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Speed vs. Size.
It's official; Boeing and Airbus have laid out their plans for their large jets of the next 15-20 years. Airbus has launched its much-hyped A380 and Boeing has launched the design of its hybrid 777 - just sub-sonic Concorde with whiskers called the "Sonic Cruiser". My prediction is that Boeing has the right answer. Of course time will tell if the manufacturers and I are right.
So why do I think this way? Actually my thoughts are based on some research, experience and sound reasoning. On the psychological and cultural side I can also explain the rhetoric and reasoning behind this pre-market tested design bake off.
Lets look at some basic facts. People (obvious exceptions like my grandmother granted) are always in a hurry. Everyone is always racing to get from one place to the next. For example, what happens when the captain turns off the Fasten Seat Belt sign? What is the major selling point of High Speed Trains, FedEx, Digital Cameras, e-mail, the Pentium V, DSL, the autobahn? What do people always want more of, other than money -- time. Time; that precious commodity that slips away from all of us. What has happened to every slower paced technology? Other than a curio for historians, slower technology is surpassed.
How does this quest for speed relate to these two major aircraft choices? What can we learn from Concorde? What can we learn from the 747-X00?
Concorde failed from a commercial perspective, but proved that people were willing to pay a premium for faster travel. If you extend this logic, as Boeing has been doing for years, then if we could make an aircraft that could be both fast and commercially feasible then we would have a winner. The trouble is that all research indicates that the technological, environmental and ergonomic hurdles to overcome flying big aircraft at supersonic speeds mean that this project is just not feasible yet. Imagine, a windowless aircraft, creating sonic booms, damaging the protective ozone-layer (a favorite of the greeny euros Airbus camp) and getting super hot so no one can touch it for an hour or so when it lands.
As for the 747-X00, while this aircraft revolutionized long-haul air travel, there has been a constant shift away from this aircraft of choice as aircraft economics, substitute aircraft and airports, and passenger revenue management systems have changed the scheduled passenger business. Also, passengers, and the majority of airlines now prefer the 180-280 range of seating aircraft for long-haul flights.
So why are Airbus and Boeing's views so divergent?
If we build an aircraft that goes as fast as we can go before crossing the sound-barrier, flies as far as possible, fits today's infrastructure and pushes the design envelope slightly, then we have delivered the best we can, and people will pay for this. This is what Boeing will bring to market in the late 2000s. Critics will point out that the timesavings will only be material on very long-haul flights -- right (but that's the market), they will also say that airway congestion will slow up the aircraft, and you won't get the promised time savings -- wrong (at 45,000 ft there is just clear air and very soon Free-Flight, and if you get to the airport and it's congested, it would have been anyway, whether you took 8 hours to get there or left 3 hours earlier). Boeing believes that the market will adjust so that the supply of available profitable flying opportunities will remain, and aircraft range will extend to the maximum necessary (1/2 way round the world). What this means is that over time not everyone will want to fly to Heathrow, Tokyo or Los Angeles. Secondary airports will develop over time -- of course the American way is to simply go build another airport as there is enough space available to do it (and of course with the Republicans in power -- never mind the wilderness areas, spotted owls or pollution -- just build it and to heck with the environmental consequences) -- and people will fly from e.g. Orange County to Osaka, Gatwick to Newark, Oakland to Guangzhou. As aircraft range develops groups of 180-280 people will also fly from Tokyo to Miami, or Houston to Abu Dhabi.
Airbus' offering is the large A380, double-decker 550 seat behemoth that flies at normal sub-sonic speeds. Airbus claims (along with some highly paid consultants) that this is a response to the market and congested airports. This, I contend is a Euro-centric view, and when viewed from Europe it appears to make sense. Everything is crowded in Europe, the airports are slot constrained, the ATC system is creaking under the weight of the air traffic, nobody wants another airport near them -- so what's the answer -- build bigger aircraft (also put more seats onto existing aircraft -- did you know its possible to configure a 747-200 up to nearly 540 seats?) -- It seems to make sense right?
