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Matt6461
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Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 5:40 pm

https://leehamnews.com/2018/06/18/vla-e ... too-large/

Story is behind a paywall; this isn't one of my catch-up on Leeham premium months, but the broad argument is in the summary.

I don't disagree that VLA's aren't selling well, obviously. The 748i and A388 are terrible products; A35K and 777-9 are suboptimal products that will likely occupy only a niche for the biggest network carriers on their thickest routes.

Per Leeham's analysis, A35K has only a ~2% cash operating cost per seat edge over A359 (~13% higher COC trip cost), while 779 has ~3-4% COC/seat edge at ~10-11% higher trip cost. A380 has ~3-5% higher COC/seat than 777-9 per Leeham at similar seating density. 748i's COC/seat is worse than 77W.

Given those stats, I remain flabbergasted that Leeham continually propounds on the state of the size-category market, rather than addressing the individual planes. It should be obvious that (1) longhaul upgauging is rare absent compelling economies of scale and that (2) today's large planes don't offer compelling economies of scale - especially above 777-9 size.

So Leeham has gone from arguing for the A380NEO business case to declaring the death of the VLA. That's sad. The A380 has burned seemingly all of its (non-EK) boosters and killed appetite and even imagination for VLA's. Instead of giving up on the whole sector, Leeham - and other analysts/stakeholders - should be considering which analytical errors caused their past misfires.

I'm still convinced a successful A380NEO is possible next decade with substantial investment and that a clean sheet VLA should appear around 2030. Pronouncements like Leeham's are boring, discouraging conventional wisdom.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 6:08 pm

Matt6461 wrote:
So Leeham has gone from arguing for the A380NEO business case to declaring the death of the VLA. That's sad.


That's not sad, that's someone whose opinion whistles depending on the wind. Tomorrow we could see him bragging about the new VLA era.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 6:51 pm

Imho, this opinion is a breath of fresh air. International yields are not strong due to overcapacity. Capacity should shrink to meet demand imo and only the most competitive products should survive. Ancient rehashes like the A330neo will continue to see weak demand. Too large VLA's like A380 and 777x should go the way of the dinosaur, those programs should be cancelled ASAP. All hail the 787 and A350.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 6:52 pm

I would be interested in reading how Leeham thinks ultrafan type bypass ratios will be integrated into 777x/A350 sized twins.
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:03 pm

Jayafe wrote:
Matt6461 wrote:
So Leeham has gone from arguing for the A380NEO business case to declaring the death of the VLA. That's sad.


That's not sad, that's someone whose opinion whistles depending on the wind. Tomorrow we could see him bragging about the new VLA era.


Do you think the seat economics change with the wind?
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:16 pm

MIflyer12 wrote:
Jayafe wrote:
Matt6461 wrote:
So Leeham has gone from arguing for the A380NEO business case to declaring the death of the VLA. That's sad.


That's not sad, that's someone whose opinion whistles depending on the wind. Tomorrow we could see him bragging about the new VLA era.


Do you think the seat economics change with the wind?


In fact, they do! A tail wind will get you farther than a front wind with the same amount of fuel :laughing:
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:20 pm

As they are planning to install sleeping berths in the cargo hold of planes, VLA's will shine due to the fact that they are not going to send a 2nd aircraft just with everybody's luggage. If they build the berths, they'll have to find where to store the luggage in the same aircraft.
In come the VLA's!
That it will happen next week, maybe not, but it is something someone is willing to try and a lot of people have the wallet for it. As we are getting to the 20+ hour long flights, many people want to rest up so they can get off the plane and go to do whatever it is they want to go do in that far away place. Maybe the 748 and a388 wont be the ones they use, or maybe they will use them, but the VLA's will be the solution. I guess we need to stay tuned to see how this drama unfolds.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:25 pm

(1) longhaul upgauging is rare absent compelling economies of scale and that
I 100% agree larger planes require compelling economics.

What isn't mentioned is cargo.

Since later seats must be sold at a discount, a little more cost savings is required so the larger aircraft may be abused.

I think the 779 is better than Leeham's numbers. If the 77W vs. A346 went as they analyzed, the market would have been split.

Everything I'm hearing about GE9X is it will beat promise fuel burn at EIS. It will be up to Boeing on weight...

VLA works if the added passengers are cheap.

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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:34 pm

SteelChair wrote:
Imho, this opinion is a breath of fresh air. International yields are not strong due to overcapacity. Capacity should shrink to meet demand imo and only the most competitive products should survive. Ancient rehashes like the A330neo will continue to see weak demand. Too large VLA's like A380 and 777x should go the way of the dinosaur, those programs should be cancelled ASAP. All hail the 787 and A350.

I see a market for the A35K and 777X on high cargo routes. The planes are combis.

