Economics of the 777 vs MD-11

[captain_adf 16]

I'm having trouble understanding why the much vaunted fuel savings of the 777 has been accepted by the industry as reason to abandon the MD-11. If I was starting a cargo airline, I'd be gobbling up every MD-11 I could get my hands on.

 

Nordic Global, operator of 4 GE freighters, has an interesting analysis on their website showing a considerable advantage to the MD-11 despite conventional wisdom to the contrary:

 

"The MD-11F unit costs are 13% – 20% lower than the 777F, 747-400F and 747-400BCF for payloads between 70 to 90 tonnes, flight segments of 3500 NM’s, monthly utilization of 350 hours and fuel at 4.00 per gallon. At lower payloads, utilization, stage lengths and fuel prices, the benefits of the MF11-F will be even greater."

 

Source: http://www.nordicglobalcargo.com/?page_id=46

 

My own analysis based on some limited performance data for the P&W 4462 is not as rosy but it still shows a very minimal cost differential vs. the 777F and several pockets where it is more efficient than the big twin. For low FTKs (in the 30-40 ton range) and for shorter trips (<5000nm), the M11F actually uses less fuel than the 7F.

 

Consider a typical freight scenario with an average load factor of 70%. On a 4500nm trip, the MD-11F will burn roughly 3,000 kg more than the 777F. Jet A is going to run about $1/kg if you have a decent contract. So you're talking about spending an extra $3k for a 10 hour flight. If you're averaging 350 hour utilization per month, the MD-11 is costing you $105k extra per month vs. flying the same RTK in the 777. That's about $1.25M per year. Sounds like a lot, right?

 

Wrong! How much did you pay for that 777F? The list price is 309.7 million USD. How much clout do you have with Boeing Finance? Enough to get a 50% discount off list? I highly doubt it but ok fine, let's say you just bought a sparkly new 777F for a little over $150MM. Meanwhile, I'm going to pick up a second-hand (or 3rd or 4th hand) MD-11 passenger variant for a smooth 30 mill, spend about 10-15 on conversion to freighter, taxes, airworthiness certs, and I've got a big beautiful bird ready to fly for a good 10 more years... and I spent $100 million less than you did! Do the math: there's no way the fuel savings of the 777 is ever going to make up for that massive difference in capital outlay.

 

In fact, just to rub it in, every time I fill up my MD-11F, I'm going to buy you 5,000 gallons of fuel for your 777F AND I WILL STILL COME OUT AHEAD after 10 years of flying. I just don't see how the ever so slight advantage in fuel economy provided by the 777F could justify its price tag.

 

Am I missing something here, or should I round up some investors? Who's with me!

[Patco Lch 1,465]

Very interesting topic ! I don't own eather plane but I love informative RW topics as a break from so much computor techno talk on this fourm. I think Delta has a similer philosiphy of older less fuel eficient( but cheaper) aircraft. Interesting article in August 2014 Airways magazine pg 60.

[Bartow 0]

There so some other factor to consider as well:

 

What about maintenace costs MD-11 vs 777F?

What about safety of problems of MD-11?

What about cost of pilot traing to operate these birds?

[PHXMD-11 86]

 

 

there's no way the fuel savings of the 777 is ever going to make up for that massive difference in capital outlay.

 

Maybe when BCA starts offering the 79 in a couple decades.

 

 

 

Who's with me!

 

Buy me my ATP with a M11 type and I'll work for ya!

 

 

I think Delta has a similer philosiphy of older less fuel eficient( but cheaper) aircraft.

 

I think their strategy is more buying/leasing lower cost airplanes that have proven themselves.

 

 

What about safety of problems of MD-11?

 

What problems? Other than SWR111, the other incidents/accidents were the result of the pilots improperly operating the airplane. American, Delta, and KLM have all operated the airplane but haven't suffered any damage from it.

[JoeDiamond 67]

You need to factor in the costs of maintaining three engines on the MD-11 vs. maintaining two on the 777.  How does the cargo compartment volume compare between the two airplanes?  I'm guessing that the 777 has more cargo capacity.  More capacity = more revenue.

[PHXMD-11 86]

 

 

How does the cargo compartment volume compare between the two airplanes? 

 

There's a max payload difference of only 26000 pounds. Though the 77F has a 1000 NM range benefit.

[KriVa 307]

 

 

MD-11 passenger variant for a smooth 30 mill, spend about 10-15 on conversion to freighter.

Unless you're very, very quick... No, you won't. It's been quite some time, but last time I checked, there was only one MD-11 pax to freighter conversion kit left. That kit may very well have been used since then, so conversion is not an option, really. (Aside from the fact that there are pretty much no more pax MD-11s left to convert.)

This debate ultimately comes down to the "bean counters". Sadly, those guys know what they're doing.

I'm a big MD-11 fan myself, but the fact that so many wind up in the desert these days, does give the impression that newer, more economic planes are cheaper to operate (and maintain).

