Airbus A321XLR & Boeing, cargo, and where do Airlines go from here?

A321XLR: Boeing concerned about its safety? Really?

I appreciate it’s been a while, but COVIOD-19 waits for no one and people needed vaccinating.

Now I’m back and there have been some interesting stories in the past few days.

First of all Boeing has been using its PR team to underline i a very public way, the potential of a major safety issue on the A321XLR. The aircraft uses redesigned wing tanks, gave some cargo space over to fuel tanks – all that produced the A321LR. The XLR includes a newly designed moulded tank built into the bottom of the fuselage.

<p style="font-size:18px" value="<amp-fit-text layout="fixed-height" min-font-size="6" max-font-size="72" height="80">Airbus are well aware of the inevitability of the possible safety issues – fire and external penetration of the tank being possible – but they say, having long ago anticipated it, that it was designed with all of this already in mind, and EASA are planning on testing the aircraft with it in mind.Airbus are well aware of the inevitability of the possible safety issues – fire and external penetration of the tank being possible – but they say, having long ago anticipated it, that it was designed with all of this already in mind, and EASA are planning on testing the aircraft with it in mind.

So why has Boeing been stoking doubts in the minds of customers, because it really isn’t out of genuine concern for their wellbeing? The answer is simple. If they can persuade enough customers to be wary, and get EASA to do a double-take on their review process, it might delay service entry until late 2024. If it can do that, by then Boeing expect to have whatever the 797-X in its new guise is going to be, available to order, even if its service entry date is still years away. Additionally it might persuade anyone still wavering to rethink a 737MAX order.

Former Qatari A332F now flying for AirBelgium as OO-AIR

Cargo makes a comeback but is it really sustainable?

One of the things that’s happened in the past three months is a huge rebound in cargo. AirBelgium, using the recently disposed of Qatari A330F’s has moved into the cargo market with two aircraft. Air Canada is bringing on converted 767’s as freighters, and generally speaking there’s been a huge uptick in those risking a dip of the toe, and in some cases full-on diving in, to a once forbidden market. Nobody wanted to know about cargo, since 2012 if you weren’t a full time operator with a significant fleet you were pretty much doomed.

Even those who kept hold of their freighters (with the exception of Qatar which had the blockade to deal with for three years), let many go, especially the bigger and older 747F’s. The market for the 748F dried up, and only the 767F (propped up by Fedex and UPS) and the 777F had any real market share.

Conversions continued, especially the 757, but 747 stock was basically too old to justify such expensive changes. However, the Airbus A321P2F and the new 777-300F conversions being made available through Israel and GE, have offered a way forward. And airlines are taking them up.

The pandemic, now just days away from the first anniversary of the UK’s first full lockdown, has transformed everything, way, way beyond anything we’ve ever seen or expected. Financially the cost is equal to a major war, economically it has seriously depressed major economies around the world. As much as 10% in the UK and Western Europe. Any other time that alone would have been an economic catastrophe. Yet it doesn’t look or feel like it, and thats largely because its been artificially induced.

One way or another a recession was coming, now its here, but its under our control, and it’s re-set the economic clock. After World War One in 1914-19 (the blockade and starvation of Germany continued and the Treaty of Versailles ending it wasn’t signed until July 28 of that year), there was a year of recalibration as people and industries re-set their lives and re-tooled, followed by a massive economic resurgence that carried on through to the end of 1929. Such a re-set is what every economic forecaster seems to be pointing to. And that is why cargo is so keen to be on top of it.

Vaccine distribution by air is essential

Add to that there is a vast programme of vaccine distribution that hasn’t even started to reach peak yet – and probably won’t until well into early next year. Once the major industrial economies have vaccinated their populations global distribution will really begin. And as many predict COVID will be here for many years and endlessly mutating, vaccines will always been in demand year in year out, even if it dies down and becomes ‘just another flu variant’.

