US Airways To Decide On Order By End Of April

cageyjames · Post by **cageyjames** » 14 Mar 2007, 16:05

US Airways to Decide on 60-Jet Order by End of April

US Airways Group Inc., restarting a push to retire aging jets from its fleet, will order 60 aircraft valued at almost $5 billion by the end of April.

The airline is evaluating proposals from Boeing Co. and Airbus SAS for narrow-body, single-aisle planes, Chief Financial Officer Derek Kerr said in an interview. Tempe, Arizona-based US Airways also will decide by April 30 on the future of a pending 2005 order for 20 Airbus A350 wide-body jets, Kerr said.

"The A350 today is not the plane we ordered,'' Kerr said yesterday, referring to delays and redesigns for the plane. "We need to know what the plane is going to cost and when it will be ready.''

So the delays to the A350 might cost Airbus a large narrowbody order (or at least cause the leadership of Airbus to lower their pants again). Frankly the largest Airbus customer could become a Boeing customer again and how would Leahy spin that?

DFW · Post by **DFW** » 14 Mar 2007, 16:18

Is the narrow body order tied to the wide body order? I didn't get that impression from the article.

cageyjames · Post by **cageyjames** » 14 Mar 2007, 17:22

I think the underlying message is that US will probably go for the 787 over the A350XWB as the 787 closer matches the size of aircraft US needs (they need a A330/B767 replacement, not a 777).

Now does that affect the narrowbody order? The big issue at US is that we need a larger transcon aircraft. The A321s can't make it across the country (BOS-SFO) all the time and we need 757s to Hawaii and Europe. Now does that mean that a 739ER might be ordered and if that is the case, plus Airbus dragging their feet on the A350, and in turn 73G/738s are ordered as well.

I know right now US is VERY unhappy with A321 performance. I suspect we'll start seeing them pushed to North/South routes, rather than transcon in the next few months. So that leaves A320s as transcon or the older 757s we have.

TexasGuy · Post by **TexasGuy** » 14 Mar 2007, 17:44

US has known from the beginning the A321 was a bad plane to cross the continent with, yet they pulled the 757 and put the 321's on the transcon routes anyway. Yet another series in bad managerial mistakes. They need to start listening to thier people. The B757 is more than capable of doing those runs with fuel to spare. I knew the day would come when airlines start to regret they didnt get more B757's

As far as the narrow bodies being tied to the widebody orders, i dontbuy it.

US going to B787 is a possibility,but i dont see it happening. They will not get the deep discounts from Boeing that Airbus will give because the B787 is practically selling itself.

cageyjames · Post by **cageyjames** » 14 Mar 2007, 17:52

TexasGuy wrote:US has known from the beginning the A321 was a bad plane to cross the continent with, yet they pulled the 757 and put the 321's on the transcon routes anyway.

You'll love this, an internal memo said that this is a problem, but do they remove them from transcon? Of course not...

Yet another series in bad managerial mistakes. They need to start listening to thier people.

See above!

The B757 is more than capable of doing those runs with fuel to spare. I knew the day would come when airlines start to regret they didnt get more B757's

Too late now and with FedEx trying to get more......

As far as the narrow bodies being tied to the widebody orders, i dontbuy it.

Fair enough, I suspect there would be a deal to be made to buy all one company. I dont' see them splitting the order for narrowbody (729ER and A320).

US going to B787 is a possibility,but i dont see it happening. They will not get the deep discounts from Boeing that Airbus will give because the B787 is practically selling itself.

True, but the A350XWB is a much larger aircraft than US needs. The 787 is closer to the original specs that US signed up for, plus it is cheaper (list price) than the A350XWB.

That said if I was a betting man, I'd wager that US will get a deal they can't refuse on the Airbus' and the largest user of Airbus will start phasing out all their Boeing narrowbodies.

Then again there is the A321 transcon problem.....

smokejumper · Post by **smokejumper** » 14 Mar 2007, 18:40

It appears tha the B-757 is like the beautiful girl that you did not ask to marrry because you were not ready at the time. Later, after she marrried someone else, you realized what you lost and you can't get her back!

USAir's equipment selection might be a similar situation. One supplier is offering a plane for delivery in 4 or so years at a price that might be higher than another supplier. The second supplier's price may be VERY attractive, but delivery and performance are uncertain.

Like Pandora's Box, you might not like what's in there.

TexasGuy · Post by **TexasGuy** » 14 Mar 2007, 18:51

smokejumper wrote:It appears tha the B-757 is like the beautiful girl that you did not ask to marrry because you were not ready at the time. Later, after she marrried someone else, you realized what you lost and you can't get her back!

USAir's equipment selection might be a similar situation. One supplier is offering a plane for delivery in 4 or so years at a price that might be higher than another supplier. The second supplier's price may be VERY attractive, but delivery and performance are uncertain.

Like Pandora's Box, you might not like what's in there.

