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US Vs. NW: Narrowbody Fleet Decisions  
User currently offlineSpoke2Spoke From United States of America, joined Oct 2004, 190 posts, RR: 0
Posted (9 years 5 months 23 hours ago) and read 4141 times:

The recently posted article about NW's 1995 decision to refurbish their DC-9 fleet instead of replacing it got me thinking about US Airways' decision to replace their DC-9s with Airbus narrowbodies. I wanted to compare some reasoning for each carrier's reasoning.

I believe US Airways made the right decision for their airline to introduce the Airbus narrowbodies and retire their DC-9s. I think is a big reason they're still around today. Here's why:

1. They've been able to utilize the Airbus narrowbody fleet to new international destinations, where margins are better and low-cost competition less fierce. In 2004, former CEO Dave Siegel mentioned that this service made up a bulk of the Mainline's profitable flying. The DC-9s wouldn't have been able to fly these lucrative routes.

2. Versatility: An airbus narrowbody from a Caribbean destination can refuel and compete just as effectively on a short-haul northeast route, or a transcontinental flight.

3. The Airbus fleet offers improved in-flight features like laptop power at every seat and video entertainment. This is attractive to customers, and helps their product to better compete with their competition, which often has the same new aircraft, often with comparable or better in-flight features.

Now Northwest's decision to refurbish their DC-9 fleet provides some benefits for them, as the article outlined.

1. They own the aircraft, so parking them when demand falls is more cost-effective.

2. The costs to operate the DC-9 fleet are suprisingly competitive.

I think the fleet decision has limited Northwest's options somewhat for growth. Northwest can't grow to Mexico and Caribbean like US and CO can. They're forced to grow narrowbody destinations domestically, where the competition is more fierce and margins are historically smaller.
While the US decision has provided the aircraft to implement more profitable international flying, those fancy new Airbus planes are very advanced and aren't owned outright.


Has each airline made the right narrowbody choices for their company and network, that gives them the best chance to survive long term?

Spokes


...carelessness and overconfidence are usually far more dangerous than deliberately accepted risks. - Wilbur Wright
11 replies: All unread, jump to last
 
User currently offlinePVD757 From United States of America, joined Aug 2003, 3411 posts, RR: 17
Reply 1, posted (9 years 5 months 23 hours ago) and read 4058 times:

Yeah, well who's in BK and who's not? NW made the right decision for them. US made the right decision for them as well. They have different regions of operations and that shaped each decision more than anything else.

User currently offlineTango-Bravo From United States of America, joined Jun 2001, 3802 posts, RR: 29
Reply 2, posted (9 years 5 months 22 hours ago) and read 4039 times:

Quoting Spoke2Spoke (reply 0):
I think the fleet decision has limited Northwest's options somewhat for growth. Northwest can't grow to Mexico and Caribbean like US and CO can.


I respectfully disagree. Many of Northwest's A319/320 domestic routes are sectors of 1,000 miles or less, meaning DC-9s can be be used on such services, which would free 319/320s for routes to Mexico, Central America and the Caribbean if NW should choose to expand internationally to these areas.


User currently offlineM404 From United States of America, joined Nov 2003, 2224 posts, RR: 5
Reply 3, posted (9 years 5 months 22 hours ago) and read 3984 times:
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I would have to slightly agree with the contrite answer in #1 in that the additional debt of the ABs are a factor pushing US to BK but when balanced with the traditional high costs of East Coast operations and the exposure to LCCs US has versus NW it is not as large as pictured. US was also trying to save lift after grounding the Fokkers, an interim step NW did not have to make. Their certainly is no doubt the AB has greater benefits in performance over the 40 year old 9 and for those advantages NW is replacing lift with the AB as well as structural cycle limits are reached.

I would have no idea about the conditions of US versus NW 9s at the times this decision was made nor the fiscal limits each carriers was answerable to.
Your question is nicely thought out and reasonable. Thanks.



Less sarcasm and more thought equal better understanding
User currently offlineAvek00 From United States of America, joined Oct 2004, 4336 posts, RR: 19
Reply 4, posted (9 years 5 months 22 hours ago) and read 3921 times:

You have to remember that that the NW and US decisions did not occur simultaneously, and that one happened as an indirect result of another.

