Extra Extra Read all about it!
04-23-2007, 08:36 AM
#1
Gets Weekends Off
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Joined APC: Jul 2006
Position: FO
Posts: 290
Extra Extra Read all about it!
Horizon orders 15 new Q400s, ushering in simplified fleet and improved economics
April 23, 2007
Horizon Air has just signed a major agreement with Bombardier Aerospace for 15 additional Q400 high-speed turboprops, plus 20 options.
The order has a “list price” value of US$393 million. That’s not the actual price -- for orders of this size, it’s customary to negotiate discounts but not disclose them publicly. A Horizon team headed by Rudi Schmidt, vice president, Finance, achieved this new Q400 deal after extensive negotiations with Bombardier.
Delivery of the additional 76-seat Q400s is scheduled to begin October 2008 and continue through August 2009. As these Q400s roll in, Horizon plans to phase out the remaining 37-seat Q200s from its fleet.
Simplified fleet brings huge benefits
In little more than two years Horizon will evolve to a two-aircraft-type fleet – consisting entirely of Q400 turboprops and CRJ-700 jets – considerably improving the economics of our flying and strengthening our competitive edge.
“This major strategic initiative is aimed at keeping us on course toward our goal of generating sustainable profits that compensate our investors and fund our future – providing a structural foundation for all the exceptional work our people do on behalf of our customers every day,” says Jeff Pinneo, president and CEO. “Years from now, I anticipate we’ll look back on this as a turning point for our company and an ambitious move that helped us secure our future.”
“The upside to a simplified fleet is tremendous from just about any viewpoint,” adds Pat Zachwieja, vice president, Marketing and Planning. “In addition to dramatically reducing our turboprop unit costs, it will considerably strengthen our marketing efforts. By putting Q400s into all markets where we have Q200s, we’ll be able to grow capacity to better meet customer demand and thus fend off competitors. Also, we’ll have aircraft available to pursue new markets, like we did recently in Santa Rosa, and add nonstops in markets that don’t have them now."
Q400 lowers fares, attracts customers
In one market, Horizon is about to get a taste of the impact of a shifting from Q200s to Q400s.
On April 22, we phased out the last of our Q200s from Bellingham to Seattle, replacing eight Q200 flights with six Q400 flights. The 50 percent more seats and lower operating costs allowed us to cut fares by up to half on the route. This makes it possible to not only carry more connecting passengers to our Seattle hub, but also stimulate new travel from business people who – attracted by the lower fares – might choose to forego traffic on the congested I-5 corridor.
“With the Q400, we have a real opportunity to draw travelers back from other airlines – and from their cars, in markets where driving is an alternative,” Zachwieja says. “The Q400, because of its size, comfort and speed, ranks right up there with jets in customers’ minds on many routes, as our frequent flier surveys have shown. You couldn’t say that for the smaller Q200, though it’s served us very well over the years.”
According to Zachwieja, the Q400 has the potential to significantly improve profitability in more than 80 percent of current Q200 markets. In addition, phasing out the Q200 greatly reduces the company’s overhead costs related to parts, maintenance work, flight crew time, and training. This is particularly true for maintenance – as aircraft go out of warranty and age, their maintenance costs rise. That’s the case with the Q200, which began to enter the fleet in 1997.
Transition brings challenges
Despite all the benefits of a simplified fleet, the transition won’t be without its issues.
“We’ll have to take what we learn from Bellingham and other short-haul markets that we’re converting to Q400s and figure out how to apply the successful marketing strategies to cities in our system that might be challenged by the additional Q400 capacity,” Zachwieja says. “Also, a few airports we serve are not fully equipped or authorized to accept the Q400 yet; those airports will now have some lead time to take the necessary steps to gain that ability.”
The biggest concern for some will be the placing of such a big bet on the Q400, an aircraft that has provided reliability challenges since it was introduced in 2001.
“As much as we believe in the aircraft, we’ve had our share of frustrations,” says Tom Gerharter, senior vice president, Operations. “The good news is that the Q400’s reliability has definitely improved, and we’re confident this will continue, because we’ve worked it into our new contract. In it, Bombardier provides specific, industry-leading commitments relative to support for parts and labor that we believe will accelerate our improvement trend. The new Q400s will come equipped with the whole suite of modifications developed since its introduction, and we’ve established the mod line in Spokane to methodically install the latest modifications to already-received aircraft as well.
