Airlines Investing In Interiors.
Airlines Investing In Interiors: What, When And Why.
As airlines continue to make changes in onboard service, the industry is engaged in a wave of cabin make-overs and modifications.
In fact, spending on cabin interiors is projected to exceed $2 billion for narrowbody and widebody aircraft in 2026—double the amount spent in 2016—according to data from ICF in London. This trend, reports ICF, is driven by Airbus A320 and Boeing 737 upgrades and the introduction of next-generation jets such as the A350, Boeing 787 and the new 777X.
“Interior retrofit markets along with passenger-to- freighter conversions will have the highest growth rates for narrowbody aircraft, while the majority of the growth on the widebodies will be cabin systems upgrades where there are connectivity opportunities,” says ICF Principal Richard Brown.
He explains that a new aircraft’s entry into service with a carrier’s fleet also provides MRO opportunities for standardized, fleet-wide cabin interior modifications. “It’s all about maintaining a consistent brand image and capturing lucrative higher-yield business travelers,” Brown notes. “If a new business, premium-economy or economy-class cabin is installed on a new aircraft such as the 787 or the A350, some airlines may choose to upgrade their existing aircraft—such as A330s or 777s—to provide a similar look and feel.”
Brown also reports that airline profitability is having a major impact on discretionary spending for upgrades. “Recent profits have allowed airlines to spend more on discretionary items such as new connectivity, larger overhead bins and mood lighting,” he explains.
Kent Craver, regional director of cabin experience for Boeing Commercial Airplanes in Seattle, agrees that the interiors installed in newly delivered aircraft are a catalyst for upgrades and changes to aircraft already in service. However, he points out that the main focus of cabin innovations today is on business class and the growing number of premium-economy installations.
According to Craver, business class represents “an interesting evolution” in that it has essentially replaced first-class service on many aircraft. To illustrate, he says that prior to 2008, about 70% of 777s were fitted with first-class cabins, but during the first seven months of 2017, only 22% of deliveries of new 777s and 787s were so equipped. “In 2008, a business-class cabin with full-flat seats accounted for 65% of our 777 deliveries, but with the exception of those low-cost carriers operating 777s and 787s, that number increased to nearly 100% of the 777s and 787s delivered in 2017, through July of that year,” he remarks.
As Craver explains, full-flat seats—with a recline of 180 deg.—essentially provide the passenger with a bed as well as a seat. “They are also angled to provide direct access to the aisle. That is where the competition is now,” he notes.
Still, first class is not likely to disappear, Craver stresses. In fact, he observes that some airlines have taken the concept to a higher level by providing full-height enclosures in their first-class cabins. He specifically mentions Emirates Airline, which announced a new first-class product incorporating six private suites on its 777-300ERs at the 2017 Dubai Airshow.
"I think that those airlines doing this see its greater value is in brand enhancement,” he says. “It will appeal to some passengers on a few routes, but I don’t think it will become that common.”
Ben Orson, managing director of JPA Design in London, says that over the past 5-10 years, there has been a 50% reduction in the number of seats offered in first-class service. “Where once first class might have offered eight seats, typically, now, it’s more like four,” he notes. “But at the same time, many airlines that still offer first class—such as Singapore Airlines, Emirates Airlines and Etihad Airways—have enhanced their product with separate compartments, offering complete privacy and in some cases, full beds.”
Orson adds that an opulent first-class interior is also intended to differentiate the service from business class, which is the equivalent of what first class was only a few years ago.
P.J. Wilcynski, Boeing Commercial Airplane’s payloads chief architect, reports that on long-haul jets the relatively recent premium-economy service is being designed as a separate cabin, with one or two fewer seats per row than regular economy. “If the economy section has nine seats across, premium economy will have seven or eight,” he explains. “About 80% of the 777s and 787s delivered by Boeing in 2017—as of July—had a premium-economy cabin with that seating configuration.”
For the economy section, says Wilcynski, new slim line seats have been designed to allow the installation of additional seating without sacrificing knee and shin clearance. That, he explains, is being accomplished through greater use of composite materials in seat frames, and less bulky upholstery. In some cases, this can add another 2 in. of legroom.
At the opposite end of the spectrum, a high-density economy service is another emerging trend, offering fewer amenities than standard economy, with additional seat rows and narrower seat pitch, according to Michael Planey, co-founder of HMPlaney Consultants in Alexandria, Virginia.
“To address this market, the seating manufacturers are developing new narrower seats with thinner cushions, so that a standard level of passenger comfort can be maintained as the seat pitch declines,” he explains.
Planey emphasizes that the airlines—not the seat designers—are driving the trend toward more compact seats, based on the revenue performance they want to achieve. “The low-cost carriers have essentially changed the airline market, and the legacy carriers have tried to match the lower end of the market where they can,” he remarks. “You may now see situations where an airline may offer 4-5 levels of service within the same aircraft. There may be as many as three types of economy class, a business class and maybe even a first class.”
Planey ventures a provocative opinion underlying this trend: “While there are some passengers who will willingly purchase a less-than-standard economy service, the airlines are also using a higher-density economy section to encourage customers to move up to the next class of service—standard coach—and pay more money for it. It’s really a hidden fare increase,” he remarks.
