The A380 advantage, as analyzed by Airbus, is stated to be when both airplanes are configured to the same comfort standard. This would seem to mean that the SQ configurations for these two airplanes, seating 471 and 278 respectively, would be a good example of a common comfort standard.
However, this article also says the A380 has a 12% fuel burn per passenger advantage over the 773ER. Using this fuel burn relationship, the operating cost advantage as stated seems a bit high.
From some work I once did for the 773ER, I believe it's operating costs and their approximate relative weights are as follows:
Fuel 60%
Flight Crew 12%
Cabin Crew 11%
Airframe Maint 5%
Engine Maint 3%
Landing Fee 4%
Control & Comm 3%
Ground Handling 2%
Total 100%
If the 773ER is 22% higher in operating costs per pax, then the summation of these costs for the A380 would need to be 82%. (0.82*1.22 = 1.0).
Using the 12% higher 7773ER fuel burn stated in the article, the fuel burn portion would drop to 53.6% (60/1.12 = 53.6).
With the revised fuel, the remainder of the costs must sum to 28.4% to support 82% lower costs (82% - 53.6% = 28.4%).
Flight Crew: 12% * (278/471) = 7.1% (assumes no Flight Crew premium for operating larger airplane)
Cabin Crew: 11% (unchanged because equal service standard implies equal FA per pax)
Airframe Maint: 5% * (610/471) * (278/370) * 0.9 = 4.4% (Airframe Maint related to OEW, assumes A380 10% improvement)
Engine Maint: 3% * (4*70/471) * (278/(2*115.3)) = 2.1% (Engines at same tech level, power by the hour)
Landing Fee: 4% * (860/471) * (278/554) = 3.7% (Landing fee based on MLW)
Control & Comm 3% * (278/471) = 1.8%
Ground Handling 2% * (278/471) = 1.2% (Assumes no additional fee for A380 Code F wing span)
Total: 31.3% + 53.6% = 84.9%
So the 773ER would be about 18% more expensive per seat to operate than the A380 in the SQ configuration assuming it has a 12% higher fuel burn per seat.
There are plenty of "knobs" to turn that alter the results. For instance, assume that a portion of Flight Crew pay is related to airplane MTOW.
Zkpilot From New Zealand, joined Mar 2006, 4575 posts, RR: 12 Reply 1, posted (5 months 4 weeks 1 day 23 hours ago) and read 10279 times:
Sounds pretty reasonable...
of course that all works out if the A380 is full or close to it... if it is only going out with 278 pax (or say 300) then the 773ER is going to kill it economically not to mention the extra hold space available on the 773ER for freight!
Arniepie From Belgium, joined Aug 2005, 1265 posts, RR: 1 Reply 2, posted (5 months 4 weeks 1 day 23 hours ago) and read 10259 times:
Doesn't the fact that the A380 simply has more seats put extra pressure on overall seatprice on the routes
this plane is used for?
I always was under the impression that price was determined by how long before people book their flight and as
the date nears, when there are still a fair amount of seats available, certainly with something as big as the 380, the
prices must go down quite substantially, no?
I clearly remember reading (on A net or PPrune) that especially on slot restricted airports ,like the ones the 380 is
meant for, it can be more beneficial to use planes that are booked out very quickly and long before the actual flight
takes place to guarantee a high yield/big profit.
Planes that are too small (under 50 seats) like we've seen the past 20-30 years used by commuter services seem to
be on their way out, save for markets that have no alternative like islands or very remote places.
Probably the same can be said for planes that are too big, they esentially undermine the overall profitability by adding
too much capacity, again with the exception of markets that have no real alternatives like the bussiest citypairs that
are constantly underserved, but how many airports really qualify for those parameters is the question.
Probably explains the lukewarm salesnumbers for anything bigger than the 77W.
Airlines do not just pay operating costs, they also have to pay the cost of ownership.
An A380 costs around 375 million, the 77W around 300 million on lists prices. The A380 carries around 70% more passengers, however only costs 25% more to purchase.
Good topic for someone who is retired and no longer has their pulse on what is happening in the real world. Cost of ownership of assets is covered in most if not all airlines annual reports.
WingedMigrator From United States of America, joined Oct 2005, 1944 posts, RR: 57 Reply 4, posted (5 months 4 weeks 1 day 21 hours ago) and read 10160 times:
Quoting zeke (Reply 3): Airlines do not just pay operating costs, they also have to pay the cost of ownership
Depreciation is very much an operating cost. It didn't show up on OldAeroGuy's list.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 5, posted (5 months 4 weeks 12 hours ago) and read 9676 times:
Quoting zeke (Reply 3): An A380 costs around 375 million, the 77W around 300 million on lists prices. The A380 carries around 70% more passengers, however only costs 25% more to purchase.
An interesting observation. However, I'm curious: given that the 77W is in far more demand, which would also indicate that its resale value would also be far more higher (as would the fact that a delivery date on the production line is farther out) than an A380's, wouldn't that mean that an A380's discounted price as compared to a 77W mean that on a per-seat basis its sale price would be comparable from the standpoint of depreciation?
zeke From Hong Kong, joined Dec 2006, 6800 posts, RR: 74 Reply 6, posted (5 months 4 weeks 11 hours ago) and read 9664 times:
Quoting redflyer (Reply 5):
An interesting observation. However, I'm curious: given that the 77W is in far more demand, which would also indicate that its resale value would also be far more higher (as would the fact that a delivery date on the production line is farther out) than an A380's, wouldn't that mean that an A380's discounted price as compared to a 77W mean that on a per-seat basis its sale price would be comparable from the standpoint of depreciation?
I will try and convert that question into English.
Depreciation is not based upon resale value, it is based upon purchase price. Depreciation schedules are country specific depending on local tax laws. Some airlines claim that other airlines have an unfair advantage as they do not receive the same depreciation schedule under their local tax laws.
Today’s demand for a 77W has little effect on what the resale value will be in 10 years, it is the demand in 8-12 years that will dive that figure.
rwessel From United States of America, joined Jan 2007, 1614 posts, RR: 2 Reply 7, posted (5 months 4 weeks 7 hours ago) and read 9596 times:
Quoting zeke (Reply 6): Depreciation is not based upon resale value, it is based upon purchase price. Depreciation schedules are country specific depending on local tax laws. Some airlines claim that other airlines have an unfair advantage as they do not receive the same depreciation schedule under their local tax laws.
Today’s demand for a 77W has little effect on what the resale value will be in 10 years, it is the demand in 8-12 years that will dive that figure.
No, no, no.
You are correct in terms of *tax* accounting, which arguably isn't real accounting at all. If your (public*) airline tried to present its books on a tax basis, it would be laughed off Wall Street (and delisted by the NYSE for not following proper accounting standards, and probably smacked around by the SEC).
It terms of the actual bottom line for a corporation, depreciation is the actual decline in value of an asset. It has nothing to do with tax depreciation schedules (which impact how much tax you have to pay, and when). Ideally, a proper estimate of the value of each asset would be made annually, using data from a highly liquid market in that asset. In practice, most markets for industrial assets are anything but liquid, and all sorts of estimates are made, and there are a number of standard schedules for generating those estimates. But you'll need to include a footnote if you stray too far from those (IOW, you had better justify an unusually fast or slow depreciation schedule for an asset). Also a predetermined schedule allows some predictability as asset values are often volatile (again, just to the very ill-liquid markets). But in an ideal world, if you bought a 777 ten years ago for $300m, and you could sell it today for $200m, the accumulated depreciation for that asset *should* be $100m.
*If it’s privately held, they can do their books any way they like, but will still have to do the tax books per your local taxing agencies’ rules
Its is very much dependant on where the aircraft are registered, and what tax rules they fall under. Depreciation is cost allocation, it is not a measure of the assets market value at any period of time. In this article you can see that SQ depreciates their aircraft over 3 years, whilst QF does it over 10.
More recently QF changed their formula to a straight line depreciation schedule over a longer period
"From 1 January 2010, all passenger aircraft will be depreciated to a residual value of 10 per cent at 20 years, compared to the previous policy of 12.5 or 20 per cent at 20 years, depending on aircraft type."
This is almost identical to the CX does it, aircraft are depreciated over 15 to 20 years to residual value of between 10% to 20% of cost. EK does similar, however over 15 years.
The methods of depreciation that are used in industry include straight line, progressive, and regressive, double declining, sum of years, and in the USA MACRS. Some operators depreciate their airframes based upon cycles and hours as well.
The US is somewhat unique in that companies often have two sets of books, one for tax purposes where the use MACRS (which is a form of accelerated depreciation), and another for the public where a straight line depreciation is often used.
Quoting rwessel (Reply 7): But in an ideal world, if you bought a 777 ten years ago for $300m, and you could sell it today for $200m, the accumulated depreciation for that asset *should* be $100m.
So in your world, inflation does not exist. Depreciation is about allocating costs, nothing to do with the market value of the asset.
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 9, posted (5 months 4 weeks 2 hours ago) and read 9518 times:
Quoting redflyer (Reply 5): I'm curious: given that the 77W is in far more demand, which would also indicate that its resale value would also be far more higher (as would the fact that a delivery date on the production line is farther out) than an A380's...
The 777-300ER and A380-800 both enjoy the highest average values of any (Western) commercial airliner in service today. Even during the darkest days of the GFC, when aircraft values were hit hardest, both models held their values very well.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 10, posted (5 months 4 weeks ago) and read 9451 times:
Quoting zeke (Reply 6): I will try and convert that question into English.
Depreciation is not based upon resale value, it is based upon purchase price.
So what you're saying is that I could depreciate an asset so that it's residual value is less than market value?
And thanks for the English lesson...I'll be sure to water-down my prose in the future so that even a simpleton forum member will understand it.
Quoting Stitch (Reply 9): The 777-300ER and A380-800 both enjoy the highest average values of any (Western) commercial airliner in service today.
Given that they are the newest, most modern, and most efficient commercial planes flying I'm sure that their values would be the highest compared to other aircraft. But this issue is about how they compare with one another with regards to those values.
nomadd22 From United States of America, joined Feb 2008, 1352 posts, RR: 0 Reply 11, posted (5 months 4 weeks ago) and read 9449 times:
Give the 380 a few years till some of them start to be resold. The tax schedule might not match up to the real world very well. There are some interesting ways to account for maintanence costs that can make comparisons a little iffy too.
