What's happening at the top end of the market...

Date:         10 Jul 99 02:33:36 
From:         jmweber@goodnet.com (James Matthew Weber)
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If you have read my previous post, you know the current press reports
say the A340-500 is about 6.5 tonnes overweight. For SQ if this
problem doesn't get fixed, it will get very ugly.

The A340-500 was purchased for a specific mission, LAX-SIN against
prevailing winter winds. At the time the purchase was being
negotiated, the requirement was reported as 200 revenue passengers.
Other analysis suggestd a break even load factor of 90%, which is
troubling in and of itself. Some of you may remember that AA actually
refused to accept MD11's because they couldn't fly the mission they
were ordered for, so such a decision from SQ would hardly break new
ground.

If the aircraft remains overweight, each 100kg in weight costs 1
passenger, so if the aircraft ends up more than 2 tonnes overweight,
it will be impossible to make money with it, assuming all things are
equal. If the RR Trent 500 comes in as little as 1% over predicted
fuel burn, or even a little overweight, the same thing happens. A
combination of an overweight aircraft, and even a slight shortfall in
engine performance would be catastrophic. For instance a 1% fuel
economy problem with the current weight problem would mean the loss of
40% of the passenger load. (I wouldn't mind traveling on an A340 with
a maximum passenger load of 120.......) I suspect SQ would object very
strongly to being forced to fly them that ways however...

RR thinks the overweight problem can be addressed with more engine
thrust, which is certainly true to a certain extent, but the extra
weight will cost fuel burn which reduces payload unless you can make a
corresponding increase in both MGTOW and MLW. That however increases
the fuel costs and the in transit fees and landing fees for the
aircraft which obviously erode the margins

How much is payload worth... The Arithmetic suggests the result can be
staggering over the life of the aircraft. One of the reasons BA likes
the 777 so much is it turned out to be about 400kg under weight. Let's
look at how much that 400kg is worth.  If we assume it is cargo, and
we can get on average $1.75 per kg in revenue for it (given how the
777 is deployed today, this is probably a realistic number), and you
fly a round trip per day, that 400kg is worth $1400 per day. Assuming
you fly the aircraft 80% of the days it is the fleet, over the 20 year
life of the airframe that is $8 million...The savings in fuel over the
life at current US prices for Jet A is about another half million.

I leave it to the readers to figure out just how much 6.5 tonnes would
reduce the revenue over the life of the aircraft. It is probably
enough to guarantee the operator could never make money with it...

The other interesting bit in the current Avweek is how Boeing plans to
increase the range of the 777 and word on the 747 variants. The
current plan is to allow for up to 3 pallet mounted fuel tanks, each
of which could hold up to 1850 gallons... The traditional problem with
fitting tanks to increase the range of aircraft, is the tanks and
associated hardware become a permanent part of the airframe, and
increase the empty weight accordingly. I.E. you pay for the ability to
carry the fuel, even if you don't need to carry it because the weight
of the tanks and the space they occupy comes out of cargo lift and
space. The pallet allows most of the airframe wieght and space to
recovered if you don't need the additional fuel capacity.

Without the tanks fitted, the basic 777-200x is claimed to capable of
an 8750nm operation with 300 passengers, at a 14% lower ASM cost than
the A340-500. The 200X is claimed to be 55,000 pounds lighter than the
A340-500. If true, it would give a sizeable fuel burn advantage to the
777 even with the 777's oversize engines that are required for
certification, and would imply a substantially lower fuel burn (and
reduced operating cost for the 777) for the 777. For some airports,
the new 777's could be painful.. wingspan has gone up 11.5 feet...

At this point both the A340-500 and 777-200X are not a lot more than
paper airplanes, so I tend to view the claims as interesting, but I
wouldn't want to bet a lot of money on how accurate they turn out to
be when and if the aircraft come into service.

A couple of 747 variants are in the winds again. Boeing claims to have
prospective customers. The trailing edge wedge modifications have been
flight tested on an Asiana 747-400. The enhanced 747-400, possible the
ER, would have a 930,000 pound MGTOW, and is claimed to be capable of
JFK-HKG or SIN-LHR with a full commercial payload in all weather
conditions. The other 747 variant referred to by Avweek as the -400X
involves a plug in the wingroots, and a fuselage plug compelled with a
new undercarriage and a 1,043,000 MGTOW.

 Boeing claims an improvement in direct operating costs of 10%
relative to the current 747-400. No doubt these claims are all aimed
at damaging the opportunities for the A3XX.

I think there is one safe bet, if both the 747-400X and A3XX are
built, I doubt Airbus will ever sell enough A3XX's at a reasonable
margin to recover the R&D costs. I don't think Boeing will make money
either, but they would be looking at an R&D bill that is likely to be
a LOT lower, so the level of pain involved is likely to be less.

To be brutally honest, the usefulness of either aircraft is suspect if
777-200X and -300X goes ahead, and ETOPS gets extended to 207 minutes.
Given the choice between a carrier operating an A3XX or 747-400X
twice a day, and another carrier operating another widebody, be it an
A330-200X or 777-200X four times a day, or a carrier operating A 747
or A3XX via a hub, or less than once a day, versus daily operation
with a smaller widebody non-stop, The monsters lose. That has
certainly been the experience on the Atlantic. As the aircraft to do
this have started to become available on the Pacific, it seems to be
happening there as well.