AIR - Air NZ.

[stoploss]

I read an article today where the Delta CEO claimed in October (with various follow up articles if you care to Google this topic) that he could purchase used Boeing 777 for 10 million & Boeing told the media he was wrong: http://www.bloomberg.com/news/articl...lion-777-price - well turns out he wasn't. They've now agreed to purchase a 10 year old 777 for 7.7 million, which certainly made me sit up considering the lowest price i've seen quoted 10 years ago was 170 million (and current list price today I have seen quoted as 277 million), which is either a 95.47% or 97.22% discount depending on which number you believe).

For me, it does give a bit more credibility to his claims that there is a bit of an oversupply of these older planes coming off lease's soon: http://www.bloomberg.com/news/articl...ing-stock-gain

I would be keen to hear from those with a better understanding of the numbers than myself on the potential of a carrier purchasing these planes at a reduced rate combined with crude being so low and what impact this could have on competition for the airline industry globally and more specifically AIR which is currently ramping up its capacity around the Pacific Rim.

DISC: Not holding at present, but I have in the past & think AIR is a fantastic business and a fantastic airline.

Sure they could buy those planes but at that price , must need significant maintenance . New fit out , etc, etc someone will know the likely cost of that . Being older ongoing maintenance
will be much higher than the AIR NZ , considerably newer fleet. Unlikely to return as much per passenger, per K as the new Air NZ 787 imo.

[skid]

There was also a comment on the radio this morning that it costs airlines 50% less to fly a plane today than it was in 1995 (or might have even been 1985)

No wonder AIR might make 1/2 billion bucks in 6 months

Id be interested to know how many think their prices now reflect that cost savings

I believe for a company like this,it is more helpful to think like a customer ,rather than a shareholder(to avoid the ''bubble syndrome''

[KiwiGekko]

Sure they could buy those planes but at that price , must need significant maintenance . New fit out , etc, etc someone will know the likely cost of that . Being older ongoing maintenance
will be much higher than the AIR NZ , considerably newer fleet. Unlikely to return as much per passenger, per K as the new Air NZ 787 imo.

Yeah, exactly. We have all heard that the 787 yield higher RPK's - but my question is can anyone comment or point to information that explains the relationship between the reduction in the cost of oil (fuel) combined with the reduction in the cost of purchasing second hand but not really much older than AIR's current 777-200ER's. I am specifically interested in what meaningful impact this might have on the RPK's a 777 could yield then compared to the industry leaders - for arguments sake the 787.

Regarding the fit out - interestingly, we can assume a refit costs around 12 million (I assume NZD, so 8.5 USD?) based on this article here: http://www.nzherald.co.nz/business/n...ectid=11349416 - AIR's fleet of 777-200ER's are coming up on 10 years, which means they're getting a refit at present.

I have started some scratchings in a spreadsheet which are missing a few things that are assumed equal and probably are not - maintenance costs for example. Currently (and perhaps incorrectly) assuming jet fuel at US $1.33 per Gallon and a cost of capital at 175 points above the prime rate I come out with a cost per passenger kilometre which is 19% cheaper on a full flight between AKL -> IAH with a 777-200ER vs 787. I will continue working on this over my "holiday" and see what conclusion I reach, but this quite interesting (unless i've completely cocked up my numbers) given I am working on the assumption the 787 is 22% more fuel efficient as detailed here: http://planes.axlegeeks.com/compare/...7-8-Dreamliner

I am playing devils advocate here, but if the trend is for oil to be low for a while & we're about to see a few cheap 777's on the market. What does this mean for the plane manufacturers? What does this mean for the investment the various airlines have made in the new 787's - will we perhaps see some increased competition as a result? Have I completely stuffed up my numbers and if not does anyone want to purchase a 777-200ER as a timeshare? ;-)

I'm genuinely interested in hearing peoples thoughts & as always DYOR.

[biker]

Yeah, exactly. We have all heard that the 787 yield higher RPK's - but my question is can anyone comment or point to information that explains the relationship between the reduction in the cost of oil (fuel) combined with the reduction in the cost of purchasing second hand but not really much older than AIR's current 777-200ER's. I am specifically interested in what meaningful impact this might have on the RPK's a 777 could yield then compared to the industry leaders - for arguments sake the 787.

Regarding the fit out - interestingly, we can assume a refit costs around 12 million (I assume NZD, so 8.5 USD?) based on this article here: http://www.nzherald.co.nz/business/n...ectid=11349416 - AIR's fleet of 777-200ER's are coming up on 10 years, which means they're getting a refit at present.

I have started some scratchings in a spreadsheet which are missing a few things that are assumed equal and probably are not - maintenance costs for example. Currently (and perhaps incorrectly) assuming jet fuel at US $1.33 per Gallon and a cost of capital at 175 points above the prime rate I come out with a cost per passenger kilometre which is 19% cheaper on a full flight between AKL -> IAH with a 777-200ER vs 787. I will continue working on this over my "holiday" and see what conclusion I reach, but this quite interesting (unless i've completely cocked up my numbers) given I am working on a fuel inefficiency of 22% for the 777-200ER.

I am playing devils advocate here, but if the trend is for oil to be low for a while & we're about to see a few cheap 777's on the market. What does this mean for the plane manufacturers? What does this mean for the investment the various airlines have made in the new 787's - will we perhaps see some increased competition as a result? Have I completely stuffed up my numbers and if not does anyone want to purchase a 777-200ER as a timeshare? ;-)

I'm genuinely interested in hearing peoples thoughts & as always DYOR.

The fuel efficiency should apply to the 787 not the 777

[stoploss]

[QUOTE=biker;601998]The fuel efficiency should apply to the 787 not the 777[/QUOTE
Biker I think thats what Gekko was saying "working on a fuel inefficiency of 22% for the 777-200ER"

[KiwiGekko]

The fuel efficiency should apply to the 787 not the 777

Correct, sorry for any confusion caused by my double dutch. I will edit my post so it makes more sense. I used the fuel figures from this website here: http://planes.axlegeeks.com/compare/...7-8-Dreamliner - I lay these up in my spreadsheet side by side as opposed to calculating relative numbers which can be confusing to keep track of. The 787 according to that site has a 22% fuel efficiency over the 777-200ER, but my above post is about how the cost translates on a per passenger kilometre basis if the fuel is cheap & one could purchase an older 777 (roughly the same age as AIR's fleet) for a reduced price.

I fully admit I am missing some factors as this was just something I quickly slapped up this afternoon, so would be interested in any additional information out there around the *other* quantifiable cost differences between these two planes (or older vs newer planes).

[biker]

[QUOTE=stoploss;602004]

The fuel efficiency should apply to the 787 not the 777[/QUOTE
Biker I think thats what Gekko was saying "working on a fuel inefficiency of 22% for the 777-200ER"

Ah, quite so Gekko. Read it as efficiency not inefficiency ;-/

[Joshuatree]

keep at it kiwi gekko, it is int; what does a new 787 cost($224 to $264 mill last i looked) .Buy a 777 and refit it cost what $20 mill total , pay it off quick smart and the higher maintenance and fuel costs may be negated against paying off a bank interest etc over a multitude of years. And these planes are often still in service after what 25-30 years?

[slimwin]

The 787 will last you ten years without major work. The old 777 ,less than two...

[winner69]

Way back on this thread I think it was Roger (probably) who said that Chris Luxon told the annual meeting they paid only $150m for their Dreamliners and they're getting 24% better seat mile costs than the 767-300's that they were replacing.