Quoting redflyer (Reply 10): And thanks for the English lesson...I'll be sure to water-down my prose in the future so that even a simpleton forum member will understand it.
Not that I'm likley to go see Brokeback Mountain with Zeke anytime soon, but he was right. Your "prose" was just plain garbled english.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 12, posted (5 months 3 weeks 6 days 23 hours ago) and read 9413 times:
Quoting nomadd22 (Reply 11): Not that I'm likley to go see Brokeback Mountain with Zeke anytime soon, but he was right. Your "prose" was just plain garbled english.
Be careful when throwing stones while living in a glass house, especially when using words such as "likley" (I won't remind you that "english" should have an uppercase "E").
zeke From Hong Kong, joined Dec 2006, 6800 posts, RR: 74 Reply 13, posted (5 months 3 weeks 6 days 20 hours ago) and read 9357 times:
Quoting redflyer (Reply 10):
So what you're saying is that I could depreciate an asset so that it's residual value is less than market value?
Assuming you had a small business and needed an aircraft for 100% business use, you could purchase yourself a new light aircraft like a SR22 and under the current tax rules you could depreciate 100% of that aircraft this year. That is assuming Section 179 expensing which would allow your businesses to expense up to $500,000 in capital improvements for the 2011 tax year.
PolymerPlane From United States of America, joined May 2006, 991 posts, RR: 3 Reply 14, posted (5 months 3 weeks 6 days 19 hours ago) and read 9304 times:
Quoting redflyer (Reply 10): So what you're saying is that I could depreciate an asset so that it's residual value is less than market value?
Yes. When you sell the asset, you'll have gain or loss from sale of asset, and it will be taxed accordingly.
That's how a lot of housing rental companies can make their money, by depreciating their assets, eventhough their actual values are appreciating (at least before the housing meltdown).
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 15, posted (5 months 3 weeks 6 days 15 hours ago) and read 9232 times:
Thanks for the tax advice, guys! I had no idea coming to an aviation forum I could get top-notch info on airplanes AND accounting practices, and all from the same expert sources! Who would've imagined???
MoltenRock From , joined Dec 1969, posts, RR: Reply 16, posted (5 months 3 weeks 6 days 14 hours ago) and read 9195 times:
Quoting redflyer (Reply 5): An interesting observation. However, I'm curious: given that the 77W is in far more demand, which would also indicate that its resale value would also be far more higher (as would the fact that a delivery date on the production line is farther out) than an A380's, wouldn't that mean that an A380's discounted price as compared to a 77W mean that on a per-seat basis its sale price would be comparable from the standpoint of depreciation?
Huh? What the hell are you going on about? You obviously don't understand depreciation and tax law. For instance, Infiniti (autos) sell far fewer units in the USA than Chevy or Ford, yet Infiniti resale values are some of the highest in the industry, thus their residual values are much higher than the other two are. Depreciation has NOTHING to do with "sales volume", and if anything, is inversely proportionate to the overall volume of units being output, thus invalidating your anti-A380 bias.
Depreciation for tax purposes is a fixed schedule regardless if an asset is actually worth more or less over that fixed timeframe. Why do you find that so hard to understand?
cmf From United States of America, joined Jun 2011, 1064 posts, RR: 24 Reply 17, posted (5 months 3 weeks 6 days 12 hours ago) and read 9166 times:
Quoting zeke (Reply 6): Depreciation schedules are country specific depending on local tax laws.
Often the rules give companies a lot of flex. LH do new planes at 12 years and Air Berlin at 10 for example.
Quoting zeke (Reply 8): SQ depreciates their aircraft over 3 years, whilst QF does it over 10.
SQ is 15 years for new airplanes. I think QF is 20 for new.
Quoting redflyer (Reply 10): So what you're saying is that I could depreciate an asset so that it's residual value is less than market value?
Happens all the time. Depreciation is actually just a way of spreading the cost of purchase over many years instead of taking the full charge at time of purchase and thus making the result of that year look really bad.
A lot of companies have extended depreciation to "fool" shareholder in to thinking the result are better than it would under rules used at earlier times.
Don’t repeat earlier generations’ mistakes. Learn history for a better future.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 18, posted (5 months 3 weeks 6 days 12 hours ago) and read 9173 times:
Quoting zeke (Reply 3): Good topic for someone who is retired and no longer has their pulse on what is happening in the real world.
Quoting zeke (Reply 3): An A380 costs around 375 million, the 77W around 300 million on lists prices. The A380 carries around 70% more passengers, however only costs 25% more to purchase.
My understanding of the real world is still firm enough to know that airliner list prices have little to do with what airlines actually pay for them or their value on the open market.
Quoting WingedMigrator (Reply 4): Depreciation is very much an operating cost. It didn't show up on OldAeroGuy's list.
The 12 posts below yours (and Zeke's) show why I didn't include Depreciation in my cash operating cost comparison analysis. There are far too many variables and assumptions when trying to account for Depreciation. Besides, Depreciation has little to do with the cash required for day-to-day airliner operation.
After all, flights aren't delayed because someone couldn't pay the Depreciation bill.
Still looking for a link to an airline created operating cost comparison between the A380 and t.he 777-300ER
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
rwessel From United States of America, joined Jan 2007, 1614 posts, RR: 2 Reply 19, posted (5 months 3 weeks 6 days 11 hours ago) and read 9166 times:
Quoting zeke (Reply 8): Its is very much dependant on where the aircraft are registered, and what tax rules they fall under. Depreciation is cost allocation, it is not a measure of the assets market value at any period of time. In this article you can see that SQ depreciates their aircraft over 3 years, whilst QF does it over 10.
There are fundamental difference between “real†accounting and tax accounting. Real accounting is about presenting an accurate picture of the company. Tax accounting is about paying the tax man, according to whatever (often absurd) rules the tax man has set.
Quoting from my “Fundamental Accounting Principles†(Irwin):
“Since plant assets* are purchased for use, you may think of a plant asset as a quantity of usefulness that will contribute to the operations of the business throughout the service life of the asset. However, since the life of any plant asset* (other than land) is limited, this quantity of usefulness expires as the asset is used. This expiration of a plant asset’s quantity of usefulness is generally described as depreciation; and in accounting** the term is used to describe the process of allocating and charging the costs of this usefulness to the accounting periods that will benefit from the asset’s use.â€
…
“The service life of a plant asset is the length of time it will be used in the operation of the business. This may not be the same as the asset’s potential life. For example, although typewriters*** have a potential life of six to eight years, a company may plan to trade in its old typewriters on new ones every three years. In this case, the typewriters have a three year service life. Furthermore, in this company, the cost of the typewriters, less their expected trade-in value, should be charged to depreciation expense over this three year period.â€
If you prefer the actual prose from the accounting standards (OK, from the same text book, so a bit dated, but they haven’t changed materially for this):
“…This procedure is known as depreciation accounting, a system of accounting that aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unitâ€
(Apologies for any typos in the above).
*aka fixed assets or capital assets
*and here we’re talking actual GAAP-style accounting, *not* tax “accountingâ€
***yeah, yeah, yeah - the textbook is old enough that they’re discussing the value of a typewriter - showing my age
The real point of accounting is to understand the entity in question. Owning a 10 year old 777-300ER adds $200m**** to your bottom line in any sane accounting. If you bought that 777 for $300m, and are planning on selling it tomorrow, done correctly, you would have spread $100m of depreciation over the past ten years. If the 777 didn’t depreciate at all (IOW, you could sell it for $300m), you could not claim *any* depreciation. And yes, inflation adds some interesting wrinkles to the process.
Exactly how you allocate the depreciation over the service life is a very interesting question – probably the most common method is straight-line (which has the major advantage of simplicity), but many other schemes exist. For example, if an asset is used irregularly “units of production†is often used to allocation the consumption of the useful life of the asset to the actual use (let’s say an airplane***** is good for 10,000 cycles, if you fly it 1000 cycles this year, and 500 cycles next, you’d depreciate 10% of the cost – less salvage - of the aircraft this year, and 5% next). Various accelerated schedules are used, but care must be taken to not generate an incorrect assessment of the business.
And depreciation is fundamentally scheduled over the expected service life – if an airline is expecting to sell their airplanes after five years, they would allocate the cost, less salvage, to depreciation over those five years. If they were planning on keeping the aircraft 20 years, they’d do it over 20 (presumable with a rather different salvage value). While the expected service life can be fudged somewhat (it is, after all, something of a judgment call, especially for very long lived assets), there are basically no cases where you can, for GAAP-type purposes, depreciate a 20 year asset over three years, or vice versa.
And this has *nothing* to do with tax depreciation (except, of course, indirectly, that tax is an expense). MACRS in particular presents a distorted picture of a companies assets (first it disregards salvage value, then the schedules are extremely rigid – the under 20 year schedules are all declining balance switching to straight line, while the longer ones are all straight line, and are all typically substantially faster than the real life of the asset). Worse, if an asset *does* have salvage value, you record that as income for tax purposes when you actually sell it, which is absurd from a real accounting perspective, since the company just got money for something that was supposed to have no value. IOW, would you a value a company that owns a fully (tax) depreciated airplane that has a market value of $100m more than an otherwise identical company that didn’t? Of course you would (but the tax man basically doesn’t).
****made up valuation of a 10 year old 777-300ER for purposes of discussion
*****just an example, I really don’t know what depreciation scheme most airlines use for airliners, or even if they’re particularly consistent
cmf From United States of America, joined Jun 2011, 1064 posts, RR: 24 Reply 20, posted (5 months 3 weeks 6 days 11 hours ago) and read 9156 times:
Quoting rwessel (Reply 19): I really don’t know what depreciation scheme most airlines use for airliners, or even if they’re particularly consistent
Most are straight. IIRC LH and QF didn't for a couple of years but changed back.
