Fleet Planning: Boeing and Airbus - Essay Example

Fleet Planning Modernization has led to the development and growth of air transport in the world. As a result, major aircraft manufacturers like Boeing and Airbus have continued to develop and produce new aircraft models. This availability of different aircraft models and types has led to the need for airlines to make vital decisions when it comes to the type and model of aircraft that each airline requires to meet their targets. By making these decisions, airlines undertake what is commonly regarded as fleet planning. Fleet planning is an important step in an airline’s planning. This is because it has to meet the demands of the airline. There are many influencing factors when it comes to fleet planning. These factors influence the decisions that the airline makes during its fleet planning procedure. One of these influencing factors is fleet commonality. Fleet commonality explains the number of similar aircrafts, aircrafts bought from the same manufacturer, or aircrafts belonging to the same family in a fleet. In this paper, fleet commonality which is an influencing factor will be looked at. Its benefits, examples of airlines ordering from the same manufacturer and their rationale, reasons why some airlines forego fleet commonality with examples of such airlines and their rationale, how benefits can be mitigated, reasons for an airline to order two different aircrafts from different manufacturers with similar specifications foregoing commonality benefits, opportunities and issues of partial mergers that airlines raise in fleet decisions in terms of commonality and finally answering the question whether joining an alliance offers similar benefits in terms of fleet acquisitions. Airbus reports on its website that airlines are reaping merits of the distinctive commonality that is from the use of the fly–by–wire technology used in Airbus’s aircrafts. The website goes on to state that this commonality does not only result from this technology but also from the use of operational processes and consistent cockpit layers (Airbus). This is just but one example. The questions that arise are: What are the main benefits of commonality between a new aircraft and the existing fleet? How significant are each of these benefits and how long lasting are they? According to Clark, fleet commonality avails many benefits to the manufacturer and to the operators of the produced aircrafts. Airlines are the operators of these aircrafts. They are able to save financially, decrease and comprehend the risks associated with the aircrafts. Saving financially is a benefit that fleet commonality provides. This is based on the fact that currently, jet fuel prices have sky rocketed. This has called upon effective planning by airlines to mitigate the negative consequences of these inflated prices. Financial saving is of utmost importance to airlines. Fleet commonality provides financial saving through provision of common spares for the fleet. The airline does not have to buy spares for aircraft repair from different aircraft manufacturers. This makes it easy to agree on prices and deals that are financially friendly to the airline. This is very significant because aircrafts are subject to damage and repairs are needed, without which the aircraft is rendered useless. It is time dependant because the aircraft model is bound to change with time as the manufactures alters it to suit demands. The time frame for this benefit could be up to three years after the time of delivery because a present aircraft may not have much in common with a model manufactured three years earlier (Clark, 95). Many airlines have specific ground support apparatus that are well-suited with a specific fleet of aircrafts. This means that the airline has invested in these ground support apparatus. Thus, fleet commonality provides the airline with the choice of investing in one common fleet of aircrafts which are operable with the ground support apparatus the airline has. This benefit is very significant as an airline cannot function without it. The airline does not have to keep buying new and different ground support apparatus for specific aircrafts. It lasts for as long as the airline operates the same fleet. Different aircrafts have different specifications. By having a common fleet, the airline benefits when it needs crew to operate the aircrafts as it does not have to train different crews for different aircrafts because they have one common fleet[Bel09]. If say a pilot changes from operating one aircraft to another, he or she does not have to undertake transition training. This saves time and costs which could have been used to train the pilot for that other type of aircraft. Flight commonality in the function and design of the deck avails various benefits such as Mixed Flight Flying where a group of pilots is allowed to fly different aircrafts types at the same period. It allows pilots to merge long and short haul flying. Thus, the number of pilots needed at a particular time is reduced. Also, Same Type Rating