Boeing drops 767-200ER and 767-400ER, launches 767-2CFX in latest pricing update

by Vinay Bhaskara

A 767-300F - Image Credit: Boeing

American aircraft manufacturer Boeing has released its latest aircraft pricing update, and there were several changes made. Firstly, the original equipment manufacturer (OEM) has dropped the 767-200ER and 767-400ER variants from its 767 product line. These aircraft can no longer be purchased by customers, though if a sizable enough order comes through for Boeing, they could easily re-start production, unlike the 757, whose production line has been retooled for the 737.

The 767-200ER was among the first 767 aircraft offered by Boeing, launching in 1982, the year its standard range cousin, the 767-200, entered service. Ethiopian Airlines was the launch customer for the type in December 1982. Over the years, the smaller 767-200ER was rapidly eclipsed by the larger 767-300 variant, which became the dominant variant in the overall program with 807 ordered (out of 1108 program wide) as of the June Boeing orders and deliveries (also O&D) spreadsheet. Overall, 121 767-200ERs were ordered and delivered, and 39 remain in passenger service. American Airlines is the largest operator with 12 in its fleet used on premium transcontinental routes within the US, though these aircraft will be retired quickly as American takes delivery of their replacement; the Airbus A321.

The 767-400ER was a bit more of an oddball, with only 2 operators (Delta Air Lines, and Continental Airlines - now United Airlines) ordering a total of 38 aircraft. Delta currently has 21 767-400ERs in its fleet, though some of these aircraft may be eventually replaced with the carrier's recent order for 10 additional Airbus A330-300s, while United has 16 frames remaining. The 767-400ER was designed to compete with the aforementioned A330-300, but largely failed to do so, with the A330-300 having won 635 orders over the course of its lifetime.

The 767 program itself had a seemingly bleak future as recently as 3 years ago, with orders slowing to a crawl (primarily existing 767 operators such as ANA and LAN ordering the 767-300ER as interim lift due to the 787 delays). But in February 2011, Boeing won a landmark aerial refueling tanker deal from the United States Air Force, worth nearly $30 billion over the contract's lifetime, with a design based around the 767 called the KC-46A. This made it possible for Boeing to extend the life cycle of the commercial variants of the 767, winning further orders, most notably for 46 767-300Fs from FedEx in 2011-12.

Interestingly, the commercial version of the KC-46A, the 767-2CFX has been added to the pricing table, though no price has been set for the aircraft yet. The table with updated prices from Boeing can be seen below. Interestingly, despite Lufthansa's order for 34 777X family (777-9) aircraft announced today, the type has not yet been formally launched. In all likelihood, formal launch will occur at this years Dubai Air Show, alongside a massive order from Emirates.

Aircraft	Price ($ million)
737
737-700	76.0
737-800	90.5
737-900ER	96.1
737 MAX 7	85.1
737 MAX 8	103.7
737 MAX 9	109.9
747
747-8i	356.9
747-8F	357.5
767
767-300ER	185.8
767-300F	188.0
767-2CFX	TBD
777
777-200ER	261.5
777-200LR	296.0
777-300ER	320.2
777F	300.5
787
787-8	211.8
787-9	249.5
787-10	288.7

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IndiGo modifies its seat pricing after ministry rap

by Devesh Agarwal

Photo copyright Devesh Agarwal. All rights reserved.

A chastened IndiGo airline, hurried modified portions of its much annoying seat pricing policy after facing the irritation of passengers and the rap of the civil aviation ministry.

A late night statement from the airline says

The feedback of our flyers is of utmost importance to us and as a result, with immediate effect, IndiGo will not charge for pre-booking of any of its middle seats (except for rows 1, 12 and 13)

About 11 days ago, the airline had announced a new seat pricing formula called IndiGo Seat Plus, after the aviation ministry had indicated their acceptance of un-bundling of additional services like baggage, food, seat pre-selection, etc, which helps drive ancillary revenue, a major income source for airlines.

Under IndiGo Seat Plus, passengers could pre-block seats for a premium. Rs 500 for sitting in Rows 1, 2, 12 and 13 on domestic flights and Rs 800 for international. For all other window and aisle seats the premium was Rs 200 and Rs. 300 for domestic and international flights respectively. However, what got the goat of almost everyone was IndiGo's Rs. 100 and Rs. 200 charge for booking of even the most unwanted seat in the aircraft, the middle seat.

