of a 1960’s aircraft that is for all intents and purposes “broken.”
Gotta say that Beluga is so cute it takes me a bit to see how ugly (bent fuselage ahhhh!) it is(unlike an a380 which is just ugly ugly)
Still I wonder why they are using a 330 for this? You’d think they’d get more room on a 380 much like Boeing does on the 747 based dream lifter.
Whomever Airbus hired to do the graphics on the Beluga (at least those forward of the wing) did a great, great job. Unpainted it would be ugly and ungainly, but with the friendly “Flipper the Dolphin” face (yes, I know it’s “Beluga”, like a whale, but it looks more like a dolphin to me), it looks very cute and friendly.
Now if they can just find an appropriately sized aircraft decorated like a feeder fish to put in front of the Beluga, that would be fun.
Tell me. Why isn’t Muilenberg being held *PERSONALLY* responsbile for at least some of this debacle?
That would mean clawing back some or all of the bonuses/perks/compensation he received as CEO during the development and rollout of the MAX. Dare I say even possible prison time, given the scope of this mess that is getting worse by the day, not better. Sure, she’s out now. But all of this began on HIS watch.
Especially considering how much taxpayer money Boeing already lives on.
As CEO, like it or not, the buck stops with him. If he was complicit in making the decisions that culminated in this fiasco or at least approved them, that means he has blood on his hands. And needs to answer for those actions.
If he continues to try and play dumb, or perhaps really wasn’t aware of the decisions and choices being made in the company he was supposedly managing, then he’s an ignorant buffoon.
So either way, it makes him unfit to serve as CEO. And therefore-not deserving of the compensations he received.
I’m asking this question more rhetorically because I’m pretty sure I already know the answer.
Bad choices without consequences: that’s just how big business rolls in America. Were we to start holding people personally responsible for lost lives and disasters like this; no more hiding behind the veil of corporate protection, the ensuing chilling effect would absolutely crater the stock markets, possibly triggering a repeat of 2008.
And we all know what the political and economic implications of that would be.
All of this really speaks more about how diseased and corrupt our business and political paradigms really are more than just ‘a mistake being made’ in the design, manufacture, and sale of a commercial jetliner.
Confidence in both as at an all time nadir. And continues to sink. If we continue to accept this with disgust and apathy, then it’s only a matter of time before something else like this…perhaps worse….comes to light.
But if we wish to stop and reverse this course, that means restoring faith and confidence. And the only way to do that sadly, is by publicly sacrificing and slaughtering both a big company and whatever individual got it there.
And in this case, both Boeing and Muilenberg respectively should be number one on that list.
It’s too bad that the article you linked about AA in Boston doesn’t look at the full AA-DL competitive situation either in Boston or each of the cities that AA has added.
If he did that analysis – which he clearly is capable of doing because he presented the data in the markets he looked at – he would see that AA’s new flights are really a tepid response to Delta’s addition of new service from Boston to half of American’s many hubs over the past two years.
Delta added Boston to Philadelphia and already has one-quarter of AA’s local market revenue.
Delta just added Boston to Washington DCA, Chicago ORD, and Miami in the 4th quarter – all AA hubs – as well as Newark (UA hub).
The number of seats that DL has added to AA hubs -where AA is the largest carrier – is far larger than the number of seats that AA added to these markets – which are not DL hubs and also where DL and B6 both fly and actually have fairly similar amounts of local market revenue.
The only market that AA added which was a unique DL market is IND – and AA has the best chance of winning in that market, if they can win whatever high value business traffic DL carries. I am certain WN tried to get that traffic; AA might succeed but in non-hub markets where AA and DL compete, including from both LGA and JFK, DL has higher average fares in just about every one of them.
Even though B6 and DL both fly AUS-BOS, WN also flies the route and is the most likely casualty of yet another carrier in the market. WN has cut more service from BOS during DL’s buildout of BOS than any other airline; they just don’t do well in legacy carrier hubs or in markets where they have to compete against multiple carriers on a nonstop basis.
AA also has flown BOS to both AUS and RDU before. You have to ask yourself why they left those markets and why they will succeed now given that DL is much stronger in Boston than they were before and also now that B6 is basically in a do or die defense of BOS.
in RDU, DL is now 25% larger than AA in terms of local market revenue and DL gets higher average fares in every market where the two directly compete. B6 and DL both fly JFK-RDU and AA blinked there. Hard to see how the dynamics of BOS-RDU will be different than in NYC.
Spirit also flies BOS-RDU which the author strangely didn’t notice.
DL doesn’t fly BOS to CLT or DFW, two markets that make strategic sense for DL’s develop of its BOS hub; B6 does serve those markets.
And apart from Boston, DL just announced a 25% increase in seats this summer, yes, this summer, from MIA – all to Delta hubs – but it clearly foreshadows a showdown there.
AA really has to look like it is defending itself and some may perceive that its latest move, in isolation, is targeted at Delta – but taking just one step back will show that DL has grown and is still growing in top AA markets far more than the other way around. Except for IND, at best, AA is also competing against other airlines besides just Delta.
holy cow… the proverbial ink hadn’t even dried on my post before Delta announced a significant wave of new flights from MIA to 4 new cities – MCO, TPA, RDU and SLC.
