Spoke2Spoke
Topic Author
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US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 5:59 am

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

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

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

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

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

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

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

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

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


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

Spokes
...carelessness and overconfidence are usually far more dangerous than deliberately accepted risks. - Wilbur Wright
 
PVD757
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 6:13 am

Yeah, well who's in BK and who's not? NW made the right decision for them. US made the right decision for them as well. They have different regions of operations and that shaped each decision more than anything else.
 
Tango-Bravo
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 6:18 am

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


I respectfully disagree. Many of Northwest's A319/320 domestic routes are sectors of 1,000 miles or less, meaning DC-9s can be be used on such services, which would free 319/320s for routes to Mexico, Central America and the Caribbean if NW should choose to expand internationally to these areas.
 
m404
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 6:40 am

I would have to slightly agree with the contrite answer in #1 in that the additional debt of the ABs are a factor pushing US to BK but when balanced with the traditional high costs of East Coast operations and the exposure to LCCs US has versus NW it is not as large as pictured. US was also trying to save lift after grounding the Fokkers, an interim step NW did not have to make. Their certainly is no doubt the AB has greater benefits in performance over the 40 year old 9 and for those advantages NW is replacing lift with the AB as well as structural cycle limits are reached.

I would have no idea about the conditions of US versus NW 9s at the times this decision was made nor the fiscal limits each carriers was answerable to.
Your question is nicely thought out and reasonable. Thanks.
Less sarcasm and more thought equal better understanding
 
avek00
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 7:03 am

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

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

Sun Feb 27, 2005 12:35 pm

Quoting Avek00 (reply 4):
now!


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


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

-SOAC
Non Illegitimi Carborundum
 
norjet
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 2:00 pm

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

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

--Scott
Publishing travel advice for adopting families - to justify being an airline geek
 
N801NW
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RE: US Vs. NW: Narrowbody Fleet Decisions

Sun Feb 27, 2005 10:10 pm

SoAC: The decision to refurb the 9's was made in 1994. It cost about $2m per plane.
 
isitsafenow
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RE: US Vs. NW: Narrowbody Fleet Decisions

Mon Feb 28, 2005 12:01 am

Just for fun, NW took delivery of their first narrow body Airbus in June of 1989.
N301US, an A 320. It went into service later that year.
safe
If two people agree on EVERYTHING, then one isn't necessary.
 
avek00
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RE: US Vs. NW: Narrowbody Fleet Decisions

Mon Feb 28, 2005 1:00 am

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

Yes - it proved to be a very economical decision for Northwest - hence the manufacturers' fear that other airlines would follow suit for some or all of their future fleet requirements.
Live life to the fullest.
 
N801NW
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RE: US Vs. NW: Narrowbody Fleet Decisions

Mon Feb 28, 2005 1:00 am

Didn't NW cancel the order after 50 planes then re-order a combo of A319 (options) and 320's?
 
NASCARAirforce
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RE: US Vs. NW: Narrowbody Fleet Decisions

Mon Feb 28, 2005 10:18 am

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


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