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- [00:02]
A
I'm Jon Ostrower, editor in chief of the Air Current.
- [00:04]
B
I'm Brian Summers. I write the Airline Observer.
- [00:06]
C
And I'm Brett Snyder, author of Cranky Flyer. You're listening to the Air show, the podcast where we talk about what goes on in the business of the sky. And as you probably already guessed, John is not out and about this week.
- [00:19]
B
How about that?
- [00:20]
A
I'm back. And let me tell you, the last 30 days on the road have been intense. We're actually recording this pretty much threading the eye of a needle. I got back late last night and I have been on about a dozen flights on three different US airlines. Had my first A321neo flight on United.
- [00:39]
B
Did you use the self service snack bar, John, in the back of the airplane?
- [00:43]
A
I did not, but I did connect my Bluetooth headphones. I thought that was pretty cool.
- [00:46]
B
Well done.
- [00:47]
A
Thank you. Also had my first Starlink and SES in flight connectivity flights. That's the teeny tiny, sorry, teeny tiny antenna that we have talked about.
- [00:56]
C
Thank you.
- [00:58]
A
Regional airline connectivity is in actually really good hands with these new technologies. Also added two new airports, Albany, New York and Bentonville, Arkansas. Who knew had also had some comically long taxi times at o' Hare and as many Milanese tortas at Frontera as I'm legally and biologically allowed to consume.
- [01:17]
C
Yeah, I support that decision. That place delicious.
- [01:21]
B
I think it's too heavy of a meal on a travel day, frankly.
- [01:24]
C
Yeah, we know Brian just wants caviar. He can't settle for this peasant stuff.
- [01:29]
A
Oh, stop.
- [01:30]
B
So let's just unpack the aviation angle here. John, you have covered a lot of ground in these last 30 days doing reporting for the Air Current. You've really been a machine while Brett and I just sit here in Southern California and enjoy the weather. So how about we just fire some questions at you and we'll see how this goes. What's the most important thing that you've learned while on the road?
- [01:53]
A
Oh, man. Every time I have trips like this, I kind of come away having a newfound respect in how hard it is to make this whole thing tick. A month ago, I started this whole whirlwind in D.C. and that was for the U.S. chamber of Commerce Aerospace Summit. But there were some real twists and turns that came along. Some really interesting and challenging reporting concurrent with that trip. That week actually started with a really great conversation with Airbus CEO Guillaume Free. We covered a lot of ground, but what immediately popped from that interview was how the company is thinking about the A220,500. That's the notional third member of the A220 family stretched to seat up to 180 passengers.
- [02:38]
B
I know a lot of network planners want to know, are we going to see this airplane?
- [02:43]
A
I strongly suspect we will. Fourie effectively put a target on 2026 for a decision. And there are really clear signals that I'm seeing from the perspective customer base that this airplane probably won't actually have transcon range, which by the way the exist thing 100 and 300 do. What this means is that Delta and Air France won the debate over JetBlue. So again, think of an airplane that does Minneapolis to Orlando north south as opposed to Atlanta to Seattle east west. But look, this is a really important caveat. I think this is where Furie really drew the line in the sand and it sets up a challenge to the Airbus team in, in Mirabel and Quebec and Mobile, Alabama to write the industrial ship of this aircraft program and get to rate 14 next year as they're currently targeting.
- [03:33]
B
Rate 14. That means 14 airplanes a month, right?
- [03:36]
A
Yeah, yeah, that's, that's the monthly production rate for the airplane and they're at about half of that right now. Reaching that rate is number one central to breaking even on this program and actually making money on it. And ultimately, as for you put it a prerequisite for launch in the future of the 8020 program broadly to introduce a third member of the family.
- [03:59]
C
Okay, so I'm glad we started with the low hanging easy stuff here, like nothing that important. I was just going to ask the average speed of a Swallow, but that's fine.
- [04:08]
A
Laden or unladen?
