Finnair Gambling with its Future

[RC20]

They confirmed they will buy the A350s (and add orders total of 11 now). Delivery supposedly 2014.

They have thrown their entire future on Airbus, and its most uncertain of programs. This on top of the A340 orders. They should at least have made those 777s.

Not a good move, just giving the competition advantages, and when the delivery of the A350 slips to 2015-16, where does that leave them. A330s and A340s. The game keeps on changing, and you better have the best aircraft in any given category or you will get trampled.

That does not mean the A330 is not a good aircraft, certainly as an interim measure it is, but it has been superseded.

[sab319]

I'm sure the people at Finnair are very capable to decide what planes they want, there are a lot of factors you have to take in account when ordering a plane and I'm sure a respectable airline as Finnair chooses what suits them best

[jumpjet]

I am sure Finnair are not oblivious to the Airbus porblems that keep us all entertained in the press.

I would be pertty sure that when making such a serious commercial decision they factored in the current diffiuclties and the longer term consequences for the delivery of the A350

[David747]

They confirmed they will buy the A350s (and add orders total of 11 now). Delivery supposedly 2014.

They have thrown their entire future on Airbus, and its most uncertain of programs. This on top of the A340 orders. They should at least have made those 777s.

You could have said that about Finnair when they placed orders for the uncertain program in the MD-11. There is a reason why Finnair decided to stay with Airbus, one, they find their product to be at a better price than Boeing's products, and maybe they believe the 777 and 787 doesn't meet their needs, as odd as that may sound, it could be the case.

Not a good move, just giving the competition advantages, and when the delivery of the A350 slips to 2015-16, where does that leave them. A330s and A340s. The game keeps on changing, and you better have the best aircraft in any given category or you will get trampled.

Might not seem like a good move knowing what we know about the A350 at the moment, but if Airbus delivers a product on the A350 that not only meets the challenge of the 787, but provides an alternative to both the 787 and 777 then Finnair made a good decision based on their long term market strategy. Whatever the reason for the move, Finnair made it and the suits at the company have a better grasp of their market situation than we do.

That does not mean the A330 is not a good aircraft, certainly as an interim measure it is, but it has been superseded.

agreed.

[SN30952]

This on top of the A340 orders. They should at least have made those 777s.
Not a good move, just giving the competition advantages....

Finnair was established in 1923, and is thus one of the oldest still operating airlines in the world.
It started as Aero OY!
What with are they flying now?
And making money?
Their advantage is now, that they can see it coming. Their new aircraft will almost be paid when they arrive. Meanwhile they have time to see what to do with the old ones. What a nice prospect.

Finnair Fleet
Airbus A319-100 11
Airbus A320-200 12
Airbus A321-200 6
Airbus A340/Airbus A330 1(10 orders)
Airbus A350-XWB (11 orders)
Boeing 757-200 6 Charter and leisure flights only
McDonnell Douglas MD-11 7
Embraer 170-100STD/LR 10
Embraer 190-100STD/LR 1 (9 orders)

[teach]

This is the most ridiculous case of sour grapes I've seen on here in a very long time. I mean "Finnar gabling (sic) with its future" as a title for a thread about the company ordering new planes???

This on top of the A340 orders. They should at least have made those 777s.

Newsflash: when Finnair made their choice, they had a few more figures handy on such things as acquisition cost, crew training cost, and operating cost than you do.

Not a good move, just giving the competition advantages, and when the delivery of the A350 slips to 2015-16, where does that leave them.

I'm sure you said the same thing back when ANA decided to order 50 787s at a time when that plane existed only on a computerscreen too, right?

The game keeps on changing, and you better have the best aircraft in any given category or you will get trampled.

So if you don't always and from the very beginning operate the very newest and shiniest and best planes in the world (which obviously would be a Boeing), you will 'get trampled'? Ah, so THAT explains why Finnair has been getting 'trampled' all these years operating MD-11s when 'better' aircraft were available.

Seriously, if I want drama, I'll go to the theatre.

[achace]

I think RC20 missed the most important little item in the Finnair release.

They got at least the first 9 at the old A350 price, so maybe not so stupid!

Despite some views, Airbus will not go down the tube.

Perhaps the cleanest way out of their current problems would be to accept a one time write off of incurred costs on the A380, similar to the pragmatic approach at Boeing when they got caught with their pants down on the Tanker project. They bit the bullet and got on with life.

Cheers
Achace

[smokejumper]

I am confident that Finnair carefully considered all the variables when they made their selection and were certainly looking out for their own interests and future. They are very competent and thorough and I’m certain that Airbus gave them a very good price.

At a low enough price, even a Boeing 707-360B could be profitable! (Well, maybe the price would have to be in the negative numbers.) The higher fuel costs would be offset by the price.

I used to fly Finnair to Helsinki on both DC-10’s and MD-11’s and found Finnair operations to be smooth and pleasant. Good airline.

[RC20]

First of all, agreed with the reply on the title, I am a lousy speller, and screwed that up badly!

I will stick with what I said. Finnair does not like Boeing (thats obvious from their order pattern). That’s all well and fine if the products from Airbus and Boeing are fairly equal. JAL and BA for example stuck with 767s, and those are not considered as good as the A330. How not good of course depends on all sorts of factors, and fleet change costs are certainly one of those. Also, the 767 has s proven to be a good bird. In JALs case though, they simply will not buy Airbus, though generally the product is close enough for it to work for them.

Finnair appears to be in the same boat. And I suggest that in the current climate, it is not good. Almost no one is buying A340s, and some of those who did dropped them. Going to 777s have been some of Airbuses staunchest customers (and in the case of Air Canada, given a clean slate to start over, they dropped them entirely and went Boeing 777 and 787).