Earlier today, reports indicated The Ministry of Civil Aviation has directed domestic airlines to limit the number of seats on their flights for which they charge passengers a fee which is over and above the cost of the ticket. Since IndiGo was the only airline charging for seats, quiet clearly it was in the cross-hairs of the officials.

Indian carriers would be well advised to take heed of the developments in the North American market, where airlines nickel and dime their passengers every step of the way. Last year, US airlines earned in excess of $6 billion (about Rs. 33,000 crores) in change fees alone. Change fees are normally charged for changing ticketed schedules.

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Air India commences circuitous flights from New Delhi to Agra

Air India operated its first flight to Agra earlier today.

Following a circuitous route (Delhi-Varanasi-Agra), this flight has a schedule that leaves much to be desired.

Image courtesy gcmap.com

The flight will be operated with an all-economy class Airbus A320 aircraft, three times a week on Mondays, Wednesdays and Fridays. Flight AI 406 departs New Delhi at 1245, arrives Varanasi at 1400. Departs Varanasi at 1435 arrives Agra at 1530. Departs Agra at 1605 and arrives Khajuraho at 1645 hours. One the return flight AI 405 will leave Khajuraho at 1720 arrive in Varanasi at 1810 hours. Depart from Varanasi at 1845 and reach Delhi at 1955.

Only a politician who is not answerable for the route profitability can have thought up of such a convoluted routing.

One would expect at least one of the network planners at Air India to advise their political masters that no passenger in his or her right mind will take a flight of 2h45m when they can take a train between New Delhi and Agra and reach in 1h50m.

One can drive from Delhi to Agra on the new Yamuna Expressway and reach in a lesser time.

And all this at 12 Noon?!?!?! Which tourist wants to waste their whole day?

Unfortunately the connectivity to Khajuraho is poor at best, and both Air India and Jet Airways who serve this city, fleece their passengers mercilessly. 30 day advance purchase New Delhi Khajuraho roundtrip fares start from Rs. 16,415 quickly shooting up to Rs. 22,487. In comparison a roundtrip flight across the country from New Delhi to Bangalore for the same travel dates will cost Rs. 10,200.

And then we wonder, why India received less half the number of foreign tourists compared to a small country like Thailand.

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Survey: The Kingfisher Airlines drama continues. Is the airline ready for euthanasia?

Employees of Kingfisher Airlines have finally reached a breaking point. The airline, blaming the employees has declared a lockout

Kingfisher Airlines Limited today announced that following a series of protracted and unabated incidents of violence, criminal intimidation, assault, wrongful restraint and other illegal acts including refraining from attending work, by a small section of recalcitrant employees which were all unnecessary and unprovoked, the management has been forced to declare a partial lock-out at the airline, effective immediately.

May be the airline should look at the insensitive tweets of Sidhartha Mallya, son of Kingfisher Chairman Dr. Vijay Mallya.

Just spent the morning playing volleyball with 12 bikini clad models on the beach...now I understand why people hate me. HA!
— Sid Mallya (@sidharthamallya) September 29, 2012

Rubbing a high flying lifestyle, in to the face of employees whose salaries remain unpaid for months, will surely achieve disastrous results.

The Directorate General of Civil Aviation (DGCA) summoning the Kingfisher management to a meeting on Tuesday, which happened to be Gandhi Jayanti, a national holiday, shows us, the seriousness of the government, which till now has been treating Dr. Mallya with kid gloves.

Even the Civil Aviation minister Ajit Singh, a well wisher of the airline, warned that the government establishment could no longer ignore frequent disruptions and non-adherence to published flight schedules, reports The Economic Times (ET).

"Disruption of (flight) schedule has become an issue with Kingfisher Airlines. While the issue of passenger safety is paramount and cannot be jeopardised and DGCA needs to be satisfied that there are no safety concerns, Kingfisher has to also ensure that they operate flights as per the schedule they have submitted to the DGCA," Singh told ET over phone.

To rub salt in to the wounds, the Kingfisher management arrived in Delhi on board a flight of arch-rival IndiGo. Kingfisher CEO Sanjay Aggarwal and Executive Vice President Hitesh Patel had an hour’s meeting with DGCA chief Arun Mishra. FirstPost reports, Aggarwal told the regulator, Kingfisher is loosing Rs. 80 million (Rs. 8 Cr., $1.5 mn) per day and also presented ten points. Most of them we have heard before. During the lockout, the airline cuts its losses in half, says Mint. This raises the question, why not keep the airline in hibernation till a foreign investor is found? Two immediate answers are; (1) Given its massive losses and accumulated debt, it is not very certain how attractive an investment Kingfisher is, despite the claims of the company and (2) With each passing day, by not operating its schedule, the airline is loosing its most desired assets, the routes and peak-time landing and parking slots at the major airports.