That said, it limits the applicable markets.

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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:45 pm

lightsaber wrote:
(1) longhaul upgauging is rare absent compelling economies of scale and that
I 100% agree larger planes require compelling economics.

What isn't mentioned is cargo.

Since later seats must be sold at a discount, a little more cost savings is required so the larger aircraft may be abused.

I think the 779 is better than Leeham's numbers. If the 77W vs. A346 went as they analyzed, the market would have been split.

Everything I'm hearing about GE9X is it will beat promise fuel burn at EIS. It will be up to Boeing on weight...

VLA works if the added passengers are cheap.

Lightsaber


I too wonder about the numbers considering the GE9X. Promised to be more than 10% more efficient than the latest GE90-115, and 10% less thrust to boot. Should add up to more than a 2-3% advantage over a plane that's 5% better than a 77E
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 7:57 pm

SteelChair wrote:
Imho, this opinion is a breath of fresh air. International yields are not strong due to overcapacity. Capacity should shrink to meet demand imo and only the most competitive products should survive. Ancient rehashes like the A330neo will continue to see weak demand. Too large VLA's like A380 and 777x should go the way of the dinosaur, those programs should be cancelled ASAP. All hail the 787 and A350.

CORSIA will stimulate right-sizing, reduced capacity, flight-sharing, less frequency, mergers, industry rationalisation and greater co-operation. Still a niche for VLA's?
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:11 pm

B764er wrote:
As they are planning to install sleeping berths in the cargo hold of planes, VLA's will shine due to the fact that they are not going to send a 2nd aircraft just with everybody's luggage. If they build the berths, they'll have to find where to store the luggage in the same aircraft.
In come the VLA's!
That it will happen next week, maybe not, but it is something someone is willing to try and a lot of people have the wallet for it. As we are getting to the 20+ hour long flights, many people want to rest up so they can get off the plane and go to do whatever it is they want to go do in that far away place. Maybe the 748 and a388 wont be the ones they use, or maybe they will use them, but the VLA's will be the solution. I guess we need to stay tuned to see how this drama unfolds.


You, my friend, are buying too much into the PR/marketing machine. Non-seat sleeping berths are a pipe dream, IMO. The reality of cost-revenue are such that cabin space is best reserved for premium (read: lie flat) seats. Anyone who has the "wallet" for a berth on a 20 hour flight, has the "wallet" for a lie-flat J seat. The idea that a berth would cost meaningfully less (than J) or that pax are willing to fork over $2K+ for a berth, but be relegated to a Y seat for part of the journey (takeoff, landing, meals, more?) is unrealistic. So, if the idea is that unused cargo hold space can generate revenue with berths (but can't hold seats due to exit/other regulation), then carriers are best off shifting lavs, galleys, other main deck storage below, and maximizing main deck space for premium pax - be it more suites/lie flat, or for that matter - berths on main deck, if you really want them.

That's even making a massive assumption that there are many more 20 hour flights viable on the horizon. Heck, even the very few current 17+ hour flights are continually on shaky ground due to changes in fuel costs and global economics. Frankly, outside of a few ME3, LON, NYC, SIN heavily premium routes - how many 20 hour city pairs can you really imagine being cost competitive when a one stop might be half the cost?

Personally, I think the era of the airline berth came and went with the "Clipper ships".
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:19 pm

The VLA market is in disarray. Not only are the 787/350 eating its lunch but the 321neo (and to a much lesser degree the 737MAX) are impinging. A potential MOM from Boeing is further muddying the future. I suspect it will be another 5 years before this all will clarify. And about that time won't the 350/787 be ready to announce an engine upgrade?
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:36 pm

Matt6461 wrote:
https://leehamnews.com/2018/06/18/vla-era-is-over-are-777x-a350-1000-too-large/

Story is behind a paywall; this isn't one of my catch-up on Leeham premium months, but the broad argument is in the summary.

I don't disagree that VLA's aren't selling well, obviously. The 748i and A388 are terrible products; A35K and 777-9 are suboptimal products that will likely occupy only a niche for the biggest network carriers on their thickest routes.

Per Leeham's analysis, A35K has only a ~2% cash operating cost per seat edge over A359 (~13% higher COC trip cost), while 779 has ~3-4% COC/seat edge at ~10-11% higher trip cost. A380 has ~3-5% higher COC/seat than 777-9 per Leeham at similar seating density. 748i's COC/seat is worse than 77W.

Given those stats, I remain flabbergasted that Leeham continually propounds on the state of the size-category market, rather than addressing the individual planes. It should be obvious that (1) longhaul upgauging is rare absent compelling economies of scale and that (2) today's large planes don't offer compelling economies of scale - especially above 777-9 size.

