Monday Insight – March 15

March 22 Insight To Be Posted Shortly!

The Traffic Picture – U.S. Positive. International Not So

The Main Concern – Changing Policies From The Economic Hobbyists In Washington

We can start with this: the U.S. airline industry is in better shape than any other in the world. One reason is that, aside from China, it is the only one that’s based on a huge domestic demand.

A recovery is starting to show… the capacity knife was used a lot less on the originally-filed schedules for March… as it stands, it appears that this may be the case with April and beyond.

The latest Airports:USA® short term forecast:

If the trend holds, if the economy holds, if new taxes are not imposed, if the increasing constriction on petro-production on the part of the inhabitants in Washington doesn’t jack the price of jet-A up, the traffic recovery will be quicker than estimated three months.  A lot of ifs.

The Welcome Signs Are Coming Up. A number of states have made the decision to completely or almost completely open up. The requirements to cover one’s nose and mouth – regardless with what (N95 or a used hankie are both regulatory-satisfactory), and regardless of where one is, or how effective it may be – are being lifted in several states.

This removes the barrier and uncertainty of traveling to major places such as Texas and Florida. Other states are still in a state of CCP-Covid confusion. Nevertheless, the picture is clearing.

That’s in the United States. Not so in the E.U. or the U.K. Latest news is that Italy may shut down, and it appears that guy with the run-away hairdo who’s running Merry Olde England is clueless. Canada is still constricted. Same with other parts of the globe.

A New U.S. Air Transportation System. New Airline Strategies. Amid all this, the restructuring of the U.S. air transportation system will continue. The main apparent trends are:

  • Expansion of Leisure Destinations… Florida is the main recipient, but any flows that can be identified as having potential leisure stimulation are in play. Montana is another opportunity. The goal is to plumb into some of the money not spent over the last year.
  • Major City – Secondary City O&D Market Spokes. Big markets such as Los Angeles can offer potential of stimulating day-of-week or low frequency service to mid-size airports that in pre-CCP-Covid days weren’t really opportunities. In regard to Los Angeles – and California in general – it will all depend on some regulatory consistency coming into the picture.
  • Expansion of Hub Flows. American in particular is bulking up on accessing secondary airport flows, particularly at CLT. Great news for some regions… how fleet changes will affect this in the long term is uncertain.

The U.S. airline industry went into full metal jacket mode almost immediately upon the arrival of this gift from the CCP in Wuhan. It’s clear that every airline now has an aggressive and internally-generated strategy to deal with the effects of the pandemic and the sometimes herkie-jerk responses on the part of some state governors.

Meantime, Back In The Old Countries… The situation in the rest of the world is not encouraging. As noted above, Europe is completely in planning chaos. Australia is still restricted in regard to international access.

Asia is not only affected by the CCP virus, but by widespread and very uncertain political issues, mostly driven by the 21st century Nazis running China. (The chief Don of this criminal enterprise has instructed his army to prepare for war. It may be more than the usual doggerel, based on infighting between factions in China. Think Kinmen or even Taiwan as “points of interest” in the next 12 months.)

The point is this… the main reason for the plunge in domestic air traffic in the USA was first fear of the disease, and then the uncertainty of whether entire cities might be shut down. Both of those factors are receding. Domestic traffic levels will rebound faster than recently forecasted.

But the emerging national and global air transportation systems are still structured for the world of 2019. That’s dead… the roles and utility of air travel have been shifted. Leisure, business and international travel patterns have changed and that means airlines are facing new fleet imperatives.

As noted last week, the era of the “regional jet” – defined as 70-seats and below – is over. The next big trend will be in the single aisle category, with A320neo, 737 MAX and A220 variants opening secondary airports to a much wider set of new market opportunities.

Danger Signs… Torpedoes Spotted. The only uncertainty is how the economic plans being ginned up by the inhabitants of the Marble Play Pen will slow all this down.

The indicators are not positive. Standby.

