Currently, Delta colours adorn seven different types of jets, including multiple versions of the Boeing 767 and the Douglas MD-80 series. The L.1011s will join a group of Airbus A310s, the last of which was parked last year, as victims of Delta's drive to cut costs by paring down the number of jet types it operates.
For the near future, Delta is committed to increasing its fleet only by expanding the number of a type it already operates - the carrier has outstanding orders for 767s, MD-11s, and MD-90s - rather than expanding the number of types in its fleet. Word is that Delta is considering further consolidation, probably by replacing its 737-200s and -300s with Douglas MD-90/95s, and later on, possibly doing the same with its 727 fleet.
Part of today's conventional wisdom says that fewer aircraft types translates into a more efficient use of manpower, lower costs in areas such as training and spare parts inventories, and a leaner, more efficient operation overall. But can the actions of carriers such as Delta, TWA and Air Canada be considered part of a sweeping trend that could, at its extreme, ultimately turn more carriers into, 'Boeing', 'Airbus' or 'Douglas' airlines? Or are managers keen to streamline costs by taking advantage of the simplest means available - eliminating an ageing aircraft type from the fleet, while expanding capacity by accepting a sweetheart deal from an aggressive manufacturer?
An informal survey of industry officials indicates that the drive to harmonise fleets is not, in and of itself, worthy of being considered a trend. Instead, it is simply one means to the end that consumes today's airline management worldwide - the reduction and rationalisation of operating costs.
Airlines choosing to harmonise fleets are doing so only after careful consideration of their own situations, taking into account factors such as their current fleet structure, their cash positions, and, in some cases, the availability of certain models on the second-hand market. And even when the time comes to make a long-anticipated aircraft purchase, sometimes the deciding factor has more to do with the difference between the price of two aircraft types than with the similarities they may have with others the carrier already operates.
Any discussion of equipment commonality in aviation today must begin with Airbus Industrie. When the A319 enters commercial service this summer with Air Inter and Swissair, Airbus will have five aircraft types, from 120 to 385 seats, that can all be operated with a common pool of pilots. The cockpits, systems, and overall design of the new Airbus family are as similar as they can be on aircraft that, at the bottom end, are built to carry 120 passengers on a Paris-Bordeaux type route, and at the top end can haul 385 passengers from Paris to Washington DC.
Airbus says that, in a mixed fleet situation, its commonality features save carriers US$1 million per aircraft per year in operating costs. The ability of airlines to use a common pool of pilots to fly the different types of modern Airbus aircraft leads to substantial savings in crew staffing and training. Further savings on expenses such as simulators add up to a major positive impact on an Airbus operator's bottom line - a US$15-20 million A320 simulator can be converted into an A340 trainer in 30 minutes.
Considering today's industry-wide emphasis on minimising costs, it is difficult to understand why Airbus' family concept is not given more attention. The consortium hopes that the examples of carriers like Air Canada will soon change this. Canada's largest airline is the first North American carrier to operate both a narrowbody version of Airbus' modern family (the A320) and a widebody version (the A340). Air Canada uses a common pool of pilots to operate its Airbuses, thereby gaining full benefit from commonality.
However, when it was time for the Canadian carrier to decide on a replacement for its 35 100-seat DC-9-30s, the seemingly logical choice - the 120-seat little brother of the A320 and A340, the A319 - did not win the initial battle. Air Canada chose instead to hushkit and refurbish its DC-9 fleet - at first. Then, the carrier's brass was convinced to reconsider its decision to eschew new equipment by a manufacturer whose aircraft Air Canada didn't even operate: Fokker. After the airline's officials reopened the battle to all the jet-makers, Airbus swooped in and used the leverage of commonality with Air Canada's A320s and A340s to win an order for 35 A319s.
'We got a big plus in [Air Canada's] economic analysis because of our commonality, and that was really the biggest issue in that deal,' says Airbus-North America sales director Doug Sutton.
Airbus hopes that Air Canada's decision to capitalise on commonality will help enlighten other carriers regarding the advantages for any mixed fleet. 'Air Canada is the poster child [for commonality] in North America,' says Sutton. 'They got A340s primarily because they could fly them with A320 captains, and the A319 fits right in there.'
Airbus has achieved reasonable success in selling its commonality concept. Air Canada is one of 15 A320 operators that have also signed up for either A330s or A340s. Most of these carriers, including notables such as Lufthansa and Swissair, are using the mixed pilot and maintenance staffing flexibility that makes the Airbus family unique.
