Wednesday, March 28, 2007

Never Say Never

Orrin's ongoing tirade against the A-380 has demonstrated a couple things.

First, never say never, as that is always a trumpeting invitation to being proven wrong. Depending, of course, on the meaning of the word "never."

Second, substituting animus for analysis has a single-minded tendency to obscure what is going on, and why.

The A-380 program is simultaneously a design, a business decision, the implementation of that design, and, ultimately, the design's employment. It is entirely possible for the program to be more or less a failure in some ways, but a success in others.

The issue of the design can be neatly encapsulated by one simple question: Why so bloody big? The answer is not difficult, but does require some conceptual math. In discussing an airplane's size, it is important to remember that the surface area of
the aircraft is proportional to the square of its dimensions, while its volume is proportional to the cube.

In other words, as surface area grows, volume grows faster. This is the primary challenge to building large aircraft. The supporting structure is, to a first approximation, the aircraft's surface. This means the structure has to get stronger as fast as the volume increases, despite being area bound.

Why big, reason one: The larger the aircraft, the less fuel per seat mile. Roughly 60% of an aircraft's drag is called "form drag". It is the consequence of the airplane having to push the air aside, as well as the energy lost pulling air along with the airplane due to fuselage and wing surface roughness. Since that drag is directly related to area, there is less drag per unit volume in a large airplane than a small one. For example, an A-320 and an MD-11 are near contemporaries. A 150 seat A-320 burns roughly 12,000 pounds per hour at altitude. An MD-11 with 300 seats (3-class configuration) burns about 18,000 pounds per hour. Result, twice as many people carried the same distance while burning only fifty percent more fuel.

Why big, reason two: Maintenance costs are proportional to size, but the constant of proportionality is less than one; much less, depending upon the system. An A-380 will require no more engine maintenance than a 747-400, but will carry approximately 40% more passengers.

Therefore, in terms of operating cost-per-seat-mile, bigger is better. Compared to the 747-400, the A380 direct operating cost per seat mile will be 15-20% less.

So if cost per seat mile was the only objective, the A-380 superior to any airliner flying today. As an airplane, any comparison to the Concorde is simply ignorant.

This is where Airbus's business case comes in, and is, also, encapsulated by one question: how many city pairs can be served at a suitable frequency while also filling, on average, a sufficient number of seats to turn a profit.

Unlike the objective engineering analysis, answering this question means dueling with the What-ifs and Maybes. Airbus is betting the farm on passenger miles continuing their relentless increase, and that most of those passengers will get to their destinations via a relatively constant number of hubs.

Under those circumstances, an increasing number of airports will become, a la London Heathrow, "slot bound". This case is particularly lucrative for A380 operators, especially early adopters. The seat prices reflect overall limited supply, but those flying the A380 will be selling 60% more seats, at a higher profit per seat, then the 747-400, its next closest competitor.

The most daunting Maybe, though, is the future of the hub and spoke system. If it remains much as it is today, then there will be a sufficient number of city pairs supporting enough demand to allow at least daily departures while keeping the average load factor above the break-even load factor (which will be lower for an A380 than a 747-400). However, if the number of hubs increases significantly, which is another way of saying more flying will approximate point-to-point, then, all bets are off. Well, all of Airbus's, anyway, since this is Boeing's bet.

There is no need to further discuss program execution here. The A380 program is conclusively proving to everyone, except for those with exceptionally potent evidence-fighting antibodies, that EU has become the French word for "millstone". In this vein, it is worth noting the EU's providing taxpayer subsidies mascerading as loans encouraged what may turn out to be a serious strategic error: focussing entirely on executing the A380 program may very well make Airbus predominant in a niche market, while ceding almost everything else to Boeing. Airbus's most rosy projections for the A380 -- roughly 1200 total sales (current firm orders are 156) -- must come true if Airbus is not to be left permanently weakened.