The same thinking may, according to Planey, be applicable to a decision to install larger baggage storage bins, which Boeing and Airbus, are offering on the 737 MAX and A320neo, respectively.
“There is some debate about the value of more overhead storage capacity because a checked bag is yet another revenue source for the airline,” he says. “Often, by the time a passenger’s boarding group is called, the agent may announce there is no further room for carry-ons and require a gate check—for an extra fee. There’s plenty of evidence that two trends involving aircraft interior design are happening. One is to encourage more passengers to upgrade to a more roomy area of the cabin, and the other is to force them to do gate checks.”
Earl Diamond, CEO of Avianor in Montreal, concurs. “The complaints airlines have gotten about narrow seat pitch in economy class have opened an opportunity to upsell to a premium economy or business-class cabin,” he reports. This is creating opportunities for MROs to do a lot of cabin fine-tuning—especially on narrowbody aircraft where premium cabins are being installed.
Diamond says that over the past three years, he has observed the addition of “some kind of premium cabin” on long-haul, low-cost widebody carriers. “They have discovered that people are willing to pay a little more for extra room,” he says. “For example, we have been reconfiguring [Reykjavik, Iceland-based] WOW air’s A330s with a premium cabin.”
Asked if there is a rule of thumb concerning the number of seats long-haul, low-cost carriers usually devote to a premium cabin on a widebody aircraft, Diamond says that while it is airline-specific, a good rule of thumb would be about 10% of the total seats.
Along with modifications focused on coach and premium-service cabins, Gary Weissel, managing officer of Tronos Aviation Consulting in Atlanta, cites inflight connectivity as a major trend in cabin retrofits.
Traditionally, cabin connectivity took the form of a hard drive providing the passenger with content from the airline, displayed on seatback screens. That, however, is giving way to an internet connection, via downlink to a ground-based station or a satellite link, allowing passengers to use their own devices. “The trend is more toward a satellite service because it provides higher speed and is becoming available at lower cost, since there are many more companies coming into the market. The prices are dropping from what they were a few years ago,” says Weissel.
U.S. mainline air carriers offer connectivity, but in an effort to create a seamless passenger experience, they are asking their regional partners to provide the same service. “A very large program is now in progress to bring inflight connectivity to regional aircraft,” he says. “U.S. carriers are also looking to upgrade connectivity for better speed, in an effort to stream more data. The older systems installed as much as 10 years ago are being phased out.”
Outside of the U.S., Weissel sees tremendous retrofit market potential, where 70-75% of non-U.S. carriers still do not offer inflight connectivity. “There is a massive rush among the non-U.S. airlines to install it, with most opting for satellite-based systems,” he notes.
But Avianor’s Diamond reports that in many cases, orders for inflight entertainment (IFE) systems are driven by what is already in the airplane, since it is more cost-effective to leave the system in and make some upgrades. “There is a very large fleet that has the seatback systems installed, and it will take a number of years to go through that,” he says.
Another direction in cabin modifications is toward LED systems, as Nina Schulz, head of product sales-aircraft modification and base maintenance at Lufthansa Technik in Hamburg, points out.
“There is a change to LED lighting systems that allows mood lighting concepts to support the boarding process, food or shopping scenarios, brand concepts, as well as the chrono-biological processes,” she explains. “This means airlines can simulate sunset or sunrise scenarios, which then show a very positive impact on well-being of the passengers as it helps the inner clock to adapt to the new time zone.” She points out that LED lighting also offers higher reliability and reduced maintenance costs.
The frequency of cabin refurbishments will be tied to such variables as the class of service and aircraft entry into service, says Ken Herbert, managing director, and aerospace and defense analyst in the San Francisco office of Canaccord Genuity.
“Generally, first- and business-class cabins have to be refurbished more frequently than coach sections—normally every 5-7 years. However, it’s more like every 6-10 years for the economy cabin,” Herbert remarks. “We therefore expect to see the first of the 787s, which were delivered in 2011, to undergo [first- and business-class] cabin refreshing, probably beginning around 2018 to 2020—and by the early 2020s for the coach section.”
Herbert also projects that the 737s being delivered today, and operated by low-cost carriers, will begin to undergo cabin refurbishments in about 10 years. “The low-cost carrier model is, in fact, the fastest-growing segment of the market, especially for narrowbody jets operated in Europe and Asia,” he says. “That is typically going to be a growing segment of the cabin upgrade market.”
Also playing into the market for cabin interior alterations is transitional activity in aircraft leasing. In that regard, Avianor CEO Diamond calls 2018 “the year of the 777” due to what he reports is a large number of that type coming off lease and being remarketed to other carriers.
“Right now, we are seeing 777 lease returns from Singapore Airlines and Emirates as the main drivers,” Diamond says. “We are working with six different leasing companies and quoting a lot of 777 cabin work. In fact, one leasing company told us they will have 18 777s being returned this year.”
Diamond adds that this has created an interesting shift in the company’s business, since the A330 and A320 families have historically been what he terms Avianor’s “sweet spot.”
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