MIflyer12 wrote:

SRQKEF wrote:

https://www.visir.is/g/20222211429d/god-utkoma-boeing-max-frestar-kaupum-a-langdraegari-thotum

This translates loosely to FI being so happy with the MAX fuel efficiency and increased range, leading to it operating routes such as KEF-SEA and MCO without penalties, that it has reduced the need for a direct 757 replacement.

It's not as if they're magically getting an extra 300nm of range. Do we see the dozens of other MAX operators scheduling well above claimed range?

I'm wearing my cynical hat, but this smells of recognizing they can't afford new aircraft and Corporate Communications trying to put a happy spin on that reality.

LCDFlight wrote:

I always say you can lose the least money by flying the cheapest aircraft it takes to cover your daily network. That is your decision baseline. Some "conventional wisdom" that you need widebodies is not the baseline. The baseline is the cheapest solution. People have this prejudice that larger airplanes are "cheaper" to run. That is false in COVID and actually has always been very false, with a kernel of truth sometimes.

LCDFlight wrote:

Opus99 wrote:

LCDFlight wrote:

I always say you can lose the least money by flying the cheapest aircraft it takes to cover your daily network. That is your decision baseline. Some "conventional wisdom" that you need widebodies is not the baseline. The baseline is the cheapest solution. People have this prejudice that larger airplanes are "cheaper" to run. That is false in COVID and actually has always been very false, with a kernel of truth sometimes.

Of course larger planes are not cheaper to run. But if you have the demand the money you make is much much much more; that’s the attraction to widebodies. Widebodies were once for range and market demand but as the narrows become more capable it’s really inching closer and closer into just market demand

But of course we notice OEMs talk endlessly about the "economies" and "efficiency" of large airplanes. Isn't a 737 Max or A321 NEO just as fuel efficient per seat? Bigger airplanes do not add high yield capacity. They only add low yield, more often empty capacity. The high yield can all be carried on the small airplane, so it is not part of the decision analysis.

Example, say 737-9 baseline capacity is say 90% load factor, which drops to say 75% on an A339 (as an example). The load factor of the incremental is around 55%. With low yields. It is not always easy to make higher profit with that. Meanwhile, the costs of the A339 occur every day. An airplane's peak capacity is not nearly so relevant as its daily cost and average daily revenue.

My point (which is qualitative, and applies loosely to what FI is doing here) is I just think people have this wrong notion that bigger airplanes make more money. Cape Air makes more profit than many wide body operators. Not profit margin... total profit. Just my 2c.

LCDFlight wrote:

Opus99 wrote:

LCDFlight wrote:

But of course we notice OEMs talk endlessly about the "economies" and "efficiency" of large airplanes. Isn't a 737 Max or A321 NEO just as fuel efficient per seat? Bigger airplanes do not add high yield capacity. They only add low yield, more often empty capacity. The high yield can all be carried on the small airplane, so it is not part of the decision analysis.

Example, say 737-9 baseline capacity is say 90% load factor, which drops to say 75% on an A339 (as an example). The load factor of the incremental is around 55%. With low yields. It is not always easy to make higher profit with that. Meanwhile, the costs of the A339 occur every day. An airplane's peak capacity is not nearly so relevant as its daily cost and average daily revenue.

My point (which is qualitative, and applies loosely to what FI is doing here) is I just think people have this wrong notion that bigger airplanes make more money. Cape Air makes more profit than many wide body operators. Not profit margin... total profit. Just my 2c.

You forget cargo. The revenue generation from a wise body is very diverse and like I said when you have the market demand, it will blow out a narrow body. That’s why people have their core markets. The 1 billion dollars on the LHR-NYC route that British airways made on 7 747s a day. What in their right mind will make them now switch to narrobodies. Or the 7 a day LHR-DXB. Just because it’s “cheapest” option certainly does not make it the smartest option. These are businesses. The goal is profit maximisation. Like I said if you have the numbers and yield. a narrowbody does not work.