In the meeting, the airline executives reportedly told the DGCA, Kingfisher is in talks with the various authorities for unfreezing multiple bank accounts, holding about Rs 600 million, frozen due to non-payment of various taxes and mandatory dues, which includes the with-holding taxes deducted on employees salaries, but not remitted to the government. An act, which invites immediate trips to jail for mere taxpayers like you and me, but not the Chairman sahib. 

In the meeting Mishra gave an ultimatum, that the airline must give a time-line for paying employees, apart from a “satisfactory and realistic” operational preparedness plan, before it can get permission to fly again, as per a report in Business Standard.

Mr. Mishra went to warn other airlines not to profit from the suspension of Kingfisher flights, but market forces are already taking effect, and fares are rising, thanks to panic buying for the upcoming holiday period by concerned travellers

Aggarwal who apparently has not been paid salary himself was left to defend the airline while the Chairman was nowhere to be seen. He was confident the airline, which has a monthly wage bill of Rs. 200 million, would be able to pay the pending salaries in the next few days. The reason for Aggarwal's confidence? May be a deal between United Spirits and Diageo, which DNA reports should be announced tomorrow. However, some other reports suggest that Mallya will use the proceeds of this sale to retire those liabilities that have his personal guarantee. Is he getting ready to finally bail out of Kingfisher Airlines? Or once his guarantees are retired, he threatens the banks to walk away from Kingfisher unless additional funding is provided?

The Economic Times also reports that Mallya has borrowed Rs. 525 Cr. from HDFC Bank against his ancestral property, but it is not clear whether this money has been used to fund Kingfisher Airlines in any way. Is Dr. Mallya reduced to selling the family jewels to wriggle out of the situation?

Despite the regulator not being satisfied, according to the Mint, Mishra has indicated there is no risk of the airline being shut down, since they have more than the minimum five aircraft.

This surely begs the question, why is the airline still being propped up? Is it to protect the books of the various government owned banks, led by State Bank of India, who are owed over Rs. 80 billion (Rs. 8,000 Cr.), and whose books will be awash with red if the airline goes under? Is it because of the government's policy, which does not allow for quick or easy liquidation of failed companies, thanks to a misplaced pride to demonstrate, that Indian companies do not fail?

Can this airline be saved? Or is it time for this airline to be euthanised? Share your views via the survey below and via comments.

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Lufthansa warns of ticket price increases as Europe implements Emissions Trading Scheme (ETS)

German carrier Deutsche Lufthansa is warning that flyers will face higher ticket prices as it refuses to shoulder the almost €130 million (approx US$ 170 million) additional costs it faces thanks to the European Union's new Emissions Trading System (ETS) which took effect on new year's day, January 1.

In a statement the airline explained its reasoning based on the requirements of the new ETS.

From the beginning of this year, all airlines are required to hold emission rights in the form of CO2 certificates for flights to and from Europe. In 2012, 82 per cent of the necessary certificates will be awarded to airlines free of charge. Airlines will have to purchase another 15 per cent of the certificates, with 3 per cent being reserved for new airlines.

As these allocations are based on average emissions for the years 2004 to 2006, the Lufthansa Group will have to buy at least 35 per cent of the certificates it needs to represent its growth in recent years. Judging by the average trend in certificate prices, Lufthansa expects to incur additional expenses of EUR €130m in 2012.

As competition is tough - especially from non-EU companies, whose operations are only subject to limited emissions trading rules - Lufthansa will have to pass on the costs via higher ticket prices, as recommended by the EU. Lufthansa will therefore include the cost of purchasing the certificates in its existing fuel surcharge as of the beginning of 2012. However, it has no immediate plans to increase this surcharge.

Carsten Spohr, Member of the Executive Board of Deutsche Lufthansa AG, said: “Climate change is a global challenge. This means we also need a global solution. The incorporation of airlines in the EU Emissions Trading Scheme means that European operators are now facing additional costs which will make flying within and via Europe more expensive for passengers. It will also distort competition and impact on the sustainability of the aviation industry if it proves impossible to implement with the competitive neutrality promised by policy makers. However, given the huge resistance at international level, it is unclear just how the situation will develop.”