__________

In The Latest Aviation Unscripted Video…

The Realities of Establishing Air Service At Small Communities…
Time To Stop The Games

Getting scheduled flights into small unserved airports has been one of the most misunderstood – and abused – challenges in the realm of air service development schemes.

The problem is that there is the belief that unless a community has scheduled flights at the local airport, the economic future for that community is dead.  In most cases that is pure hogwash, and in any case often completely impossible.

What these ASD programs usually ignore is the consumer… civic hubris and another jive-time “Market Study” won’t replace superior air service  options.

We grab this third rail in the current Unscripted video,,, click here to join us as we explore reality.

_______________________

 

Monday Insight – March 8, 2021

Follow Fleet Trends & See The Future

Where fleet trends go, passenger volume goes along.

Every part of aviation forecasting is driven by one core metric: the fleets that airlines actually order and operate.

The number and type of airliners being used, on order and to be retired are the harbingers of what can be expected not only in regard to passenger and cargo volumes, but in other areas such as component demand, the number and categories of ground and support equipment, airport facilities, overhaul hangar bay needs, technician numbers, and dozens more aviation sectors.

Airplane fleets and the emerging dynamics of same determine the rest of the future for aviation.

This is what sets Boyd Group International apart from other forecast entities. We do not rely on outdated metrics that have no connection to the real world. We’re at the forefront of the drivers of the aviation future. One of them is fleet forecasting. For us, this is an absolutely essential component of projecting the future.

Let’s Take A Quick Primer In Reading The Fleet-Driven Tea Leaves.

Last week, there were two apparently unrelated events regarding fleets. But, put together they are an important directional signal for air service planning.

Event One: Mesa Retires Last CRJ-700. The Phoenix-based carrier has parked its last CRJ-700s, and now operates only 76-seat CRJ-900s and E-175s, leased out to major airline customers. It is also bringing in an additional 737 for its cargo operations. But the days of flying turboprops and smaller jets are over.

Event Two: End of The CRJ Line. On March 2, Bombardier CRJ-900, S/N 15499 was delivered to SkyWest. This was the last CRJ to be produced. Done, finished. No More. Bombardier is out of the airliner business.

The first prototype CRJ-100 emerged in May of 1991. In total, 2,014 CRJs of all models were produced. Just over half are still flying, with the majority in North America. And that’s a number that’s going to head south fast in the next 36 months.

Two Different Stories. One Solid Message. These two events are critical to understanding the trajectory of air service planning in the USA. There are no more “small” airliners coming down the production line. Or even on the drawing board. That means airline fleet and mission capabilities will evolve.

CRJs and ERJs are fine airplanes, but as they age, they are going to be retired. It is basic aeronautical economic reality. A reality that cannot be ignored in future air service planning.

No Size Replacements Coming. The fact is that the  that the two main platforms that were produced – the Bombardier CRJ and Embraer ERJ – have their roots in political government planning, and not due to hard economic market realities. When the two companies were privatized, the massive developmental costs were “sunk” by the respective governments.

Unfortunately, there are no sugar-daddy governments around to support the clean-sheet planning cost for small capacity (and small revenue-producing)  airliners. The gelt needed would be not much less than for a new 150-seat airliner that would have more value and sell for a lot more per unit. Do the math.

Packaged Air Service Deals – Short Term Application of Excess Small Jets. Indeed in the near term, we may see new applications of RJs, in the form of “pre-designed route system” deals with some small lift lessors (a.k.a. “regional” airlines) with the intent of flying specific markets from a customer airport. Naturally, with local subsidies in the millions. But even here, it’s a short-term flicker. Aircraft age and costs are not to be denied.

Here’s the message: it won’t be the market “need,” or civic hubris, or ethically-challenged consultant “market studies” that will determine where and how air service will manifest at small communities. At baseline, where and how airlines will operate will be dependent on fleets that airlines operate.

And increasingly, it won’t be small jets. That’s a factor that is a starting point for any air service access program.

_________

In Other Airliner Demand News

While we’re on the subject of fleets…

Good News At Boeing: United’s 737-Max 10 order is back on the active books – 96 units.

