FLEET CHANGES AND THE ECONOMIC IMPACT OF NEW TECHNOLOGY AIRCRAFT

Transcription

1 FLEET CHANGES AND THE ECONOMIC IMPACT OF NEW TECHNOLOGY AIRCRAFT Presented by: Deborah Meehan President and COO Simat, Helliesen and Eichner, Inc. ACI-NA Economic Specialty Conference June 6, 2006 Montreal

2 Goal What Are the Service Impacts of the New Technology Aircraft 1

3 Agenda Industry Overview Who is Buying Who is Not Description of New Technology Aircraft and Their Competitors Evolution of New Technology Aircraft 787 Advantages and Disadvantages of A380 Where Are the EMB 190s Being Used What About VLJs 2

4 Aggregate Demand Has Recovered RPMs 600 U.S. Carriers Domestic Traffic History (1980 YE 3Q 2005) GDP 12,500 RPMs (billions) GDP RPMs 10,500 8,500 6,500 4,500 2, Real GDP ($ billions) 100 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04-1,500 3 Source: U.S. DOT, T100, Database Products, Inc, US Bureau of Economic Analysis

5 Year-Over-Year Capacity is Down While Fares Are Up in the U.S. Year-Over Over-Year Domestic Nominal Yields & ASMs ATA Reporting Carriers, YTD November % 8% 6% 4% 3.7% 5.0% 5.8% 8.5% 8.1% 7.7% 2% 0% -2% -4% -6% -8% -10% 0.7% -2.0% -4.5% -7.3% -7.5% -2.7% -4.0% Yield ASMs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 4 Source: Air Transport Association

6 Bankrupt Carriers Tend to Reduce Capacity, and Delta/Northwest Will Likely Follow Suit Percent Change in Seats Aug 2005 vs. Aug 2001 and Jan 2006) 0% -5% -10% -15% -20% -25% -30% -35% -0.4% -3.3% -6.7% -20.5% -28.8% AS CO AA UA US -11.2% December % Northwest -6.3% January 2006 Delta -25.4% Restructured Restructuring 5 Source: OAG Schedule Tapes

7 Who will Buy the New Technology Aircraft? US Legacy Carriers Are Not Buying Anything in Great Numbers U.S. Legacy Carriers Scheduled Aircraft Deliveries as a Percent of Current Fleet CY 2006 CY % 2.0% 1.72% 1.5% 1.36% 1.20% 1.0% 0.5% 0.68% 0.92% 0.0% Source: ACAS as of October 2005; Carriers - AA,UA,DL,NW,CO

8 JetBlue s Embraer 190 May Be the First Step Toward Broadening LCC Service into Smaller Markets 10 9 Direct Operating Cost per ASM Generic Routes Current LCC Model A320 ('02) ('02) ERJ-190 ( 05) CRJ-900 ('04) CRJ-200 ('02) 7 Note: Assumed 98 seats for ERJ-190. Fuel assumed at $60/bbl with 25% premium on Jet A over crude.

9 The New Widebodies How They Compare Seats Range Seats Range A , ER 416 8, , ER 245 6, LR ,800 8 Source: Boeing and Airbus websites

10 The Impact of Smaller Widebodies on U.S. European Service 3,000 Weekly Flights U.S. Europe August 1981, August 1992, June ,500 2,782 2,000 1,500 1,794 1, Average Aircraft Size Source: OAG Schedules

11 The B767 Had Limited Range and Offered Only Limited International Opportunities B ER 6,495 mi. Beijing Tokyo Honolulu YUL Moscow London LHR Frankfurt Cairo Mumbai Sydney Auckland Santiago Rio de Janeiro Cape Town 10 Source: Boeing press releases

12 The 787 is Truly the Dreamliner and Makes More Points Feasible On a Nonstop Basis B ,100 mi. Beijing Tokyo Honolulu YUL Moscow London LHR Frankfurt Cairo Mumbai Sydney Auckland Santiago Rio de Janeiro Cape Town 11 Source: Boeing press releases

13 Who is Ordering the New technology Aircraft? Customer Country Orders Options 12 Boeing B787 Orders and Options Through 2015 Source: ACAS, May 2006 As of May 2006 All Nippon Airways Japan 50 0 Qantas Australia Air India India 27 0 ILFC USA 18 0 Northwest Airlines USA Japan Airlines Japan 17 0 Air China China 15 0 China Eastern Airlines China 15 0 Air Canada Canada Low-Cost Aircraft Leasing Saudi Arabia 14 9 Japan Airlines Domestic Japan JetStar Airways Australia 12 0 China Southern Airlines China 10 0 Ethiopian Airlines Ethiopia 10 0 Korean Air South Korea Shanghai Airlines China 9 0 Hainan Airlines China 8 0 Continental Airlines USA 7 3 LOT Polish Airlines Poland 7 2 First Choice Airways UK 6 3 Kenya Airways Kenya 6 0 Air Pacific FIJI 5 3 Air New Zealand New Zealand 4 16 Blue Panorama Airlines Italy 4 0 IcelandAir Iceland 4 3 Royal Air Maroc Morocco 4 1 Vietnam Airlines Vietnam 4 0 Xiamen Airlines China 3 0 Air Seychelles Seychelles 2 0 Total

