The Game Changer

 The most common phrase used to describe the new fuel-efficient Boeing 787 “Dreamliner” is “Game Changer.” The phrase was repeated endlessly by Boeing company officials during the long gestation period that finally came to an end this month, when the first operational Dreamliner, belonging to All Nippon Airways, began making scheduled flights.

ANA president Shinichiro Ito happily repeated the “game changer” phrase during the aircraft’s first “revenue” flight (most of the tickets were actually sold through a bidding process at very high prices) flight from Tokyo to Hong Kong on Oct. 26. The airline  began regularly scheduled flights within Japan on Nov. 1.

The Dreamliner is considered a game changers (some have said it is the most significant advance in commercial aviation since the Concorde or even the Boeing 707) primarily because of the special carbon fiber materials used to make the wings and fuselage which reduces the weight of the aircraft considerably and thus requires less fuel.

That enables the airline to cover longer distances with fewer paying passengers and still make a profit. That’s because the airline does not have to pack them in like they do with the current long haul workhorses, such as the Boeing 747, requiring more fuel to carry the load. The Dreamliner is capable of flying nonstop from Tokyo to Europe or to the U.S. East Coast. ANA plans to fill only about 160 seats on its long-haul flights.

Yet ANA’s Boeing-787s won’t be making international flights for a few more months. For the time being they are flying the skies to decidedly un-exotic Japanese destinations of Okayama and Hiroshima. It won’t be until January at the earliest, that ANA will start putting the Dreamliner on international routes, starting with Tokyo to Frankfort, Germany.

When it became the launch customer, the airline had hoped, to fly passengers to Beijing for the 2008 Olympic games, but like other airlines, ANA  was subjected to seven completion dates delays stretching over three years, as the Boeing company worked out the problems of this very complex aircraft with its revolutionary carbon fiber basic structure.

ANA anticipates taking delivery of nine new 787s before the end of the fiscal year in March, 2012. Present plans call for putting the first seven aircraft on domestic routes  where fuel efficiency is less a concern, and the latter two deliveries on international routes. The airline’s utilization plan assumes that the later models coming off the production line they will be lighter than the earliest models.

Boeing has had difficulties keeping the weight of the aircraft down to meet the aircraft’s advertised fuel efficiency. The 787 models gained weight with succeeding models due in part of perceived structural weaknesses that had to be addressed with additional titanium fittings (ANA’s Dreamliner is the 8^th model to roll off the assembly line.)

The first aircraft in service are said exceed the original target weight by a several tons. Boeing officials have pointed out that the stronger structure means that the aircraft can carry more fuel needed for the long distance flights. That prompted  Boeing chief project engineer for 787, Mike Delany, to assert that the “Dreamliner will meet its targets on range and payload and still deliver on the original promise of being 20 percent more fuel efficient.”

The lack of promised fuel efficiency is reportedly one of the issues on the table in negotiations between ANA and Boeing for compensation for the delays in delivering the promised aircraft. While the details of the negotiations are governed by a confidentiality clause, they are thought to include such things as loss of anticipated profits and fuel efficiency.

Because of the delays ANA has had to re-jig its routes and alter its plans by putting more emphasis on domestic flights than it had hoped. ANA president Ito told reporters that its large number of  787 orders is aimed at the corporate goal of expanding service throughout the world eventually superseding Japan Airlines as Japan’s premier international carrier.

“With the 787 some previously unprofitable routes become feasible,” Ito said. ANA has been expanding its international coverage, using Tokyo’s Haneda Airport (opened for international traffic one year ago this October) as the hub. It now has 12 international flights from that airport.

The airline was able to work around the delivery delays by postponing the retirement of some aircraft. Boeing also helped ANA to obtain aircraft to help as a bridge during the last three years. ANA broke with tradition of Japanese airlines by choosing to use Rolls Royce engines over General Electric. Ito praised their ruggedness, especially in the wear and tear of shorter domestic routes.

Negotiations with Boeing over compensation for the delays are “close to a decision” Ito told reporters. The aircraft industry in Asia will be watching the outcome, as ANA is not the only airline in Asia that has experienced delivery delays. Will it be for cash or some other compensation, such as steep discounts for other aircraft?

Voicing concerns over the delays, Air New Zealand has said it will seek compensation. On Oct 17, China Eastern Airlines lost its patience and cancelled its order for 24 Dreamliners, raising questions just how Boeing will reallocate the planes.

In recent years as its main competitor JAL went through bankruptcy, closed down routes and laid off thousands, ANA has had it relatively easy but cannot rest on its laurels. This year JAL has had its heavy debt burden lifted after a court-supervised reorganization. With its new found profitability, it is poised for new lines of attack.

It plans to open a new international route linking Tokyo and Boston, the first new airline route out of Narita for nearly a decade; it is linking up with Qantas Airways for its new budget airline JetStar and reportedly talking with JetBlue. And it is scheduled to get five of its own Dreamliners.

ANA is not ignoring the fast-moving trend towards budget carriers in Asia either. It plans to launch two budget airlines in 2012, Peach Airlines, of which it owns a third with Hong Kong investors and  Air Asia Japan in partnership with the Kuala Lumpur-based budget airline, Air Asia, the largest of its kind in Asia will operate from Kansai Airport near Osaka with domestic destinations and flights to Korea.