So Leeham has gone from arguing for the A380NEO business case to declaring the death of the VLA. That's sad. The A380 has burned seemingly all of its (non-EK) boosters and killed appetite and even imagination for VLA's. Instead of giving up on the whole sector, Leeham - and other analysts/stakeholders - should be considering which analytical errors caused their past misfires.

I'm still convinced a successful A380NEO is possible next decade with substantial investment and that a clean sheet VLA should appear around 2030. Pronouncements like Leeham's are boring, discouraging conventional wisdom.


I think the A350-1000 is similar capacity-range as 777-300ER. How many where sold?
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:40 pm

These are interesting times indeed. Within the next five years, there will a shift because airlines will be part of the environmental measure and will be brought within the Paris framework. That might result in a move back towards bigger planes and, especially within the European context and perhaps within South East Asia, a move back towards the hup and spoke system, just the spokes being a high-speed train.

So I can see a move back towards A380, but it must be a NEO-ed one. B777X, don't know about this one. And a MOM-Boeing. The CSAM needs to come down fast, very fast if we want to keep within the Paris accords.
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:43 pm

Lightsaber wrote:
What isn't mentioned is cargo.


True - it's a significant factor in favor of the big twins versus A380.
But it can also be overstated - not saying you overstate, as you qualify your remark to a few combi-appropriate routes.
Per Drewry's, the average price for shipping a pound of cargo from Asia to U.S./Europe has been hovering around $1/lb - belly cargo usually flies cheaper than maindeck cargo. https://aircargoworld.com/allposts/airf ... arly-2018/
That means a fully-loaded LD3 pays ~$1,500 in revenue - not quite a PY ticket for a TPAC or Europe-Asia flight.
Considering that freight belly LF's are about half of pax LF's (~40%), a full L/D capability is worth about a one-way Y seat or 2 return Y seats.
If using 779's/A35K's gets you an additional ~10% cargo capacity versus equivalent number of seats in more A359/B789 flights, then the total trip revenue delta is low-single-digits. And that's before accounting for marginal fuel burn and handling costs.
Given that the airline business is usually one of slight margins, that difference can be significant for a lot of cargo-heavy carriers - CX and EK come to mind and indeed they've ordered the big twins.
But I don't think the cargo delta of the big twins is sufficient to move their economies of scale from "meh" to compelling. (and we don't seem to disagree - just for the audience).

Lightsaber wrote:
VLA works if the added passengers are cheap.


At the most basic level, it's just hard to see a compelling case for larger versions of twin-aisle, twin-turbine longhaulers.
We know that fuel burn is a matter of weight, SFC, and L/D.
There are only very slight economies of scale for SFC (tip clearance factors) and L/D (Reynolds number effects).
On weight there are slight economies for 10 cattle-class seats sharing two aisles versus 8/9, and there are slight economies for the lower contribution of minimum-gauge components. OTOH the square-cube principle starts coming into play.

Outside of fuel, a bigger plane will be cheaper to build (per seat), spreads flight crew cost over more pax, and sees less-than-linear escalation of en route fees (navigation/landing/slots) with size. But it's a very gradual curve with diminishing returns.

So I don't see any reason to expect a large-scale swing back towards the upper end of capacity scale unless we can identify - and expect to hit - some "kink" in capacity/efficiency curve that the aero/structural/economic fundamentals dictate.

One such kink, however, should be once you hit an efficient size for a 2-deck VLA, as well as when you exceed the 3-3 single aisle size range. In both cases your fuselage weight and drag per pax differ markedly around the kink in the curve - flattening out afterward.
Around the single-aisle kink, we see this dynamic in the OEM's struggles to address the MoM segment. That kink may be smoothed by CFRP's enabling of oval/elliptical fuselages that ameliorate the weight/drag per pax problem.

The second kink is what I believe Leeham and others are ignoring. A good double-decker of ~500 seats would create "capacity desserts" around it: smaller single-deckers would be too close in trip cost to make economic sense, while larger planes would return to the smooth and non-compelling economies of scale curve.

Folks will say we tried that with the A380 but the A380 is an exception that proves my proposed rule: here we have an inefficient shrink of an older, suboptimal design - and it's still on par with the seat-mile costs of planes over a decade newer.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:49 pm

Keesje wrote:
I think the A350-1000 is similar capacity-range as 777-300ER. How many where sold?


That's a catastrophically simplistic way to look at it. Products sell - or don't - in comparison to their competition.
In the 77W's heyday your choice was ~350 seats or ~300 seats in a far-less-efficient 77E/L or A343/5.
Nowadays you can choose 250-300 seats with hardly any efficiency sacrifice.

