"Not so fast on Sonic Cruiser outlook"

Tuesday, May 28, 2002

Not so fast on Sonic Cruiser outlook 
By Peter Robison
Bloomberg News

 
CHICAGO - Boeing's Sonic Cruiser, proposed as the fastest jetliner since
the Concorde, may not be fast enough, some airline executives say. 
Boeing promises a plane that will fly at 98 percent of the speed of
sound, cutting as much as an hour for every 3,000 miles flown. But
Cathay Pacific Airways, Deutsche Lufthansa and other carriers question
whether that will make up for inevitable delays on the ground. 

"Perhaps it's got to be a bit faster than Boeing is currently planning,"
said Tony Tyler, Cathay's director of corporate development. 

Karl Ulrich Garnadt, a senior vice president at Lufthansa, said
passengers may save only a half-hour from Frankfurt to New York.
"Where's the value?" he asked. 

The comments show that Boeing, which proposed the new delta-winged craft
with great fanfare last year, hasn't convinced at least some airlines.
It's likely to make further design changes and could end up developing a
supersonic plane or a slower, more fuel-efficient one, analysts said. 

"These are drawings that may ultimately produce something, but we're a
long way away from the wind tunnel," said Richard Aboulafia, an aircraft
consultant at the Teal Group in Fairfax, Va. 

Boeing is counting on the new jet to maintain its edge over Airbus. Its
European rival has gained market share with three new jets since the
1980s and expects a fourth, the 550-seat A380, to enter service in 2006.
The 250-seat Sonic Cruiser would fly by 2008, setting up a battle of
size versus speed. 

"Nothing has changed about our plans," Alan Mulally, the head of
Boeing's airliner unit, said at the company's investor conference last
week. "One of the most exciting new opportunities in travel is the Sonic
Cruiser." 

Airlines, distracted by the post-Sept. 11 slump in air travel, aren't as
excited in public as they were a year ago, however. 

American Airlines Chief Executive Don Carty said this month that he may
be retired by the time the plane flies. Carty, who is 55, said last year
American would sign up for the first three years of production if it
could have them to itself. 

"Most of our customers are focused on the problems of today," said John
Plueger, chief operating officer of International Lease Finance, the
world's largest aircraft lessor by assets. 

The plane "is a great idea, but we're still waiting for a bit more
definition," he said. "Certainly there is a concern that the speed
advantage maybe isn't enough. Like most things, it's going to come down
largely to a matter of cost." 

Cathay's Tyler said he's skeptical passengers would pay more to fly at
the speeds Boeing is proposing. 

The carrier would also prefer a bigger plane, about 300 seats, he said. 

"If they can make it work it would be fantastic," he said. "But is it
going to be fast enough to make a difference? It's got to offer
something that we could charge a premium for." 

Airlines may find it cheaper to pack passengers onto the A380,
Lufthansa's Garnadt said. The carrier is buying 15 A380s. 

"If you've got an A380 with 25 to 30 percent lower unit costs against a
Sonic Cruiser, forget it," he said, adding that the Boeing plane may be
useful only in a "limited number of markets and with a limited number of
aircraft." 

Boeing argues that the A380 is a mistake because travelers prefer
smaller planes flying direct routes. 

It says airlines won't need to charge a premium for the Sonic Cruiser
because it will cost about as much to fly as today's planes. 

Airlines can also get more out of them by squeezing in more flights a
day, said Lori Gunter, a Boeing spokeswoman. 

"Instead of needing two or three airplanes, you only need one," she
said. "That's a big part of the value equation." 

It isn't clear how much the speed will save airlines, Mulally said.
Boeing is working with airlines to determine the "value of speed," he
said. "We don't know the answer." 

With skepticism over the use of flying just below the speed of sound,
Boeing may change plans, Aboulafia said. It could delay the Sonic
Cruiser to allow time for supersonic technology to mature, or it could
develop a more fuel-efficient replacement for its 757 and 767 jetliners,
he said. 

Boeing has hinted at both options. Last year, Mulally said Boeing has
worked on a subsonic 757-767 replacement and that a second design "sweet
spot" for the Sonic Cruiser is at Mach 1.2, above the speed of sound. 

"It's not so much the technical ability to go 1.2; it's there," Gunter
said. "It's just if the cost is worth it - the fuel consumption with
today's technology is considerably higher. It's possible the Sonic
Cruiser we talk about today is a step toward 1.2 at some point." 

T. Allan McArtor, chairman of Airbus' North American arm, said he bet
Mulally a steak dinner if any airline flies the Sonic Cruiser at Mach
0.98, the speed initially proposed. 

"They're going to build a new aircraft; we just don't know what it is
yet," McArtor said.


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