Insight: Friday 20 September 2019: The NMA can’t come too soon!

News Boeing’s proposed new middle of market aircraft is aimed as a replacement for the aging Boeing 757 and 767-300ER aircraft. AirInsight’s data models show clearly that the 767-300ER is becoming increasingly costly, as shown in the following snapshot of data from the first three months of 2019 for US carriers. The 767-300ER, labeled 763, has significantly higher costs than other wide-body aircraft in service on a hourly cost per passenger basis. The question we examined is whether the 767-300ER can remain in service long-enough for the Boeing NMA to replace it, or whether other alternatives may be needed before that aircraft arrives. Analysis The following chart shows operating costs per seat per hour and average stage length operated by aircraft types over a ten year period, for US airlines. The snapshot of this interactive model for the first three months of 2019 is shown below. Data for this chart come from Department of Transportation databases for US carriers. For this chart we use a combination of data from the Form 41 (Table 5.2) economic database and the T2 database that covers traffic and capacity statistics by aircraft type. Combining data series from each by airline and aircraft type, we can examine some interesting relationships and trends. Operating cost data from the airline financial database P5.2 includes Pilots, other flight personnel, trainees and instructors, personnel expenses, professional and technical fees and expenses, aircraft interchange charges, aircraft fuel, aircraft oil, rentals, other supplies, insurance purchased, employee benefits and pensions, injuries, loss and damage, payroll and other taxes, and other taxes to yield total flying operations costs. Data from the T2 database, US air carrier airport activity statistics were used to compute the average stage length per flight. To form the overall model, data from the two databases were incorporated into the analytic model. Our data models cover a ten year period from 2010-1Q19, and the model enables us to interactively track performance over that period. For this analysis, we have compared the ten year history of the 767-300ER and the 777-300ER, which tracks performance over time on the same chart. Using the online interactive model, clicking on the data point or moving the years on the lower axis provides easy access to historical trends. Right clicking on the data point provides additional information and values. The chart below shows historical trends. The 767 shows costs rising and stage length declining, indicating that the age of the aircraft may be problematic from a maintenance standpoint for airlines. By contrast, the 777-300ER appears to be optimizing its costs, which are dropping slightly, with gradually increasing stage lengths. Examining the historical patterns by aircraft can illustrate which aircraft are experiencing the cost and utilization trends typically associated with an aging, or a new fleet. The 767-300ER is a prime candidate for replacement by Boeing’s proposed NMA. However, with the delays in bringing the NMA to market, and cost increases associated with maintaining an aging fleet, will the NMA arrive soon enough? The patterns that we see for the 763 have been consistent across a number of airlines. We added airline to our interactive model to determine if trends in cost and stage length utilization varied dramatically by airline. Examining cost levels for American, Delta, and United all show similar results -- growing costs and decreasing stage lengths. Given that the NMA will not be available until 2025 at the earliest, can these 767s be cost-effective enough in airline fleets to profitably remain in service until then, or will alternative lift be needed. Insight After examining the data, our conclusion is that should trends continue, the NMA will be too late to replace a large number of 767 aircraft still being operated by US carriers. Airlines may be forced to retire the 767-300ER before 2025, and the alternative of the A330neo models look attractive as potential replacements for similar routes. Our models are updated automatically as additional data becomes available, and with Delta beginning A330neo service this year, it will be interesting to compare these aircraft when additional data are incorporated into the DoT databases. For now, our conclusion is that if trends continue, the 767-300ER will become economically obsolete prior to the arrival of the Boeing NMA, and that retirements will need to occur prior to the arrival of the new aircraft. Maintenance cost increases to keep the fleet flying, plus the costs of additional delays, may mandate airlines to migrate to the A330neo. Might the A330-800 be the right airplane for American, United, and Delta on trans-Atlantic markets? Given current trends, that may be the case. Note: Access to this and other data models is available on AirInsight.com under Analytics. Should you be interested in a subscription, please contact us at +1.858.536.9900 or email.

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