- [04:10]
C
African or European, sir. Anyway, I want to talk about something else that happened when you were back in at the beginning of your adventure here. You did manage to snag a scoop on the Avelo deal with embraer for the 50 E195E2 aircraft.
- [04:28]
A
Man, that was a wild one. Okay, so there's lots of triangulation and pounding the pavement here, but it ultimately culminated in a deep conversation with Avelo CEO Andrew Levy and CFO Hunter Key about the strategy underpinning that deal. And also the piece of key reporting from the Air Current was that Embraer was going to be providing a significant amount of debt financing to Avela as part of that transaction to get those airplanes in the field. I think the biggest insight that I gleaned from that interview, and you can read all about this on the Air Current, really hits on the idea that the lower trip costs of the roughly 140 seat airplane in the form of the E195E2 and its lower fuel burn means that the goal for Avelo, simply, if only it was that easy, is to lose less money in the troughs of demand that come along with being a ULCC think allegiant on Tuesdays.
- [05:25]
C
Right.
- [05:26]
A
Rather than really like trying to maximize how much money you make in the peak. So this is really about them stabilizing their business model. I think it was really an interesting transaction.
- [05:35]
B
A very good reporting here. I do think it's going to take a lot for Avello to stabilize its business model. I know you and Brett, I think were briefed by Andrew Levy and Hunter.
- [05:48]
C
Key is that I talked to Andrew, but not Hunter.
- [05:52]
B
Okay, so I was not briefed, gentlemen. And I don't think that that was just by accident. So a few months ago I had my own scoop in the Airline Observer. Somebody sent me a deck that Avello had put out and this was an airline that for a while was almost completely out of cash in the low millions. It struck me at the time that this was an airline that had to do something big to get back on track. It sounds like this might be the Embraer order. I talked to a lot of people in this industry and I cannot tell you guys that very many people, at least in the commercial world are particularly bullish on this airline at best. I think a lot of competitors don't think about Avelo and at worse, let's just say there's some skepticism and that hasn't changed based on this order. What are you guys hearing?
- [06:44]
C
Yeah, so I don't have a problem with this order at all. I think it's great, especially if it gives them some cash or debt finance, whatever it is that has made them not have to worry about horrible failure. That's a win for them. But this does sound like they've moved on to the breeze mantra. David Neeleman's mantra, trip costs over unit cost. My problem is on the commercial side, I'm still not sure where they're going going with this. I mean, there's New Haven. We all know that New Haven is the rock that keeps them in business despite some of the hiccups it's had. But then what? I mean, there's Wilmington, couple of Wilmington's, there's Lakeland, Concord outside Charlotte. There's nothing that's really been a runaway success. I mean the west coast is gone. I just don't really understand what they're trying to do. And maybe they have this plan and we'll hear more about it when the Embraers start flying. But it's just a big question mark to me that this feels like a good deal for them. Extends their Runway but I'm not sure where they go. So John, after that I can't keep track. Where did you go after this?
- [07:52]
A
So I came home for. For a little while, not that long. And then I went to Arkansas. So let's talk about the UP Summit. This is put on by venture capital fund UP Partners and the Walton and Perot families. Genuinely, this is like no event I've ever been to before. Think like Davos, which another event that I've also never been to meets like a scaled down version of Oshkosh but in Bentonville, Arkansas where Walmart headquarters is based. As I'm watching single seat electric aircraft fly around pylons and do, you know, stunts and all kinds of crazy stuff. Drag racing between Teslas and Ferraris on a closed Runway. P51s doing fly by. I realize if you had told me that my 7 year old organized this event, I absolutely would have believed you. It was wild.
- [08:48]
C
This sounds absolutely ridiculous. It's just like a bunch of toys.
