Boeing Frontiers
July 2002 
Volume 01, Issue 03 
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Commercial Airplanes

Going the Distance

Are longer-range direct flights the answer to hub congestion?


Going the DistanceBuilding the wrong airplane can be disastrous for Boeing. When Chairman Bill Allen gave the go-ahead for development of the 707 in 1952, he literally bet the net worth of the entire company on a single project.

Today, with a more balanced business portfolio, introducing a new commercial airliner may not be a "bet the company" move, but Boeing still can't afford to be wrong.

"Boeing and others have studied the market for more than forty years—studied passengers, airlines, airports, the dynamics of air travel—and all of this on a global scale," said Nicole Piasecki, vice president, Marketing and Business Strategy. "Without a global market, the size and diversity of the customer base isn't enough to support a commercial airplane manufacturing business."

Boeing and industry research also demonstrates conclusively that air travel growth and the development of world economies move in lockstep. A swing in gross domestic product is followed by a swing in airline industry revenue passenger kilometers, which are measured as one paying passenger being flown one kilometer.

Simply put, as population grows, economic development occurs and people travel, creating a demand for airplanes. But the billion-dollar question is always the same: What kind and number of airliners will the world's airlines need to satisfy passenger demand into the future?

Where do you (really) want to go?

Since the days of Euclid, the ancient Greek mathematician, the shortest distance between two points has been a straight line. But the airline hub-and-spoke system changed all of that for those who travel by air.

Today, big airports such as those in Tokyo, Chicago and London act as collector- distributors between the origin and final destination points in the air travel system, according to Tim Meskill, Commercial Airplanes director of Marketing Analysis.

These "hubs" can be a nightmare for air traffic controllers and passengers; the former trying to manage the increasing congestion of growing demand, and the latter trying to navigate a system that at times seems intent on frustrating the simplest of itineraries.

Airliner solutions focus on improvements in speed, range and size—with the manufacturer and the airlines working together to create the right features to meet passenger demand and airline profitability requirements, Meskill said.

The ideal solution for the airline is an airplane with exactly the right size and range to meet today's passenger demand on a specific route, and the ability for that airplane to shrink or expand to fit tomorrow's passenger demand on the same route. The ideal solution for the passenger, however, is a less-than-filled widebody airplane flying every hour directly from point to point, with no hubs in between, he said.

Hurry up and wait

"Chicago's O'Hare Airport serves 66.5 million passengers a year, but only a fraction have Chicago as its destination. O'Hare is perhaps the most metaphysically nonexistent locale ever dreamed up. While the airport is physically 'there' (after all, it can be measured, surveyed, telephoned, and driven to) it somehow seems to not exist at all," according to writer Douglas Coupland in a recent article he penned in Hotwired magazine.

While hubs may have originated because they were an important destination, the points beyond these hubs are now becoming important destinations in themselves. Passengers are less willing to pass through what they see as a bottleneck in the system, Meskill said.

Indeed, Boeing research has confirmed that more than half of the people who go to Narita airport don't want to go to Tokyo at all. The same likely is true at O'Hare, London's Heathrow and other world hub airports.

The low-fare carriers in the United States and Europe have been successful at least partly because they often bypass a major airport for a secondary airport that is less congested and perhaps closer to the passengers' final destination.

"It seems logical that the same appeal will apply on longer routes, as hubs become more congested and secondary destinations expand in market size," Piasecki said.

Boeing is betting the airlines will grow by adding airplanes that can fly farther and faster—directly to the passenger's final destination. Airbus, on the other hand, is betting the airlines will grow by adding airplanes that can carry more passengers, reducing congestion by reducing the number of flights to major hubs.

Market fragmentation

If what passengers want ultimately influences what airlines do, Boeing believes customer service will lead the way.