DL has served all of those markets before so knows what they can do as well as they strategic value (or not) they bring to DL’s position in MIA which is now enhanced by its partnership with Latam.
Let’s see if the author thinks this move was a shot across AA’s bow or if he sees that DL has grown from the 6th largest to the largest airline in the US in the 40 years since deregulation because it has more successfully grown its network in AA and UA strength markets rather than the other way around..
It is a start. That is the important take away.
Based on what I have read from your relentless posts one would think that AA is in a perpetual and permanent state of doom. On the verge or soon to shut down. What a state of glee such an occurrence would create.
no, not a state of glee.
DL has taken more share from AA than any other airline since 9/11. JFK, LAX, now ORD and MIA.
It is actually stunning that an airline that intends to stick around allows a competitor to kick them around as much as DL does AA.
And the reason why DL is able to do it is because AA’s CASM (unit cost) is now the highest in the US airline industry and about 10% higher than DL’s. We’ll see next week what AA reports but it is likely that DL is going after AA because AA’s costs are so high that DL will win and because AA has so many competitively important markets.
As for “state of doom” let’s see where this all ends up but AA ended up in bankruptcy when its CASM was about 10% higher than any other competitor; the fact that they are right back in that position just 6 years after their exit from bankruptcy is mind-numbing.
Glee, no. Mind-numbing amazement at how rapidly the competitive situation in the US airline changes. yes.
Boeing tried to kill off the C Series to protect the bottom end Max, instead Bombardier gave half plus 1 to Airbus and now look at it. Boeing could have bought it and quickly added a 500 and there was your MAX 7 and 8 solution. They run off and buy Embraer who has a plane that will never meet scope in the States and and will battle a now established CSeries now the A220 for Airbus. Performance cost figures are impressive for Delta and other operators.
Bottom line, Boeing could be using the now A220-100, 300 and potential 500 as a Max 7 and 8 replacement where they could be developing a new large single aisle for the A321 , B757, B767 markets while.Aitlrbus Frankensteins the A321 into longer and longer range birds stealing market share that Boeing gave away.
From what I’ve read from some British travel reviewers is that FlyBE fills travel needs from parts of the UK lacking timely/reliable train service. However as a concept I understand propping this airline up, but regular travelers using FlyBE complain about really inconsistent customer service, baggage rules/fees/enforcement of them and connections at their destinations. Maybe that could be quickly sorted out with the tie up with Virgin.
Boeing is headed down the path of McDonnell Douglas in that they aren’t innovating and it will catch up to them soon enough. Airbus has a winner in the A350. After flying the A220 a few times, I really like that plane from a pax-ex experience. It’s much, much nicer than a 737. If the A320XLR lives up to their promises, then it will be game over for Boeing in having an NMA.
Right now, I can’t think of a Boeing product that I would prefer to the Airbus competitor in terms of pax-ex.
A220 and A320 > 737
A350 > 787, 777
The only one I can think of is 757 > A321. Because who doesn’t love the 75?
But, unfortunately, 757s won’t be long for this world. The newest ones are already 15 years old.
FlyBe’s owners (Connect) are major Tory party donors; I wonder why the Government might be interested in cutting the airline some slack…
It’s sad to watch Boeing fall apart like KMart did years ago. (To jog our memories, KMart’s CEO did all he could to prop up the company’s stock price while the stores’ buildings crumbled and many of them closed, and while employees left in droves.) A pity, since Boeing had decided years ago not to build a VLA to compete with the A380, because they saw that the future of air travel would be more point-to-point, requiring the development of MMAs. And, they were right! But, look what Boeing put out, the 737 MAX8, a plane made by bean counters! At least, no one died when KMart began closing stores!
I am a former Boeing stockholder.
The Saturday BOS-ILM service seems really random – seems like more of an Allegiant type of route/schedule than AA. Any theories on that?
Alex – So my theory is that the other markets are business markets, and they don’t need to run the same schedule on Saturday, so they looked at something with a similar block time that would do better than, say, a flight down to RDU. They must have seen some value here. It’s similar to what they did in Austin – they run an airplane down to Cabo on Saturday instead of doing an empty morning flight to San Jose or Boston. But Wilmington is definitely a weirder one.
There are political calculations with flyBe’s saving. The Tories are inveterate privatizers, and if they could sell Big Ben they probably would, however they have found themselves in a mess where they are now reliant on their hold in Parliament to a wave of Labour voter defections in parts of the country that have been deprived ever since Margaret Thatcher rose to power and brutalized the vast bulk of England outside of London. Part of the Faustian bargain is going to be a tension between voters in the North and elsewhere who are looking for a substantial increase in investment in their areas, including significant state economic aid post Brexit, and the desire of their Eton bred finance minded members who would prefer if the rest of the country didn’t exist . As someone pointed out, John Major won the largest number of votes ever in his 1992 election (though due to first past the post he actually lost seats) and saw himself wiped out in five years. Depending on how disastrous Boris’ bungling of Brexit is, and Boris’ overall intelligence suggests it will be a mess, one will see how quickly the economy and his government collapse.