- [08:54]
A
That was part of it. This was a gathering of industrial and political leaders from both parties. A subtext that really ran through the event was the future of US and China and the global competition around innovation and industrial development. It was probably pound for pound one of the most interesting events I've ever been to. The main program was really a series of talks by founders, effectively product pitches on what they're working on as they look to raise capital and awareness of their product. There were some really far out concepts. Like the company that wants to launch a satellite constellation that will shine reflected sunlight on a 6,000 acre area on the ground at night.
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Yeah, what could possibly go wrong? Let's set that aside for a second. But there were really some trul. Fascinating ones on the future of automotive battery technology. And by the way, did you know that the second largest sovereign wealth fund in the US after Alaska is in New Mexico? Really just a fascinating series of presentations. This is a huge swath of the US economy right now that is trying to rev itself up into the next generation of technology.
- [10:02]
B
John, this is really interesting stuff. I am of course a little bit more narrow focused on airplanes that fly around with people on them. What else did you learn about those? I think we saw something about a windowless business jet. Did they announce that?
- [10:20]
A
So you were talking about auto aerospace. They formally launched their Phantom 3500 super midsize business jet. It's a startup in the business jet world and it's leveraging technology that's been really the holy grail of aerodynamics. It's called natural laminar flow, which in short keeps the airflow over the wings and fuselage over a longer distance before it becomes detached and turbulent and that significantly reduces drag. I don't need your emails and phone calls, aerodynamicists. I know I'm paraphrasing here, which means ultimately you don't need as much thrust in the engines or in turn as much fuel to get across the country.
- [11:04]
B
John, we may have some listeners who are going to go buy this Phantom 3500 super mid sized business jet. But any lessons here here for the overall commercial industry, Maybe we might see something like this 50 years hence on a commercial airliner or is that not really the case?
- [11:23]
A
I think the real question you're asking is does this thing have a chance and does this technology actually scale? You know, I always felt the joke about laminar flow was like when people look at the indestructible black boxes on an airplane and say, well, why don't you just make the whole airplane out of that? And you know, lots of reasons you wouldn't want to do that. But this is kind of like that. But they've got some serious engineering horsepower behind the effort. But really, I think to the core of your question, there's one theme that sort of run through my reporting career. It's how hard it is to break into civil aerospace as an oem. That's original equipment manufacturer. For those playing the acronym game at home, think Boeing, Airbus, ge, Gulfstream, Pratt Whitney. But what's fascinating about each new entrant that has survived to reach market, notably I'm thinking of sort of Honda Jet. Here they've brought a major focused leap in technology and efficiency. A real differentiator versus the competition. But technology isn't enough. There are lots of good ideas out there that can't get to market. Certification and industrialization for auto is going to really determine if they'll survive. Let's put it this way, we'll have a lot more in the air current soon on all of this.
- [12:35]
C
How much of this is just Silicon Valley tech? Bullcrap, vaporware, whatever. I mean, how many of these things are actually serious and not smoke and mirrors?
- [12:44]
A
Well, look, candidly, there's a lot of froth here. A lot of these projects won't come to fruition. They're going to get either Bought up. Whether it's an IP stack or any kind of consolidation, or they're just never going to get to market. I think the modern Silicon Valley ethos comes with a lot of over promising. And it's interesting. You kind of hear some founders talk about sort of how they raise money. It's like the bigger the goal, the bigger the fundraiser can be and eventually reality has to take hold. And frankly, one would hope that it would sooner rather than later. But look, some of these technologies will come to market. I think one great example of this is Beta Technologies. They were backed early on by UP partners and they have an electric airplane flying passengers doing market surveys in Norway right now and last week announced plans for an IPO as they approach certification for their conventional takeoff and landing electric aircraft in 2020. But look, in all seriousness, up was an unapologetically optimistic view of what a technology centric future could look like on this planet. There is perhaps a uniquely American worldview here about entrepreneurship and the role or absence of government regulation or involvement. But really, you know, this is what happens when people almost myopically focus on the goal of developing something new, new for the world to use. And that level of energy and excitement is, I think, really, really valuable. Obviously, it's a question of how it's focused and harnessed and cultivated across the overall stakeholder ecosystem. Yes, that means government, yes, that means regulation, yes, that means customers, and yes, that means, you know, labor and capital markets, all of those things. But fundamentally, it was really intensely exciting to kind of step into this genuine bubble where all of this action was happening.