If you can't understand that difference I just can't help you.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 8:50 pm

Give it 20 years, and all of our major airports will be choking up, and all of our major cities will be choking with airports, and then airlines will realize how short sighted and incompetent frequency over capacity was.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:01 pm

speedbird52 wrote:
Give it 20 years, and all of our major airports will be choking up, and all of our major cities will be choking with airports, and then airlines will realize how short sighted and incompetent frequency over capacity was.


For the vast vast majority of airports the solution to that isn’t the A380 but would be to replace 737/A320’s whenever possible on a 2 for 1 basis. If the number of movements is the problem the key is at the small end, not the top end.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:04 pm

speedbird52 wrote:
Give it 20 years, and all of our major airports will be choking up, and all of our major cities will be choking with airports, and then airlines will realize how short sighted and incompetent frequency over capacity was.


Airlines will make $billions more in that environment because supply restrictions will create monopoly rents.
The short-sightedness and incompetence lies with public policy, not airlines. They're very competently exploiting policy failure for shareholder benefit.

This isn't a large widebody issue, however. Merely upgauging narrowbodies to small widebodies, small NB's to large NB's, RJ's to NB's, will address capacity long before you need an A35K - let alone A380.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:12 pm

Let see...

First 5 years of 777 (1990-1994): 112 Orders
Up to 1999 (10 years in; 4 years into production): 438 Orders

Yes, in 2000 there's 116 orders when 77W was launched, and the rest is history.

And maybe, just maybe, that 777X is not getting a lot of orders b/c many 77Ws are still relatively new? Airlines that need 77Ws already have tons of them, and those planes are far from having to be replaced yet. As for 35K - 77W factor applied (since 359 I would say are more replacing 772s/333s) also. Plus maybe a stretch is not necessarily a good thing? (78J is not exactly getting tons of orders, either).

P.S. As for the whole "capacity vs. frequency" argument. To start, it's a LONG way from operating 10x 737/320 to operating a 77W/35K/779, much less an A380. Plus, isn't the whole point of Boeing (mythical) MoM suppose to fill the niche of frequency-constraint but not quite large widebody space? Need the capacity? Upgauge from 160-180 seats to 220-250 seats MoM. There are only very few high frequency routes (Most of them in East Asia) where you can really fill up a VLA anyway (i.e. upgauging from a 333 to 773A/77W), and like it or not, A380 will still be a money loser.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:31 pm

Matt6461 wrote:
The 748i and A388 are terrible products

The products themselves weren't bad; the market analysis that led to them was.
One came way too late in its family's life, the other arguably way too early.


strfyr51 wrote:
I just retired and I worked on B747's for the last 37years non-Stop. The A380 will never even SEE that longevity. Unless you can Identify it as a beer can.

Except that this isn't the '70s anymore, and carriers have no need to buy oversized airframes for the sake of range.... which if we're to be intellectually honest, was the 747 family's saving-grace for most of its existence.

Until the early '90s, if an airline wanted to reliably go further than ~5000nm nonstop, then they had no choice but to get a 747.

Today is a market were 200seaters now have 18hr+ nonstop range; thus the only reason to acquire a VLA is if you actually NEED the capacity-- which the overwhelming majority of airlines don't. THAT is the main reason that the A380 will never have the 747's sales total, and not some untouchable prowess by the latter. Let's keep it real here.
Last edited by LAX772LR on Mon Jun 18, 2018 9:37 pm, edited 1 time in total.
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:35 pm

ME3 is effectively a new concept of one stop to and from anywhere.If you take 150 A380's and the same number (if not more) of 777's then you are sucking an enormous (enormous) amount of pax volume out of the long haul market.So unsurprising (to me at least) that the vast majority of 'everyone else' is downsizing.Its particularly attractive these days as the new mid size kids on the block have both amazing range and phenomenal economics - thus lower risk profitability.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 9:40 pm

parapente wrote:
ME3 is effectively a new concept of one stop to and from anywhere.If you take 150 A380's and the same number (if not more) of 777's then you are sucking an enormous (enormous) amount of pax volume out of the long haul market.So unsurprising (to me at least) that the vast majority of 'everyone else' is downsizing.

That's been the consistent trend since the mid-'80s, when 767s began to defragment longhaul markets that were traditionally 747/D10/L10 routes.

The ME3 have have tweaked some specific market defragmentations here and there, but the downsizing trend outdates their ascent by decades.
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 11:03 pm

One of the reasons Pan Am bled out was American launching US-Europe with new B762s out of ORD and DFW.
Ironically AA walked away from a frankly enormous European presence when STAR was born and now focuses on LHR with BA....
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 11:28 pm

The A380 and the 747-8 are NOT horrible products. What kind of crap is that?
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Re: Leeham: VLA era is over; are 779/A35K too large?