14 Who is Ordering the New technology Aircraft? Boeing B787 Orders and Options Through 2015 As of May 2006 Pacific 26% Africa 4% Asia 40% North America 25% Europe 5% 13 Source: ACAS, May 2006

15 Who is Ordering the New technology Aircraft? Airbus A380 Orders and Options Through 2015 As of May 2006 Customer Country Orders Options Emirates United Arab Lufthansa Germany 15 0 Qantas Australia Air France France 10 4 Singapore Airlines Singapore ILFC USA 8 10 Malaysia Airlines Malaysia 6 0 Thai Airways International Thailand 6 0 Virgina Atlantic Airways UK 6 6 China Southern Airlines China 5 0 KingFisher Airlines India 5 0 Korean Air South Korea 5 3 Etihad Airways United Arab 4 0 Qatar Airways Qatar 2 2 Total Source: ACAS, May 2006

16 Who is Ordering the New technology Aircraft? Airbus A380 Orders and Options Through 2015 As of May 2006 Pacific 12% Asia 30% Middle East 35% Europe 23% 15 Source: ACAS, May 2006

17 The A380 What Are Its Service Impacts? Pros Intended to be the Natural Successor to the B747 Size Replaces Frequency Advantageous for High-Density Long-Haul Markets, Especially Slot Controlled Lower Unit Costs Allowing Lower Fares Cons Requires Significant Investment in the Infrastructure at Airports Runways, Taxiways, Gates, etc. Requires Increase in Separation Distance in the Air and On the Ground Requires More Time to Unload 16

18 Who is Ordering the New technology Aircraft? Customer Country Active Orders Options Embraer 190 Orders and Options Through 2015 As of May 2006 JetBlue Airways North America US Airways USA Air Canada Canada GECAS USA 17 0 Copa Airlines Panama FinnAir Finland 6 0 Regional France 6 6 Aero Republic Colombia 5 20 Tame Ecuador 1 0 Total Source: ACAS, May 2006

19 Regional Aircraft Demand is Focused on the Larger RJs Regional Jet Orders by Seat Type CY2006- CY Seats 70 Seats 50 or Less Source: ACAS January 2006

20 The Evolution of Embraer 190 Markets jetblue Embraer Service (Domestic US) June 2006 Market Daily Flights 10 Years Ago: AUS - BOS 1 AUS - JFK 3 BOS - IAD 6 BOS - JFK 9 BOS - RIC 2 BOS - TPA 2 JFK - RIC 4 1 market had no direct service 3 had only jet service 1 had turboprop only 2 had a combination of jet and turboprop service 5 Years Ago: 39% of the frequencies in those markets were served with seat RJs 19 Source: OAG Schedules

21 jetblue s Embraer 190 Operations Threaten Regional Carriers Introduced NOV 2005, Expected to Pose Competitive Threat in Mid Size Markets Introductory Schedule Has Been Hampered by Operational Problems, Scaling Back Roll Out 30% in Q1 CASM Costs Remain Competitive Aggressive Growth in 2006, Entering 8 10 New Markets Financial Losses in 2005, Expected thru 2006, Coupled with Operational Issues May Slow Growth Plans 20

22 How is jetblue Using the Embraer 190? jetblue Embraer 190 Domestic Routes June 2006 Average: Daily Flights O&D Pax 200,176 Competitors 1 jetblue Airbus A320 Domestic Routes June 2006 Average: Daily Flights O&D Pax 448,427 Competitors 1 21

23 Very Light Jets How Competitive Are They? Will Replace and Stimulate Demand for Business Jets Which Historically Have Been More Expensive Could Be Competitive With Commercial Service When There Are Significant Elapsed Time Savings However, Higher Unit Costs Requires Substantially Higher Fares No Leisure Traffic No Price Sensitive Business Traffic No Traffic in Market Already Served With Nonstops 22

24 The Market May Be Limited to Passengers Paying Full First-Class Fares 0.8% O&D Traffic Paying Full First-Class Fare 3,516,020 Absolute Number Paying Full First-Class Fare Even for First-Class Passengers, VLJs Will Compete with Airline Frequent Flier Programs 23

25 The Jury is Out on the Commercial Passenger Implications of the VLJ Pogo Jets Has a Concept of Air Limo Services Using VLJs on Routes Shorter Than 500 Miles Was Expected to Launch in 2006/2007 Orders for 75 Adam Aircraft Crandall Announced That the Eclipse and Adam Planes Are Good for Private Ownership, But Are Not Good for Day Charters For Crandall to Start, He Needs an Aircraft That is Cheap to Buy, Cheap to Run, and Very Reliable Nobody Has Built That Aircraft Yet 24