Finally, there is the matter of operating the thing, and flying it will not be the hard part. Unlike all previous aircraft since the start of the jet-age, the A380 will require substantial infrastructure modifications at those airports supporting scheduled operations. Here is short rundown:

  1. Some taxiways will require reconfiguring to allow opposite direction A380s to pass with sufficient wingtip clearance
  2. Taxiways connecting the ramp to runways will require additional paving on either side (although it need not be load bearing) to prevent the outboard engines hoovering dirt and insufficiently alert rodents.
  3. Unless blocking adjacent gates is tolerable, gates serving the A380 will have to be further apart than the standard spacing.
  4. Bigger aircraft tugs
  5. Existing catering lifts will not reach the A380 service doors.
  6. Multiple access jetways

Substituting analysis for animus, here are my predictions.

As an aircraft, the A380 will be successful. It contains many technological advances that, in addition to the advantages attending size, will result in the lowest per-seat-mile costs by a substantial margin. Adding to this advantage, the A380's range will be 700 nautical miles greater than the 747-400, putting more destinations within non-stop range. Since the A380 is also quieter than the 747, assertions that the A380 will not be allowed to land anywhere voters have a say are silly (particularly since plenty of such anywheres already allow the AN-225, bigger than the A380, to land). The airlines that have a need for such an aircraft will operate it very profitably.

As a business decision, it will somewhere between a serious and catastrophic failure. Airbus needs over 400 sales to break even. Based upon the notion that unit sales are inversely related to size (i.e., there are fewer big airplanes than small ones) I expect 350 sales, of which a third will be freighters. This corresponds to 630 747-400s, of which nearly 30% are freighters. Airbus's estimate of over 1200 total sales makes a glass 1/10th full optimist. Just as bad, maybe worse, it has completely sacrificed development everywhere else, ceding market dominance to Boeing for the next 15 years.

So the A380 will be both a success and a failure: an excellent aircraft that will make lots of money for its owners, while crippling its producer.

And, as opposed to never, it will regularly fly to US destinations. I predict we are in for a new definition of "never".


Blogger Duck said...

Great analysis Skipper! Once again market planning beats central planning. This mirrors the decision that Boeing made to kill it's supersonic jetliner project in the 1960's in favor of the 747. The French and British went ahead with their plan and produced an awesome airplane, but Boeing dominated the industry.

March 30, 2007 7:13 AM  
Blogger Hey Skipper said...


Yes, but.

At a technical level, the A380 is extremely impressive, which was got me wondering about the things that OJ was saying.

I am perfectly willing to give him full credit for looking beneath the surface for deeper meaning in a way that eludes almost everyone else.

In this case, though, the deeper meaning was so very near the surface as to risk immediate detection by even the most casual observer. He equated a bad business decision -- how Airbus could assume it would sell 2.7 times as many 380s as 747-400s is a complete mystery to me -- to a bad product.

Which makes his analysis every bit as mystifying as Airbus's business decision.

March 30, 2007 8:10 AM  
Blogger Duck said...

I thought that OJ's decision was because the Europeans had rejected Jesus Christ as their saviour, and so nothing good could ever come of them.

March 30, 2007 8:52 AM  
Blogger Harry Eagar said...

The slot problem will be, I suspect, a political fight.

On Maui, the airport was built with 48 gates. Planes got bigger, so now we have 24. And requests for more than 24.

At the harbor, there are berths for 2 or 3 barges, depending on size. The berths are occupied almost every day, so the only way to cope with increasing volumes of cargo is to use bigger barges. But that means you no longer have 3 berths, but only about 2.5.

I think I recall Boeing solicited customers about their desire for an 800-seat airliner about 25 years ago.

March 30, 2007 9:28 AM  
Blogger Mike Beversluis said...

Any thoughts on the Lazy B's 787?

March 30, 2007 7:41 PM  
Blogger Hey Skipper said...


No, other than to note Boeing has not completely lost its sense of humor.

The rollout date is supposed to be July 8th, this year.

March 31, 2007 4:34 PM  

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