Quite right about freight in the 737 versus A330 comparison, which I believe is a real issue FI are thinking about. Yes, Icelandair can do significant cargo. An A330 can save the need to do an additional jet freighter trip. In that sense, it is very efficient (IF that freight demand is compelling). And yet, there will be cases where FI says, you know what, forget the cargo revenue. The 737 Max saves so much money, we don't care.

FluidFlow wrote:

Opus99 wrote:

LCDFlight wrote:

But of course we notice OEMs talk endlessly about the "economies" and "efficiency" of large airplanes. Isn't a 737 Max or A321 NEO just as fuel efficient per seat? Bigger airplanes do not add high yield capacity. They only add low yield, more often empty capacity. The high yield can all be carried on the small airplane, so it is not part of the decision analysis.

Example, say 737-9 baseline capacity is say 90% load factor, which drops to say 75% on an A339 (as an example). The load factor of the incremental is around 55%. With low yields. It is not always easy to make higher profit with that. Meanwhile, the costs of the A339 occur every day. An airplane's peak capacity is not nearly so relevant as its daily cost and average daily revenue.

My point (which is qualitative, and applies loosely to what FI is doing here) is I just think people have this wrong notion that bigger airplanes make more money. Cape Air makes more profit than many wide body operators. Not profit margin... total profit. Just my 2c.

You forget cargo. The revenue generation from a wise body is very diverse and like I said when you have the market demand, it will blow out a narrow body. That’s why people have their core markets. The 1 billion dollars on the LHR-NYC route that British airways made on 7 747s a day. What in their right mind will make them now switch to narrobodies. Or the 7 a day LHR-DXB. Just because it’s “cheapest” option certainly does not make it the smartest option. These are businesses. The goal is profit maximisation. Like I said if you have the numbers and yield. a narrowbody does not work.

The NYC-LHR route is a bit skewed though because if BA could run 16 321XLR flights between LHR and JFK they would but there are not slots for that. I bet if there is no slot restrictions, 16-20 XLR flights with various premium to non premium configurations based on the timing of departure would make more money than 7 WB flights. The immense flexibility would be payed back in gold. If seats do not book out just cancel 1-2 a day and rebook on the 30 minute earlier or later departure. That is very hard with a WB.

So for Operators that are not slot limited the NB makes way more sense. There is inherentely less risk in a 321XLR than in a 787-9. The only reason we still have big aircraft is their range and the slot limitations at airports.

Every mass transport solution favors frequency over capacity and I count air travel into this. Look at the AA 321T. Instead of using a wide body that adds sensless capacity, AA uses the 321T with a very premium configuration. AA could put this capacity into a wide body flight toghether with a normal transcon flight but instead they chose to use two flights on smaller aircraft.

If the WB would inherentely make more money the bigger it is, the A380 would be at 2000 deliveries. But that is not the case.

If there would be no slot restriction, 2x A321XLR and 1x 767F would have a larger revenue potential than 1x 777W. Especially because you could pull one XLR if the demand is not there. With the 777W you either fly half empty or you have no offer if you pull it.

FluidFlow wrote:

Opus99 wrote:

FluidFlow wrote:

The NYC-LHR route is a bit skewed though because if BA could run 16 321XLR flights between LHR and JFK they would but there are not slots for that. I bet if there is no slot restrictions, 16-20 XLR flights with various premium to non premium configurations based on the timing of departure would make more money than 7 WB flights. The immense flexibility would be payed back in gold. If seats do not book out just cancel 1-2 a day and rebook on the 30 minute earlier or later departure. That is very hard with a WB.

So for Operators that are not slot limited the NB makes way more sense. There is inherentely less risk in a 321XLR than in a 787-9. The only reason we still have big aircraft is their range and the slot limitations at airports.

Every mass transport solution favors frequency over capacity and I count air travel into this. Look at the AA 321T. Instead of using a wide body that adds sensless capacity, AA uses the 321T with a very premium configuration. AA could put this capacity into a wide body flight toghether with a normal transcon flight but instead they chose to use two flights on smaller aircraft.

If the WB would inherentely make more money the bigger it is, the A380 would be at 2000 deliveries. But that is not the case.