 

Which brings me to the next topic, maintenance.

The older an aircraft gets, the more it breaks down.

The dispatch reliability of a new 777f will be much, much higher than that of even the best maintained MD-11 flying today. This mean you'll have more downtime, resulting in a less "packed" schedule for the aircraft.

Parts and engineers (and pilots) will be harder to find as well, costing you more money.

Most big airports these days are used to handling 777s, so finding a contractor to do the maintenance for you will not be that big of a problem.

There's not that many airports left where the contractor with experience on the MD-11 is already present, so you'd need to set this up yourself in a lot of cases.

 

Another factor in the equation is the time left for the airplane in the sky.

Planes are built to fly, but they do have limits on the time they can spend in the sky. (Cycle limit)

The MD-11 is a very beefy airplane, but it won't be able to continue flying forever. At a certain point, the cycle limit is reached, and the airplane will be grounded, no matter what. (well, you could do some very, very expensive maintenance, but by then it's often cheaper to just buy a new plane). You may calculate that you'll still come out on top after 10 years, but I don't think you'll find that many MD-11Fs up for sale which still have 10 years worth of life left in them. That brand spanking new 777f your competitor just bought may outlast the MD-11Fs you purchased by a factor of 2-4, maybe even 4.

At one point, you'll have to ground the airplane, and get another one.

 

A last point (off the top of my head) I also see is, how often do you intend to let the airplane fly?

The busier a schedule gets, the more time an airplane spends in the air, the more economic it becomes to buy a new airplane.

This can often be seen in the real world too: Most 777Fs flying these days won't be on the ground for long between flights. MD-11Fs flying these days, especially by smaller operators, will often have quite a few hours of downtime before the next flight.

 

Quite a lengthy post, but this is all I could think of in the first few minutes.

I like the MD.. A lot... But I don't think we'll see more of them flying in the future than we do today, only less. That's a sad fact, right there.

[davidbartoli 0]

 the maintenance on the MD11 is certainly an issue, it is an aircraft demanding constant attention. In my 14 years experience flying this airplane I have seen how it's reliability decreased drammaticaly when the maint. quality (whatever is the reason)  is reduced.

It s still a great freighter anyway. with the actual leasing cost of a 777F you can have at least 4 MD11, but of the 200 built, only a handful is available in the desert so even getting one is not so easy.

Regarding the cargo capacity, on the weight the 777 wins but on the volume the capacity is very similar with the 777 capable of 37 standard pallets vs 36 of the MD11

I m not an airline business expert, just an MD11 cqptain  but if i'd have to  start a cargo airline with  MD11s, my major concern would be having a VERY well qualified staff, both, pilots and maint.staff or i wiould see my fleet spending more time in the hangar than in the air, ater all the newest MD11 built is already 14 years old.

[FleaJump 7]

I stand to be corrected, but  MD11 aircraft have been involved in a disproportionate number of crashes, in comparison to other jets of similar capacity.  Many of those crashes were reportedly associated with design specific anomalies in that air-frame, and apparently due to the fact that even the tiniest error in airspeed settings greatly increases the odds that the MD11 will depart from controlled flight and plummet to the ground like a rock. 

 

I have zero real world flying experience to speak of, but in the virtual world I have performed many hundreds, if not thousands of hand-flown stormy weather landings in heavy metal jets from the PMDG stable, in addition to my hands-down favorite till date - the Level D 767.  

 

Taking the Kai Tak Runway Checkerboard approach into Runway 13 as a test case, I got to the point of being able to execute that radical right turn into short finals with unerring precision and fluidity when I selected the LD 767, and with slightly less consistency, the PMDG 737 and 747, BUT, I could not for the life me accomplish one single smooth landing with the MD11,   which felt wobbly, unstable and on the edge of a stall right through most of that Kai Tak approach, resulting in crashes each and every single time I tried the MD11.

 

News reports of the years have been rife with MD11 crashes on landing approach, so I would make bold to suggest that my humble flight sim observations do have a clear correlation in real life, which, at least to an extent, might explain why the MD11 lost market share so dramatically over the years since it was first designed and fielded. 

[Jarkko 59]

I could not for the life me accomplish one single smooth landing with the MD11

 

Just that you know, the PMDG MD11 doesn't fly like the big boys simulator, that I got to fly (the full motion kind). PMDG has done an exceptional job system wise, but the flight model isn't true to life (and how could it be considering the price). Also the real MD11 pilots said that the real aircraft is a bit more forgiving on landings than the sim they were using for training.

 

With the PMDG MD11 I had gotten into a habit of pushing a bit forward right after the wheels left the ground. When I did it in the sim that the real pilots use, I dropped straight back to the ground. (and got yelled at by the MD11 pilot)

 

Same thing for landing. With the PMDG variant, I flared late and sharp and have gotten good landings. Tried that in the "real sim" and I floated all my landings.