“It’s not easy being the launch customer for a new aircraft type. We experienced similar challenges with the Q200 and the Dornier 328. But the Q400 was and continues to be the right choice for us because of its superior economics and customer preference. That’s why other regionals are lining up to order it now.”
Another issue will be the ramping up of hiring and training to handle the new number of Q400s. Since Q400s carry twice as many flight attendants as the Q200, more will need to be hired. Q200 pilots will need to be certified on the Q400, which requires 64 hours of ground school and 12 hours of simulator training. Some station personnel will need to be trained on how to ground handle the Q400, and some stations will need to acquire additional ground equipment, such as stairs for rear-door boarding.
Final fleeting thoughts
Horizon's fleet currently includes 71 aircraft: 26 Q400s, 20 CRJ-700s, and 25 Q200s. As previously contracted with Bombardier, Horizon is scheduled to receive an additional seven new Q400s by mid-2007. And as per its agreement with CommutAir, Horizon is subleasing 13 of these Q200s to the carrier. Bombardier, as part of its latest contract with Horizon, will assist in the remarketing of the remaining 12 Q200s.
“We’re confident of finding good homes for this last dozen Q200s – in fact, we already have initial indications of interest in these aircraft, particularly since they’ve been so well maintained,” Schmidt says.
In 2001, Horizon became the North America launch customer for the Q400, making it a global pioneer in the introduction of this next-generation turboprop. By mid-2009, Horizon will be operating 48 Q400s, the most of any airline in North America.
April 23, 2007
Horizon Air has just signed a major agreement with Bombardier Aerospace for 15 additional Q400 high-speed turboprops, plus 20 options.
The order has a “list price” value of US$393 million. That’s not the actual price -- for orders of this size, it’s customary to negotiate discounts but not disclose them publicly. A Horizon team headed by Rudi Schmidt, vice president, Finance, achieved this new Q400 deal after extensive negotiations with Bombardier.
Delivery of the additional 76-seat Q400s is scheduled to begin October 2008 and continue through August 2009. As these Q400s roll in, Horizon plans to phase out the remaining 37-seat Q200s from its fleet.
Simplified fleet brings huge benefits
In little more than two years Horizon will evolve to a two-aircraft-type fleet – consisting entirely of Q400 turboprops and CRJ-700 jets – considerably improving the economics of our flying and strengthening our competitive edge.
“This major strategic initiative is aimed at keeping us on course toward our goal of generating sustainable profits that compensate our investors and fund our future – providing a structural foundation for all the exceptional work our people do on behalf of our customers every day,” says Jeff Pinneo, president and CEO. “Years from now, I anticipate we’ll look back on this as a turning point for our company and an ambitious move that helped us secure our future.”
“The upside to a simplified fleet is tremendous from just about any viewpoint,” adds Pat Zachwieja, vice president, Marketing and Planning. “In addition to dramatically reducing our turboprop unit costs, it will considerably strengthen our marketing efforts. By putting Q400s into all markets where we have Q200s, we’ll be able to grow capacity to better meet customer demand and thus fend off competitors. Also, we’ll have aircraft available to pursue new markets, like we did recently in Santa Rosa, and add nonstops in markets that don’t have them now."
Q400 lowers fares, attracts customers
In one market, Horizon is about to get a taste of the impact of a shifting from Q200s to Q400s.
On April 22, we phased out the last of our Q200s from Bellingham to Seattle, replacing eight Q200 flights with six Q400 flights. The 50 percent more seats and lower operating costs allowed us to cut fares by up to half on the route. This makes it possible to not only carry more connecting passengers to our Seattle hub, but also stimulate new travel from business people who – attracted by the lower fares – might choose to forego traffic on the congested I-5 corridor.
“With the Q400, we have a real opportunity to draw travelers back from other airlines – and from their cars, in markets where driving is an alternative,” Zachwieja says. “The Q400, because of its size, comfort and speed, ranks right up there with jets in customers’ minds on many routes, as our frequent flier surveys have shown. You couldn’t say that for the smaller Q200, though it’s served us very well over the years.”