for aircrafts with similar certificates minimise the training needed by a pilot to briefings that take a few hours. Due to fluctuations in the global economy, these benefits are significant. The benefits last for as long as the crew are available to operate the fleet of aircraft in that family. Part of the consideration of an airline in fleet planning is the engineering costs for the fleet within its acquisition. Fleet commonality is not only found on the deck; it extends to the engine. Fleet commonality provides benefits by having aircrafts which have engines sharing technology in their makeup. This decreases the need to train engineers due to similarity in the engine system. Even the spares needed are decreased as many parts of the engine in that family of aircraft are similar. These benefits are so important because the engine functioning, advantages and similarities determine how successful an airline is in its delivery. They last for as long as the airline maintains the fleet of aircrafts. Many airlines value and appreciate the benefits of commonality within their fleet. Recent examples of such airlines include Shandong Airlines that is based in China as reported on BBC News website. The airline ordered for 50 Boeing 737 aircrafts. These aircrafts from Boeing are worth an estimated four billion US dollars. The reason for buying the aircrafts as the airline indicates is to provide for the ever increasing need for air travel in China. The Boeing 737 is an aircraft that is well suited for domestic travels with a one to two hundred seat capacity. The airline also cites its fuel efficiency which will easily allow the airline to save on fuel costs [BBC14]. The Norwegian Air Shuttle has all Boeing models in its fleet: from the 737–800, 737–300, to the 787–8. According to its website, it has been receiving aircrafts from Boeing totalling seventy three, from the year 2008 to date. The airline cites the environmental friendliness of the Boeing 737–800 model as a reason for its utilization[Nor14]. It notes that Boeing aircraft models especially the 737–800 model decrease carbon emissions per seat by twenty three percent when compared to the 737–300 model. This indicates that the airline utilises fleet commonality to make decisions pertaining to fleet acquisitions. It also notes that the aircraft decreases technical and maintenance costs. For long haul operations, Norwegian makes use of the Boeing 787–8 Dreamliner [Nor14]. Turkish airlines also ordered fifteen 737 MAX 8s. Boeing released a statement indicating that Turkish Airlines has placed orders for sixty five similar aircraft types. This indicates that Turkish Airlines has been utilising the Boeing model of aircrafts in its fleet. An official from Turkish airlines notes that this is in tandem with Turkish Airlines growth strategy which implies that fleet commonality provides the basis for an airline to grow. The official goes on to state that the order of Boeing 737 Max 8s aircrafts will avail the airline with enhanced flexibility throughout its ever growing network. The efficacy, comfort availed to passengers, and reliability of Boeing’s 737 MAX 8s are reasons for the investment of Turkish Airlines in the aircraft [Gaz14]. The stated examples express a common trend in many airlines globally. However, there are airlines which prefer to acquire different aircrafts. These airlines seem to assume benefits associated with fleet commonality for specific reasons, one major reason being so that they can capitalise on the advantages that each aircraft offers. An example of such an airline is ANA Holdings Incorporation which is Japan’s largest airline. According to Bloomberg, the airline ordered forty aircrafts from Boeing and thirty from Airbus. The models of the aircrafts bought from each manufacturer include A321neo and A320neo models from Airbus and 787 – 9, 777 – 9x and 777 – 300ER aircraft models from Boeing. The reason for buying these aircrafts was to expand their fleet and transform it. By expanding, it seems that they sought to take advantage of the different benefits offered by the aircraft models from Airbus and Boeing. The airline’s president stated that on acquiring the aircrafts, it would enable the airline to enhance fuel competency and help the airline achieve utmost flexibility in its operations [Blo14]. AMR Corporation which is the original company of American Eagle and American Airlines bought aircrafts from both Boeing and Airbus. The aircraft models it ordered include the Airbus A320 and Boeing 737. One of the reasons was to enable it become fuel efficient in its daily operations. This means it would achieve reductions in the costs it accrued. It also aimed at transitioning its current fleet with the new orders. The different aircrafts enables the airline to convey customer merits from the different aircraft sizes and types. The chief Commercial officer of the airline noted that diversification in their fleet was vital in delivering greater travel experiences to its customers along with comfort, and safety[Wor11]. There were financial