Mon Jun 18, 2018 11:36 pm

The A35K is slightly narrower than the B77W and is exactly the same length as it. Its exit-limit capacity is 440 (same as the A359 since it's just 4 doors). I don't believe it's too big. The B777X is debatable, although it is a twin-jet and it's derived from the best belly-cargo carrier out there. As others have said, however, only a few carriers are looking to replace B77Ws, and Japan Airlines decided to go with Airbus after decades of nothing but Boeing (with some McDonnell-Douglas mixed in). The decision to go with only 8 doors on the B777X instead of the 10 on the B77W basically prevents an ultra-high density configuration. Airlines who are replacing B77Es will likely be sold on the B789 or the B78J, while Boeing will target B77W customers and even A388 customers with the B777X. I could see the B777-8X being targeted toward airlines like Singapore Airlines, Air New Zealand and Qantas, to carry 3 or 4 classes of customers from their bases to the NYC area nonstop (or for QF, SYD-LHR nonstop), or even Turkish Airlines to serve Australia.

That said, the Dreamliner, especially the B789, hit the sweet spot. The B777X is likely targeted towards the 300-400 seat class.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 12:31 am

aemoreira1981 wrote:
The A35K is slightly narrower than the B77W and is exactly the same length as it.


Cabin is shorter in addition to being narrower. Look at ACAP interdoor lengths instead of wikipedia LOA figures.

NWADTWE16 wrote:
The A380 and the 747-8 are NOT horrible products. What kind of crap is that?


Feel free to mount a defense of products that cost $billions to develop, never have nor ever will return production profits, that have small market share, and are obsolete not even a decade after EIS.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 12:35 am

LAX772LR wrote:
The products themselves weren't bad; the market analysis that led to them was.


If the market analysis influenced the product development (as it did), then bad market analysis created a bad product (garbage in, garbage out). If, OTOH, the market analysis was completely unrelated to the product's characteristics, then your statement is internally contradictory. I don't see a coherent point here.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 12:52 am

Matt6461 wrote:
NWADTWE16 wrote:
The A380 and the 747-8 are NOT horrible products. What kind of crap is that?


Feel free to mount a defense of products that cost $billions to develop, never have nor ever will return production profits, that have small market share, and are obsolete not even a decade after EIS.


The 747-8 wasn't that expensive to develop and has led to the 747-8F which appears to have some future. The 747-8i was cheap enough to make and annoying enough to siphon off a handful of potential a380 orders. IMO, mission accomplished for Boeing. The a330 neo is similar. relatively low program costs, so only 200 orders isn't a dealbreaker and it is putting downward pressure on the 787 prices.

The a380 is the elephant in the room. I won't argue that Airbus completely missed the mark on it.
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 12:53 am

Antarius wrote:
The 747-8 wasn't that expensive to develop


IIRC ~$5bn after the delays etc. Boeing would have been better off launching the rewinged 747 it had previously floated, assuming it could have executed competently (big if). That plane would at least have sold serious pax models, might have killed the A380.

The 748F is a useful product but all its orders would have gone to 777F anyway. On net Boeing lost big time on the 747-8.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 1:13 am

Matt6461 wrote:

At the most basic level, it's just hard to see a compelling case for larger versions of twin-aisle, twin-turbine longhaulers.
We know that fuel burn is a matter of weight, SFC, and L/D.
There are only very slight economies of scale for SFC (tip clearance factors) and L/D (Reynolds number effects).
On weight there are slight economies for 10 cattle-class seats sharing two aisles versus 8/9, and there are slight economies for the lower contribution of minimum-gauge components. OTOH the square-cube principle starts coming into play.


There should be better than slight economies of scale. The A388 went wrong. It needed a slightly wider main deck and top deck and certainly more wingspan and length. To go double deck means to go big.

If freight is that poor of yield, then the combi idea won't float.

But the 779 should save about 7% or so versus flying a passenger on the A359. Is that worth the risk of not filling the plane? That will be an airline decision.

I also think GE and Boeing underpromised with the 779, but that is a hunch and not fact. The EIS performance will determine how well it sells. Excluding a few ULH routes (too few IMHO), the 789 and A359 can pretty much fly anything needed. So the debate is, for the trunk routes (in particular those with good cargo yield), how many are there to justify purchasing?

I think enough. Now, since so much growth will be in Asia, I do not subscribe to the congested hub theory pushing VLAs. :no: It will be economics per pax/cargo carried. For when airports start getting monopoly rents, business tends to relocate. I know my employer thinks nothing about relocating thousands of jobs to other cities when the business case is there. But how many high demand routes will there be? :scratchchin: that depends on the cost discount. For what Leeham noted, it wouldn't be worth it. But for what I estimate, I believe it is.