"The thinking behind Boeing's theory of market fragmentation is this: the current hub-and-spoke system will break into smaller fragments—routes that are point-to-point rather than point-hub-point," said Randy Baseler, Commercial Airplanes vice president of Marketing. "If you want to go to Beijing, you go directly to Beijing without passing through Tokyo. If passengers have a choice, it's pretty obvious that's what they'd want."

How many airplanes will be needed?

Boeing and Airbus agree that air travel will grow on average around 4.5 to 5 percent per year over the next 20 years.

When you add this growth in passengers and cargo to the replacement of older airplanes, it's clear the airlines will need a lot of new airplanes over the next 20 years. Although Boeing and Airbus differ somewhat on the total number and type of airplanes that will be needed, the number is somewhere between 15,000 and 18,000 airplanes. The real difference is in the average airplane size; Airbus' average airplane has more seats than those in the Boeing forecast.

The difference stems from how the two manufacturers think the airlines will handle growth and congestion, Baseler said.

If hubs just need more capacity with fewer flights, the 550-passenger A380 under development at Airbus Industrie may be the best answer. Airbus claims the A380 will reduce congestion and costs. However, bigger airplanes certainly won't reduce the human congestion at hubs, Meskill said, and most of those people will still need connecting flights to their ultimate destination. "Indeed, even more connecting flights may have to be added to justify the inflow of large A380 passenger loads," Meskill said.

Boeing research indicates passenger demand will drive the equation, and that long-range airplanes will provide passengers the direct flights and added frequencies they want, bypassing hubs altogether and reducing hub congestion.

Logic also says that air travel for nearly every current city-pair will increase—and at some point it will be either cost-effective or the only viable service option to fly directly rather than through a hub.

Boeing also is focusing on improving opportunities for productivity during long flights. One anticipated service is Connexion by Boeing. It will provide real-time, wideband connectivity to to everyone from the corporate executive in a Boeing Business Jet equipped with a full office suite to the everyday airline passenger who wants to send and receive e-mail, watch movies or surf the Web.

Although there's been a lot of fanfare of late about the "cruise ship" environment being promised by the A380, past experience shows similar amenities, such as the 747 piano bar of the early 1970s, quickly gave way to revenue-producing seats, Baseler said.

The sheer size of an A380's passenger load also is expected to present problems. "Can you imagine the dynamics of 500 to 600 people arranging themselves and their carry-on items at the beginning and the end of the flight—much less the embarking and disembarking process itself?" asked Baseler. "Taking a flight could become more like attending a football game—without benefit of the game."

Who's right?

Liberalization has led to market fragmentation"As deregulation meets increased demand, competition will become intense," said industry analyst Richard Aboulafia, director—aviation for The Teal Group in Fairfax, Va., "and on a global scale the two factors of service and price will drive the market. How much will you pay to get what you want? What will you do without to save money?"

Aboulafia added, "Airlines that have downsized on many routes from large planes to mini-jumbos (typically Boeing 777s) have enjoyed a noticeable increase in profitability. Clearly, adding bulk does nobody any good. Since the advent of the high bypass turbofan, it isn't clear that making planes larger saves any appreciable amount of money."

Baseler puts it this way: "It helps to remember that air travel is a means to an end. Going through the hassle of making a reservation, buying a ticket, packing, parking and getting on the airplane is all done for one purpose—to reach another place on the globe where business or leisure awaits you. Delays in reaching your destination will degrade the overall travel experience. The optimum solution is always to go the distance point-to-point."


Two forecasts for the future

Driving strategies are predictions of how airlines will handle growth and congestion

Total forecast: 18,120
Point of view: Hub congestion will be handled through the addition of longer-range, point-to-point service driven by passenger demand and in some cases, greater efficiency.
Effect: More single-aisle airplanes and very few 500+ seats airplanes will be needed.

Total forecast: 14,670
Point of view: Hub congestion will be handled through fewer flights/larger airplanes driven by lower cost per seat-mile.
Effect: Few single-aisle airplanes and more 500+ seat airplanes will be needed.

Source: Boeing


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