In the mid-1990s, neither Airbus nor Boeing (nor what was left of McD, for that matter) were in a discounting mood - the industry had begun to bounce back from a global multiyear recession, and the manufacturers knew that most airlines would be placing orders for new planes. As it turns out, NW was evaluating the future of the DC-9, and was forced to choose between paying near-retail list prices for Airbus 319/320s vs. Boeing 737NGs vs. whatever else. After performing an economic analysis, NW decided that it was cost-effective to simply refurbish the DC-9 fleet, a decision that sent shockwaves throughout the airline manufacturing world. The notion that airlines would simply refurbish existing fleet to fly for another 15-20 years put the fear of God into Boeing and Airbus, and forced the manufacturers to offer much more aggressive discounting, of which US was one of many beneficiaries.



Live life to the fullest.
User currently offlineSonOfACaptain From United States of America, joined May 2004, 1747 posts, RR: 6
Reply 5, posted (9 years 5 months 16 hours ago) and read 3699 times:

Quoting Avek00 (reply 4):
now!


US ordered their buses in 1996. When did NW decide to refurbish the DC-9's?


On to the topic, it should also be noted that US did not have as many DC-9s as NW did. US was also going to replace the DC-9s even if they didn't order the Airbuses. (They had a bunch of 733's on order, which they cancelled when the got the A320 family.)

-SOAC



Non Illegitimi Carborundum
User currently offlineNorjet From United States of America, joined Oct 2000, 72 posts, RR: 0
Reply 6, posted (9 years 5 months 15 hours ago) and read 3615 times:

NW's hub position in the center of the continent also makes the range capabilities of the A products less of an issue -- the 9s can comfortably cover most potential new destinations. US with an East Cost concentration, on the other hand, needs aircraft with longer range in order to reach most potential new destinations, beyond the ability of the 9.

Higher a/c weights on the A products are a drawback, however, on intra-Northeast flying such as PHL-BDL/ALB/ROC et al in the form of higher landing fees, fuel load & such. Just too much plane for the route. This is where the F-100 fleet was optimal, a lightweight fuel-efficient fast-turnaround bird to maintain hub frequencies. We shall see if the E fleet can free up enough of the A fleet in order for US to redeploy those bigger craft onto more appropriate longer-range legs in time to stave off liquidation.

--Scott



Publishing travel advice for adopting families - to justify being an airline geek
User currently offlineN801NW From United States of America, joined Jul 2004, 744 posts, RR: 1
Reply 7, posted (9 years 5 months 7 hours ago) and read 3447 times:

SoAC: The decision to refurb the 9's was made in 1994. It cost about $2m per plane.

User currently offlineIsitsafenow From United States of America, joined Feb 2004, 4984 posts, RR: 23
Reply 8, posted (9 years 5 months 5 hours ago) and read 3382 times:

Just for fun, NW took delivery of their first narrow body Airbus in June of 1989.
N301US, an A 320. It went into service later that year.
safe



If two people agree on EVERYTHING, then one isn't necessary.
User currently offlineAvek00 From United States of America, joined Oct 2004, 4336 posts, RR: 19
Reply 9, posted (9 years 5 months 4 hours ago) and read 3307 times:

"The decision to refurb the 9's was made in 1994. It cost about $2m per plane."

Yes - it proved to be a very economical decision for Northwest - hence the manufacturers' fear that other airlines would follow suit for some or all of their future fleet requirements.



Live life to the fullest.
User currently offlineN801NW From United States of America, joined Jul 2004, 744 posts, RR: 1
Reply 10, posted (9 years 5 months 4 hours ago) and read 3310 times:

Didn't NW cancel the order after 50 planes then re-order a combo of A319 (options) and 320's?

User currently offlineNASCARAirforce From United States of America, joined Feb 2005, 3178 posts, RR: 4
Reply 11, posted (9 years 4 months 4 weeks 1 day 18 hours ago) and read 2370 times:

**"I think the fleet decision has limited Northwest's options somewhat for growth. Northwest can't grow to Mexico and Caribbean like US and CO can. They're forced to grow narrowbody destinations domestically, where the competition is more fierce and margins are historically smaller."**


Northwest still has a larger fleet of Airbuses than US does. They have regular scheduled service to MEX and seasonal charters to various Mexican vacation areas from DTW and MSP. It has nothing to do with Northwest having a large fleet of DC-9s.


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