Lufthansa last raised its fuel surcharge for European and long-haul flights on 15 December 2011 by three to ten euros. In the future, the surcharge will reflect both the price of oil and the cost of acquiring emission rights.

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Price of an Emirates airline Airbus A380 superjumbo is $234 million

The one very confidential piece of information in the world of aviation is the price paid by an airline to an airframer for an aircraft. Along with announcments of orders, at best, the value of the order at list prices is revealed.

A few days back, thanks to a minor mistake, this veil of secrecy has been penetrated. We now know that an Airbus A380-800 superjumbo costs Emirates airline US$ 234 million (Rs. 1,220 crore).


On October 14th, a subsiadiary of Nimrod Capital LLC, Doric Nimrod Air Two Limited made an announcement (in WSJ, in StockMarketWire) which disclosed the financial information about the first of three Airbus A380-800 superjumbos it has bought, and will be leasing to Dubai based Emirates airline for 12 years. This aircraft MSN077 (manufacturer's serial number 077), will be the 16th A380 to join the carrier's fleet, the first to be delivered by Airbus to Emirates in 2011, and is registered with the tail number A6-EDP.

Doric Nimrod Air Two Limited (the "Company") is pleased to announce that its wholly owned subsidiary, MSN 077 Limited (the "Subsidiary"), has today acquired an Airbus A380-800 aircraft bearing manufacturer's serial number 077 (the "Aircraft") for the sum of US$234,000,000. The Aircraft was delivered to the Subsidiary today at the Airbus delivery centre in Hamburg, Germany.

In connection with the acquisition of the Aircraft, the Subsidiary drew down senior debt financing in accordance with a Loan Agreement entered into with a syndicate of lenders (led by Westpac Banking Corporation and Commerzbank Aktiengesellschaft) in the amount of US$151,047,509.

Upon delivery, the Subsidiary also entered into an Aircraft Operating Lease with Emirates airline ("Emirates") pursuant to which the Aircraft has been leased to Emirates for an initial term of 12 years, with fixed lease rentals for the duration. The debt portion of the funding, which has been advanced under the same interest rate fixing methodology, will fully amortise over the 12 year term of the Lease, leaving the aircraft unencumbered at the conclusion of the Lease.

The list price for an A380 currently is about $375.3 million and this disclosure shows that the largest A380 operator in the world is getting about a 37.65% discount which, while more or less in line with industry norms, does appear on the lower side keeping in view the size of the 90+ aircraft order of the carrier, which also constitutes almost 50% of the total A380 order book at Airbus.

Having said that, it is important to keep in mind, the "list prices" are an average indication. As Boeing puts it

[the list prices] reflect an average price reflecting a range of available options and configurations for each model. Configurations and options that may affect price include performance capability, interiors, avionics, fuel capacity, etc

Emirates' A380s undergo an elaborate interior cabin customisation, including installation of a state of the art in-flight entertainment (IFE) system, and the only on-board shower facility on a commercially scheduled airline.

The $234 mn price would most likely include the costs of these upgrades which may not be factored in to the regular list price and therefore the quantum of discount the carrier is getting is actually greater.

It is also not clear if the prices of the Engine Alliance GP7200 engines which list at around $16 million each are included, though it most likely would be.

All said and done, this announcement does help give perspective on the actual revenues realised by airframers like Airbus, Boeing, and others, on orders, as well as lease rental costs paid by carriers.

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The great Indian wine war

WINE PRICES IN BANGALORE HEADED INTO THE STRATOSPHERE !

You might be surprised at a wine article in my aviation blog, but wine is a subject close to my heart.

The convoluted alcoholic beverages policy in India, makes each state, akin to another country, each with their own cumbersome taxes and regulations. The recent collapse of the Doha round of trade talks was not the only failure last month. A trade war is growing between the three wine producing states in India, Maharashtra, Karnataka and Goa, and it is going to send prices of Indian wines up by 46% ~ 100%, in Karnataka. Unfortunately, unlike the world which has the World Trade Organisation, India has no mechanism for settling economic wars between states.