- [14:38]
B
Let's take a break here, and when we come back, why don't we talk about some old school aerospace?
- [14:45]
C
All right, Brian, how many miles have you bought this quarter?
- [14:49]
B
Look, some people collect sneakers. I collect miles. I like being ready to book what I want when I want it.
- [14:55]
C
And you're not the only one buying points. And miles has become one of the most consistent performers in loyalty. It's simple, scalable, and it works because it gives travelers exactly what they want. Flexibility right now, especially when you're just.
- [15:08]
B
Short of a redemption or you want to lock something in fast. I like knowing I've got options.
- [15:14]
C
And it's not just about the transaction. The data tells the real story. Members who buy miles fly more, earn more, and redeem more. They become your most valuable members.
- [15:23]
A
I'm seeing more ways to buy all the time. Accelerating past earnings, monthly subscriptions so you don't have to think about it. Even exchanging points for my credit card program.
- [15:31]
C
Exactly. Plusgrid powers all of it across the entire loyalty lifecycle. And it's not guesswork. Its platform uses real time data to deliver the right offer to the right member at exactly the right moment, which.
- [15:43]
B
Is how they keep getting me too often.
- [15:45]
A
And for loyalty programs, this solves the real problems. Plusgrade keeps members active, bridges redemption gaps and grows value. Whether it's from a first time buyer or a super engaged member like you. It's predictable revenue, better performance and it leads to a stronger program overall. And in today's market, that's the kind.
- [16:03]
C
Of loyalty strategy that lasts more than 250. Airline hospitality, cruise passenger rail and financial services companies trust plusgrade to create new meaningful revenue streams through incredible customer experiences. As the ancillary revenue powerhouse, Plus Grade has generated billions of dollars in new revenue opportunities across its platform while helping millions of travelers go further. Learn more@plusgrade.com.
- [16:30]
And we're back. So John, you mentioned Albany, New York. Why were you in Albany?
- [16:35]
A
I made it to Niskayuna, New York. I really hope I'm pronouncing that right. It's near Schenectady, which is where GE Aerospace has its research center. It's like a university campus with just incredible industrial testing facilities. It is really one of the crown jewels of the US industrial infrastructure. So GE actually originally had planned on having an investor event this summer in Paris. Obviously that got sidelined by the Air India crash and this was sort of a makeup for that to talk about engine durability and that it really gets to the heart of the challenge with the latest generation of jet engines. Look, the jump in fuel efficiency that these new engines promise has largely been consumed by higher maintenance costs, industrial and manufacturing quality issues across manufacturers, and just lower time spent on wing compared to the generation that they replace. This is not unique to ge. Pratt is is in the process of of dealing through their powder metal issues. Just see any bankruptcy filing by by Spirit Airlines. To give you a guide for the operational impact of that, Pratt's also rolling out a new upgrade package called the HS plus the hot section plus coming for the upgrades for their turbine blades. Rolls Royce too 787 A330 Neo are both getting upgrades. The Trent 1000 and 7000 engines that power those wide bodies. This durability issue, the how long the parts inside the engines are surviving is an endemic problem for the engine business because of the new technology and how it manifests hotter temperatures, exotic materials and like. Look, this is not new in terms of durability upgrades for for new engines, it's just manifesting different and very, very disruptive scale given how much bigger the industry is, given the thousands and thousands of aircraft delivered by Boeing, Airbus and Embraer in the last 10 years with this new generation of engines.
- [18:39]
B
John, I've heard so many complaints about this engine issue. Most recently perhaps on the show when Fly A Deal CEO Stephen Greenway came on and complained quite a bit about engines.