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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 1:16 am

Antarius wrote:
The 747-8 wasn't that expensive to develop and has led to the 747-8F which appears to have some future.


Beyond the billions it cost to design, Boeing has written down almost $3.5 billion (after tax) due to production overruns and lack of orders. The only saving grace now is that the program should have fully written down the Deferred Production Costs so the subsequent 28 UPS orders and six additional freighter and Intercontinental orders will not be working to pay that down.



Antarius wrote:
The 747-8i was cheap enough to make and annoying enough to siphon off a handful of potential a380 orders. IMO, mission accomplished for Boeing.


Korean and Lufthansa also fly the A380 and their 747-8's operate on missions that the A380 was not-suited for. And Air China was never going to be an A380 operator so it's about as much "Mission Accomplished" as Bush aboard the USS Abraham Lincoln.



Antarius wrote:
The a330 neo is similar. relatively low program costs, so only 200 orders isn't a dealbreaker and it is putting downward pressure on the 787 prices.


Actually it is the 787 that is putting the pricing pressure on the A330neo as Boeing's production costs are likely not much more, if they are at all.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 2:11 am

Matt6461 wrote:
Antarius wrote:
The 747-8 wasn't that expensive to develop


IIRC ~$5bn after the delays etc. Boeing would have been better off launching the rewinged 747 it had previously floated, assuming it could have executed competently (big if). That plane would at least have sold serious pax models, might have killed the A380.

The 748F is a useful product but all its orders would have gone to 777F anyway. On net Boeing lost big time on the 747-8.

Ironic, I found an old link stating the A330NEO development cost was expected to be just under $5 billion. With delays, it will just over that.

That means each of the 214 A330NEO sold will have to pay back about $23 million plus production costs. With 787 pricing, that will be a challenge. One expects a 20% profit, so assuming a lot of 400 sold, that would be $105 million each or so... Tough with 787 pricing at what it is today.

Link on $5 billion development cost:

https://airwaysmag.com/industry/analysi ... ilability/

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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 2:37 am

lightsaber wrote:
But the 779 should save about 7% or so versus flying a passenger on the A359.

I'm curious about the 7%. If I read the OP's post correctly Leeham say the 779 might have a 3-4% advantage. Are you basing your figure on a different analysis?
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 2:47 am

Matt6461 wrote:
LAX772LR wrote:
The products themselves weren't bad; the market analysis that led to them was.

If the market analysis influenced the product development (as it did), then bad market analysis created a bad product (garbage in, garbage out). If, OTOH, the market analysis was completely unrelated to the product's characteristics, then your statement is internally contradictory. I don't see a coherent point here.

Couldn't disagree more.

The products do exactly what they were sold to do: they didn't miss performance specifications, come in nonadjustably overweight, etc. As such, there's nothing innately wrong/defective with the product, and most who have them appear satisfied with what they bought (notable exception being AF).

What missed, is the demand projection. That happens in sales all the time.

Hell, demand can completely change during design/testing or initial rollout: I doubt Airbus would've come forward with the A380 in the way they did, if they knew that ETOPS207 would be a thing just a few years later.
I myself, suspect a more prosaic motive... ~Thranduil
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 3:17 am

B764er wrote:
VLA's will shine due to the fact that they are not going to send a 2nd aircraft just with everybody's luggage.


Passenger demand isn't what necessary determines the decisions of an airline. If you're bound to fill either a 77W or a 744 with an absolute 100% LF, the company is going to go with the one that generates the most revenue with the least expenses by the end of the financial year. So, for example, if the 77W has a far higher profit margin that is able to generate more profit by the end of the year, they're going to go with that, not the plane that gets the most people and their bags across the line.

This is why airlines like NZ boasted about the supremacy of the 789 over the 744 as well as the 744's direct replacement - the 77W.

ZKNCL
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 3:24 am

tealnz wrote:
lightsaber wrote:
But the 779 should save about 7% or so versus flying a passenger on the A359.

I'm curious about the 7%. If I read the OP's post correctly Leeham say the 779 might have a 3-4% advantage. Are you basing your figure on a different analysis?


779 has 3-4% COC/seat edge over A35K per Leeham, 5-6% over A359. At DOC level (COC+acquisition), 7% is a reasonable estimate. We don't have sufficient resolution to quibble with a few % here or there, especially pre-flight.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 3:28 am

LAX772LR wrote:
The products do exactly what they were sold to do: they didn't miss performance specifications


That's not the standard I'm using. I could build a perfectly-to-spec Rube Goldberg-esque soda can opener. It takes 15min and 40 gallons of gas to work.
If I succeeded in that endeavor, your standard would say I made a good product. That's a nonsense standard.
My soda can opener is a bad product because it's based on bad market analysis. Nobody wants a huge can opener; nobody wants a huge plane for hugeness itself.
Good products are good because their builders/inventors anticipate demand. Arguing any other standard is a waste of time.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 3:33 am

Matt6461 wrote:
779 has 3-4% COC/seat edge over A35K per Leeham, 5-6% over A359. At DOC level (COC+acquisition), 7% is a reasonable estimate. We don't have sufficient resolution to quibble with a few % here or there, especially pre-flight.

