Imagine the scenario of Southwest Airlines. If a new airline were to start up from ground purchasing dozens of the same aircraft, which of the following two aircrafts would be beneficial in terms of aircraft cost, maintenance, fuel, turn around time, and profitability for route lengths such as LAX to ORD and DFW to JFK.

Airbus: Out of the question.

Boeing 737 MAX 7 ($90 Million)
172 maximum seats
3,825 nautical miles
Average 40 minute turn around time

Bombardier CS300 ($86 Million)
160 maximum seats
3,300 nautical miles
Average 35 minute turn around time

Embraer 195 E2 ($60 Million)
146 maximum seats
2,450 nautical miles
As low as 15 minute turn around time


Personally, I choose Embraer. It’s labeled a “regional jet,” but still carries a high number of passengers, $30 Million less than 737 Max, and faster turn around time for more air productivity. I realize Airlines negotiate purchases prices, but why do Airlines choose Boeing? What am I not understanding?

What is the better aircraft and why for the reasons stated above?

If Airbus is out of the equation for whatever reason then you are not going to get the lowest cost.

The C series is out due to tariffs.

BTW for 90 million you can buy a 787 or A330neo.

If petrol goes again around 30 USD then a used B777-200ER is great. Worth around 10M USD for a 2004 model

An old 777 without the AIMS update is worthless as Honeywell will not provide support unless you were the existing customer.

AirEnthusiast1 wrote:

Personally, I choose Embraer. It’s labeled a “regional jet,” but still carries a high number of passengers, $30 Million less than 737 Max, and faster turn around time for more air productivity. I realize Airlines negotiate purchases prices, but why do Airlines choose Boeing? What am I not understanding?

What is the better aircraft and why for the reasons stated above?

How did you factor in revenue from premium seating & service, or is it 100% economy all the same?
How did you factor in revenue from cargo?
How did you factor in operating costs including fuel, crew, landing fees, ground support staff and equipment, etc.?
How did you factor in maintenance costs?
How did you factor in residual value of the planes?

Not an airline but the most profitable airplane is a chartered Global Express (insert other type here) that cancels within 24 hours of departure. Full charter quote is billed as cancellation fee, not cost incurred. 100% profit.

GF

An interesting thing you realize is that aircraft PRICES mirror the PROFIT they can generate. And after paying the ownership cost, your profit margin is relatively equal among the available aircraft types, old and new. That's WHY the purchase price (and lease payment) is exactly where it is.

Sorry for the capital letters but it's not all that widely understood.

Which road vehicle is the most cost effective?

Depends if it's the school run or shifting 500tons of uranium!

Oh another thing about profit? Smaller aircraft are much easier to make profitable than larger aircraft. Yield almost always diminishes faster than CASM.

Plenty of markets would be super profitable (margin) with a CRJ-700, profitable with 737-800 and unprofitable on A330. Why do airlines like Delta and American and United keep old 767s in service long after you think they should be replaced by A330 or even A350-1000? Because they are more profitable. In part, because of aircraft cost. And in part because of low trip cost.

Which widebody makes more money in November carrying 160 passenger loads.. an old 767 or a new A350-1000? Small size pays you every day. Large size pays you ONLY when $$ customers fill those extra seats. The 767 will win quite often. Even on an annual profit $$ basis.

You rarely go broke flying a plane that is some what smaller than you need....but can easily go broke flying a plane bigger than you need.

Flighty wrote:

Oh another thing about profit? Smaller aircraft are much easier to make profitable than larger aircraft. Yield almost always diminishes faster than CASM.

Plenty of markets would be super profitable (margin) with a CRJ-700, profitable with 737-800 and unprofitable on A330. Why do airlines like Delta and American and United keep old 767s in service long after you think they should be replaced by A330 or even A350-1000? Because they are more profitable. In part, because of aircraft cost. And in part because of low trip cost.

Which widebody makes more money in November carrying 160 passenger loads.. an old 767 or a new A350-1000? Small size pays you every day. Large size pays you ONLY when $$ customers fill those extra seats. The 767 will win quite often. Even on an annual profit $$ basis.

This is true unless and until the market sets the price at (or slightly above) marginal cost.