- [18:52]
A
Exactly. You can draw a straight line from his frustration and this event at GE for investors, the Air Current was actually invited to kind of be a fly on the wall for all of it, which was really a fascinating experience to see also how differently companies communicate with the media versus investors. Different vocabularies, different priorities, different messages, but very different level of information and granularity that's shared. I could get off on a tangent there, but look to remind our listeners, Fly A Deal the Saudi LCC operates its A320s. Any 320neos. Importantly here in some of the hottest and harshest conditions on Earth, the sand and dust in the air literally eats away at the turbine blades as all that combusted fuel and massively compressed air helps spin the front fan to ultimately push the aircraft through the sky. It is an unbelievably complex system that these turbine blades operate in, but they take a lot of, a lot of punishment while they're doing it.
- [19:54]
B
So I get that there are good reasons why these engines, especially in certain environments, are less reliable than airlines would like. But when airlines talk to me, they say they don't really care, John. They just want it all fixed. What is GE doing to fix this?
- [20:12]
A
What do they tell you on the opposite end of all the new entrants? This is what it means to be an established player in this business. You know, it's not as simple as going to Dubai or Jetta and grabbing a sample of, of the air and the dust that, that is in the air. You know, GE at the research center actually created a proprietary dust that matches the regional characteristics in places like India, China and the Middle East. And what this let them do with the geologists that they have on, on staff, metallurgists, aerodynamicists, let them replicate the damage in their own test rigs. And ultimately the goal was to figure out a way to turn off this damage from accumulating. They do that through a revised design. What's wild here is that changes in the coating and shifts in the cooling channels in turbine blades that literally measure in the tens of human hair thicknesses, let them address this like, this is a unbelievable level of precision and complexity to figure out how all these advanced alloys interact with one another over the long term. I mean, in really the, the harshest industrial environments in the world, and do this reliably. Okay, so coming back to the whole point here, so on the Leap One A, on the A320neo family aircraft, they're now getting this new high pressure turbine BL and and other components new on deliveries. And Leap one B operators will actually get it starting in the first half of next year when it's certified for the 737 Max. Okay, so what does this mean? Okay, for fly a deal? It really means that the roughly 4, 000 takeoffs and landings that they were getting on a new engine before it came off the wing, that'll be closer to 8,000 and really a lot closer to what GE is seeing on the CFM56 today. That's the difference between 18 months for a brand new engine time on wing versus about four years. And by the way, for airlines in the rest of the world in more neutral and benign environments, we're talking about getting back to about 17,000 cycles, which puts them squarely within that CFM56.
- [22:29]
B
They are going to be very happy with that development.
- [22:31]
A
Oh, absolutely.
- [22:32]
C
There are so many questions about what you've just talked about. Like Pratt, I want to know more about Hot Section plus this sounds like a new streaming service.
- [22:42]
And also why GE can't just use its engines to fly dust over over from different parts of the world. Instead they have to make their own. But that's fine. Is the blade the only problem and, or are there other things that need to be addressed as well here to actually make this happen? Because, you know, the way you make it sound is, oh, we just do this new high pressure turbine blade and voila, it's just as good as all the others. But is that really the case?
- [23:09]
A
Yeah, I mean, hardware was the most obvious focus of the presentation, but there are a number of other things that they're doing to kind of bend the economic curves here. So one of the things obviously how you repair, use serviceable material, how you put parts that are coming off of engines, restoring them, putting back in the, in the fleet, you've got things like AI and analytics. They will do a borescope inspection on an engine and take a picture at a certain point in the engine's life and then use AI models to then index where and when these engines should be sequenced for entry into the overhaul process in terms of how they're degrading. So to really kind of map that and use, use these technolog. But there are other parts of, of the engine. There are a number of upgrades that GE and Safran have done for the, the Leap family. But look, I mean this really comes down to sort of like what does this do to the economics of these engines?