On top of that there has been a huge shift in peoples buying habits. It was already underway, but the UK recognised how much its changing just yesterday – Chancellor Rishi Sunak announced that of the eight Free Ports to be created, East Midlands Airport would be one of the first. That alone underlines the importance the UK sees attaching to air cargo, both from Europe and elsewhere. Ironically its likely to cause a major shift in where cargo in UK the flies to – Stansted might not be overly happy longer term.

So is this new cargo boom sustainable? Several airlines obviously think it is. Right now it looks like there is the clear possibility of a renaissance in the business, but it’s still a notoriously up and down market with tight margins. Good luck to all of you!

Where do airlines go from here?

Whatever you might think of British Airways, have no doubt that it’s still one of the sharpest businesses out there with few qualms and a ruthless streak about implementing drastic changes as an when it needs to; screw its staff and its pilots and anyone else who gets in the way. Right now 112 of its 254 aircraft are still flying. The UK expects to resume ‘normal’ overseas travel from May 17.

It was therefore with some interest that I noted there view on the upcoming market return and asking a few questions here and there found out that for most of the European full service airlines, they see a similar process.

The business traveller market is not dead. At least they hope its not. The prediction is that ‘Zoom culture’ while now firmly established as a major force, also has its drawbacks, especially in the live events arena for trade shows and experiential marketing, all of which are seen as essential going forward. There’s a human need to connect at a physical level, there’s also a ‘perk’ value to being a company rep at such an event, and the swagger factor of being courted by prospective buyers and sellers. People want to meet. Overall airlines are expecting a reduction by the end of 2022, of around 20% in pre-covid business travel.

That isn’t good news because the airlines make the vast bulk of their profits from business travellers. It can take ten economy seats to get even within striking distance of making the money a single business passenger does.

The upside is that they see this as being mostly a permanent change and they’re willing to work with it. The downside is that economy passengers will be in less demand (yes you read that right). Airlines don’t really want economy passengers in numbers, they want them in quality. So BA – and others are said to be planning a similar change, are looking to vastly expand by as much as 40% – the seats they offer in Premium Economy.

They will take some of these from Business, but some will come from basic economy positions as well. The reason is that the demand for cheaper business seats is expected – therefore marketing Premium to low end business travellers has merit. On the other end, a travel starved public are far more willing to pay for PE than they used to be as standard economy has bee made less and less inviting. Its also set to become very much more expensive. Airlines have vast amounts of money they need to make up, prices are expected to soar in 2022-23. The reason is twofold, simple demand and availability, coupled to the need to sustain profitability.

Furthermore BA has made its cuts. And the A380 wasn’t among them, unlike most other airlines. Heathrow remains a unique proposition and BA sees the A380 as likely to be more valuable in a re-start world than some of its smaller aircraft. Demand is expected to be so high that it thinks it will fill them easily, where it might not fill two flights a day to start with on some routes like LAX or SFO. If demand proves high enough, then smaller aircraft can be brought on too.

Elsewhere, Lufthansa (which incidentally has just repainted its first A359 delivered in the ‘old’ livery, into the new), has admitted its now in negotiations with Airbus and Boeing about its future fleet. The departure of the 744’s and the A380’s, coupled to the inevitable phase out of the now decade old 748i’s means it needs smaller aircraft to meet future needs.

Beyond all of this lies another battle that’s far from over. The fuel of the future. Europe is clearly heading down the path of genuine zero emissions and hydrogen technology. Boeing doesn’t want to know and is looking at biofuels and ‘efficiency’. The problem is biofuels don’t really do much to curb Co2 even if they reduce oil extraction, and ethanol is an intensive farming and refining product that produces Co2 just to obtain it. This battle between pseudo-green tech (Boeing’s way) and realistic and genuine zero emissions green tech (Airbus), is going to be a bit like VHS and Betamax was in the old days of TV video recording. If Boeing wins the VHS camp – and the worst of the two in terms of quality, will win again, while the better tech withers and dies because of a lack of uptake, despite it being a better product.