Don’t repeat earlier generations’ mistakes. Learn history for a better future.
zeke From Hong Kong, joined Dec 2006, 6800 posts, RR: 74 Reply 21, posted (5 months 3 weeks 6 days 9 hours ago) and read 9133 times:
Quoting OldAeroGuy (Reply 18):
My understanding of the real world is still firm enough to know that airliner list prices have little to do with what airlines actually pay for them or their value on the open market.
That is correct, as a lot of airline never actually buy aircraft. However there are a number of aircraft finance trade journals available to those in the industry that show a strong correlation between list price minus standard industry discounts. The sort of discounts made available to large 77W operators is similar to what is extended to large A380 operators, neither pays full list price, however the ratios are still a valid comparison for this discussion.
Quoting OldAeroGuy (Reply 18):
The 12 posts below yours (and Zeke's) show why I didn't include Depreciation in my cash operating cost comparison analysis. There are far too many variables and assumptions when trying to account for Depreciation. Besides, Depreciation has little to do with the cash required for day-to-day airliner operation.
The standard ATA method used for comparing direct operating costs between different airframes does include depreciation,
Depreciation (Total Aircraft Including Spares)
Cam = (Ct + 0.10 (Ct – Ne Ce) + 0.40 Ne Ce ) / (Da U Vb)
Where:
Ct = Total airplane cost including engines (dollars)
Ce = Cost of one engine (dollars)
Ne = Number of engines
Da = Depreciation period (years)
U = Annual utilization - block hours/year
Vb = Block speed
I am not sure what you are trying to prove here, everyone understands that a larger aircraft has a higher direct operating cost than a smaller one. And the larger aircraft normally has a lower per seat operating cost due to the economies of scale.
Quoting OldAeroGuy (Reply 18): After all, flights aren't delayed because someone couldn't pay the Depreciation bill.
They can be, depreciation process of allocating the cost of airframe. If an airline does not allocate costs correctly, they may not be extended credit. An airframe sitting on the ground still costs an airline money, that is why parking airframes is not “freeâ€, or long periods of downtime for maintenance is not “freeâ€.
Quoting rwessel (Reply 19): Real accounting is about presenting an accurate picture of the company. Tax accounting is about paying the tax man, according to whatever (often absurd) rules the tax man has set.
The two are not disconnected, you need to account for the cost of the asset to the tax man and to the shareholder. This came up recently when QF said its long haul international operations were a loss making venture, despite producing a profit. While the operations were profitable, the allocation of high value assets, and the amount of return they were getting from those assets was below what they could have received by putting an equivalent amount of cash in the bank. One of the major reasons for this is the taxation treatment of its costs, which is less competitive in Australia than countries in the middle and say Singapore.
Quoting rwessel (Reply 19):
“…This procedure is known as depreciation accounting, a system of accounting that aims to distribute the cost or other basic value of tangible capital assets, less salvage (if any), over the estimated useful life of the unitâ€
I agree with that, however that has nothing to do with market value, it is using a book value. The tax man also works on book values, not market values.
Quoting rwessel (Reply 19): Owning a 10 year old 777-300ER adds $200m**** to your bottom line in any sane accounting. If you bought that 777 for $300m, and are planning on selling it tomorrow, done correctly, you would have spread $100m of depreciation over the past ten years.
Quoting rwessel (Reply 19): And yes, inflation adds some interesting wrinkles to the process.
Yes, 300 million 10 years ago is worth around 383 million today. The other wrinkle for non US$ based airlines is the exchange rate variation over time.
Quoting rwessel (Reply 19):
Exactly how you allocate the depreciation over the service life is a very interesting question – probably the most common method is straight-line (which has the major advantage of simplicity), but many other schemes exist.
Actually it is normally a modified straight line, often with an overvaluation of the asset in the early years. This takes into account the high costs associated with operating an aircraft over a long period of time. If you have a low service life you may dodge some of the large mid life airframe, engine, and APU expenses. Power by the hour also adds complexity to the equation.
Quoting rwessel (Reply 19):
And this has *nothing* to do with tax depreciation (except, of course, indirectly, that tax is an expense).
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 22, posted (5 months 3 weeks 6 days 1 hour ago) and read 9043 times:
Exactly how you allocate the depreciation over the service life is a very interesting question – probably the most common method is straight-line (which has the major advantage of simplicity), but many other schemes exist.
Actually it is normally a modified straight line, often with an overvaluation of the asset in the early years. This takes into account the high costs associated with operating an aircraft over a long period of time.
But the standard ATA method is a straight line.
Quoting zeke (Reply 21): The standard ATA method used for comparing direct operating costs between different airframes does include depreciation,
Depreciation (Total Aircraft Including Spares)
Cam = (Ct + 0.10 (Ct – Ne Ce) + 0.40 Ne Ce ) / (Da U Vb)
Where:
Ct = Total airplane cost including engines (dollars)
Ce = Cost of one engine (dollars)
Ne = Number of engines
Da = Depreciation period (years)
U = Annual utilization - block hours/year
Vb = Block speed
You're suggesting yet another variation to Depreciation cost accounting.
If Airbus is using Depreciation in their A380 vs 773ER cost comparison, I wonder what method, write down period and airplane & engine values they are using.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 23, posted (5 months 3 weeks 6 days ago) and read 9020 times:
Quoting MoltenRock (Reply 16): You obviously don't understand depreciation and tax law.
Really?
Quoting MoltenRock (Reply 16): Depreciation for tax purposes is a fixed schedule regardless if an asset is actually worth more or less over that fixed timeframe.
I know that. However, that schedule does in fact take into consideration the potential (estimated) residual value. And my original comment was in regards to Zeke's in Reply #6 --
Quoting zeke (Reply 6): Depreciation is not based upon resale value, it is based upon purchase price.
-- that depreciation is based only on purchase price. That was only partially correct because residual (resale) values are a part of determining the schedule. If you have an asset that will hold a value after a period of time you can certainly depreciate it more, but then you will be ignoring any potential liabilities on the gain from the sale.
You obviously don't understand depreciation and tax law. And I would suggest certain members stick to giving advice in their areas of expertise, which I would assume for certain members is aviation. I don't pretend to be a professional commercial pilot and I would think a professional commercial pilot would not pretend to be a tax accountant.
hal9213 From Germany, joined May 2009, 301 posts, RR: 0 Reply 24, posted (5 months 3 weeks 5 days ago) and read 8823 times:
Quoting rwessel (Reply 7): But in an ideal world, if you bought a 777 ten years ago for $300m, and you could sell it today for $200m, the accumulated depreciation for that asset *should* be $100m.
Quoting zeke (Reply 8): EK does similar, however over 15 years.
To be precise, Emirates leases, so does not need to account for that. However, looking at the leasing groups, I can give you the following values:
Emirates 777-300ER A6-ECQ from mid 2009 has been bought for 163M USD and the prognosed sale value is:
Year 5: 109.620.000
Year 10: 89.750.000
Year 12: 81.930.000
Year 14: 72.290.000
Year 16: 66.520.000
Year 18: 62.710.000
Compared to Emirates A380 A6-EDW for mid 2012 will cost 234M USD and the value is prospected to be:
Year 5: 148.380.000
Year 10: 103.910.000
Year 12: 89.010.000
Year 15: 69.650.000
So YES, the prospected residual value of a 777-300ER is MUCH MUCH more than of an A380. In fact, after 15 years, they are basically worth nearly the same.
The figures can be found on the net if you google for DS Fonds, which is the leasing company. The figures are the prospected normal values, there are also "worst case" and "best case" scenario ranges.
Flighty From United States of America, joined Apr 2007, 6724 posts, RR: 3 Reply 25, posted (5 months 3 weeks 4 days 21 hours ago) and read 8972 times:
Quoting Arniepie (Reply 2): Doesn't the fact that the A380 simply has more seats put extra pressure on overall seatprice on the routes this plane is used for?
Yes. This is why knee-jerk comparisons between different size classes do not really mean much.
On revenue... The A380 fits all your 773ER passengers. In addition, it fits a bunch of _cheap_ passengers you rejected before from the 773. Or, it fits vacant chairs where the absent / nonexistent additional aspiring travelers can sit. What is the revenue gain from this... questionable and inconsistent.
On costs... CASM is one thing. Cost per _occupied_ seat mile is always going to be a bit more favorable to the 777, even tipping the balance, as the 777 has higher seat occupancy % than A380. The 777 always carries the first 300 pax. The pax counts from 300 to 480 might only fill on an extremely erratic basis -- perhaps as low as 20% of the time. Meanwhile, seat costs are incurred 100% of the time.
Big airplanes only make sense in very special situations. Much more commonly, you want the small jet.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 26, posted (5 months 3 weeks 2 days 2 hours ago) and read 8713 times:
Thanks to everyone for the good discussion and the additional information.
With the Depreciation data provided by hal9213, I'll try to include Depreciation in the operating costs. Bear with me since I'm not an accountant and it may take a couple of trys to get it right. I'm open to suggestions.
Quoting hal9213 (Reply 24): Emirates 777-300ER A6-ECQ from mid 2009 has been bought for 163M USD and the prognosed sale value is:
Year 5: 109.620.000
Year 10: 89.750.000
Year 12: 81.930.000
Year 14: 72.290.000
Year 16: 66.520.000
Year 18: 62.710.000
Compared to Emirates A380 A6-EDW for mid 2012 will cost 234M USD and the value is prospected to be:
Year 5: 148.380.000
Year 10: 103.910.000
Year 12: 89.010.000
Year 15: 69.650.000
From these data, it appears the Depreciation charges over 15 years would be:
773ER: $163M - $69.4M = $93.6M
A380: $234M - $69.7M = $164.3M
If we assume each airplane flies 350 days per year for 15 years, the Depreciation daily charge would be:
773ER: $93.6M / (350*15) = $17.8K
A380: $164.3M / (350*15) = $31.3K
Now let's suppose the daily utilization of both aircraft was 16 hrs per day. This would roughly correspond to a 3000nm round trip and a 1500nm tag on trip. Using fuel in the $3 per gal range and the relationships of the thread starter, the 7773ER daily Cash costs would be roughly:
A380: $186.6K * (471/278) * 84.9% = $268.4K per trip
Adding Depreciation to the Cash costs:
773ER: $186.6K + $17.8K = $204.4K
A380: $268.4K + $31.3K = $299.7K
Daily Seat Costs:
773ER: $204.4K / 278 = $735 per seat
A380: $299.7K / 471 = $636 per seat
Using these data, the A380 would have a 15.6% per seat advantage.