Despite this, the consortium has lost some key orders from current Airbus operators to Boeing. Singapore Airlines, Malaysia Airlines, and South African Airways all chose the B777 over comparable Airbus products, even though each already operates at least one other member of the modern Airbus family. What beat the promise of Airbus commonality in these deals?
'Boeing was very, very aggressive on price - that's it. The price overcame the commonality advantage,' an Airbus official states. 'When you're talking a higher order of magnitude of initial price, it's easy for Boeing or anybody to reduce the [asking] price that much more to overcome [the commonality advantage].' On the other hand, Boeing - and the airlines - insist that these B777 sales were achieved on merit, with the B777's larger cabin and growth potential standing in its favour.
Even if Airbus' family concept gives it a distinct advantage in terms of the economics of commonality, many argue that the longevity of Boeing and Douglas - and the familiarity this breeds over time - more than counteracts the Europeans' biggest advantage, even before taking major price breaks into account.
'People who were concerned about their potential maintenance problem looked at their [Boeing] airplanes and said, "well whatever the next generation is that Boeing builds, that's the one we're gonna buy," ' says Jim Ireland, whose Miami-based aviation consulting firm Avidel specialises in maintenance issues. 'McDonnell Douglas had the same kind of thing - people looked at their Douglas fleets and said, "we're McDonnell Douglas people and we're going to stick with it".
'If you're a mechanic for very long and grow up on a 707 and they take you over to work on a 777, you're not going to be lost because you're going to be looking at a Boeing product,' Ireland continues. 'It may be assembled a little different - it may be glued together instead of riveted - but the frames, the angles, the stringers - they're all Boeing. It's the way Boeing puts it together - the underlying philosophy. There's the commonality.'
Douglas and Boeing do have tangible commonality advantages as well. Douglas' MD-80 series offers flexibility similar to the 737 and A320 families, for example. And, despite the accolades given to Airbus for the common cockpits in a widebody and narrowbody design, it was in fact Boeing that introduced this feature with its 757 and 767. A total of 20 carriers operate both 757s and 767s; many are willing to bet their futures on the aircraft.
In February, TWA placed its first major aircraft order since 1989. The carrier announced an order for 20 Boeing 757s, 14 of which will replace ageing Lockheed L.1011s. Besides reducing the number of types in its fleet, TWA chose 757s for another major reason: their commonality with the carrier's 15 767s. TWA's 757 and 767 pilots will be type-rated to fly both, meaning that, in addition to the direct operating cost reduction that flying 757s will bring compared to the L.1011s, the carrier will realise substantial indirect operating cost reductions as well.
'This kind of staffing flexibility will give us greatly improved operating efficiency compared with the L.1011,' says TWA president and CEO Jeffrey Erickson. TWA plans to enhance these benefits by adding more 767s in the near future. The carrier is also gearing up to replace its 727s with MD-80s, a move which would leave TWA with only four types in its fleet - the DC-9/MD-80, 757, 767, and 747. Although this would be only one less aircraft type than the carrier currently operates (the 757s will be added while the 727s and L-1011s are to be removed), the commonality of the Boeing twins translates into a much more efficient fleet in terms of both direct and indirect operating costs.
Airbus, Boeing and McDonnell Douglas are not the only manufacturers that consider the impact of similar systems when designing families of products. Aero International (Regional)'s jet division is now building the second generation of the Avro RJ family capable of serving top end regional markets with aircraft ranging from 70 to 120 seats. Interestingly, commonality has not been a major influence on carriers seeking to build versatile RJ fleets. Crossair is the only airline to date that has committed to multiple versions of the new family through a mix of RJ85s and RJ100s on intra-European routes. The latter model replaces the Fokker 100, after a careful analysis of its stand-alone ability and the synergies with the RJ85.
Dornier, which is under intense pressure from parent Daimler Benz to cut losses, is also under pressure to build common aircraft types. Current Dornier 328 operators are pressing the German manufacturer to produce a stretched version of the existing model. According to one Dornier official, the company could sell several dozen of the larger design immediately if it could allocate the funds to launch the programme.
While airframe commonality certainly offers the most potential savings to an airline, cost-cutting quests have led carriers to recognise the benefits of common powerplant families and models as well. Both Asiana and Alitalia provide examples of carriers that have chosen General Electric powerplants on every type of aircraft they currently operate for which GE offers a product. In the case of Alitalia, that adds up to eight different versions of aircraft from three major manufacturers, all GE-powered. And, like common cockpits and systems, similar engine designs mean savings on both immediate and long-term expenditure.
