Premium #118 – 737 Usage in Pictures

We developed the AirInsight Index as a method to study airline operational performance. The tool has proven useful and generates intriguing looks at the operational performance among US carriers. Let's take a look at 737 use among US-based airlines. The AirInsight Index "ideal" is the zero line. If the curve goes above zero, the index indicates worsening performance. Curves below the zero line mean improving performance. The Index consists of a combination of data, including on-time arrivals and costs. The charts below are based on thousands of flights for each aircraft and are, in our view, statistically valid. First the 737-300. As the chart illustrates, the aircraft is aging. US Airways has retired its fleet. Southwest keeps on flying this aircraft and they are not doing especially well. Indeed, during the 2Q and 3Q of 2013, the worst performing tail numbers were all at over 50% in terms of late arrivals. We estimate that the airline is seeing rising operational losses from its 737-300 fleet. Next the 737-400, another aging aircraft. As the chart shows, the airlines are seeing performance degrade in an operational sense. The trend seems to suggest we can expect more of the same going forward. Alaska has 24 and US Airways has 25 of these aircraft in service. The opportunity to convert the -400s to P2F makes sense, and we expect this to provide a successful "second life" for the -400 once these carriers retire the aircraft. Next we start with the NG models, first the 737-700. Southwest is a big operator of this aircraft and should not be seeing such a rise in operational impact. We ascribe this rise in impact to merging operations with AirTran. AirTran shows up in the legend, but all their data has been added to Southwest in the chart. Interestingly we note Delta is also seeing a sharp rise in its Index numbers. United has seen some improvement while Alaska has shown its operational use of the -700 is the most effective among US carriers. Next we look at the 737-800. The stand out performance here is once again at Alaska. Delta was also doing very well for some time but as 2013 wore on, it jumped the zero line. The -800 is a new aircraft for Southwest and we are not surprised to see some settling in as it grapples with a much larger airplane than it has used to date. American and United saw some wild tandem swings with other operators as summer traffic delays kicked in. Next we have the 737-900. There were two airlines flying this aircraft in the period - Delta only recently started flying them. Once again we see Alaska doing well on an operational basis. United saw some gyrations, but may be getting its hands on the airplane and seeing steady improvements as the year wore on. In summary we think Alaska Airlines seems to be doing a good job on an operational basis; arguably the best among US-based 737 operators. Based on our calculations the airline is delivering better on-time arrivals, ensuring its costs closely approximate plan. The Bottom Line: Successful airlines execute well, flight after flight, day after day. Once operational delays creep in, schedules go awry, crews and equipment go out of sync and costs spiral while revenue stays fixed. The 737 Classics appear to be aging, and the impact is shown in our metrics. The -800 is a workhorse, but Alaska seems to be more consistent than other carriers. The -900 appears to be improving, and is becoming more effective, despite its transcon runway limitations that impact schedule reliability more than other models. Running an airline is somewhat akin to conducting an orchestra, and weaker players need to be identified.

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