Quoting zeke (Reply 21): I am not sure what you are trying to prove here, everyone understands that a larger aircraft has a higher direct operating cost than a smaller one. And the larger aircraft normally has a lower per seat operating cost due to the economies of scale.
I'm trying to understand how Airbus arrives at the claim that the 773ER is 22% more expensive to operate on a per seat basis than the A380 when both are configured at the same comfort standard. So far, the available data do not appear to support that claim by a fairly wide margin of 6.4%. If other forum readers can bring additional information to the discussion, we can include it to see how it changes the answer.
I agree with other responders that there is risk in operating the larger airplane on a given route if there is not enough traffic to support it. This risk might be justified if there is sufficient operating cost per seat reduction to reward using the larger airplane.
[Edited 2011-12-04 07:41:26]
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 27, posted (5 months 2 weeks 5 days 14 hours ago) and read 8464 times:
Quoting OldAeroGuy (Reply 26): Using these data, the A380 would have a 15.6% per seat advantage.
Frankly, we don't know what Airbus used to come up with its 22% cost advantage over the 77W. (I'll stand corrected if someone will show us the published data that Airbus used to come up with that figure.) There are so many variables, starting with the fact that depreciation schedules are highly subjective. Then there's also the fact that many airlines lease. And depending on whether the leases are operating or capital would determine if and how the depreciation is applied. (A lessor would certainly depreciate a capital asset, but then a lessor is not so much concerned about operating expenses since the lessee picks that up.)
In short, I think this discussion around depreciation is a red-herring. Perhaps Airbus did use it, but any airline that would make a real-world comparison would probably ignore Airbus' figures and use their own - which I think they would do anyway.
In the final analysis, I don't think depreciation plays into this figure because the article referenced in your original post states, "A key enabler for these figures is the A380’s step-change in cash operating costs, building on the fuel efficiency advantage mentioned above.[Emphasis added.]
Based on that statement, seems to me they are looking at the pure operating costs and not any accounting treatments.
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 28, posted (5 months 2 weeks 5 days 13 hours ago) and read 8462 times:
Quoting redflyer (Reply 27): Frankly, we don't know what Airbus used to come up with its 22% cost advantage over the 77W.
I believe it was data provided by SQ, who operate both models with similar cabin configurations - what Airbus refers to as "comfort standards".
Suites Class on the A380 is nicer than First on the 77W, but having sampled both, I can say F on the 77W is from a "comfort" standpoint comparable to R on the A388 and significantly better than F on SQ's 744s.
astuteman From United Kingdom, joined Jan 2005, 8612 posts, RR: 96 Reply 30, posted (5 months 2 weeks 5 days 11 hours ago) and read 8487 times:
Quoting OldAeroGuy (Thread starter): The A380 advantage, as analyzed by Airbus, is stated to be when both airplanes are configured to the same comfort standard. This would seem to mean that the SQ configurations for these two airplanes, seating 471 and 278 respectively, would be a good example of a common comfort standard.
SQ's replacement of 10x 773ER with 7x A380 to ZRH weekly would seem to be the perfect example.
When they did that, they described a 20% capacity increase coupled with a 3% reduction in operating cost - i.e. a 23% reduction in per-seat cost.
The number wasn't created by Airbus. It was created by SQ
Quoting OldAeroGuy (Thread starter): I'd be happy to see a link on this topic performed by an airline rather than an OEM. I can't seem to find one.
I will dig one out when I've got more time
Quoting Zkpilot (Reply 1): of course that all works out if the A380 is full or close to it... if it is only going out with 278 pax (or say 300) then the 773ER is going to kill it economically not to mention the extra hold space available on the 773ER for freight!
And if the 773ER is only going out with 60 pax, a Q400 might better serve.....
Quoting Arniepie (Reply 2): Doesn't the fact that the A380 simply has more seats put extra pressure on overall seatprice on the routes this plane is used for?
Not necessarily. Replacing 12 x 773ER with 7 x A380 from Singapore to Zurich did not change the weekly seat count.
Quoting redflyer (Reply 5): However, I'm curious: given that the 77W is in far more demand
Are you sure just how much you can judge the demand from sales, when supply is still constrained?
"Demand" measured by current sales means the market has completely turned its back on the 787.
Which of course it hasn't
Quoting OldAeroGuy (Reply 18): Still looking for a link to an airline created operating cost comparison between the A380 and t.he 777-300ER
I will get you the link to SQ's comments later
Quoting OldAeroGuy (Reply 26): I'm trying to understand how Airbus arrives at the claim that the 773ER is 22% more expensive to operate on a per seat basis than the A380 when both are configured at the same comfort standard
hal9213 From Germany, joined May 2009, 301 posts, RR: 0 Reply 32, posted (5 months 2 weeks 5 days 6 hours ago) and read 8325 times:
Quoting OldAeroGuy (Reply 26): With the Depreciation data provided by hal9213, I'll try to include Depreciation in the operating costs.
Cool, thanks for the calculations.
However, I must point out, that those depreciation values were from the leasing company. Emirates pays a static monthly rate (around 1.3 million per month for the 777) for 10 or 12 years, so accounting for the actual airline might look different.
Quoting Stitch (Reply 28): Suites Class on the A380 is nicer than First on the 77W,
At EK, I would say the other way around. Since there are no overhead bins etc., the 77W has a huge ceiling and a "dome" feeling, helping against claustrophic feelings in a suite. And, the 77W is a hint wider than the A380 on the top floor.
Obivously, the aircraft-unrelated extras like shower and bar make the EK A380 more fun.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 33, posted (5 months 2 weeks 5 days 5 hours ago) and read 8302 times:
Quoting astuteman (Reply 30): Quoting OldAeroGuy (Reply 18):Still looking for a link to an airline created operating cost comparison between the A380 and t.he 777-300ER
I will get you the link to SQ's comments later
Quoting OldAeroGuy (Reply 26):I'm trying to understand how Airbus arrives at the claim that the 773ER is 22% more expensive to operate on a per seat basis than the A380 when both are configured at the same comfort standard
THEY didn't. SQ did
I'll eagerly await a link that supports an Airline operating cost analysis between the two airplanes. The only ones I can find quote Airbus analyses of Airline data.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 34, posted (5 months 2 weeks 5 days 4 hours ago) and read 8302 times:
Quoting OldAeroGuy (Reply 33): I'll eagerly await a link that supports an Airline operating cost analysis between the two airplanes. The only ones I can find quote Airbus analyses of Airline data.
Notice it quotes an Airbus analysis, not something that SQ said.
"Another Airbus calculation based on Singapore Airlines operations to Paris shows that replacing a 278-seat 77-300ER operating 10 flights a week with a 471-seat 380 operating daily flights, gives a 20 per cent increase in capacity with a 3 per cent fall in operating costs."
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 35, posted (5 months 2 weeks 5 days 3 hours ago) and read 8260 times:
Quoting astuteman (Reply 30): Are you sure just how much you can judge the demand from sales, when supply is still constrained?
"Demand" measured by current sales means the market has completely turned its back on the 787.
Which of course it hasn't
You bring up a valid point, and my initial thought is that, yes, you could. A lull in sales does not necessarily point to a drop in demand. One has to look at a longer period of time in an industry such as aviation. But, for the sake of argument, we could certainly conclude "demand" for the 777 far outstrips the A380 even based on your proposed analysis given that the 777 has had its best year in sales yet, and sales seem to be picking up speed over the past few years, while the A380's best year in sales was 10 years ago and sales have been at a relative trickle since (notwithstanding a single order from one airline in 2010 and that airline accounts for 40% of all A380 sales since its launch).
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 36, posted (5 months 2 weeks 4 days 14 hours ago) and read 8132 times:
Quoting OldAeroGuy (Reply 34): Notice it quotes an Airbus analysis, not something that SQ said.
But it's an analysis of actual SQ in-service data, not a computer model projection based on hypotheticals.
So consider it SQ saying it by proxy through Airbus.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 37, posted (5 months 2 weeks 4 days 11 hours ago) and read 8092 times:
Quoting Stitch (Reply 36): But it's an analysis of actual SQ in-service data,
Is it? Or is it an Airbus prediction based on their cost model for SQ's operational choices?
I don't think we know without SQ actually saying so.
Quoting Stitch (Reply 36): So consider it SQ saying it by proxy through Airbus.
I'd rather hear SQ say it rather than having it passed through the Airbus filter.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
I don't think that any A380's will be put on to routes where there os only 1 777 sized A/C currently on it.
For the sake of argument lets say that there is a SQ772 and a UA 772 scheduled on the same route at ~500 seats total ( I dont know the exact numbers) then SQ change the 772 for an A380 of ~450 seats then there is a seat increase on the route of ~40%. They are however, able to cut ticket prices to gain market share from UA. There may be a 20% increase in seats on the route and SQ may need to get an extra 30% on their flight to make it remain profitable but may be able to assume that half of that increase comes from poaching PAX from UA
Quoting redflyer (Reply 35): and that airline accounts for 40% of all A380 sales since its launch).
Ah yes, the old assumption that dollars paid from dubai are worth less than the dollars paid from australia.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 40, posted (5 months 2 weeks 4 days ago) and read 7930 times:
Quoting flipdewaf (Reply 38): Quoting redflyer (Reply 35):
and that airline accounts for 40% of all A380 sales since its launch).
Ah yes, the old assumption that dollars paid from dubai are worth less than the dollars paid from australia.
Not sure what you're trying to imply. If it was intended as a one-up it failed miserably. The fact is, 40% of all A380's sold have been purchased by one airline. Doesn't matter where that airline is based, and I would make the same comment and draw the same conclusions had it been LH or SQ or even UA that purchased 40% of all A380's. The fact is that 40% of all A380's have been purchased by one airline and that, my friend, distorts the underlying market dynamics for the real demand for the A380.
cmf From United States of America, joined Jun 2011, 1064 posts, RR: 24 Reply 41, posted (5 months 2 weeks 3 days 22 hours ago) and read 7880 times:
Quoting redflyer (Reply 40): The fact is that 40% of all A380's have been purchased by one airline and that, my friend, distorts the underlying market dynamics for the real demand for the A380.