- [24:06]
C
Well, that's what I was going to ask. I mean, is this something that they think they can do within the existing price point framework they have or are they like, oh, you want your engines to actually function properly, that's going to be twice as much money now.
- [24:19]
A
Well, you know, hit the nail on the head, which is that, you know, when Ben Minicucci came the show last year, he said that the Leap overhauls on their, on their engines were millions of dollars more than first anticipated. You know, just for comparison, GE was saying that they were going to have the same maintenance costs for the Leap as they had for the CF56. Like this has been hugely, hugely disruptive for, for airlines, right? If you don't have a spare engine ready to swap in, it's a bad day. But like there are huge incentives for both airlines and engine makers to increase time on wing. That's goodness. It really is. And for ge, which you know, makes its money selling spare parts and services in the aftermarket, they initially bet on service agreements that have some airlines paying a set per hour operating cost that was determined before all this went sideways. So ultimately they have to eat some of that overage. And for an airline, obviously just having an engine that is operating reliably and isn't being damaged and degrading faster than they would expect, go straight to the operational reliability of the overall fleet. And so look, there's a lot of good reasons why, why this is the, the focus. But fundamentally, I think stepping back from all this, GE Pratt roles need to restore confidence that new technology can work in this business. There has been a real aversion to the cost and expense that comes along with that. And I think that's going to be really essential, not just from the economic perspective in the short term, but ultimately what the long term adoption is going to be for this next generation of single aisle airplanes that's going to eventually replace the the A320 and 737.
- [26:04]
C
So we can't just bring back the JTads and call it a day.
- [26:07]
A
I think we should actually bring back the JT8s and call it a day. That would actually be really freaking cool.
- [26:11]
C
Let's do that.
- [26:12]
A
That actually better yet, let's bring back the JT 90s, okay?
- [26:16]
B
All right. John, thank you for that engine. Goodness. I know you cannot sit still for long. Where are you going next?
- [26:23]
A
Okay, so while I'm home long enough to go to some kids sporting events. Go Lions. Go Grey Wolves. Do some laundry. I am headed for my last leg of travel for a few weeks. Thank God. I'm headed to the east coast for the Washington D.C. edition of the aerospace event. Full disclosure, The Air Current is the proud media partner for the event on October 13th and 14th. The Beverly Hills event in the spring is the template that's mostly focused on civil aerospace. This DC event takes a turn toward looking at defense aerospace technology in the intersection with U.S. policy and geopolitics and policymakers and industry. It promises to be a great gathering, Brian. Also, can we tease what we're up to next week?
- [27:06]
B
I think that we can. You and I are headed to New York City for the annual Wings Club gala. We will be in our tuxedos. I should say that we're going to be sitting at the Southwest Airlines table. In full disclosure, if you are a fan of the show, please come find us. But just remember something that I learned when I was covering sports. Sometimes it's not as great as you think when you meet your heroes, so just be aware. Better yet, we've got a big interview queued up in New York that I don't think think you want to miss. I'm not going to spill it here, but I want you to know that I've been in touch with this airline's people, and we're supposed to address the.
- [27:48]
A
Person we're interviewing as Sir Paul McCartney supplementary type certificates. That's all I'm saying.
- [27:56]
C
Can we just go address the fact that Brian said he's someone's hero?
- [28:01]
B
It was a joke, Brett. You're never supposed to meet your heroes. It's a. It's a sports joke.
- [28:05]
C
Oh, no, I get the joke. I just. I really just wanted to drive that home.
- [28:10]
A
More to the point, I'm really looking forward to this one. Stay tuned.
- [28:15]
B
And just a programming note, we will be back in two weeks with this.
- [28:19]
C
Exciting interview you've been listening to, the Air Show. If you have suggestions or questions for us, or if you're interested in sponsoring the podcast, go to our website, theairshowpodcast.com to get in touch.
- [28:32]
B
The Air show podcast is produced and edited by Sarah Fay. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.