Bangaloreans, along with the rest of India, are increasingly taking to wine as their drink of choice. It is more healthy, low impact, goes great with food, and more fashionable. What ever the reason, the market is growing about 20% year on year. In 2007-8, about 56,225 cases of wine were sold in Karnataka, almost all of it in Bangalore. This does not include the Goan Port "Wines". As consumers' wine tastes evolve, they gravitate from the cheap and cheerful variety to the mid-range and higher quality.

Maharashtra is India's California; the leading producer of wines. About 18 "non-Karnataka", Indian wine producers, Sula, Indage, Reveilo, Nine Hills, Mandala Valley, Big Banyan, sell their wines in Karnataka. There are two wine producers in Karnataka, Grover and Naka, and about 27 foreign (Non-Indian) wine producers whose products are available in Bangalore.

(Click on image for a larger image)

A few years ago, the Government of Maharashtra imposed a special tax of 150% on wines “imported” into the state from outside Maharashtra. It was a purely political decision done at the behest of one of India's most influential politicians in India, who has, for long, been reportedly, the major player in the wine-grape farming and wine producing industry in Maharashtra. The 150% tax made non-Maharashtra wines more expensive in the state. The wine producers of Karnataka, found it hard to compete in Mumbai, the capital of Maharashtra, but more importantly, the economic capital of India.

There have been half-hearted attempts by the Karnataka Government to resolve this issue with their Maharashtra counter-parts. The lack of genuine desire, urgency, or sensibility, on both sides, expectedly, has not yielded positive results. While, I will be the first to say, the nasty actions of Maharashtra deserve a response, the recent actions of the Karnataka Government, are equally nasty. Two wrongs do not make a right.

Effective August 1, 2008, the Karnataka government started levying a tax, just as offensive, to the one in Maharashtra, on all wines of Indian origin “imported” into Karnataka. The new levy raises the import fee on wine from outside Karnataka from Rs. 10 to Rs. 300 per bulk litre, an increase of Rs 217.50 per bottle!!!! Add to this other levies and margins that will subsequently accrue, the final retail price to consumers will rise by approx Rs 250~280 per bottle.

55% of all wine sold in Karnataka is currently priced between Rs. 350 - Rs. 550 a bottle. The increase translates to a 46% - 100% increase in final price. Lower priced, entry level, wines like UB's Zinzi will see their prices go up over 100% from Rs. 250 to Rs. 500~530 per bottle. Dr. Mallya’s fledgling Indian wine business (Zinzi) will be hit hard, in his home town of Bangalore, since all his Indian wines are produced in Maharashtra.

(Click on image for a larger image)

The wines produced by Grover's and Naka in Karnataka, will be spared the tax. I wonder how long will they maintain their original price. Like any opportunistic business house, I am sure they will slip in a few price increases since their competition is more expensive by Rs. 250.

Another most unfortunate consequence: as the entry-level wines will rise 100% in prices, many prospective wine drinkers, who were just taking to wine, will decide wine is suddenly too rich for their blood, and give healthy wine-drinking a go-by, reverting back to high impact spirits.

Observing the antics of their fellow Governments in Maharashtra and Karnataka, the Government of Goa is now talking about similar "protection" for its wine producers and growers.

The market place, consumers and producers, determine usage. Government can implement rules of conduct (procedures) but no one, including the self-proclaimed smartest people in the world, often found working in government, can accurately predict a marketplace. The market place determines itself.

The majority of the wine producers in this country are going to take a hit – the emerging wine drinking segment will take a hit – the retailing industry will take a hit. Even the wine producers of Karnataka will be hit. To get around the new levy Maharashtra wine producers will set up wineries in Karnataka state. There is simply not enough wine-grape grown in Karnataka to meet the needs of the state. Existing farmers will be tempted away from their existing contracts with Grovers and Naka to supply the newcomers.

The only “good news” in this sorry saga ? Fearing the wrath of the WTO, the new Karnataka levy does not apply to foreign wines. With the new higher prices of the non-Karnataka wines, many of the Australian, Chilean, South African, Spanish, and Argentinian wines will now look quite attractive. This retrograde step is helping the foreign brands, while sticking a most cruel knife into the heart of the Indian wine business. How many wineries will close, and as a result farmers going bankrupt, as sales drop and mayhem prevails ?

This squabble, in many ways, reminds me of the days of the British Raj. While the Indian states are busy fighting each other, the winners are the foreign wines.

I wonder if Indian wine producers can go to the WTO and beg for protection from their own governments.

Thanks to Stanley Pinto for the inspiration and some of the data.

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