You mean like the distortion from Lufthansa holding 55% of all 747-8i orders? Or Delta 55% of all 767-400ER orders. I don't think so.
Don’t repeat earlier generations’ mistakes. Learn history for a better future.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 42, posted (5 months 2 weeks 3 days 18 hours ago) and read 7826 times:
Quoting cmf (Reply 41): You mean like the distortion from Lufthansa holding 55% of all 747-8i orders? Or Delta 55% of all 767-400ER orders.
You must think I'm a shill for Boeing and that I would have some excuse not to put your examples under the same analysis. Fact is, the examples you cite are indeed in the same boat as the A380. (And a good reason why the 764 is a dead-ender, and the 748i could be as well.)
astuteman From United Kingdom, joined Jan 2005, 8612 posts, RR: 96 Reply 43, posted (5 months 2 weeks 3 days 9 hours ago) and read 7783 times:
Quoting OldAeroGuy (Reply 37): I'd rather hear SQ say it rather than having it passed through the Airbus filter.
Disbelieve all you want. The fact remains that these are the nearest to airline-based figures that we have
Unless you just want to pluck a shedload of figures out of the air based on nothing more than predjudice and declare them to be "more likely to be the truth"?
Quoting redflyer (Reply 40): The fact is that 40% of all A380's have been purchased by one airline and that, my friend, distorts the underlying market dynamics for the real demand for the A380.
BS
The frames that EK have bought are an integral part of that market dynamic. Period.
They interract with the market around them. Period.
And if EK make shitloads of money flying them, then the market WAS there.
Period.
flipdewaf From United Kingdom, joined Jul 2006, 1166 posts, RR: 1 Reply 44, posted (5 months 2 weeks 3 days 7 hours ago) and read 7728 times:
Quoting flipdewaf (Reply 38): I don't think that any A380's will be put on to routes where there os only 1 777 sized A/C currently on it.
For the sake of argument lets say that there is a SQ772 and a UA 772 scheduled on the same route at ~500 seats total ( I dont know the exact numbers) then SQ change the 772 for an A380 of ~450 seats then there is a seat increase on the route of ~40%. They are however, able to cut ticket prices to gain market share from UA. There may be a 20% increase in seats on the route and SQ may need to get an extra 30% on their flight to make it remain profitable but may be able to assume that half of that increase comes from poaching PAX from UA
I did some quick analysis on this (don't know much about demand dynamics) but I stated that for every 4 pax gained from outside one was poached from the opposition that the cost per seat actually went up using a cheaper per seat plane
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 45, posted (5 months 2 weeks 3 days 2 hours ago) and read 7683 times:
Quoting astuteman (Reply 43): The frames that EK have bought are an integral part of that market dynamic. Period.
They interract with the market around them. Period.
Perhaps if 600 or more A380's had been ordered to date (over 10 years after it was launched and in line with Airbus' original projections) and EK held 40% of those orders then I'd say you had a valid point. But with a mere 243 ordered to date and EK holding 40% of those orders, it would appear that there is a very large elephant in a very small room.
Quoting astuteman (Reply 43): And if EK make shitloads of money flying them, then the market WAS there.
Period.
Correction: If EK makes shitloads of money flying them then the market WAS there - for EK.
XaraB From Norway, joined Aug 2007, 206 posts, RR: 0 Reply 46, posted (5 months 2 weeks 3 days 1 hour ago) and read 7656 times:
Quoting redflyer (Reply 45): Correction: If EK makes shitloads of money flying them then the market WAS there - for EK.
Markets aren't company specific. If EK makes money on their deployment of the A380 (all imaginable costs included), then the market for the A380 is definitely there, independent of which airline decided to use them. It can be argued, however, that EK have been much better positioned to EXPLOIT that market, but it is by no means locked to them.
It's the same way as some airlines are able to make money with A340s and 777s, while others are not on exactly the same routes. The market is equal to all, but the individual companies' overall cost and strategy structure is unique.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 47, posted (5 months 2 weeks 3 days 1 hour ago) and read 7664 times:
Quoting astuteman (Reply 43): Quoting OldAeroGuy (Reply 37):I'd rather hear SQ say it rather than having it passed through the Airbus filter.
Disbelieve all you want. The fact remains that these are the nearest to airline-based figures that we have
Unless you just want to pluck a shedload of figures out of the air based on nothing more than predjudice and declare them to be "more likely to be the truth"?
Quite the contrary. My thread opener post laid out a cash cost breakdown by cost category for the 773ER that I know to be based on fact. Using Airbus' own fuel burn per pax comparison between the A380 and 773ER, I then adjusted by cost category for the seat differences between the two airplanes n their SQ configurations. The A380 was given the benefit of the doubt in these adjustments by assuming that flight crew costs didn't change even though crews of larger airplanes typically earn more and that the larger size of the A380 would not entail higher ground charges. The result indicates that the 773ER would be 17.8% per seat more expensive to operate than the A380 for an SQ type configuration.
When a real world depreciation cost model is added to the cash cost model, the 773ER becomes 15.6% more expensive.
I fail to see where prejudice has been injected in this analysis. My main question is where the proposed cost models would need to change to achieve the Airbus quoted result of the 773ER being 22% more expensive. I'd be grateful for your comments.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
cmf From United States of America, joined Jun 2011, 1064 posts, RR: 24 Reply 48, posted (5 months 2 weeks 2 days 22 hours ago) and read 7599 times:
Quoting redflyer (Reply 42): You must think I'm a shill for Boeing and that I would have some excuse not to put your examples under the same analysis. Fact is, the examples you cite are indeed in the same boat as the A380. (And a good reason why the 764 is a dead-ender, and the 748i could be as well.)
I do not have enough experience in your posts to even consider the shill aspect. I just saw a very poor argument and hoped bringing up a couple of similar cases would highlight why having one customer holding a large percentage of orders isn't important.
Based on your comments the 737-800 where South West hold 1/3 is probably a better example as I do not think one customer with a large percentage of orders indicate a poor program.
From my perspective a delivery is a delivery. Doesn't matter if one customer gets 100 or 100 customers get 1 each, still 100 delivered. Risk management may dictate that one customer holding a large percentage of orders makes it dangerous but I think that is too simplified view. To judge risk you need to consider the customer too. So I judge the chances of Emirates taking all A380 (and 777) much more likely than American taking the 260 frames they ordered.
I do not think there is a problem with EK holding 40% of the A380 orders. If there is a problem then it is that the total order number isn't higher.
Don’t repeat earlier generations’ mistakes. Learn history for a better future.
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 49, posted (5 months 2 weeks 2 days 22 hours ago) and read 7586 times:
Quoting XaraB (Reply 46): Markets aren't company specific. If EK makes money on their deployment of the A380 (all imaginable costs included), then the market for the A380 is definitely there
When talking of markets, there are two parts to the analysis. The first part would be to determine if there is a market, and the second part would be to determine if that market is profitable. There is certainly a market where the A380 is concerned as evidenced by the 243 copies ordered thus far, so that would be a "yes" to the first part of the analysis. But then the key is part 2 of the analysis and whether that market is profitable for Airbus.
From an airline standpoint, I'm sure EK is thrilled to have access to the A380 and will turn a profit flying the planes. From an OEM standpoint, I doubt the same can be said for Airbus.
When Boeing's Sonic Cruiser was first being marketed AA said they would buy the first 3 years' worth of production. Did that make the Sonic Cruiser a potential market success? Looking back, we know where the Sonic Cruiser ended up.
sunrisevalley From Canada, joined Jul 2004, 3393 posts, RR: 1 Reply 50, posted (5 months 2 weeks 2 days 20 hours ago) and read 7552 times:
Quoting OldAeroGuy (Reply 47): I fail to see where prejudice has been injected in this analysis. My main question is where the proposed cost models would need to change to achieve the Airbus quoted result of the 773ER being 22% more expensive. I'd be grateful for your comments.
Have you determined a cross over point below which the A380 would cost more to use than the 773ER? It seems to me that this is relevant to a decision which type a carrier might use if like SQ they have both in their fleet.
WingedMigrator From United States of America, joined Oct 2005, 1944 posts, RR: 57 Reply 51, posted (5 months 2 weeks 2 days 16 hours ago) and read 7506 times:
Quoting OldAeroGuy (Reply 47): My main question is where the proposed cost models would need to change to achieve the Airbus quoted result of the 773ER being 22% more expensive.
I don't think you're going to find the missing % via any rational analysis method. OEM sales and marketing typically picks a mission that exaggerates the difference in their favor, which explains why the 737 is 6% better than the A320 while the A320 is 6% better than the 737.
I'm sure you could compare the respective A380 and 77W payload range curves, pick a range where the 77W is disadvantaged (probably something nice and long) and run the numbers for that. Would it be worth the effort? Not to me...
XaraB From Norway, joined Aug 2007, 206 posts, RR: 0 Reply 52, posted (5 months 2 weeks 1 day 23 hours ago) and read 7436 times:
Quoting redflyer (Reply 49): When talking of markets, there are two parts to the analysis.
This is correct; I deliberately left out the "OEM profitable" part of this since the discussion was centered around whether there was a real market for the A380 wrt capacity vs operating costs (i.e. if airlines could make money off of it).
With reference to whether the A380 has an OEM market; we are (from memory) only 7 frames away from the original break-even point, less than 1/3 into the program's lifespan. In other words; the A380 would most definitely have turned a profit for Airbus if it wouldn't go on to be delayed, confirming that it was a sell-able concept and a sound business decision. However, because of the delays, whether a profit will actually materialize remains to be seen.
tommytoyz From United States of America, joined Jan 2007, 719 posts, RR: 3 Reply 53, posted (5 months 2 weeks 1 day 13 hours ago) and read 7306 times:
Quoting zeke (Reply 6): Depreciation is not based upon resale value, it is based upon purchase price
No, it is based on both, unless it is written off as worthless, in an uninsured accident for example.
