Aviation Outlook - 2005

[StaySeated]

Boyd is to aviation what armstrong williams is to education. Embraer is one of his biggest clients, therefore, he has been ripping on 50 seaters for years and starting the "e-jet" circle jerk every chance he gets.

 

[FDJ2]

Boyd is to aviation what armstrong williams is to education. Embraer is one of his biggest clients, therefore, he has been ripping on 50 seaters for years and starting the "e-jet" circle jerk every chance he gets.

Is he right? Yep. Was he right 15 years ago when he predicted explosive growth for the CRJ? Yep.

 

[Mugs]

Is he right? Yep. Was he right 15 years ago when he predicted explosive growth for the CRJ? Yep.

A rather easy prediction 15 years ago. Did anyone really think that consumers wouldn't demand a small jet to replace turboprops on most routes? One ride in a J-31 in August or January did that instantly.

 

[FDJ2]

A rather easy prediction 15 years ago. Did anyone really think that consumers wouldn't demand a small jet to replace turboprops on most routes? One ride in a J-31 in August or January did that instantly.

You're correct, and it is an equally easy prediction today that customers will prefer the E class over the CRJ tube and network carriers know it. Emb is gearing up for production of this class while Canadair is laying off. There is a glut in the CRJ market.

Small Jet Providers ("Regional Airlines") - The Growth Is Over

At the Conference in 2003, we were the first to outline that there was an emerging glut of both "regional" jets and the small jet providers who were operating them for major carriers. That trend was proven accurate in 2004 by the transformation of ACA from being a United Express carrier into an independent operator of 50-seat jets. In a period of a few weeks, this yanked over seven dozen (87) CRJs out from under United Airlines. The result: United replaced the lift they needed without any problem. In the past two weeks, this has again been underscored by the cancellation of orders for 18 ERJ-145s at American Eagle, plus the slowing of the Bombardier production of RJs to just over one unit per week.

The expense of operation of these 50-seaters (and to a lesser degree the Canadair 70-seaters) is heading northward - labor, maintenance, and fuel costs are going in the wrong direction. Consider consistently-declining yields, and we again project that by the end of the decade, there will be somewhere around 200 CRJs and ERJs in the desert, with an aftermarket demand roughly akin to a litter of stray kittens.

Prediction: Small Jet Providers ("Regional" airlines) will see a shake-out starting later in 2006. There is little or no potential for any more existing SJPs to break away and become independent airlines. The Independence Air experiment, even if successful, is a one-off. Washington, DC isn't Salt Lake City. Nor is it Indianapolis, or Phoenix, or Los Angeles. The bottom line: 50-seat RJs (and the larger Bombardier CRJs) increasingly don't have the cost or revenue moxie to compete independently. Indeed, the ability to do so within a mega-carrier system is getting tough as well.-Boyd

Does any one still believe there is a huge demand for more CRJs? Does anyone really doubt that the next growth segment will be in the bigger, roomier, more comfotable and economic E class or smaller Airbus and Boeing aircraft?

 

[Indapool]

"Embraer is one of his biggest clients, therefore, he has been ripping on 50 seaters for years and starting the "e-jet" circle jerk every chance he gets."

I knew we would find out who Low-Turd was..

 

[Buschpilot]

You're correct, and it is an equally easy prediction today thatcustomers will prefer the E class over the CRJ tube and networkcarriers know it. Emb is gearing up for production of this class whileCanadair is laying off. There is a glut in the CRJ market.

Small Jet Providers ("Regional Airlines") - The Growth Is Over

At the Conference in 2003, we werethe first to outline that there was an emerging glut of both "regional"jets and the small jet providers who were operating them for majorcarriers. That trend was proven accurate in 2004 by the transformationof ACA from being a United Express carrier into an independent operatorof 50-seat jets. In a period of a few weeks, this yanked over sevendozen (87) CRJs out from under United Airlines. The result: Unitedreplaced the lift they needed without any problem. In the past twoweeks, this has again been underscored by the cancellation of ordersfor 18 ERJ-145s at American Eagle, plus the slowing of the Bombardierproduction of RJs to just over one unit per week.

The expense of operation of these 50-seaters (and to a lesser degreethe Canadair 70-seaters) is heading northward - labor, maintenance, andfuel costs are going in the wrong direction. Considerconsistently-declining yields, and we again project that by the end ofthe decade, there will be somewhere around 200 CRJs and ERJs in thedesert, with an aftermarket demand roughly akin to a litter of straykittens.

Prediction: Small Jet Providers ("Regional" airlines) will see a shake-out starting later in 2006. There is little or no potential for any more existing SJPs to break away and become independent airlines.The Independence Air experiment, even if successful, is a one-off.Washington, DC isn't Salt Lake City. Nor is it Indianapolis, orPhoenix, or Los Angeles. The bottom line: 50-seat RJs (and thelarger Bombardier CRJs) increasingly don't have the cost or revenuemoxie to compete independently. Indeed, the ability to do so within amega-carrier system is getting tough as well.-Boyd

Does any one still believe there is a huge demand for more CRJs? Doesanyone really doubt that the next growth segment will be in the bigger,roomier, more comfotable and economic E class or smaller Airbus andBoeing aircraft?

I fully agree. As a stand alone operator of 70-seat Rj's,companies are hard pressed to make a dime on them, let alone the 50seaters. They simply fill a void at a lesser loss formainline until mainline can recover and take those routes back. Sad forus that operate them, but true.

 

[TonyC]

Boyd Group:

Boeing - Airbus Dogfight. .... (By the way, the 170/190 is not a regional jet, as many lightweights in the media describe it.

Yea it is.

Boyd Group:

Boeing - Airbus Dogfight.

Airbus is building the A-380 WhaleJet - a 550-seat replacement for the 747. Let's be blunt. The 7E7 is based on hard futurist fleet projections. The A-380 is a political airplane - the Europeans want a monument to show off to the world, one that shows their industrial prowess is better than that of the US.

And that perfectly describes the Concorde program of the 1960s. The WhaleJet may be no different.

In the first place, the Whale is the 747. Using that nickname to describe an Airbus just won't float. In the second place, the A380 is not a 747 replacement; it goes beyond the 747 is capacity, range, economy and environment. Third, it is based on a real world need - - airports have reached their slot capacities. Fourth, their industrial prowess IS better than that of the US.

 

[surplus1]

Good gracious Tony, that's heresy! You have a lot of nerve challenging Boyd and FDJ2 in the same post.

 

[DAS at 10/250]

Fourth, their industrial prowess IS better than that of the US.

He's right. Remember all the tanks, planes, jeeps, guns, uniforms, boots, rifles, grenades, ships, etc that france built for us in WW2?

 

[FlyBoeingJets]

Thanks for the info, FDJ2. By the way, Boyd's 2004 pop quiz is pretty interesting. The question about labor cost as a percentage of total cost is very interesting - I guessed Southwest on a lark and was surprised that it was the correct answer.

You may have already figured this out but here goes....

If you take airline X with $.095 CASM and airline Y with $.08 CASM and make their labor costs equal what do you get?

.027 / .095 = Labor 28.4 % of costs

.027 / .08 = Labor 33.7% of costs

But....the fact that SWA is 10% higher than a few others is not good. Without more information on total costs or with a single digit difference, having the highest labor cost is not indicative of a problem.

For those of you claiming SWA is the source of your problem in the "race to the bottom", this is telling. The unions at SWA are getting more of the pie than anyone else, even Delta and Northwest. The fuel hedge is a temporary blip that will not last.

History has shown that bragging about making a profit off of "investment income" is not the road to long term success. I'm hoping fares go up and soon!!