Hmmm. From memory it was that sort of differential that killed the A346. I can't immediately see how you square that sort of cost advantage for the 77X with its flat sales (which is the point of the Leeham story, right?)
Last edited by tealnz on Tue Jun 19, 2018 3:35 am, edited 1 time in total.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 3:50 am

tealnz wrote:
Hmmm. From memory it was that sort of differential that killed the A346. I can't immediately see how you square that sort of cost advantage for the 77X with its flat sales (which is the point of the Leeham story, right?)


Again, you have to look at the landscape of capacity/efficiency tradeoffs available at the relevant times.
A346 and 77W were almost identical in capacity and range, so it's a very nearly winner-take-all situation between the two if the efficiency delta is even marginally significant.
For 779, your primary competition isn't the A35K - it's the 789 and A359.
Airlines - competent ones at least - do not ask simplistic, narrow questions like "which 350-400 seater should I buy?"
Rather, the question is more like, "Given the range of capacities available, the efficiency levels dictated by those capacities, my route structure, my present and future customer demand for frequency/fragmentation versus price/space, my appetite for risk, my expectations of growth, etc. GIVEN ALL OF THESE, what route structure and which planes maximize my profit?"
The existence of highly-efficient smaller widebodies means the foregoing calculus will give A359/B789 more often than when the choice was between 77W/744 and smaller, much-less-efficient widebodies (77E/L, A343/5, MD-11).
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 4:07 am

Lightsaber wrote:
But the 779 should save about 7% or so versus flying a passenger on the A359. Is that worth the risk of not filling the plane? That will be an airline decision.

I also think GE and Boeing underpromised with the 779, but that is a hunch and not fact.


Re the GE9X I hope you're right. I always found it interesting that RR and PW offered obviously better brochure SFC for 777X yet GE won. Probably some of that is reliability, incumbency, and trust between Boeing and GE, but it's a good guess that GE discreetly suggested better-than-brochure performance potential combined with a more solid guarantee of more modest brochure performance.

On the broader issue of how much a ~7% efficiency delta will matter, I think that's the most interesting question in the future of the airline business. IMO the current longhaul market is dominated by artificial constraints that dictate profit maximization as pursuing a somewhat-limited pool of relatively inelastic travelers. In this market, setting supply close to marginal cost - as would happen in a competitive market - is bad business: you pick up lower-yielding pax and see no increase in your money-makers.

Folks on a.net think it's smart and self-evident that the business will always be this way (cue chortles about making no money off cattle class, only the flat beds matter).
That was the party line in shorthaul/regional/domestic services for decades as well - let the LCC's take the plebs; we'll make our money off the corporate accounts.
Then barriers to entry were overcome, basic competitive dynamics pushed the price of flying down towards its natural cost, and LCC's conquered.
If something half that dramatic happens in long haul markets - if DY can hang on for another five years, for example - then today's rage for frequency and fragmentation might become tomorrow's opening paragraph in Chapter 11 filings.
In that environment, 7% CASM is the difference between nice dividends and bankruptcy. Hope it works out that way and 777-9 sells really well.

My over/under on 2025 777X production is 55/year.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 4:14 am

Matt6461 wrote:
Lightsaber wrote:
But the 779 should save about 7% or so versus flying a passenger on the A359. Is that worth the risk of not filling the plane? That will be an airline decision.

I also think GE and Boeing underpromised with the 779, but that is a hunch and not fact.


Re the GE9X I hope you're right. I always found it interesting that RR and PW offered obviously better brochure SFC for 777X yet GE won. Probably some of that is reliability, incumbency, and trust between Boeing and GE, but it's a good guess that GE discreetly suggested better-than-brochure performance potential combined with a more solid guarantee of more modest brochure performance.

On the broader issue of how much a ~7% efficiency delta will matter, I think that's the most interesting question in the future of the airline business. IMO the current longhaul market is dominated by artificial constraints that dictate profit maximization as pursuing a somewhat-limited pool of relatively inelastic travelers. In this market, setting supply close to marginal cost - as would happen in a competitive market - is bad business: you pick up lower-yielding pax and see no increase in your money-makers.