Quoting zeke (Reply 6): Depreciation schedules are country specific depending on local tax laws.
Let me unravel:
1. Tax accounting treatments of aircraft depreciation by different tax jurisdictions is one thing.
2. Corporate accounting treatment of depreciation, such as in GAAP (Vs tax accounting), is another.
3. The actual capital depreciation costs (or profits) actually realized by the airlines is yet another. They are all different. This third thing is not dependent on any accounting treatments in 1 or 2 above, but rather on market prices (difference between purchase and resale price or insurance residual payment). This third thing is what determines the cost of the asset.
You interchange and conflate the three in the same paragraph of your posts, as if they were the same or interchangeable. They are not.
flipdewaf From United Kingdom, joined Jul 2006, 1166 posts, RR: 1 Reply 54, posted (5 months 2 weeks 7 hours ago) and read 7051 times:
Quoting WingedMigrator (Reply 51): I don't think you're going to find the missing % via any rational analysis method. OEM sales and marketing typically picks a mission that exaggerates the difference in their favor, which explains why the 737 is 6% better than the A320 while the A320 is 6% better than the 737.
Except this isn't marketing talk, it is the actual numbers from SQ operating both aircraft on the SIN-ZRH route.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 55, posted (5 months 2 weeks 2 hours ago) and read 7014 times:
Quoting flipdewaf (Reply 54): Except this isn't marketing talk, it is the actual numbers from SQ operating both aircraft on the SIN-ZRH route.
Except that I can't find any reference that attributes the 22% or so to a statement from SQ. All the information I've found so far say it's an Airbus analysis of SQ operations. I'm still looking for a direct quote from SQ or AF since both operate the A380 and 773ER.
Notice it quotes an Airbus analysis, not something that SQ said.
"Another Airbus calculation based on Singapore Airlines operations to Paris shows that replacing a 278-seat 77-300ER operating 10 flights a week with a 471-seat 380 operating daily flights, gives a 20 per cent increase in capacity with a 3 per cent fall in operating costs."
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
sunrisevalley From Canada, joined Jul 2004, 3393 posts, RR: 1 Reply 56, posted (5 months 1 week 6 days 17 hours ago) and read 6890 times:
Quoting OldAeroGuy (Reply 34): "Another Airbus calculation based on Singapore Airlines operations to Paris shows that replacing a 278-seat 77-300ER operating 10 flights a week with a 471-seat 380 operating daily flights, gives a 20 per cent increase in capacity with a 3 per cent fall in operating costs."
Does this mean from an operating cost stand point that it costs the same to operate (10*278=2780) seats on the 77W as (7*471*.97=3198) seats on the A380.
LAXDESI From United States of America, joined May 2005, 4863 posts, RR: 46 Reply 57, posted (5 months 1 week 6 days 13 hours ago) and read 6871 times:
Quoting sunrisevalley (Reply 56): Quoting OldAeroGuy (Reply 34):"Another Airbus calculation based on Singapore Airlines operations to Paris shows that replacing a 278-seat 77-300ER operating 10 flights a week with a 471-seat 380 operating daily flights, gives a 20 per cent increase in capacity with a 3 per cent fall in operating costs."
Does this mean from an operating cost stand point that it costs the same to operate (10*278=2780) seats on the 77W as (7*471*.97=3198) seats on the A380.
Going by the numbers quoted in reply #56, the capacity increase is about 16%. With a 3% decrease in operating cost, A380 should have about 19% lower operating costs per seat relative to B77W.
WingedMigrator From United States of America, joined Oct 2005, 1944 posts, RR: 57 Reply 58, posted (5 months 1 week 6 days 1 hour ago) and read 6738 times:
Quoting LAXDESI (Reply 57): A380 should have about 19% lower operating costs per seat relative to B77W
...which is mathematically equivalent to the 77W having 23% higher operating costs per seat relative to the A380. Percentages always look better one way than the other, a fact that is not lost on marketing departments.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 59, posted (5 months 1 week 5 days 22 hours ago) and read 6669 times:
Quoting sunrisevalley (Reply 56): Does this mean from an operating cost stand point that it costs the same to operate (10*278=2780) seats on the 77W as (7*471*.97=3198) seats on the A380.
No, the relationship would be:
(7*471/.97=3399)/(10*278=2780) = 1.223 With this relationship, the 773ER would be 22.3% more expensive to operate per seat. This is the number I take issue with since it looks like the relationship should be 17.8% as discussed in the Thread openner.
Quoting LAXDESI (Reply 57): Quoting sunrisevalley (Reply 56):
Quoting OldAeroGuy (Reply 34):"Another Airbus calculation based on Singapore Airlines operations to Paris shows that replacing a 278-seat 77-300ER operating 10 flights a week with a 471-seat 380 operating daily flights, gives a 20 per cent increase in capacity with a 3 per cent fall in operating costs."
Does this mean from an operating cost stand point that it costs the same to operate (10*278=2780) seats on the 77W as (7*471*.97=3198) seats on the A380.
Going by the numbers quoted in reply #56, the capacity increase is about 16%. .
Actually the capacity increase is (7*471)/(10*278) = 3297/2780 = 1.186 or 18.6%.
Since the article says the capacity increase is 20% and I am familiar with the precision of the SQ Ops department, it reinforces my doubts about this calculation being actually done by SQ.
Quoting WingedMigrator (Reply 58): ...which is mathematically equivalent to the 77W having 23% higher operating costs per seat relative to the A380. Percentages always look better one way than the other, a fact that is not lost on marketing departments.
Percentages are wonderful things.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
LAXDESI From United States of America, joined May 2005, 4863 posts, RR: 46 Reply 61, posted (5 months 1 week 5 days 18 hours ago) and read 6610 times:
Quoting LAXDESI (Reply 57): Going by the numbers quoted in reply #56, the capacity increase is about 16%. With a 3% decrease in operating cost, A380 should have about 19% lower operating costs per seat relative to B77W.
Quoting OldAeroGuy (Reply 59): Actually the capacity increase is (7*471)/(10*278) = 3297/2780 = 1.186 or 18.6%.
I made a mistake. Going by your correct number, A388 should have about 21.6% lower operating costs per seat relative to B77W in SQ configuration.
I suspect this advantage will vary depending on airline configuration, but an advantage of around 20% bodes well for A380 over B77W on many dense routes. One would expect the B777-9X to cut this 20% advantage by half, and more if it is stretched.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 62, posted (5 months 1 week 5 days 17 hours ago) and read 6602 times:
Quoting LAXDESI (Reply 61): Going by your correct number, A388 should have about 21.6% lower operating costs per seat relative to B77W in SQ configuration.
Any details at how you arrived at 21.6%? If you did a built up analysis, what fuel burn per seat increment did you use?
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
zeke From Hong Kong, joined Dec 2006, 6800 posts, RR: 74 Reply 63, posted (5 months 1 week 5 days 16 hours ago) and read 6628 times:
Quoting OldAeroGuy (Reply 22): But the standard ATA method is a straight line.
The last update to the ATA method was published in 1967 where the industry in the US was heavily regulated. With deregulation, the industry has modified the model, however most operators follow a modified ATA-67 format. Depreciation models these days normally differentiate the engines, airframe, APU and spares. Various direct cost that were not used in the ATA-67 model are normally included in todays analysis, these include cabin crew, landing and terminal charges, navigation charges and interest.
Based upon that model, the cost per seat to operate SIN-LHR is USD$487 for the A380 and USD$574 for the 77W, around an 18% difference on a per seat basis.
Some of the assumptions I made :
All pilots earn the same salary, regardless of rank or type, fly 850 hours a year. Cabin crew earn the same, regardless of rank or type. Salaries were amended to reflect an Asian pay scales. Passenger to cabin crew ratio of 20:1. Interest was not included as SQ normally pays cash, navigation and landing charges were not calculated. I assumed that the airline received 40% discount on the list price for the airframe, and 20%discount on spares, 480 cycles a year, residual of 10%, and engine/airframe life of 15 years. Fuel price as per the IATA Jet Fuel price monitor. Weights were taken from the ACAPS, engine weights taken from the TCDS. Seating capacity as per the OP, load factor of around 70% as per SQ latest figures.
Click to view 77W calculation (done in MathCad)
Click to view A380 calculation (done in MathCad)
SQ has however stated a number of times they see higher load factors on the A380, around 90%, the cost per seat reduces to $377.
Quoting OldAeroGuy (Reply 22):
If Airbus is using Depreciation in their A380 vs 773ER cost comparison, I wonder what method, write down period and airplane & engine values they are using.
While the OEMs may use various models, the models that count are the ones derived by the end users, it is used for their own internal comparisons between aircraft. They use their own accounting rules and history to derive the comparisons, and use airframe, engine, spares, and APU values supplied by the OEMs. Manufacturers may put forward their own analysis, however it is taken with a grain of salt, they are normally very one sided.
I have yet to see one airline publish the exact model they use, they are closely guarded. What airlines do provide the OEMs is their standard mission rules, which normally results in reduced range and payload compared to the manufacturers data.
Quoting redflyer (Reply 23): that depreciation is based only on purchase price. That was only partially correct because residual (resale) values are a part of determining the schedule.
The actual resale value has nothing to do with the book value used in depreciation when selecting an airframe. The book value used as the residual is normally expressed as a percentage of the purchase price (often in the range of 5-10%). The actual resale value once purchased is often above this book value when the asset is disposed of, and this is often different to the number used when selecting the airframe.
Quoting redflyer (Reply 23): You obviously don't understand depreciation and tax law.
I do not claim to know everything about it, however I do know how it is applied to aircraft from an operators point of view when selecting aircraft. I would even suggest that even specialist tax attorneys cannot agree on many aspects of depreciation and tax law. If I had a dollar for every time a major international accountancy firm provided incorrect tax advice, I would be very rich.
I do however own a couple of aircraft myself, and work in an airline that does this sort of analysis regularly, I feel I have a better than working knowledge of the area as it applies to aircraft.