US Airways had B757 and 767's on order and then Chairman Steven Wolf cancelled the order siting the Airbus craft were better to invest in. That action caused the rift between Boeing and US, and US had to pay some heavy penalties, if i remember correctly.
Now, US Airways as well as other airlines cant get a hold of used B757's fast enough. The B757 is a beautiful and well performing bird. The A321 is a nice bird but it is not good for what US is trying to do with them. The plane wasnt built for crossing America. It doesnt have the versatility of the B757.

DFW · Post by **DFW** » 14 Mar 2007, 19:36

I wonder if Boeing would consider restarting the 757 line. What number of orders would be the breakeven point? I would guess no more than 50 orders.

smokejumper · Post by **smokejumper** » 14 Mar 2007, 20:52

DFW wrote:I wonder if Boeing would consider restarting the 757 line. What number of orders would be the breakeven point? I would guess no more than 50 orders.

I'd guess that the breakeven point would be closer to 300 units or more. Once you shut down the production line and disrupt the supplier chain, it costs a fortune to restart a line and hire and train new workers (many have retired, others found new jobs and others are re-assigned.

Lockheed restarted the C-5 production line 25 years ago (C-5B) and just starting it up again cost a fortune. Full production of the C-5A had ended (although wing and wing box production continued to strengthen them) and re-starting full production was expensive.

I am certain that Boeing would rather sell the B737-900 or a new version of the B787 than re-open the 757 line. Although, if demand and orders were high enough, I'm sure they would look at it.

cageyjames · Post by **cageyjames** » 14 Mar 2007, 21:40

I think they are building 737s on the 757 line right now so do you really want to disrupt 737 production for a couple 757s a year?. I'm sure everything has been destroyed so they'd pretty much have to start from scratch. Probably just as well wait for the 737NG.

cageyjames · Post by **cageyjames** » 15 Mar 2007, 00:16

Bloomberg added to the article:

US Airways must make a decision on the 787 soon or risk losing slots in Boeing's production line.

"We have delivery positions they have promised to us for now,'' Kerr said. "If we don't make a decision soon, they will give those to someone else.''

The jets would replace at least some of the carrier's nine Airbus A330s, 10 Boeing 767s or 43 Boeing 757-200s.

So they have pretty much ordered the 787 and are awaiting a response from Airbus before committing. Interesting.

smokejumper · Post by **smokejumper** » 15 Mar 2007, 00:39

Cageyjames:

Texasguy wrote:
"US Airways had B757 and 767's on order and then Chairman Steven Wolf cancelled the order siting the Airbus craft were better to invest in. That action caused the rift between Boeing and US, and US had to pay some heavy penalties, if i remember correctly."

I seem to remember the same thing and can not recall the reason for the switch. Obviously, Airbus' price had to be attractive enough to overcome the penalties.

Can you tell us the reason for cancelling the contract with Boeing?

TexasGuy · Post by **TexasGuy** » 15 Mar 2007, 01:09

Steven Wolf was basically in Airbus' pocket. Airbus was offering him planes at way discounted prices. Im sure he got some sort of reward for switching to Airbus over Boeing.

US was also looking at the B777. At the time they had applied to fly to NRT from PIT. He went with the A330 over the B777 due to the discount. To convince everyone it was the best thing, he said the B777 was "too much plane for them". When the A330 didnt perform as well as planned, he later admitted they had made a mistake. The A330 is a nice plane but isnt as versatile as the B777, meaning it didnt have the lift to do Asia. See a pattern here?

cageyjames · Post by **cageyjames** » 15 Mar 2007, 03:07

smokejumper wrote:Can you tell us the reason for cancelling the contract with Boeing?

I'm ex-HP so I'm not really tuned to his thinking at the time. The culture here in PHL is that people either love him or hate him. His product was touch notch where the new US is really a LCC. Some resent that so they look to him as the high point of US.

Wolf was about negotiating and Airbus was willing to do anything for him and he liked that. Wolf had a cult of personality around him so anyone who help inflate that ego got the deal.

TexasGuy · Post by **TexasGuy** » 15 Mar 2007, 03:18

The product Wolf brought in was top scale and commanded top fares and guess what, they got them. I have paid them several times in the past. The product US has now is just a bit above garbage, sorry.

My problem with Wolf wasnt his product, it was his tactics with employees. He treated them like a liability and not an asset. Not a good way to run a business.

In law school, we studied airline mergers and US was at the top of the list as to not go about merging companies. I kinda kept up with the airlines happenings ever since school.

David747 · Post by **David747** » 15 Mar 2007, 03:34

cageyjames wrote:So the delays to the A350 might cost Airbus a large narrowbody order (or at least cause the leadership of Airbus to lower their pants again). Frankly the largest Airbus customer could become a Boeing customer again and how would Leahy spin that?