Folks on a.net think it's smart and self-evident that the business will always be this way (cue chortles about making no money off cattle class, only the flat beds matter).
That was the party line in shorthaul/regional/domestic services for decades as well - let the LCC's take the plebs; we'll make our money off the corporate accounts.
Then barriers to entry were overcome, basic competitive dynamics pushed the price of flying down towards its natural cost, and LCC's conquered.
If something half that dramatic happens in long haul markets - if DY can hang on for another five years, for example - then today's rage for frequency and fragmentation might become tomorrow's opening paragraph in Chapter 11 filings.
In that environment, 7% CASM is the difference between nice dividends and bankruptcy. Hope it works out that way and 777-9 sells really well.

My over/under on 2025 777X production is 55/year.

Can you please link sources saying PW and RR quoted better fuel burn engines for the 777x? Just curious.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 4:20 am

https://www.flightglobal.com/news/artic ... 7x-369294/

This article quotes RR offering "better than 10%"... The article page has links to other older articles, including one about PW's GTF that, iirc, was touting 12-13% SFC improvement. The links are still there but the articles have been archived in premium.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:07 am

B764er wrote:
As they are planning to install sleeping berths in the cargo hold of planes, VLA's will shine due to the fact that they are not going to send a 2nd aircraft just with everybody's luggage. If they build the berths, they'll have to find where to store the luggage in the same aircraft.
In come the VLA's!
That it will happen next week, maybe not, but it is something someone is willing to try and a lot of people have the wallet for it. As we are getting to the 20+ hour long flights, many people want to rest up so they can get off the plane and go to do whatever it is they want to go do in that far away place. Maybe the 748 and a388 wont be the ones they use, or maybe they will use them, but the VLA's will be the solution. I guess we need to stay tuned to see how this drama unfolds.


If someone wants to rest up, there's a thing for that - called J cabin. And if someone wants in addition to that privacy - many airlines/routes offer F. Anyone else - are they willing to pay for it? Most VFR folks will grab the cheapest thing and somehow suffer through the Y flight, even though they'd complain afterwards.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:17 am

Matt6461 wrote:
tealnz wrote:
lightsaber wrote:
But the 779 should save about 7% or so versus flying a passenger on the A359.

I'm curious about the 7%. If I read the OP's post correctly Leeham say the 779 might have a 3-4% advantage. Are you basing your figure on a different analysis?


779 has 3-4% COC/seat edge over A35K per Leeham, 5-6% over A359. At DOC level (COC+acquisition), 7% is a reasonable estimate. We don't have sufficient resolution to quibble with a few % here or there, especially pre-flight.



I am guessing those figures are against the earlier A350s, not the upcoming ones ones with the aerodynamics and engine improvements. Perhaps we can reduce that figure by 2-3%?
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:28 am

Matt6461 wrote:
https://www.flightglobal.com/news/articles/rolls-royce-pushes-new-engine-concept-for-777x-369294/

This article quotes RR offering "better than 10%"... The article page has links to other older articles, including one about PW's GTF that, iirc, was touting 12-13% SFC improvement. The links are still there but the articles have been archived in premium.


RR already has exclusivity on the A350 with the Trent XWB and there's no working GTF at that thrust range yet. GE was an obvious choice.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:30 am

a good statistician can make identical numbers tell vastly different stories.. so many people put great faith in % differences without ever identifying what the actual values are.. is 2% cost difference $20 or $200,000.. you'l never know if all you have is percentages. Many times the actual difference is not anything but public relations hocus-pocus.

Leeham's is out to sell investments.. hardly an epitome of unbiased research.

Where are the dirigibles I once heard would take over the VLA service in the grandeur of the 20's ( dang we're almost there again)
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:31 am

lightsaber wrote:
Matt6461 wrote:
Antarius wrote:
The 747-8 wasn't that expensive to develop


IIRC ~$5bn after the delays etc. Boeing would have been better off launching the rewinged 747 it had previously floated, assuming it could have executed competently (big if). That plane would at least have sold serious pax models, might have killed the A380.

The 748F is a useful product but all its orders would have gone to 777F anyway. On net Boeing lost big time on the 747-8.

Ironic, I found an old link stating the A330NEO development cost was expected to be just under $5 billion. With delays, it will just over that.

That means each of the 214 A330NEO sold will have to pay back about $23 million plus production costs. With 787 pricing, that will be a challenge. One expects a 20% profit, so assuming a lot of 400 sold, that would be $105 million each or so... Tough with 787 pricing at what it is today.

Link on $5 billion development cost:

https://airwaysmag.com/industry/analysi ... ilability/

Lightsaber


How did they arrive at the $5 billion figure? Fabrice said it was 1-2 billion at the A330 neo launch press conference. Can't imagine delays would more than double the development cost.
 
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Re: Leeham: VLA era is over; are 779/A35K too large?

Tue Jun 19, 2018 5:33 am

"VLA era is over"

When did VLA era start?

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