Quoting tommytoyz (Reply 53): You interchange and conflate the three in the same paragraph of your posts, as if they were the same or interchangeable. They are not.
I understand depreciation as it applies to selecting aircraft, and as I posted above, the residual is normally always expressed as a percentage of the purchase price. No one is able to estimate the actual resale value of an airframe in 10-30 years, made even harder if the type is totally new and unknown to the market.
You may know depreciation as it applies to typewriters, however they is not how it is applied when selecting an aircraft. It is more how one would depreciate an airframe when operating it and subsequently disposing of it, they are not one in the same.
Quoting OldAeroGuy (Reply 55):
Except that I can't find any reference that attributes the 22% or so to a statement from SQ.
The 22% number I have never seen from SQ, SQ said their A380s were 20% better than the 744 to ATW in 2007. The 15-22% number came from EK at one of the airshows when they placed an order for more A380s. EK has a number of configurations ordered for the 77W and A380.
In any case, if it is 18 or 22%, it is a significant differance.
OldAeroGuy From United States of America, joined Dec 2004, 3141 posts, RR: 66 Reply 64, posted (5 months 1 week 5 days 2 hours ago) and read 6500 times:
Interesting data Zeke, thanks for the effort.
Two initial comments:
1) Load factor is a revenue term and has a mininal impact on operating cost per seat. I'm not sure why you included it in this discussion.
2) Your fuel cost numbers give the A380 a 23.2% per seat advantage. I know you have access to 773ER data as Cathay has a large fleet. Where did you get the A380 data, since Airbus claims only a 12% advantage? See the link in the thread starter.
"The former largest aircraft, the venerable Boeing 747-400, burns 20 percent more fuel per seat than the A380—a fact confirmed by A380 operators. Even the latest 747 derivative, the 747-8, burns eight percent more fuel per seat than the A380. And the twin-engined 777-300ER burns 12 percent more fuel per seat than the A380.
These figures result from Airbus best-estimate engineering analysis using same-comfort standards, three-class cabin layouts - a basic requirement for meaningful and credible comparisons."
Naturally, this tends to skew your results.
Airplane design is easy, the difficulty is getting them to fly - Barnes Wallis
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 65, posted (5 months 1 week 1 day ago) and read 6005 times:
Quoting zeke (Reply 63): The actual resale value has nothing to do with the book value used in depreciation when selecting an airframe.
You're right, because "actual" resale value will not be known for some time. It's the estimated resale value that is key. And it certainly does play a role in depreciation schedules.
Quoting zeke (Reply 63): I do not claim to know everything about it, however I do know how it is applied to aircraft from an operators point of view when selecting aircraft.
As I pointed out in an earlier post, aircraft lessors tend to look at leases quite differently than operators do. Makes a big difference.
astuteman From United Kingdom, joined Jan 2005, 8612 posts, RR: 96 Reply 66, posted (4 months 10 hours ago) and read 4931 times:
If I can just belatedly pick up on a couple of points.....
Quoting redflyer (Reply 35): But, for the sake of argument, we could certainly conclude "demand" for the 777 far outstrips the A380 even based on your proposed analysis given that the 777 has had its best year in sales yet, and sales seem to be picking up speed over the past few years, while the A380's best year in sales was 10 years ago and sales have been at a relative trickle since (notwithstanding a single order from one airline in 2010 and that airline accounts for 40% of all A380 sales since its launch).
Before last year's stellar performance for the 777, up to the end of 2010, about 440 773ER's net had been ordered since Feb 2000, compared to 243 A380's net since December 2010.
If the delays to EIS and ramp up are factored in, the A380 must have lost at least 2, and possibly 3 years of opportunity in that time. Those numbers hardly represent demand for the 777 "outstripping" demand for the A380.
In fact, measured in capacity terms, the orders for the 773ER represent only 8% more seats being added to the airlines than the capacity of the A380's ordered. Which is remarkable given the woes of the big bird in the period.
And anyone who dares to suggest that the delays and dislocation are irrelevant are kidding themselves to be honest. The 787, experience, A350's experience, and even the 773ER's experience last year clearly show what happens when development programmes get disrupted.
On which point I certainly accept that the 164 or so 773ER's ordered in 2011 changes things a bit, but I'll come back to that.
In terms of backlog going forward, even allowing for the stellar 164 frames ordered last year, the backlog for the 773ER stands at 290 frames, compared to 185 for the A380.
What's ironic about that is that, even after 2011's stellar performance, the capacity represented by the A380 backlog is some 5% greater than that represented by the 773ER backlog.
(In December 2010, before said "performance", the A380 backlog was 193 frames, the 773ER backlog was only 173 frames.. )
When considering the supply vs demand...
In terms of backlog, the 777 backlog (all) stood at 390 at end 2011, and at the published delivery rates (rising to 100 in 2013) measures almost exactly 4 years long (to end 2015), even after last year's stellar performance.
The A380's backlog of 185, at the published delivery rates (30 in 2012 and 35 in 2013) will take until 3rd quarter 2017 to clear - nearly 2 years longer than the 777.
Measured by supply, demand for the A380 is, in fact stronger. I'll be interested to see what the "book-to-bill" ratio is this year..)
Quoting redflyer (Reply 40): The fact is that 40% of all A380's have been purchased by one airline and that, my friend, distorts the underlying market dynamics for the real demand for the A380.
mmm
At end 2011, EK accounted for 90 out of 253 orders, which is approximately 35.5% of the total.
During last year's orderfest, of the 164 773ER's sold, 50 were sold to EK, or 30.5% of the total.
Yet EK's interest in the A380, at 35.5% is "market distorting", whilst their interest in the 773ER this year, at 30.5%, is part of a "large and ever growing demand for this popular aircraft"..
In terms of total 773ER orders, EK own 153 of 603, or 25.5%.
I'm guessing somehow that's not "market distorting"..
I'd be interested to know exactly where the cut-over point is to the nearest 1/2% in your opinion...
Actually, in truth, I'm not, because the whole "market distorting" stance is nonsense anyway IMO.
How you can selectively pick out one particular airline which is part of the whole market., and then declare that it distorts said market is a mystery to me.
Doing so selectively for the A380 alone - speaks for itself really, especially after a cursory look at the figures shows that the discrimination is unsupportable.
But hey. each to their own.
Again it's perhaps ironic that one of the biggest driver behind last year's surge for the 773ER was the 2 year slippage to the A350-1000, as evidenced by comments from some of the airlines that ordered them *shrug*
I'll accept that EK's demand for the A380 is market distorting in one sense though.
By snapping up such a large part of the available supply, they've really screwed up the supply side, and made it difficult for the other airlines to actually demonstrate what the true demand for the A380 really is
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 67, posted (4 months 4 hours ago) and read 4850 times:
Quoting astuteman (Reply 66): I'll accept that EK's demand for the A380 is market distorting in one sense though. By snapping up such a large part of the available supply, they've really screwed up the supply side, and made it difficult for the other airlines to actually demonstrate what the true demand for the A380 really is.
It's also a good way to freeze out your competition. Tim Clark has said that the A380 gives him such a CASM advantage that he doesn't know how airlines without the plane can effectively compete against him.
Then again, a huge fleet of 777-300ERs is also a pretty good way to out-CASM your competition...
redflyer From United States of America, joined Feb 2005, 4078 posts, RR: 32 Reply 68, posted (3 months 4 weeks 1 day 20 hours ago) and read 4699 times:
Quoting astuteman (Reply 66): Before last year's stellar performance for the 777, up to the end of 2010, about 440 773ER's net had been ordered since Feb 2000, compared to 243 A380's net since December 2010.
Why in the world are you excluding last year's figures? That smells of "cherry-picking" the facts.
Quoting astuteman (Reply 66): In fact, measured in capacity terms, the orders for the 773ER represent only 8% more seats being added to the airlines than the capacity of the A380's ordered. Which is remarkable given the woes of the big bird in the period.
Smoke and mirrors. Using this analysis, I could make the claim that the A380 is in more demand than an A332 given that the 572 orders for the A332 constitutes fewer seats than the A380 orders constitute. Besides, if all airlines were interested in were adding capacity then the A380 would be the only airplane they would order, why bother with 73's or 32's or any other model?
Quoting astuteman (Reply 66): And anyone who dares to suggest that the delays and dislocation are irrelevant are kidding themselves to be honest. The 787, experience, A350's experience, and even the 773ER's experience last year clearly show what happens when development programmes get disrupted.
Ok, so since most of the technical glitches and delays are years in the past now (notwithstanding recent "cracking" events), why haven't the floodgates opened? How long do we have to endure the tired excuse that but for the EIS delays the plane would be so successful?
Quoting astuteman (Reply 66): In terms of backlog going forward, even allowing for the stellar 164 frames ordered last year, the backlog for the 773ER stands at 290 frames, compared to 185 for the A380.
The 773ER also has a higher production rate, which would account for the smaller backlog.
Quoting astuteman (Reply 66): At end 2011, EK accounted for 90 out of 253 orders, which is approximately 35.5% of the total.
Since we're splitting hairs, depending on how many decimal places you want to take it out, it's 35.56%.
Quoting astuteman (Reply 66): At end 2011, EK accounted for 90 out of 253 orders, which is approximately 35.5% of the total.
During last year's orderfest, of the 164 773ER's sold, 50 were sold to EK, or 30.5% of the total.
You are cherry-picking again. Why are you comparing the entire program life of the A380 to one year's worth of sales for the 773ER? Since launch the 773ER has garnered 603 orders, of which EK comprised 120 for a purchase share of 19.90%. That pales in comparison to the 35.56% of EK's share of A380 orders. More to the point, let's just take out EK's 773ER orders from the stats. That would leave 483 orders total for the 773ER - a DERIVATIVE model. 483 orders for any model, let alone a derivative, would be something to brag about. And the 773ER was launched in the same year as the A380. But if you take EK's share of purchases out of the A380's already anemic sales book, that would leave you with a mere 163 orders. So to recap using ex-EK numbers: In the 12 years since both programs were launched, A380=163 orders vs. 773ER=483 orders. And how does the seat capacity count statistic stack up now?