According to Zachwieja, the Q400 has the potential to significantly improve profitability in more than 80 percent of current Q200 markets. In addition, phasing out the Q200 greatly reduces the company’s overhead costs related to parts, maintenance work, flight crew time, and training. This is particularly true for maintenance – as aircraft go out of warranty and age, their maintenance costs rise. That’s the case with the Q200, which began to enter the fleet in 1997.
Transition brings challenges
Despite all the benefits of a simplified fleet, the transition won’t be without its issues.
“We’ll have to take what we learn from Bellingham and other short-haul markets that we’re converting to Q400s and figure out how to apply the successful marketing strategies to cities in our system that might be challenged by the additional Q400 capacity,” Zachwieja says. “Also, a few airports we serve are not fully equipped or authorized to accept the Q400 yet; those airports will now have some lead time to take the necessary steps to gain that ability.”
The biggest concern for some will be the placing of such a big bet on the Q400, an aircraft that has provided reliability challenges since it was introduced in 2001.
“As much as we believe in the aircraft, we’ve had our share of frustrations,” says Tom Gerharter, senior vice president, Operations. “The good news is that the Q400’s reliability has definitely improved, and we’re confident this will continue, because we’ve worked it into our new contract. In it, Bombardier provides specific, industry-leading commitments relative to support for parts and labor that we believe will accelerate our improvement trend. The new Q400s will come equipped with the whole suite of modifications developed since its introduction, and we’ve established the mod line in Spokane to methodically install the latest modifications to already-received aircraft as well.
“It’s not easy being the launch customer for a new aircraft type. We experienced similar challenges with the Q200 and the Dornier 328. But the Q400 was and continues to be the right choice for us because of its superior economics and customer preference. That’s why other regionals are lining up to order it now.”
Another issue will be the ramping up of hiring and training to handle the new number of Q400s. Since Q400s carry twice as many flight attendants as the Q200, more will need to be hired. Q200 pilots will need to be certified on the Q400, which requires 64 hours of ground school and 12 hours of simulator training. Some station personnel will need to be trained on how to ground handle the Q400, and some stations will need to acquire additional ground equipment, such as stairs for rear-door boarding.
Final fleeting thoughts
Horizon's fleet currently includes 71 aircraft: 26 Q400s, 20 CRJ-700s, and 25 Q200s. As previously contracted with Bombardier, Horizon is scheduled to receive an additional seven new Q400s by mid-2007. And as per its agreement with CommutAir, Horizon is subleasing 13 of these Q200s to the carrier. Bombardier, as part of its latest contract with Horizon, will assist in the remarketing of the remaining 12 Q200s.
“We’re confident of finding good homes for this last dozen Q200s – in fact, we already have initial indications of interest in these aircraft, particularly since they’ve been so well maintained,” Schmidt says.
In 2001, Horizon became the North America launch customer for the Q400, making it a global pioneer in the introduction of this next-generation turboprop. By mid-2009, Horizon will be operating 48 Q400s, the most of any airline in North America.
04-23-2007, 08:53 AM
#3
Gets Weekends Off
Thread Starter
Joined APC: Jul 2006
Position: FO
Posts: 290
I dont know if this is a good thing or not.. In reality we are only getting 5 more planes.. We bought 15 Q400, then subleased 13 Q200 to CommutAir, then bought 15 more Q400 and will sell 12 Q200...
15 -13 + 15 -12 = 5
I dont know what to think..
15 -13 + 15 -12 = 5
I dont know what to think..
04-23-2007, 02:20 PM
#8
Gets Weekends Off
Joined APC: Jul 2006
Position: Soon to be Ex Dash-Trash
Posts: 270
Hmmm. Upgrade to the Q200 or Q400. Decision now made. Dramatically higher pay! It is Horizon, growth is by seats not airplanes. Be happy the Q200's are going away.
04-23-2007, 02:47 PM
#10
Gets Weekends Off
Joined APC: Oct 2006
Position: Home with my family playing with my daughter as much as possible
Posts: 591
What I'm wondering is what that Horizon is going to do when they finally get rid of all of the 200's...is it a matter of difference training for the pilots?
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