'Right now you're seeing a lot of the airlines take a strong look at commonality among both airframe and engine types,' says Quentin Brasie, vice president of marketing with US consultants AvSolutions.' When an engine shop is developed, if internal capability can centre on, for instance, Rolls Royce rather than on both Rolls and General Electric, a lot of money can be saved in tooling and other related costs - a big consideration.
While the majors struggle to consolidate fleets that have grown wildly mismatched due to mergers, acquisitions, and outright unabashed growth, the latest wave of upstarts in both the US and Europe are making every effort to avoid the perils of haphazard fleet-mixing.
Since 1990, more than 50 hopefuls have filed business plans with the US Depart- ment of Transportation in the hope of cashing in on a soft used aircraft market and the phenomenon dubbed 'The Southwest Effect', in which the combination of under-served markets, low fares, and medium-to-high frequencies produces significant market stimulation.
Of the 14 that have successfully begun scheduled jet service, only the new Midway operates more than one make of aircraft. ValuJet, with its DC-9-30s and MD-83s, and Frontier, which has 737-200s and -300s, are the only others with multiple models. Most of these carriers, whether they admit it or not, pattern at least one part of their operations after Southwest: low seat mile costs driven primarily by the high use of a fleet made up of a single series of aircraft.
But is the single-series fleet an absolute for carriers in the low-cost niche? As all these smaller carriers chase bigger pieces of the pie, some are finding the lack of a mixed-fleet setup can be a burden as well. 'In today's environment, having one type of aircraft can be much more expensive due to the shortage of aircraft [on the market],' says Mark McDonald, president of 1995 startup Nations Air, an all-737 operator. McDonald has pushed his two aircraft to their limits, operating two scheduled and five charter routes in the US. For months he has been scouring the used market to find more 737s to add to Nations' stable. 'Without additional airplanes, the company cannot grow or expand. We can't increase our revenue base to take advantage of market potential we've developed.'
McDonald acknowledges that introducing another aircraft type would have a substantial impact on operating costs. 'You've got to go through the certification process for the different type,' he admits. 'It also creates a cost for producing manuals. If you've never operated that type of equipment before, you've got to go through the certification process out on the flight line. Then you've got to do proving flights, which is anywhere from 25 to 50 hours of flying an empty airplane.
'As far as crew costs go, if we add a 737 [the crews] have to go through training. The cost is basically the same as adding a 727. The only thing is you pretty much lose the potential to cross-utilise your pilots because of the different aircraft types,' McDonald adds.
These added costs would be a deterrent to any carrier, large or small. But the lack of expansion could prove more costly in the long run for a fledgling airline looking to take advantage of economies of scale. 'To me,' McDonald concludes, 'it's much more expensive to have the problem that we have, where we cannot find additional equipment to expand our revenue base, than it is to incur some additional costs by having a mixed fleet. Right now, we've got to get some airplanes to grow.'
Consolidation of airline fleets is likely to continue through the next major buying cycle, which is already underway. However, as the early part of the cycle has demonstrated, the only factor that seems to trump all others is a low purchase price. The winning plane maker in any particular aircraft deal is just as likely to be determined by how each manufacturer packages its deal rather than how well its product will mesh with the carrier's existing fleet.
As one airline president puts it: 'It's economics; the operating performance and history of the airplane. It's the economics of what it costs to operate that airplane. And, of course, it's the deal.'
Today's efforts to cut operating costs are certainly causing many airline analysts to examine what benefits are to be realised by consolidating equipment types. However, those same cost-cutting goals are also pushing analysts to scrutinise each and every item of expenditure, especially those that offer substantial near-term savings. As a result, the entire package presented in a given deal is weighed carefully, with near-term benefits (that is, the impact on a carrier's cash position) outweighing rewards that take 15-20 years to materialise fully.
This logic is demonstrated in situations such as Northwest's decision to put $7 million into each of its DC-9s in order to get another 12-15 years of life out of the fleet, as opposed to laying down $35 million each for replacement A319s/A320s. This is despite the fact that the new Airbuses would be around 20 years after the last DC-9 is scrapped. And, of course, the A320s would have been ringing up substantially lower operating costs for the duration of their lives.
'You have the marketing department, the chief financial officer, and the president steering the decision,' says Quentin Brasie, of Washington consulting firm AvSolutions, 'and it might not have anything to do with commonality. You might have a maintenance guy standing up on his tiptoes screaming at the CFO: "this is what we should do . . . it's gonna save us a lot of money". But if another manufacturer comes up with an extremely attractive deal, the commonality factor goes right out the window.'
Source: Airline Business
