Wednesday, August 14, 2013

Retro Fitting The 737 NG vs. The Max

Scimitar Winglets are a Retrofit Of The Max's Advanced Winglets 

Awhile back a blog was presented quoting O'Leary, Ryan Air's sentiment relating to purchasing the Max. One Man's Rubbish Is Another Man's Feast(updated).

Now a clearer picture emerges. Is it possible to retrofit an NG to come closer to the Max? The article link, at the top suggest this possibility. I am not naive to think you can make a silk purse purse out of, well... an NG. However, you can dress it up in white tie, old style, and take it to market.  The scimitar vs the Advanced winglets looks the part, but that is only the tip of the Iceberg, sorry I couldn't resist the metaphor. The Max has so much more after the wingtips, but the NG can cut the fuel margin in a meaningful way with those retro fitted scimitars.

Scimitar for NG

Advanced Winglets For Max

The after market retro-fits can bridge a small gap stretched out by the Max. However, that can only go so far. Boeing is striving for commonalities for its over-all family of aircraft; as customers like promoting it crews, maintenance and staff from model to model with little as possible retraining. They prefer to train operations as an upgrade process, rather than a do-over process. The do-overs situation currently exist with Boeing. The good news: the Max will look and feel like a 787 plane. The airline teams will have familiarity from the Max to the 747 line of aircraft as the 777 will fly like a 787 and the 737 Max will have orientation towards a 787, like its interface of controls, with picture perfect 787 like commonalities. The NG will remain an old school orientation of the 737.  Ryan only flies the 737 NG, and does not need those advanced commonalities added from model to up-sized models, so stick on those add-on scimitars, and gain the efficiency. "We don't need (no) stinking commonalities"! Ryan Air only flies the NG with better economics.  End of Business Plan!

I now see clearer what O'Leary plans are, Ryan Air is going to go the "upgrade route" with his NG and bridge the operational cost advantage of the Max with a lower upfront capital investment for its new NG's, and any new innovations that would enhance the NG's performance. Ryan Air will stay competitive for a long while with that strategy of not going all-in with new Max's. At some point when the teething woes of the Max works out, a fleet replacement order will be up for grabs between Airbus and Boeing, with Boeing having the inside tract for ordering Max. The low cost purchase advantage the NG has, should milk itself out in the next ten years where the production wait time for MAX will open spots for a Ryan Air to jump in. The clues are available concerning Ryan Air's secret strategy of using lower capital investments as part of its over-all cost of operations.

Instead of paying a smaller fuel bill by flying the Max, it will pay a smaller monthly interest cost on its capitalization of equipment, by buying the NG's at severe discounts. Instead of adding on benefits of technology with multi-model commonality (which increases purchase cost and monthly service interest), it does not need for its operations. It keeps its maintenance, training, and operations, leaned out. The NG will be viable and operationally competitive over the next 10-12 years by managing its bottom line through investment controls and depreciation rather than having lower fuel bills and technology changes affecting the bottom line through unknown risks. 

This is a very unique approach as is Mr. O'Leary is a unique CEO. The owners/competitors using the Max, must offset its incidences of teething risks free from its own operational mistakes with significantly improved operations costs that will pay for the increased capitalization cost of money when buying the Max.  Ryan Air avoids Max interest when buying the NG. Instead of the Max, Ryan Air strategy tries to avoid spending on things they don't need such as Boeing's commonality advancements for its family of aircraft. So O'Leary's rubbish are things he doesn't want or need at this time. He will buy the Max when its advancements costs are paid for by other customers. O'Leary then will pull the Max out of his Rubbish bin and fly on.

I guess I like O'Leary after-all, he makes me think and laugh at the same time.