General Lee
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- Aug 24, 2002
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Boyd Group International Aviation Predictions - 2011
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Over the next 36 months, over 300 50 seat RJs will be retired. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]If fuel goes over $3 a gallon, all bets are off. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fleet Trends: Renewa[/FONT][/FONT][FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]l, Not Expansion [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Key 2011 Fleet Trends: [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma] Increased Pace of Fleet Renewal At Some US Carriers [/FONT]
[FONT=Tahoma,Tahoma] Faster Retirement of 50-Seat RJs [/FONT]
[FONT=Tahoma,Tahoma] CRJ-700/900s will see challenges with higher fuel cost [/FONT]
[FONT=Tahoma,Tahoma] C-Series Pressure On Airbus, Boeing & Embraer [/FONT]
[FONT=Tahoma,Tahoma]Fuel Prices: The Wild Card. And It Will Be Wild [/FONT]
[/FONT]It’s no longer a question of whether jet fuel will cost more in 2011. It’s just an issue of how much more airlines will be paying, and how they will react in regard to adjusting fleets and flying. The key point to keep in mind is that the current management of the US airline industry has a pulse. They clearly see the coming and near-certain spike in fuel prices.
As witnessed by the fare increase implemented in the last week of December 2010, they are not asleep at the switch. Oil might go over $100 and higher, like in 2008. This time, they will be better prepared. Not immune from damage, but at least we won’t have CEOs in the fetal position under their desks, waiting for the financial grim reaper.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fuel-Driven Fleet Trends [/FONT][/FONT]
This will lead to several trends that are likely to manifest by the beginning of 3Q 2011:
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Acceleration of New Aircraft Deliveries[/FONT][/FONT]. The US airline industry is sitting on some significant cash, which can give it more market horsepower to replace older aircraft faster. Main airline to watch: American, whose fleet plan involves significant flexibility. It can keep or replace MD-80s as new 737-800s are delivered. At this point, it appears that as a new -800 comes on the property, a "Super-80" gets sent to the desert. That will continue.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Litters of Stray Cats: More Market Value Than 50-Seat RJs[/FONT][/FONT]. There have been a number of short-of-real-grey-matter "studies" from some consultants that 50-seat jets are here to stay, or as a variation on the theme, the marketplace will generate a next-generation replacement as older units end up in the desert.
Sure, a next-generation replacement. Like the ones that came along to fill in for the Metro-IIIs, B-1900s, J-31/32s, Brasilias and Saab-340s that have largely disappeared from the US skies. The 50-seat jet is in the same situation. There is no 50-seat replacement. Period.
Boyd Group International Aviation Predictions - 2011
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Most of the retired RJ lift will come from flying in large markets. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Small communities have other problems that aren’t directly related to RJ retirement. [/FONT]
[/FONT]It’s not just a matter of higher fuel costs making smaller jets uneconomic. It’s also maintenance costs. As these machines age, the cost of heavy checks start to rise roughly to the level of the German War Debt. One operator has noted that when these airplanes get to around 40,000 hours, the cost puts them on the ground. Take a look at ERJ/CRJ-100/200 deliveries in the early to mid-90s, factor in annual hours of utilization, and the result is a land rush for Arizona desert property for storage.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Outcome: Less RJ Flying. Not Necessarily Less Small City Flying. [/FONT][/FONT]
Today, after the fact, there’s all sorts of hand-wringing and gnashing of teeth in regard to "whatever are we going to do as 50-seaters go to Happy Hacksaw Land… Small communities will be devastated…
More veneer thinking. Small community air service is indeed under pressure, but that’s due to a range of dynamics much wider than retirement of 50-seaters. First, these machines were never designed nor intended for small community service, despite pronouncements by professors in aviation colleges who wouldn’t recognize ATC from an ATM machine. RJs were envisioned as expansion airplanes for the now-gone independent regional airline industry that existed in the late 1980s.
The main hit – as it were – will be reduced flying in capacity fill-in missions, and not necessarily in smaller communities.
As an example, we can use Delta’s CRJ flying reductions at CVG:
Without belaboring the point, the majority of CRJ-200 flying that has been cut out at CVG involved large markets such as BOS, IAH, DSM, and did not entail wholesale loss of service at smaller airports.
This will be the trend in 2011 as the culling of 50-seat fleets accelerates across the US airline industry along with the price of jet fuel. Less flying, but whatever issues small airports will face, they won’t be materially hit by less 50-seaters. In fact, there has been some limited interest on the part of operators such as American Eagle and SkyWest in shifting 50-seaters to sure-revenue EAS flying.
Boyd Group International Aviation Predictions - 2011
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fuel Prices: Will Begin To Affect 70-Seat RJs In 2011 [/FONT][/FONT]
The shift toward use of larger CRJ equipment – which offered more seats with only incrementally more costs than 50-seat versions, not to mention having lower maintenance expense due to a younger age – may well get zapped in the coming year, too. It will depend on just how high jet-A prices go.
Another point to keep in mind: the 70-seat units at American, Delta and at United have been shifted to dual-class configuration. While this has some secondary product-related benefit, it still removes between four and six seats that will result in some reduction in revenue generation as system load factors hit 80% and above. Typically, those first class seats do not directly bring in additional fare revenue. At United and Continental, they are awarded on a first-come basis to high-level frequent flyers.
Just waiting for eP to ask Boyd for SOURCES........Hey eP, go enjoy your eD and vD.