In your examples - widebody, mostly longhaul ops - we don't see a true competitive equilibrium approaching marginal costs. This is for many reasons, including the lack of market liberality in international flights.

The OP addresses shorthaul ops, however - a domain in which many markets behave much closer to a true competitive equilibrium. That very nearly holds perfectly for European and/or Southeast Asian ULCC ops, for example.
In this domain, where ticket prices are generally set by the lowest-cost operator, there's little opportunity to make a profit off of smaller planes with higher unit costs. This convergence on competitive equilibrium explains some of the narrowbody market's trend of up-gauging.

Returning to the OP, Southwest's U.S. domestic market is a little less liberal and a little more anti-competitive than European/SEAsian markets, but it's closer to them than the longhaul markets you describe.

We should hope that the long-term trend will be for longhaul LCC's and international liberalization to move markets to competitive equilibrium where bigger planes with lower unit costs and lower prices will dominate.

zeke wrote:

An old 777 without the AIMS update is worthless as Honeywell will not provide support unless you were the existing customer.

So if an existing 777 customer sells AIMS-1 777s to another airline, Honeywell will no longer provide support?

The OP's quesiton is impossible to answer. Depends on so many factors. If you're flying out of EYW, then a 737-700 might win. If you are flying long international flights then a 787-9 might win.

Matt6461 wrote:

Flighty wrote:

Oh another thing about profit? Smaller aircraft are much easier to make profitable than larger aircraft. Yield almost always diminishes faster than CASM.

Plenty of markets would be super profitable (margin) with a CRJ-700, profitable with 737-800 and unprofitable on A330. Why do airlines like Delta and American and United keep old 767s in service long after you think they should be replaced by A330 or even A350-1000? Because they are more profitable. In part, because of aircraft cost. And in part because of low trip cost.

Which widebody makes more money in November carrying 160 passenger loads.. an old 767 or a new A350-1000? Small size pays you every day. Large size pays you ONLY when $$ customers fill those extra seats. The 767 will win quite often. Even on an annual profit $$ basis.

This is true unless and until the market sets the price at (or slightly above) marginal cost.

In your examples - widebody, mostly longhaul ops - we don't see a true competitive equilibrium approaching marginal costs. This is for many reasons, including the lack of market liberality in international flights.

The OP addresses shorthaul ops, however - a domain in which many markets behave much closer to a true competitive equilibrium. That very nearly holds perfectly for European and/or Southeast Asian ULCC ops, for example.
In this domain, where ticket prices are generally set by the lowest-cost operator, there's little opportunity to make a profit off of smaller planes with higher unit costs. This convergence on competitive equilibrium explains some of the narrowbody market's trend of up-gauging.

Returning to the OP, Southwest's U.S. domestic market is a little less liberal and a little more anti-competitive than European/SEAsian markets, but it's closer to them than the longhaul markets you describe.

We should hope that the long-term trend will be for longhaul LCC's and international liberalization to move markets to competitive equilibrium where bigger planes with lower unit costs and lower prices will dominate.

Hmmm not sure I fully understand what you are saying, but I'm not sure you actually believe what I said either, that smaller, high-CASM aircraft can be profit optimal in a competitive market. Competitive high-yield markets need a low trip cost (capacity and unit costs are not so important). Competitive low-yield markets, like you say, tend to have more passengers, so trip cost is not an important. Capacity and unit cost can dominate.

Low unit-cost only matters if you have enough customers to populate the seats. This is untrue in a lot of markets. Competitive markets often fragment as much as they possibly can. Because yield is so peaky. I am a big advocate for the A321, but sometimes, you want an E-175 or CRJ-900.

Flighty wrote:

but I'm not sure you actually believe what I said either, that smaller, high-CASM aircraft can be profit optimal in a competitive market.

Of course that can be true in some circumstances. But regarding shorthaul ops - the OP's subject - the trend is clearly towards larger NB's for the reasons I discussed.

As to the broader discussion of capacity/efficiency tradeoff and competitive markets, that'd need its own thread.

BoeingGuy wrote:

So if an existing 777 customer sells AIMS-1 777s to another airline, Honeywell will no longer provide support?

Correct, which I think was the issue with the Saudi and Malaysian aircraft.