Airbus COO John Leahy noted that compared to a Boeing 777-200ER, the A340-300 burns 5% less fuel, with a few less seats this means it has equal fuel burn per seat (aviationnews-online.com, 04-Dec-2013). He also stated the maintenance cost on four engines is less than the maintenance cost on two engines for the 777. While Mr Leahy conceded that the A340-600 burns more fuel than the GE90, he noted that fuel burn is lower than the 747-400, adding that the engine maintenance costs are the same thanks to Rolls-Royce's four for two price promise (it has committed to a four engine maintenance cost that is equal to the maintenance cost of two) and the airframe maintenance costs are also equal. He also noted that the A340 is available short-term as a replacement of other ageing aircraft as well as providing interim lift before the A350 XWB becomes available. He said that aircraft type is also ideal for charter/niche operators with high capacity requirements as well as long-haul start-ups.
A340-300 burns 5% less fuel than 777-200ER: Airbus
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The existing Airbus narrowbodies operated by Virgin America will remain in the combined airline’s fleet for the foreseeable future. As a result, those aircraft are being reconfigured to offer standard interiors, including Alaska’s first class seat.
Similarly to Virgin America prior to the merger, Alaska has decided that a lie flat seat offering does not fit into its strategy in the contested US transcontinental market. In fact, choosing not to develop a lie flat product could put Alaska in a more favourable position when an (inevitable) economic down cycle occurs.
Despite the more favourable synergy estimates, Alaska will face some margin pressure due to Virgin America’s overall lower margin business. However, even though its margins are likely to drop in 2017, Alaska is stressing that its pretax margin performance will best the industry average.
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ULCCs Frontier and Spirit hold orders for more than 150 Airbus narrowbodies to support the proliferation of the model across the US. Frontier’s fleet is projected to grow by 83% from YE2016 to 2021 – from 66 to 121 aircraft. Spirit’s current fleet forecast shows 46% growth from YE2017 to 2021 – from 108 aircraft to 158 aircraft.
Each airline is taking nuanced approaches to financial management of its fleet. Spirit has opted to purchase some aircraft off lease in order to enlarge its number of owned aircraft, while Frontier, which is just embarking on the process of accessing public markets, will use operating leases as its primary financing vehicle.
The planned growth by each airline reflects conclusions reached by Frontier and Spirit about the opportunities for the ULCC model in the US, despite changing market dynamics – namely a push by large US global network airlines to create pricing segments to compete more effectively with ULCCs. Despite the focus on price matching by larger airlines, Frontier and Spirit remain bullish on the opportunities for stimulation in the US market.