 

---

 

Now back to the topic, but from a sim view. I fly cargo with AirHauler and in this game, only things that matter are: the purchase price, fuel burn and the amount of cargo you can carry. In this scenario, MD11 and A340 are the work horses, where B747 and B777 are too expensive to purchase or too fuel hungry.

 

So I agree, that on paper, the MD11 (and even the A340) should have been the winner (at least in cargo operations), but as mentioned, in the RW things didn't work out that way.

[kevinh 409]

One of the reasons cargo operators choose aircraft like the MD11 is that the economics suit it over a brand new airframe of similar capacity. Cost of ownership is a key issue and an older airframe will be cheaper to run overall. It might take more care in maintenance but that's cheaper than the extra lease costs of a new 777F. Ad hoc cargo operations aren't so worried about dispatch reliability. Being on time isn't so important if you aren't flying passengers.

 

The 777F will appeal more to larger operators with deeper pockets and possibly also operating 777 pax aircraft.

[KriVa 307]

 

 

Being on time isn't so important if you aren't flying passengers.

Tell that to guys like Aerologic, DHL, FedEx or UPS, and their hundreds of subsidiaries.

 

At one point, it just becomes cheaper to operate the 777f, or another newer generation aircraft. That point will mostly be defined by how long and how often you need to have the airplane in the air. That's why, for some operators, it's still cost efficient to operate a DC-8. One of those examples can be spotted on the ramp at EBOS right now. The airplane is coming to the end of it's life, sure, but the outfit flying it now only flies it once every week, if that. In the meantime, the airplane costs them next to nothing. The cost to maintain the aircraft, and the fuel burn, are a large part of the total operating cost. However, due to it being used so infrequently, that doesn't tip the scale in favour of new aircraft.

If you were to fly frequent missions with that aircraft, the costs would simply skyrocket.

The inverse is true for newer planes. The combination of lower fuel burn and lower maintenance costs is beneficial, but you have to actually USE the airplane. A lot. If you're the kind of operator that schedules two hour flights with 8 hours of downtime in between, the 777f isn't for you.

[kevinh 409]

 

 

Tell that to guys like Aerologic, DHL, FedEx or UPS, and their hundreds of subsidiaries.

Of course, but they aren't ad hoc cargo carriers. But note that Fedex, extremely schedule sensitive, operate the MD-11 and the MD-10 as well as the 777F. DHL and UPS also operate older airframes in their fleets. Anyway I doubt dispatch reliability is really a big issue for the MD-11, assuming maintenance is adequate.

 

With a new airframe your leasing costs are high before you earn a penny. With an older aircraft you have lower fixed costs but higher maintenance and fuel bills. Potentially much more profitable.

[KriVa 307]

 

 

Potentially much more profitable.

Indeed, potentially.. I'm not going through all the work of repeating myself. The reasons why a new aircraft might be more profitable than an old one, and vice versa, are all explained in posts above.

For certain types of operations, that higher fuel and MX bill really does outweigh the cost of a newer aircraft. If it didn't, we'd all still be flying in 707s now. (Hyperbole, I know, but you get the picture.)

It really comes down to a case by case basis.

 

Simple fact of the matter is this: Conversion to cargo is no longer an option. On top of that, the MD-11s that go to the desert, will stay there. Whether they're pax versions or freighter versions. They'll be stripped of useful parts, to make sure the current fleet can be maintained up to spec (or, well, since it's cargo after all... Up to MEL).

[kevinh 409]

Indeed, potentially.. I'm not going through all the work of repeating myself. The reasons why a new aircraft might be more profitable than an old one, and vice versa, are all explained in posts above.

For certain types of operations, that higher fuel and MX bill really does outweigh the cost of a newer aircraft. If it didn't, we'd all still be flying in 707s now. (Hyperbole, I know, but you get the picture.)

It really comes down to a case by case basis.

 

Simple fact of the matter is this: Conversion to cargo is no longer an option. On top of that, the MD-11s that go to the desert, will stay there. Whether they're pax versions or freighter versions. They'll be stripped of useful parts, to make sure the current fleet can be maintained up to spec (or, well, since it's cargo after all... Up to MEL).

I don't know why you are talking as if we disagree. The economics aren't in doubt. You didn't say anything which contradicted what I said. Airlines operate MD-11Fs because they are profitable for them. If the 777F was the best choice for everybody no MD-11Fs would be flying. The OP's point is a good one.

 

As for conversions not being an option, that's true (you already made that point earlier) but that is not part of the economic argument, which assumes an aircraft is available. According to online sources there are 32 MD-11Fs stored around the world. Increasingly they will be parted out, but no doubt if someone wanted to put a few back in service there are still some which could be.

 

I feel the situation with the 777 will be rather like what happened with the 747. Only a minority will be built as freighters, because the new freighter market is limited. In years to come freighter conversions of 777-200 and 777-200ERs will become more frequently seen, possibly outnumbering 777Fs, becoming a source of older, cheaper to lease, cargo aircraft.