Hence Airbus' the core argument centers on the assumption that airport capacity is fixed and demand for the busiest airports will continue unabated. Boeing's is that the market will adjust and that existing trends continue (isn't there a marketing blitz on from Paris' new third airport?). Although I know something about economics, I'm not an economist, but to me supply and demand means this -- if everybody wants to fly from Heathrow and the airport is congested, prices will rise at Heathrow to stem demand, and passengers will be motivated by price to fly to Stansted or Osaka. The operators at Heathrow will love it as they make more money on the same cost basis and don't have to invest $200 million in a new aircraft and charge the same prices. The passengers will be happy that they don't have to flight their way to crowded airports, to get in line with 550 others jostling to board the same flight.
What about Passenger choice -- won't they love those in-flight gyms and bars?
Airbus is a very skilled marketer. Its string of successes in the years from 1998 has put Boeing back on its heels. Airbus has conjured up an image of an in-flight cruise ship, packed with amenities, and it seems to have worked on capturing the public's imagination. The reality check is that if you observe people in flight, what do they do? They hunker down, read, sleep, watch movies in private, and try to maintain some personal space and semblance of privacy. Some fight over baggage space with neighbors, and get downright unreasonable. Families act nuclear, and the crew tells you to remain seated with your seat-belt fastened. In all of my flying, only about 1 in 10 people strike up a conversation with me (and I am a gregarious, normal looking chap), and I don't pack a gym bag and wash kit. My view on this is, that reality will be more of the same, only bigger with longer lines at check-in, boarding and baggage claim. In my humble experience, people want to get where they are going quickly, on-time, with good service, some personal space and respect.
And the airlines, they're all standing in line to buy the A380X aren't they?
Boeing also operates in a market where it cannot be as liberal with its incentives as Airbus. Airbus needs launch orders to justify the project. Airbus has a client base for its other aircraft. My opinion is that the Messrs at Airbus leant very heavily on well-known clients, and offered tremendous incentives to get the required launch support. Of course, Singapore, Qantas, Air France, Emirates and Virgin are all good and logical choices, provided the price of the aircraft is right. The issue I believe is that the price they have been offered is way below Airbus' true cost. My view is that only FedEx, and other cargo operators are the only ones that really want this aircraft, as the Cargo business has the flexibility and the need to operate successfully very big aircraft - why, because people want more things quickly, quicker that is than by boat or road.
Airlines know that operating an airline the size of the A380 means that they must operate full all the time, and that there are few markets with these characteristics. They also know that the valuable business passengers will be lost to a faster aircraft. So when Boeing's 250 seat faster aircraft lines up nose to nose with the Airbus 550 seat behemoth, the pressure will be stepped up on the Airbus A380 to fly with even more passengers to compensate for the lower average fare paid per passenger. Also, with an all-time high sticker price for the A380 anticipated ($150-$200m) the cost of business for the airlines owning the will increase, hence they will have a reluctance to order up many of these aircraft. Airbus knows this, and thus is focused on convincing everyone that size is good and there is a market for 1,500 of these aircraft. The market is more likely to be 400-500 aircraft maximum by 2010-2020, assuming that airlines and airports don't respond to demand as I think they will, and that Boeing doesn't launch its faster aircraft. With these factors counted, I think we're looking at 200 aircraft maximum, and at 200 Airbus cannot ever recover its costs to develop and build this aircraft -- $12 billion.
What will happen?
I think the political inertia (I once read an organizational psychologists work on this phenomenon, and he termed it "Groupthink" -- a collective resilience to contrary information similar to religion) behind the A380 means that despite the gloomy forecasts of market demand for this aircraft Airbus will press ahead with the notion that the real answer is 1,500. Sales volume will fall short of targets, and Airbus will limp along, wounded. Boeing's aircraft will arrive and airlines will segment the market with this new aircraft, charging higher prices in key business markets -- Heathrow --Tokyo, New York -- Heathrow, Los Angeles -- Tokyo. The airlines normal speed routes in business markets will take a revenue hit as higher fare traffic migrates to the faster service. So as long as the Boeing's new aircraft does not increase overall the cost of doing business, airlines will be happy. Airlines owning the A380 in 2010 will be lining up to give them back or convert them to Cargo aircraft. Airbus will be spinning its disastrous lapse of judgment, and new management will be put in to launch Airbus' close to supersonic aircraft.
Site last updated December, 2004
Copyright 2004 R Ryan. All Rights Reserved
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