News for Friday, February 05, 2010

@...Steven Udvar-Hazy, co-founder of International Lease Finance Corporation (ILFC) and one of the most powerful voices in commercial aviation, retired on 5 February after more than 27 years in the leasing business. ILFC President John Plueger will succeed Udvar-Hazy as acting CEO. The ILFC Board is considering what to do on a long-term basis. His departure from ILFC has been expected since the mega-lessor was plunged into a financial morass because of the massive scandal at its parent, AIG. When the US government bailed out AIG and assumed control of 80% of the stock, ILFC effectively became a ward of the state, relying on federal funds to meet debt obligations. Financing airplanes fell to reliance on the ECA for Airbus and ExIm for Boeing airplanes. The ECA imposed humiliating conditions that segregated lease payments and maintenance reserves into restricted accounts. Hazy tried to put together a deal that would enable him to purchase about 10% of the ILFC portfolio. The long effort came to naught late last year when his bid was rejected. "On behalf of AIG, I would like to thank Steve for his tireless service to ILFC," said Robert Benmosche, AIG President and Chief Executive Officer. "We are grateful for the work he has done to continue ILFC's leadership in the industry." In a press release, IFLC said Douglas Steenland, former president and chief executive officer of Northwest Airlines, who became ILFC's non-executive chairman in December, will continue as non-executive chairman. Steenland joined the ILFC board in September and is a member of the AIG board.

@...Japan Airlines (JAL) is suspending 12 domestic routes and slashing flight frequency and capacity on three international routes, as it undergoes a restructuring process. From April, the struggling carrier will progressively suspend the domestic routes as it closes its offices in Shizuoka, Kobe and Matsumoto. It will also cut flight frequency on nine other domestic routes, says JAL. Four of these are operated by its subsidiary Japan Air Commuter. In the international segment, the airline plans to decrease the number of flights on the Tokyo Narita-Shanghai and Tokyo Narita-Sao Paulo (via New York) routes from 28 March. The Shanghai service will be operated 21 times weekly, down from 28, while the Sao Paulo service will be operated twice a week, instead of thrice. JAL will also downsize the aircraft operated on its Tokyo Narita-Guam route to Boeing 767-300ER aircraft from Boeing 747-400 aircraft, from 28 March. The carrier will, however, increase flights on its services from Tokyo-Narita to Ho Chi Minh, Hanoi and Sapporo. The Sapporo service will receive the biggest boost, and will be operated 21 times a week, up from 14 currently. On the domestic front, JAL will increase flights on nine routes progressively from 1 April. For cargo services, the carrier will suspend its service to Ho Chi Minh, and cut flight frequencies and capacity on its services to Singapore, Bangkok and Hong Kong among other changes. JAL filed for bankruptcy protection on 19 January, and plans to cut unprofitable routes and slash its workforce numbers as part of a restructuring process. "In formulating the JAL reorganisation plan with a sharp focus on improving profitability, JAL will closely evaluate market situations and effectively capitalise on the upcoming expansion of airports in Tokyo," says the carrier.

@...Amid increasing industry speculation about the imminent launch of re-engined narrowbodies, Flightglobal has learned how Boeing could engineer the tricky installation of an advanced turbofan under the wing of the 737. To provide additional clearance under the wing to accommodate a larger engine nacelle, Boeing is examining the feasibility of raising the 737's nose landing gear, say industry sources. According to those familiar with the plan, an extension of the nose landing gear of 15cm (6in) would yield an estimated 5cm of additional diameter in the fan. One internal industry assessment of the feasibility of a re-engined 737 seen by Flightglobal says that the aircraft can currently handle a 1.6m fan without any modification. A new engine with a 1.6m fan would yield an approximate 12% improvement in specific fuel consumption, before any other airframe modifications are incorporated says the assessment. An engine with a 1.7m fan combined with a "modest increase" in landing gear height would yield fuel burn similar to a re-engined Airbus A320. Any increase in the length of the nosegear is likely to require a larger wheel well, and by extension would reduce space available in the aircraft's forward avionics bay. It was once believed that extending the 737's main landing gear would provide the required clearance. However, increasing the size of the main landing gear would yield a significant weight increase and complicate stowage. Boeing Commercial Airplanes vice-president marketing Randy Tinseth recently confirmed to Flightglobal that Boeing had competed a successful technical feasibility study into the installation of a new engine on the 737, but that the modification would require "a lot of work". The leading candidates for the re-engining are CFM International's Leap-X advanced turbofan and a possible offering from International Aero Engines that is likely to be based on partner Pratt & Whitney's geared turbofan. P&W's commercial engines senior vice-president sales Bob Keady says that IAE is the "preferred route to market" for new engine offerings for either Airbus or Boeing single-aisle aircraft, but adds that P&W has been "doing some work" with both airframers about installing the GTF on their existing aircraft. "We think we can have an effective installation of the GTF on the 737," he says.