If there would be no slot restriction, 2x A321XLR and 1x 767F would have a larger revenue potential than 1x 777W. Especially because you could pull one XLR if the demand is not there. With the 777W you either fly half empty or you have no offer if you pull it.

That’s a very good point. But of course there’s a balance right. You have to have the exact aircraft for the route. Which I think BA has done extremely well, they have everything and they make it work well and it’s part of why they’re very well run and very profitable. Of course. But of course. There are only so many runways out of hubs and into hubs/major cities and of course there’s cargo too

Sure it was just a theoretical excurse. There is always a point where one aircraft becomes overall the better solution even if most of the odds are stacked against it. Hence why we still see the 330neo selling. There are so many variables in play.

In the long run all options for Icelandair are open and I would not even exclude that the 767 replacement is just gonna be a 15 year old A332. While the NBs can be used all year around all the time, during low times a used aircraft will be cheaper to park.

LCDFlight wrote:

I always say you can lose the least money by flying the cheapest aircraft it takes to cover your daily network. That is your decision baseline. Some "conventional wisdom" that you need widebodies is not the baseline. The baseline is the cheapest solution. People have this prejudice that larger airplanes are "cheaper" to run. That is false in COVID and actually has always been very false, with a kernel of truth sometimes.

LucaDiMontanari wrote:

nikeson13 wrote:

So future, you'd have a fleet of ~13-16 737MAX, dozen plus A321neo in the near term for 757 replacements (Again thx Qatar), but really having a 150-190 seat aircraft plus a 200-250 seat aircraft with solid cargo capabilities and range is probably the goal for them (plus their subsidiary cargo).

Do you really think it makes much sense to operated two such small subfleets in the same segment? What is publicly to read about the last narrowbody generation says, that the MAX is more efficient than the NEO on long segments, which is more or less the case for every route in Icelandair's network. Why should FI buy a fistful of orphan 321's for just the odd destination where the range of the MAX is maxed out? It is definitively more economical to accept some restrictions on a few routes than operate a separate mini fleet for those. And I highly doubt that the A321XLR is of so much use for FI: 1st on the long runs it lacks cargo payload (which is different from capacity) and 2nd once it was said that the 321neo family can do 95% of what the 757 can do. However a lot of FI's network and needs is in exactly within those 5% the 321's can't do.

Opus99 wrote:

For Icelandair the narrows make the most sense.as they kind of sit in between mainland Europe and the US. They’re not a hub and the aircraft is right for their home market demand too.

Have you ever closely studied their business model? Have you ever counted how man US tourist board their birds in Europe? If this is not a hub network, I wonder what you would call a hub then...

beachroad wrote:

On an aside, I also can't see the recently rebranded Dash-8 operation lasting in the long term, it's so completely stand alone and non-core that Bain will want to asset strip off to another buyer.

Interesting question - however one has to see, that Iceland works a little different than other countries. You can't operate an airline by the (LCC-)handbook there. That is something even the Bain guys have to accept or they will fail epically. The Dash-8 operations are very important to everything that takes more than 3.5 hours by car from Reykjavik (and are thus subsidized). Akureyri is a good 4 hours drive, Höfn í Hornafirði is 6:30 and Egilsstadir is easily over 8 hours away by car. In summer under good weather conditions. And public transport is ludicrous at best, there is no such thing as high speed rail in Iceland. Sure, Höfn isn't operated by FI but by Eagle Air with their old J32's. But this shows even better that while there is a healthy domestic demand (read people with money in their pockets), the total numbers of passengers are way too few to justify domestic 737's. And honestly, I don't want to be in charge to handle a full MAX9 at EGS's microscopic terminal...

Furthermore there are even more really special operations during the summer, when they fly to Greenland including Ilulissat and Nuuk with their DHC-8-200 out of Reykjavik. While these incredible expensive flights (often well into the four digit range) have a good demand from wealthy tourists, there is hardly much more demand to these remote places, neither local VFR nor business traffic. I can't see that such flights will be flown by anything larger in the foreseeable future, maybe all Q400 operations at some point, when the old -200 finally fall apart. On the other hand I can't see an Eagle Air to take over the whole domestic market, that would be a bite too much for them.