Quoting astuteman (Reply 66): How you can selectively pick out one particular airline which is part of the whole market., and then declare that it distorts said market is a mystery to me.
How you can cherry-pick stats and claim that the A380 is a market success and in more demand than the 773ER is a mystery to me.
astuteman From United Kingdom, joined Jan 2005, 8612 posts, RR: 96 Reply 69, posted (3 months 4 weeks 1 day 11 hours ago) and read 4602 times:
Quoting redflyer (Reply 68): Why in the world are you excluding last year's figures? That smells of "cherry-picking" the facts
Why in the world you decided to exclude the portion of the post where I re-introduce last year's figures is a mystery to me. That smells of "cherry-picking" the facts
Quoting redflyer (Reply 68): Smoke and mirrors. Using this analysis, I could make the claim that the A380 is in more demand than an A332 given that the 572 orders for the A332 constitutes fewer seats than the A380 orders constitute.
So you're telling me that aircraft size isn't a factor in the demand equation? You heard it here first, folks...
In which case every aircraft on sale bar the A320 and 737 are abject failures. No?
Quoting redflyer (Reply 68): Ok, so since most of the technical glitches and delays are years in the past now (notwithstanding recent "cracking" events), why haven't the floodgates opened?
Er, demand is still seriously constrained? I'm not sure why you feel the need to go on the offensive, and add the huperbole either. Neither myself nor anyone else predicted flood-gates opening. The discussion was about supply constraints hiding the true demand. Nothing more. Nothing less
Quoting redflyer (Reply 68): The 773ER also has a higher production rate, which would account for the smaller backlog.
It should account for higher orders as well, if the demand is there..
Quoting redflyer (Reply 68): Since we're splitting hairs, depending on how many decimal places you want to take it out, it's 35.56%.
I come onto this website, and this forum in particular, for intelligent debate.. I get this
Quoting redflyer (Reply 68): You are cherry-picking again. Why are you comparing the entire program life of the A380 to one year's worth of sales for the 773ER? Since launch the 773ER has garnered 603 orders, of which EK comprised 120 for a purchase share of 19.90%
You are cherry picking again, because I did exactly that.
And for what its worth, EK have 153 773ER's in service or on order, which is 25.5%. But obviously not market distorting, because they're 777's and not A380's...
Quoting redflyer (Reply 68): How you can cherry-pick stats and claim that the A380 is a market success and in more demand than the 773ER is a mystery to me.
The same way you can cherry pick stats and claim demand for the 777 far outstrips the A380, and it's market is "distorted" in some way. Which was my entire point.
We'll have to agree to disagree. This thread is about operating cost per passengers and if we take it further the thread will get locked out. I'll just remind you that if you're going to compare statistics, your argument is better situated if you compare apples-to-apples. Your stats, above, cherry pick data to improve your argument for one side (your beloved A380). Disclaim it all you want, but you cherry-picked the data, plain and simple. But if you want to go on thinking the A380 is a fantastic market success then go right ahead. No amount of data you regurgitate will support that claim.
ftornik From Canada, joined Dec 2009, 44 posts, RR: 0 Reply 71, posted (3 months 2 weeks 3 days 10 hours ago) and read 3495 times:
Quoting Arniepie (Reply 2): Planes that are too small (under 50 seats) like we've seen the past 20-30 years used by commuter services seem to be on their way out,
A lot of experts are concerned about airport congestion and growing GHGs. Clearly part of the picture is to replace many smaller planes with fewer big planes.
By way of example, in August 1992 the JFK-LAX route was served by 19 aircraft with an average of 236 seat (DC10). In 2008 the route was served by 23 aircraft with an average of 150 seats 767-200. The downsizing of aircraft is motivated in part by the S-curve effect, but it results in an increased demand for slots and gates.
Some comfort however can be taken from Lufthansa's introduction of the A380 on the JFK-FRA route. In 2008 the carrier operated 3 flights 3333, 343, 744 to offer 746 seats/day. In the summer of 2012 they will use 2 aircraft 744 and 380 to offer 848 seats/day.
Japan's crowded skies have seen an increase in seat capacity for domestic routes and the average aircraft now operating on the Tokyo (HND) Osaka (ITM) route offers 468 seats!
See (http://www.jal.co.jp/aircraft/conf/773.html).
As traffic grows there will be a market for large aircaft and not all of these will be on long-haul routes.
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 72, posted (3 months 2 weeks 3 days 3 hours ago) and read 3424 times:
Considering the plurality, if not majority, of movements at many airports are sub-100 seat planes, replacing a 300-seat 744/7WW with a 500-seat A388 is not the only option to reduce airport congestion.
Hopefully the new generation of highly-efficient 100-130 seat narrowbodies from Bombardier and Sukhoi and 140-200 seat narrowbodies coming from Airbus, Boeing and COMAC will cull the flocks of RJs and RTP (Regional Turbo Props) and open up some slots on the bottom end to allow the 787 and A350 to create new city pairs on the upper end.
tommytoyz From United States of America, joined Jan 2007, 719 posts, RR: 3 Reply 73, posted (3 months 1 week 2 days 12 hours ago) and read 2777 times:
OldAeroGuy:
Comparing the operating costs by the seat metric alone, ignoring cargo earning potential of the two, results in a distorted comparison.
This is especially true of comparing the A380 to anything, because the A380 is extraordinarily weak in hauling underfloor cargo. The cargo space on an A380 is extremely limited relative to size.
If you do include Cargo earnings in the mix, the 777W looks a lot better Vs. the A380. I've an inkling that part of the A380's pax efficiency has been gained by sacrificing cargo space.
Starlionblue From Greenland, joined Feb 2004, 15102 posts, RR: 69 Reply 74, posted (3 months 1 week 2 days 11 hours ago) and read 2765 times:
Quoting Stitch (Reply 72):
Considering the plurality, if not majority, of movements at many airports are sub-100 seat planes, replacing a 300-seat 744/7WW with a 500-seat A388 is not the only option to reduce airport congestion.
This is the case in the US, certainly, and to lesser extent in Europe. But if you come out to East Asia in places like HKG narrowbodies are in the minority.
Tact Is For People Who Aren't Witty Enough To Be Sarcastic
Starlionblue From Greenland, joined Feb 2004, 15102 posts, RR: 69 Reply 78, posted (3 months 1 week 1 day 8 hours ago) and read 2446 times:
Quoting nicoeddf (Reply 77): Quoting Stitch (Reply 75):
Yes, but they all have brand new mega airports so they should have the space to handle plenty of movements.
I would think its rather the very decentralized scattering of US population while having large distances at the same time, no?
I think so as well.
Tact Is For People Who Aren't Witty Enough To Be Sarcastic
Stitch From United States of America, joined Jul 2005, 23615 posts, RR: 80 Reply 79, posted (3 months 1 week 1 day 4 hours ago) and read 2422 times:
Quoting Starlionblue (Reply 76): Now yes. But Kai Tak was pretty tiny and still had the same glut of widebodies.
The thought of an A380 doing that approach makes me break out in a cold sweat, but considering the FBW controls and the slower approach speeds thanks to the size of the wing, it probably would have been one of the easier widebodies to drive into the place.
astuteman From United Kingdom, joined Jan 2005, 8612 posts, RR: 96 Reply 81, posted (2 months 1 week 6 days 21 hours ago) and read 1292 times:
Quoting OldAeroGuy (Thread starter): However, this article also says the A380 has a 12% fuel burn per passenger advantage over the 773ER. Using this fuel burn relationship, the operating cost advantage as stated seems a bit high.
I was having a look at this at the weekend OAG.
OEM sales talk aside, there can be a considerable amount of variability in the fuel burn comparison, as far as I can see, dependent upon the mission.
For example, if I look even simply at the R/P charts for the two aircraft, it's fairly easy to plot a realtionship between the "mean weight" of the aircraft over its journey, and the fuel carried (I say carried, as of course the R/P chart ony shows this).
For example, for the classic "MTOW 7 500Nm ESAD" DXB-LAX style sector, the A380 at original spec would have a ZFW of about 340 tonnes and tank 220 tonnes of fuel, whereas the 773ER would have a ZFW of 210 tonnes and tank about 142 tonnes, meaning the A380 would carry some 55% more fuel, whilst providing 65% more space.
Make the mission a "MZFW, 5 700Nm ESAD" sector (the 773ER's MSP range), like a full load from SIN to western Europe (ZRH? ), and the 773ER has a ZFW of 238 tonnes and tanks 114 tonnes of fuel (and be at MTOW). The A380 though, would have a ZFW of 361 tonnes, but only take off at 525 tonnes, tanking about 164 tones of fuel, only 42% more than the 773ER, for the same pax capacity difference as before.
As supporting evidence, I suspect this may explain why airlines like SQ and EK are replacing 773ER's with A380's on busy sectors up to 5 000 - 6 000 Nm, but the 773ER still holds sway on DXB-LAX, and CX have concerns over the A380's "ability" on HKG-JFK
Quoting OldAeroGuy (Thread starter): From some work I once did for the 773ER, I believe it's operating costs and their approximate relative weights are as follows:
There's also the question of when do "direct costs" end and "indirect costs" begin?
Your 60% of costs being fuel appears high compared to some quotes from airlines who frequently say that fuel is "some 40% of operating costs".
Which begs the question "Is the same thing being measured?"
I'm guessing that on the flight itself, fuel can easily be way the biggest portion of the cost.
But for the overall cost of operating the aircraft over its life, I wonder if the result would look the same.
As you didn't specify this in the OP, it's difficult to tell what assumptions were made.
But I sense another variable that can be put to use by a marketing department
Quoting redflyer (Reply 70): We'll have to agree to disagree. This thread is about operating cost per passengers and if we take it further the thread will get locked out
I can only agree with this sentiment. Which makes the subsequent
personalisation somewhat disappointing.
No matter.
There is a saying in Lean Philosophy that simple numerical metrics are almost always at least once or twice divorced from the process which is actually being measured.
Which was all I was trying to point out.
If it were just about simple numbers, then, as I said before, only the A320 and 737 can be considered to be "in popular demand"
The fact that this is patently untrue merely underlines that the picture is a lot richer than mere number of sales suggests.
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