Energy Watch

AirGuide Business, May 25, 2009

New York (AirGuideBusiness - Energy Watch) May 24, 2009

This is a tough time for U.S. regional airlines. The major carriers, upon whom regionals rely for business, have slashed domestic capacity--first to cope with last year's skyrocketing fuel prices, and then with the long and deep recession. The legacy airlines they once thought of as partners also have become more like clients in a buyer-vendor relationship. Delta Air Lines in particular is looking for wiggle room in long-term contracts to let it cut regional services or payments to the carriers, two of which--Mesa Air Group and SkyWest--are in court with Delta over contract disputes. SkyWest is also wrangling with Delta out of court on contract-based calculations for resetting of rates. From August 2008 to February 2009, U.S. regional airlines reduced their workforce by more than 6 percent, about 4,000 employees. Shares in Mesa Air Group, one of the largest players, are trading for pennies--literally--on the stock market and the company is in danger of being delisted. Republic Airways Holdings has felt compelled to invest in carriers to keep them from going out of business or into bankruptcy, so it can maintain or add them as clients for its jets. The demand for 50-seat aircraft has dropped precipitously, and the future of fuel costs makes it unlikely that it will recover significantly. The fall-off in business traffic has lowered, or even eliminated, the profitability of some regional jets. And the regionals are being pressured to cut costs at a time when shrinking fleets make unit-cost reductions especially challenging. With the use of predominantly long-term, fixed-fee contracts, the business model adopted by the regional carriers proved itself very resilient in the past 10 years, even when major carriers ran into financial trouble, says Jonathan Ornstein, Mesa Air Group's chairman and CEO. May 19, 2009

Air France KLM

Air France-KLM is blaming fuel pricing, its hedging policy and the economic downturn for a fourth-quarter operating loss of U574 million (USD 781 million) and a full-year net loss of U814 million against the previous year's U756 million profit, as revenues stayed flat at just under U24 billion for the year. Fuel hedging generated a negative impact amounting to U234 million. May 21, 2009

Airbus

Airbus is exploring aerodynamic enhancements throughout its product range to reduce fuel burn as the drop in oil prices has not eased the pressure on aircraft makers to improve aircraft efficiencies. A variety of aerodynamic and system improvements are being pursued to boost the efficiency of the A320 family, widebodies and the new A380, the aircraft maker says. For instance, although Airbus likes to tout the efficiency of the A380's wing, Tom Williams, executive vice president for programs, says the wing's twist may be changed slightly to garner tiny fuel-burn improvements. On a long-range aircraft such as the A380, trying to achieve a minute aerodynamic benefit is worthwhile, he says. Improvements to the ram air inlet and ducting also are being examined to reduce drag further. May 18, 2009

Boeing

Boeing said Thursday that its Dreamliner 787 was still on track for its first flight later this quarter, and the company stood by a previous full-year forecast. The company said deliveries of new planes, including the 787, set to begin next year would hurt margins even as they produce growth longer-term. The jetmaker told its investor meeting that it planned to keep revamping itself despite the pressures on its commercial and defense businesses. Chicago-based Boeing and rival Airbus are suffering as airlines and cargo operators defer plane deliveries amid weak demand in the economic recession. Boeing said its test flight program of the fuel-efficient 787 was on schedule to begin this quarter. The plane has been plagued by repeated production delays, and James Bell, the company's finance chief, also said on Thursday that there were "more requests for deferrals." Although the 787 and new 747-8 freighter will hurt margins initially, Bell said the two plane programs would generate "significant growth" in the longer term. May 22, 2009

Boeing

Boeing released its 2009 Environment Report, highlighting reductions during 2008 in its energy and water consumption, carbon dioxide emissions and hazardous waste at its facilities, and efforts to pioneer environmentally progressive technologies, including the world's first demonstration flights powered in part by sustainable biofuels. Boeing is continuing to improve the environmental performance of its products through technology advancements, and targets improving the fuel efficiency of each new generation of commercial airplane by at least 15 percent compared to the airplanes they replace. May 19, 2009

Boeing, Rolls-Royce, Qantas

Boeing planned to start the Rolls-Royce Trent 1000 engines yesterday on its first 787 test aircraft and is finalizing a deal with Qantas to avoid Dreamliner deferrals. ZA001, which spent last week completing its fuel tests along with an APU start, was due to leave the fuel dock Saturday to be moved to the flight line. ZA002, the second flight test aircraft, was rolled out of the paint hangar last week in ANA colors, although ANA's first 787 is slated to be ZA007. Boeing has done some 11th hour juggling of its 787 production positions to satisfy a Qantas demand for better delivery of its order for 65. The deal will ensure that Qantas low-cost subsidiary Jetstar will get 15 787-8s over 18 months from May next year to spearhead a major expansion program to Europe. Qantas Airways had threatened to defer some early Boeing 787s, but Jetstar now will get aircraft originally destined for some Chinese carriers and Northwest Airlines. Qantas originally contracted to get one a month for 65 months from August 2008 but Boeing's production problems have thrown that program into disarray. A Jetstar said the airline is planning for its first delivery next May. Qantas plans to use 15 787-8s for Jetstar's expansion and 50 787-9s to replace its own 767 and A330 fleets. May 18, 2009