Nothing wrong with the A330 as an interim aircraft. It is about to be superseded though, and not by a single generation aircraft, as we have seen, its about a 4 generations aircraft improvement (noting that Airbus has re-designed the A350 that many times. The A340 could also be short term sollution.

And yes, not all aircraft fit all needs and there can be exceptions.

No matter how well run a company, they can drift into poor management, short sightedness and bad decision making. I have seen Pan-Am, Eastern, Western and TWA (amongst the more famous) all go down the tubes.

When you see that many decisions going against the grain, then you question the decisions and directions. I think Finnair is indeed gambling their future away. Maybe throwing it away is a more accurate term. The best deal in the world does not make up for higher fuel costs.

So, I stand by what I wrote.

[Berova]

At a low enough price, even a Boeing 707-360B could be profitable! (Well, maybe the price would have to be in the negative numbers.) The higher fuel costs would be offset by the price.

I can't speak to how well Finnair manages their business, but I can't agree with the above statement for this simple reason, acquisition cost makes up only a small portion of the total cost of the life of a plane.

The exact numbers were completely made up (I have no expertise on what the "real" numbers are), but I hope everyone gets the point: If the lifecycle cost of owning and operating an airliner is 50% fuel, 35% labor, 10% maintenance and refit, and 5% acquisition cost, then it would be very difficult if not next to impossible to be profitable in an environment of higher fuel prices. Obviously, if fuel prices return back to "cheap" levels, anything that actually can fly and take on paying passengers "can" be profitable, but even then, the question of whether you're competitive vis-a-vis others or not, is a whole another question.

[smokejumper]

At a low enough price, even a Boeing 707-360B could be profitable! (Well, maybe the price would have to be in the negative numbers.) The higher fuel costs would be offset by the price.

I can't speak to how well Finnair manages their business, but I can't agree with the above statement for this simple reason, acquisition cost makes up only a small portion of the total cost of the life of a plane.

The exact numbers were completely made up (I have no expertise on what the "real" numbers are), but I hope everyone gets the point: If the lifecycle cost of owning and operating an airliner is 50% fuel, 35% labor, 10% maintenance and refit, and 5% acquisition cost, then it would be very difficult if not next to impossible to be profitable in an environment of higher fuel prices. Obviously, if fuel prices return back to "cheap" levels, anything that actually can fly and take on paying passengers "can" be profitable, but even then, the question of whether you're competitive vis-a-vis others or not, is a whole another question.

My statement was a tongue-in-cheek argument. Taking the point further, suppose Boeing PAID an airline to acquire B707's (rather than the airline paying the manufacturer), then virtually any plane could be operated profitably, if the fee were high enough.

Life-cycle costs are the most important consideration in acquiring any product. If all costs are fairly considered (along with the time-value of money), the upfront costs frequently outweigh those in the distant future.

[Berova]

But in the "real" world, no one pays anyone to acquire jumbo jets. Heck, not even Airbus is "paying" the airliners for A380s even after accounting for the late penalties. Nevertheless, your point is taken.

If I understand what I read correctly on the last paragraph, then I think we're in agreement.

[smokejumper]

At a low enough price, even a Boeing 707-360B could be profitable! (Well, maybe the price would have to be in the negative numbers.) The higher fuel costs would be offset by the price.

I can't speak to how well Finnair manages their business, but I can't agree with the above statement for this simple reason, acquisition cost makes up only a small portion of the total cost of the life of a plane.

The exact numbers were completely made up (I have no expertise on what the "real" numbers are), but I hope everyone gets the point: If the lifecycle cost of owning and operating an airliner is 50% fuel, 35% labor, 10% maintenance and refit, and 5% acquisition cost, then it would be very difficult if not next to impossible to be profitable in an environment of higher fuel prices. Obviously, if fuel prices return back to "cheap" levels, anything that actually can fly and take on paying passengers "can" be profitable, but even then, the question of whether you're competitive vis-a-vis others or not, is a whole another question.

If Boeing were to offer the 707 at a negative price (i.e., pay the airline), then the life cycle costs would be attractive and the airline could make a profit. Since no airframe manufacturer in their right mind would do so, then the total costs of acquiring, operating and maintaining the plane come into play. Finnair must have considered these costs when they decided on the A350XWB. And... I'm sure that Airbus offered an attractive price; early orders get good prices so the manufacturer can show other airlines that they have a winner!

[RC20]

One of the Aeroflot moguls talked about the Russian aircraft (and I do not remember which one).

Basically he said, we couldn't make money with it if they gave it to us.

Something like the A340, it has 4 engines,, and while the rate of failure is low, they will loose an engine twice as often. Then add in 20% saving on fuel burn on each trip, and it adds up.

I am not saying there aren't some routes they can make it work on, but if the
situation changes, and they compete head to head, then they are automatically higher. Bad setup in today’s fast changing climate. You want the most efficnet you can get, either makes you more money, or makes sure you can compete.

Something like the 737 vs A320, somewhat different. At times the A320 has been more efficient (and two engine choices), now the 737 is, but maybe 3%.

Starting new, it would make sense to go with 737. With what you have, better to stay with the existing product. If they freshen the A320, then they likely will be even.

Cargo door is bigger on the A320, so for some that’s enough difference to make up for it.

So, if they are close, then price and other factors can offset, but if not, then pricing is not the major factor.

The 787 not only is lighter and more fuel efficient, if the composite promise holds up, then it’s a lot less maintenance. No one as far as I know has ever put composite panels on an aluminum frame. Boeing uses a lot of titanium to avoid that contact as its corrosive. It will still require more frequent inspections, and even more so as whatever isolation they use will have to be carefully monitored.

Frankly, the A350 is as much a gamble in its construction methods as the 787 is in its area. A good move for them to take the A330s. The rest, long term not good.