lightsaber wrote:I errored (majorly) in summing up the costs for adding a new aircraft, so starting again:
Slide 9 goes into the costs for JetBlue (I believe I had a typo before)
http://investor.jetblue.com/~/media/Fil ... update.pdf
$95 to $125 million the first year for JetBlue
Then $130 to $185million in later years, or $225 to $310 million to add a new type.
Yet despite that, the airplane makes an estimated $4 to $5 million per aircraft per year (slide 7 of that link).
So once Jetblue goes to 60+ aircraft, their payback is < 18 months. (They have 80 on firm order).
So this is one reason I am excited about the mid-size orders. They are what I consider the minimum for a well managed airline (50+ aircraft) to order due to the costs of multiple types.
However, the A220 will save money vs. an A319NEO or -7MAX.
$95 to $125 million the first year for JetBlue
Then $130 to $185million in later years, or $225 to $310 million to add a new type.
Yet despite that, the airplane makes an estimated $4 to $5 million per aircraft per year (slide 7 of that link).
JetBlue could have chosen to go all A320NEO at the time (I'm sure larger aircraft were analyzed to simplify the fleet).
Spirit decided an order for 47 A319NEOs was the better option for it. (Although, those A319s can, in part, be upgauged at a later date).
So is it work changing for say only 15 aircraft? No.
But JetBlue had a model for 60 and there, at the low end in 18 months they are ahead. My math says 47 is worth defecting, but NK said otherwise.
This old blog post notes the high weight difference A319NEO to A220-300.
https://aerocorner.com/aircraft/airbus-a220-300/
My "back of the envelope math" says the A220-300 will save after purchase price $3 to $3.5 million per year over the A319NEO in variable costs. So taking the higher end that it would have added say $300 million to NK's costs, for 47 aircraft payback would be at $141 million per year. So within 30 months they would be ahead. Using a 17% MRR, break even in 3 years and well ahead and by year 10 there is a present value benefit equal to the cost of inducting the new fleet. Yet with more airlines adopting the A220, the cost to adopt should go down.
Doing more math, I come up with an estimate that a mere fleet of 25 is worth adopting a new type. If less are needed, buy A319NEO or skip the size category (both are viable options).
As to the A220-500, I am a big fan, but I do not think we'll hear about it for a few years.
Lightsaber
But what about all those who said "fleet standardization" over and over til it hurt? Delta was SO wrong to have all those fleets and Southwest was SO correct. I, personally, believe that the 737-7 is a huge mistake for Southwest. It's just that their other advantages cover it up.
The reality is that after deregulation, the domestic 747s went by the wayside. It took 20 more years for the tri jets to be pushed aside. Then the 767 domestic was gone. Now, we're talking about A321 and 73M as the large domestic US airplanes. The cotinual downsizing has been readily apparent. There is a market for the A220. They're easier to fill, and you can still move them around from market to market as needed, increasing or decreasing frequencies as necessary. And you can use them to fill up all the landing slots at high revenue slot constrained airports.