benefits it would gain from the two deals. It would be rewarded with thirteen billion dollar US dollars worth of finances from commitments made by both manufacturers. This financing would be from lease deals. The lease deals would enable the airline to capitalize fully on balance sheet flexibility [Wor11]. By capitalizing on this flexibility, it would decrease risks that arise from the purchase. LATAM Airlines Group which is based in Latin America operates a fleet that has both Boeing and Airbus aircrafts. How does it mitigate the benefits it gains from the different aircraft types in its fleet? The airline mitigates these benefits for example through the use of a single operator to manage the engineering and maintenance records in one system, the single operator known as Flatirons Solutions provides LATAM Airlines group with a single flexible system for the Airbus and Boeing aircrafts in its mixed fleet [Bus14]. The Boeing’s 737 MAX and Airbus’s A320 is a family of aircrafts that have similar specifications. Both are single – aisle aircrafts. Both of these aircrafts offer new engines which enhance efficiency in fuel consumption. It is stated in Airbus’s website that the A320 new engine option will be even more fuel efficient [Air14] . The A320 has a maximum fuel capacity of twenty seven thousand two hundred litres. On the other hand, Boeing notes on its website that the 737 MAX decreases fuel use and can save airlines more than two hundred and fifteen million pounds of fuel annually[Boe14]. This is beneficial to an airline which orders both aircraft types. An airline would also choose to order both aircraft types and forego commonality in its fleet due to its customer preferences. Customers who use airlines have preferences. An aircraft type may be similar to another, but its comfort differs with that other. Hence, having different aircraft types with similar specifications allows airlines to meet its aims while serving its customers according to their preferences. This improves the passenger appeal that an airline gains from the use of two aircraft types. Both the A320 and the 737 MAX offer certain comfort specifications which each individual passenger finds appealing in accordance to his or her liking. Changes in the aviation industry have led to mergers. An example of a merger is that between Continental and United airlines as described by Fleming. One of the opportunities resulting from mergers is financial benefits. According to Fleming, airlines are able to achieve cost reductions. Cost reductions are achieved after they merge by combining assets that compliment what each airline has [Fle10]. This means that each airline is able to reduce the fleet in its possession. The airline may have to make decisions regarding its fleet once it is part of an alliance by ensuring commonality in its fleet [Han07]. This enables the attainment of efficiency in fleet operation. Airline fleets that are similar allow for airlines which merge to easily make decisions on how well each can reduce capacity of its fleet for the benefit of each airline. In a legal notice by the European Air Law Association, Strategier states that airline mergers are usually structured to attain rationalisation and fleet expansion. Strategier goes on to say that, airline merging permits airlines to exploit cost – side economies of scale and cost reductions by allowing joint buying and marketing. For fleet decisions, this means that there will be commonality in the airline fleet when there is joint buying [Str99]. This results in fleet integration [Fle10]. Cost reductions may be achieved after merging by doing away with various aircraft types from the fleet entity. Fleming indicates that Southwest Airlines initiated simplified fleets. Simplified fleets permit airlines to reduce costs by decreasing training periods and operations like maintenance. Through fleet commonality, the cost efficiencies of a merger are triggered through enhancing crew timetabling, training of pilots and rationalization of the inventory (Fleming, 9). Oxford Business Group reported that Turkish Airlines joined the Star Alliance Network which raised the number of its transfer passenger through code share agreements [Oxf09]. It also experienced more business class passenger figures. This raise in passenger numbers means that the airline would have to expand its fleet. Hence, it acquired more aircrafts to cater for the deficit that would arise [DIA00]. This shows that joining an alliance is beneficial to the airline in terms of fleet acquisition. In conclusion, it can be noted that fleet commonality offers many benefits, not only those benefits that are mentioned but many more in accordance with the airlines objectives. If an airline chooses to acquire different aircraft types, then it has to find means to mitigate the benefits of different aircrafts in its fleet. Joining an alliance is beneficial to fleet acquisition as it enables an airline to expand its fleet, cut costs, and raise the number of passengers it serves. 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