@...Allegiant Air has emerged as one of the most intriguing stories in the U.S. aviation industry, a small leisure-oriented niche carrier that has become the USA's most-consistently profitable carrier over the past few years. Despite Allegiant's success, however, the airline lacks the profile enjoyed by other big U.S. airlines. Last week, I was able to arrange a brief sit-down with Allegiant CEO Maurice Gallagher while I was in Las Vegas. Gallagher agreed (on very short notice) to take questions from our Today in the Sky readers. Read on for the fourth installment from that Q&A, which features questions derived solely from our readers' comments and e-mails. Be sure to check back tomorrow for the fifth and final installment. Q&A Part I: Fliers may not like them, but will they pay them? Q&A Part II: A la carte fees have been a 'revelation' for U.S. airline industry Q&A Part III: 'We're not ruling anything out' on Orlando airport switch; AirTran competition Ben Mutzabaugh: One reader submitted a question that reads: "Allegiant has stated they are interested in [Boeing] 757s for Hawaii service. … How's that coming along?" Is there any truth to that ... or anything you can add? Maurice Gallagher: Hawaii is an interesting market for us. Unfortunately, ... we have to have a different airplane to do it. We couldn't do Hawaii with the existing fleet. So, we'd have to add something to our fleet. But, all in good time. I wouldn't rule Hawaii out, but we have no instant plan to do it. Mutzabaugh: So, that's something that maybe has come up for discussion as your team looks for new opportunities? Gallagher: We talk a lot about a lot of different things. Mutzabaugh: One reader writes in with this question: "Any timeline for changing fleet from MD-80s to another fleet type, (perhaps to a Boeing 737 or Airbus A319)?" Gallagher: No timeline. We'll be with the MD-80 for many, many years. It's a great airplane; It's very reasonably priced. Part of our model is that we deal with the low-cost assets, since we don't fly our airplanes a lot. Our average utilization is 6, 6-1/2 hours a day compared to – I think – 11 hours for Southwest [or] maybe as many as 12 for JetBlue. When you think about that type of utilization, you're flying from 6 in the morning to 10 at night, solid. We have days – like Tuesdays – where we hardly fly. We get our utilization on our peak days, when the leisure customer wants to move. Will we eventually get another airplane type to replace the MD-80 and evolve out of it? Yes. But we have no rush. We'll deal with it in time … and when it's appropriate. Mutzabaugh: Tell me a little about maintenance costs for your MD-80 fleet. Gallagher: The ownership cost is certainly low. It's a more mature airplane regarding maintenance, so maintenance might be less expensive with a newer airplane. But the fuel burn ... We've been flying a 90% load factor now for two, three years. And [with] those 135 people that fill up that 150-seat airplane at 90%, our fuel burn per customer went from over 20 gallons per customer down to 17.5 [to] 18 [compared to when our flights flew with about 15 fewer passengers at a high-70% to low-80% load factor]. If you go back historically and look at Southwest with their brand new fleet of 737s, their fuel-burn per customer – because they flew such a low load factor in the 70s – was 17 gallons per customer. So yes, [the MD-80] is less efficient in an absolute sense, but – depending on how you use it and what you use it for – you can get efficiencies that other people haven't historically gotten out of the [airplane]. Mutzabaugh: And Allegiant is a bit different in that it owns its aircraft ... Gallagher: We own our own airplanes, we don't lease. We feel that's a much better financial arrangement. As a result, long-term, we can amortize that ownership cost better than one does through a leasing environment.