Bye Bye--General Lee
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Over the next 36 months, over 300 50 seat RJs will be retired. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]If fuel goes over $3 a gallon, all bets are off. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fleet Trends: Renewa[/FONT][/FONT][FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]l, Not Expansion [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Key 2011 Fleet Trends: [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma] Increased Pace of Fleet Renewal At Some US Carriers [/FONT]
[FONT=Tahoma,Tahoma] Faster Retirement of 50-Seat RJs [/FONT]
[FONT=Tahoma,Tahoma] CRJ-700/900s will see challenges with higher fuel cost [/FONT]
[FONT=Tahoma,Tahoma] C-Series Pressure On Airbus, Boeing & Embraer [/FONT]
[FONT=Tahoma,Tahoma]Fuel Prices: The Wild Card. And It Will Be Wild [/FONT]
[/FONT]It’s no longer a question of whether jet fuel will cost more in 2011. It’s just an issue of how much more airlines will be paying, and how they will react in regard to adjusting fleets and flying. The key point to keep in mind is that the current management of the US airline industry has a pulse. They clearly see the coming and near-certain spike in fuel prices.
As witnessed by the fare increase implemented in the last week of December 2010, they are not asleep at the switch. Oil might go over $100 and higher, like in 2008. This time, they will be better prepared. Not immune from damage, but at least we won’t have CEOs in the fetal position under their desks, waiting for the financial grim reaper.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fuel-Driven Fleet Trends [/FONT][/FONT]
This will lead to several trends that are likely to manifest by the beginning of 3Q 2011:
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Acceleration of New Aircraft Deliveries[/FONT][/FONT]. The US airline industry is sitting on some significant cash, which can give it more market horsepower to replace older aircraft faster. Main airline to watch: American, whose fleet plan involves significant flexibility. It can keep or replace MD-80s as new 737-800s are delivered. At this point, it appears that as a new -800 comes on the property, a "Super-80" gets sent to the desert. That will continue.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Litters of Stray Cats: More Market Value Than 50-Seat RJs[/FONT][/FONT]. There have been a number of short-of-real-grey-matter "studies" from some consultants that 50-seat jets are here to stay, or as a variation on the theme, the marketplace will generate a next-generation replacement as older units end up in the desert.
Sure, a next-generation replacement. Like the ones that came along to fill in for the Metro-IIIs, B-1900s, J-31/32s, Brasilias and Saab-340s that have largely disappeared from the US skies. The 50-seat jet is in the same situation. There is no 50-seat replacement. Period.
Boyd Group International Aviation Predictions - 2011
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Most of the retired RJ lift will come from flying in large markets. [/FONT][/FONT]
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Small communities have other problems that aren’t directly related to RJ retirement. [/FONT]
[/FONT]It’s not just a matter of higher fuel costs making smaller jets uneconomic. It’s also maintenance costs. As these machines age, the cost of heavy checks start to rise roughly to the level of the German War Debt. One operator has noted that when these airplanes get to around 40,000 hours, the cost puts them on the ground. Take a look at ERJ/CRJ-100/200 deliveries in the early to mid-90s, factor in annual hours of utilization, and the result is a land rush for Arizona desert property for storage.
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Outcome: Less RJ Flying. Not Necessarily Less Small City Flying. [/FONT][/FONT]
Today, after the fact, there’s all sorts of hand-wringing and gnashing of teeth in regard to "whatever are we going to do as 50-seaters go to Happy Hacksaw Land… Small communities will be devastated…
More veneer thinking. Small community air service is indeed under pressure, but that’s due to a range of dynamics much wider than retirement of 50-seaters. First, these machines were never designed nor intended for small community service, despite pronouncements by professors in aviation colleges who wouldn’t recognize ATC from an ATM machine. RJs were envisioned as expansion airplanes for the now-gone independent regional airline industry that existed in the late 1980s.
The main hit – as it were – will be reduced flying in capacity fill-in missions, and not necessarily in smaller communities.
As an example, we can use Delta’s CRJ flying reductions at CVG:
Without belaboring the point, the majority of CRJ-200 flying that has been cut out at CVG involved large markets such as BOS, IAH, DSM, and did not entail wholesale loss of service at smaller airports.
This will be the trend in 2011 as the culling of 50-seat fleets accelerates across the US airline industry along with the price of jet fuel. Less flying, but whatever issues small airports will face, they won’t be materially hit by less 50-seaters. In fact, there has been some limited interest on the part of operators such as American Eagle and SkyWest in shifting 50-seaters to sure-revenue EAS flying.
Boyd Group International Aviation Predictions - 2011
[FONT=Tahoma,Tahoma][FONT=Tahoma,Tahoma]Fuel Prices: Will Begin To Affect 70-Seat RJs In 2011 [/FONT][/FONT]
The shift toward use of larger CRJ equipment – which offered more seats with only incrementally more costs than 50-seat versions, not to mention having lower maintenance expense due to a younger age – may well get zapped in the coming year, too. It will depend on just how high jet-A prices go.
Another point to keep in mind: the 70-seat units at American, Delta and at United have been shifted to dual-class configuration. While this has some secondary product-related benefit, it still removes between four and six seats that will result in some reduction in revenue generation as system load factors hit 80% and above. Typically, those first class seats do not directly bring in additional fare revenue. At United and Continental, they are awarded on a first-come basis to high-level frequent flyers.
Just waiting for eP to ask Boyd for SOURCES........Hey eP, go enjoy your eD and vD.
Bye Bye--General Lee
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