I think Airbus is going to be hurt by the delay in the A350, but what I found interesting in the article was what Mr. Kerr said, if the A350 as it currently is, is not the plane they want, then it seems to me that US Airways would rather stick with the A330+20, I could be wrong, but that is what I feel Mr. Kerr was saying. Second, could this be another way of putting pressure on Airbus to come up with a final configuration for the A350 by the summer, Qatar Airways is putting pressure on Airbus as well on the matter. As far as the narrowbody order is concerned, if US Airways is looking to phase out their fleet of 757's, wouldn't the 737-900ER be a logical choice, from what I have read, and anyone can correct me, is that the 737-900ER offers the same sitting capacity a 757-200 does. Again, that is from what I have read, I know little of the 757.

Second, Cagey, lets hope that your bosses are spared the sight of an Airbus executive dropping their pants to make a sale again. I believe that tactic is the most disturbing way to make a sale to a customer. Wow, I'm having a nightmare just writing about it :cry2:

smokejumper · Post by **smokejumper** » 15 Mar 2007, 08:10

David747 wrote:
cageyjames wrote:So the delays to the A350 might cost Airbus a large narrowbody order (or at least cause the leadership of Airbus to lower their pants again). Frankly the largest Airbus customer could become a Boeing customer again and how would Leahy spin that?
I think Airbus is going to be hurt by the delay in the A350, but what I found interesting in the article was what Mr. Kerr said, if the A350 as it currently is, is not the plane they want, then it seems to me that US Airways would rather stick with the A330+20, I could be wrong, but that is what I feel Mr. Kerr was saying. Second, could this be another way of putting pressure on Airbus to come up with a final configuration for the A350 by the summer, Qatar Airways is putting pressure on Airbus as well on the matter. As far as the narrowbody order is concerned, if US Airways is looking to phase out their fleet of 757's, wouldn't the 737-900ER be a logical choice, from what I have read, and anyone can correct me, is that the 737-900ER offers the same sitting capacity a 757-200 does. Again, that is from what I have read, I know little of the 757.
Second, Cagey, lets hope that your bosses are spared the sight of an Airbus executive dropping their pants to make a sale again. I believe that tactic is the most disturbing way to make a sale to a customer. Wow, I'm having a nightmare just writing about it :cry2:

The 757 was a more capable plane than the 737-900 is. The 2 class passenger capacity of the 737-900 is about 180 pax and the range is 3,000-3,200 nautical miles (nm). The 757-200 carries 200 passengers in a 2 class layout for about 3,900 nm while the 757-300 carries 243 passengers (2 class) for 3,395 nm. These figures are from Boeing's website.

The 757 is used in trans-Atlantic service due to its range; however, the 737-700ER, which is based on the Boeing Business Jet and is being flown by ANA, seats 48 passengers in a premium configuration and flys 5,510 nm. Such service can open up very thin markets over large distances.

chunk · Post by **chunk** » 15 Mar 2007, 09:06

Where do you begin in this thread? Well...

Is the 350 too much or too little plane? No concensus it seems. What is clear is that one poster suggests a 777 is more flexible than an A330 in its use? How? Cos it has more seats? ANother says the 350 is too much plane? And a T7 isn't?

Also - as part of US exit from banruptcy under that scam of a law in the US, did Airbus not stump up some of the exit financing? I am sure they did.....i find it unlikely that there weren't some serious provisos in that contract.

Besides....the US airline industry could be in for another jolt soon. According to most analysts the US economy is heading towards recession again....that cannot be good for all these orders in any case. If I was airbus and boeing I would start gathering deposits pronto as i have a feeling there could be some defaulting soon........

smokejumper · Post by **smokejumper** » 15 Mar 2007, 13:08

Deposits are collected at signing and are rarely refunded unless the manufacturer defaults on the contract.

As for the US bankrupcy laws, they are intended to give a company (or individual) a chance to start over. These laws stemmed from the British practice of jailing debtors (debtor's prison) until they (or family members) paid debts that they could not pay.

cageyjames · Post by **cageyjames** » 15 Mar 2007, 14:51

chunk wrote:Is the 350 too much or too little plane? No concensus it seems. What is clear is that one poster suggests a 777 is more flexible than an A330 in its use? How? Cos it has more seats? ANother says the 350 is too much plane? And a T7 isn't?

I say the A332 is the best plane for US, that said the 787 has much better economics so one has to look at it (and the A350 that we ordered). I do think the A350XWB is too much plane for US, but the 777 is even much more so.

Also - as part of US exit from banruptcy under that scam of a law in the US, did Airbus not stump up some of the exit financing? I am sure they did.....i find it unlikely that there weren't some serious provisos in that contract.

US paid back Airbus early and can do what we please. Bankruptcy may be a "scam" but it didn't seem to bother Airbus if they could sell 20 A350s. Now the A350 that was part of that deal was a totally different plane than the one we see today and all those orders from before need to be resigned.

Besides....the US airline industry could be in for another jolt soon. According to most analysts the US economy is heading towards recession again....that cannot be good for all these orders in any case. If I was airbus and boeing I would start gathering deposits pronto as i have a feeling there could be some defaulting soon........

I'm not even sure how to respond to this.

Trust me, US has the money to pay for these planes and we need them for growth and improved economics over the old 733s and 734s that we are currently flying.