@... Frontier Airlines announced this afternoon that it will add seven nonstop routes from Denver. The new routes: Branson, Mo..; Grand Rapids, Mich.; Green Bay, Wis.; Long Beach, Calif.; Madison, Wis.; Newport News, Va.; and Santa Barbara, Calif. In addition, Frontier will add a third daily frequency to New York LaGuardia on April 19 and a fifth daily frequency during the peak summer travel period to Portland (Ore.), San Francisco and Seattle on May 14. And Frontier says it will convert its seasonal Fort Myers service to year-round service. "This is a very exciting day for Frontier Airlines as we continue to show our strong commitment to Denver," Daniel Shurz, Frontier's vice president of planning and strategy, says in a press release. "With the delivery of three new Airbus A320s and additional E190s this spring we are able to expand our service to new and underserved markets out of Denver, as well as increase frequencies in several of our popular markets." But the growth comes with a very some significant cut. The Denver Post writes "Lynx Aviation, the regional turboprop carrier that feeds Frontier Airlines' Denver hub, will cease to exist by mid-September. Lynx employees were told today about parent company Republic Airways' plans to replace the turboprops with small jets. The jets will be flown by Republic pilots." Air Transport Intelligence (ATI) writes that's part of an effort by Frontier parent Republic to phase out Lynx's Q-400 turboprops. The change will result in the furlough of 80 of Lynx's 120 pilots and 70 of its 110 flight attendants, according to the Post. "Unfortunately, after extensive analysis and months of efforts to grow the business, we concluded we could not efficiently operate a fleet of 11 Q400 aircraft," Republic COO Wayne Heller is quoted as saying by ATI. ATI adds "Republic (today) said three Q400s are scheduled to exit the Lynx fleet effective 6 April, followed by three additional aircraft on 19 April. The phase-out will continue through mid-September." The Post says "service will continue to nine of the 11 current Lynx destinations. Operations to Fargo, N.D., and Tulsa, Okla., will stop April 5."

@...Republic Airways Holdings Inc. (NASDAQ: RJET - News) today announced it will transition the regional service operated by Lynx Aviation Bombardier Q400 turboprop aircraft to Embraer 170 and 190 jet service operated by Republic Airlines. The Company will remove three Q400 turboprop aircraft from service effective April 6. Another three aircraft will be removed from service on April 19. In addition, the Company will terminate the leases of seven smaller regional jets and return them to the lessor. The transition to jet service will improve the Company’s ability to operate in highly contested markets in which the Q400 operates at a competitive disadvantage to jet service offered by competitors. The changeover, including the decision to terminate the leases on its seven remaining CRJ200 aircraft operated by Chautauqua, also will support the Company’s ongoing program to simplify and optimize its fleet resources across its entire network, improving aircraft utilization and cost efficiencies company-wide. Republic expects operations at Lynx to be phased out by mid-September. Service will continue to all current Lynx destinations with the exception of Fargo, N.D. and Tulsa, Okla., where the Company will cease operations on April 5. These changes will result in the reduction in April of approximately 175 positions at Lynx, including flight crews, operations, customer service and support personnel. Most employees affected by this announcement will have the opportunity to continue with either Republic or Frontier in similar capacities. Employees who choose not to accept a position within the Company and who work through their release date will be provided severance. “Lynx employees have done an outstanding job of providing service to a number of regional communities and have provided important passenger connections to Frontier’s network,” said Republic Executive Vice President and Chief Operating Officer Wayne Heller. “Unfortunately, after extensive analysis and months of efforts to grow the business, we concluded we could not efficiently operate a fleet of 11 Q400 aircraft. Converting service from the Q400 fleet to jet service allows us to better utilize our existing aircraft resources and lower our cost of operating and maintaining multiple fleet types, while providing our customers with outstanding jet service.” Heller concluded, “These changes will better position the Company to sustain the kind of growth we’ve already begun and that our employees and customers expect as we continue our work to rebuild and expand the Frontier and Midwest networks.” Republic has recently announced Frontier/Midwest service additions between: * Oklahoma City, Okla., and Orlando and Tampa, Fla.; * Denver and Fairbanks, Alaska; Jackson Hole, Wyo.; New Orleans, La. and Louisville, Ky., as well as resumption of seasonal service to Anchorage, Alaska * Milwaukee, Wis., and St. Louis, Mo., San Francisco and Raleigh/Durham, N.C. * Omaha, Neb., and Orlando and Tampa, Fla. In addition, new nonstop service will soon be available for purchase from Denver to: * Branson, Mo. * Green Bay and Madison, Wis. * Newport News, Va. * Grand Rapids, Mich. * Santa Barbara and Long Beach, Calif. Additional seasonal frequencies also will be offered: * A third round trip from Denver to New York’s LaGuardia International Airport and * An added round trip from Denver to San Francisco; Portland, Ore.; and Seattle/Tacoma, bringing the total daily round trips to those destinations to five. Frontier’s Denver - Fort Myers, Fla. route will be upgraded from seasonal to year-round service.

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