Less Than Good News At Boeing: China’s regulators are “not sure” about the 737 Max returning to the skies over the Middle Kingdom. ‘Course they’re not sure… point is more likely that they don’t need them at the moment.

More Less-Than-Good-News At Boeing: The collapse of Norwegian has led to cancellation of an order for 92 Max-8s.

__________

A Note Regarding Aviation Unscripted Videos

If you haven’t viewed the latest Unscripted, click here – we’re discussing how business migrations will be shifting air service demand patterns.

Also, we’re planning on issuing a new Aviation Unscripted video every Thursday. It’s on Rumble.com by typing in “Aviation Unscripted” (naturally) in the Channel selector. We’re exploring issues not found anywhere else.

This Thursday, barring any episodic breaking aviation news, we’re taking on the new realities of small community air access challenges.

Log on & let’s talk!

Monday Insight – March 1, 2021

From Airports:USA®

The New Traffic Driver:

Economic Migration

No, the air transportation system is not going to return to the happy days of 2019.

The national economy has changed – and that means air travel has changed too.

The latest Airports:USA® forecast illuminates three major shifts in the air transportation system:

  • Airlines are now on a complete “war footing”- adjusting to the new economic realities, new business systems and consumer spending shifts brought on from the fallout of the CCP pandemic. They are doing all this, by the way, based on internal planning.
  • Leisure spend is expected to be a much larger part of the air travel revenue stream.
  • Secondary cities in business-friendly regions are seeing massive growth in air service demand.

Point: Airlines have completely changed strategic and route planning from what was on the table one year ago.

Completely – and make no mistake, these shifts and changes are generated predominantly inside each carrier – they are not the result of consultant studies, revelations at speed-date events or traditional air service development programs. The day of the 60-page market study is over.

Here are the top growth markets projected for 2021 – all will finish the year ahead of what was experienced in 2019.

Take a look at these markets… there are two very big messages here for the future.

First, the entire mix of travel demand has changed. The U.S. airline industry has responded aggressively to adjust. What we are seeing in regard to airline route planning wasn’t even being considered one year ago. But this means airlines will be adjusting also to changes in the American economy.

Leisure Revenues Increasing As A Percentage of Airline Traffic. It’s obvious that vacation destinations are a new focus. But this means that airlines will need to restructure both their cost base and the fleet mixes. We are talking shifting where resources are applied.

The Real Message: Economic Migrations. Take another look at the forecast list. There are some real messages for the future structure of business air travel.

Take a look at COS. It’s on this list because it’s emerged as a site of business migration from economic swamps elsewhere in the nation. Or BOI, where the economy is booming and quality of life is attracting industry. Face it, New York City isn’t exactly a magnet for new businesses. Los Angeles, ditto. So, watch for more growth at points such as COS, GEG, BOI, etc. in the coming year.

More On This At Aviation Unscripted Video Channel. We’ll be covering this on this week’s Aviation Unscripted video, which will be posted shortly on Rumble.com. It may also migrate to our former Aviation Unscripted channel at YouTube.

Because YouTube does not meet our community standards, we are no longer updating that channel, but will leave it in place for the time being.

Log On To AirportsUSA.com for more information on how Boyd Group International can assist your airport, community or business in gaining a clear view of the new and very different air transportation system that’s emerging in America.

Monday Insight – February 22, 2020

Dealing With The Pandemic – Or, More Accurately The Perpetrators of Same

Something very troubling took place in Washington last week.

It involves the handling of the CCP-Covid pandemic… it should concern everyone in aviation, because it is an indication of how this plague is being addressed…

_________

When a crime is committed, cooperating with the perpetrators is in itself a crime.

Here we are in 2021, with our nation’s air transportation system struggling, like the rest of the economy, to re-emerge and survive due to the ravages of the CCP pandemic.

Millions across the globe are dead. Millions more economically devastated. Here in our industry, millions of people’s livelihoods have been destroyed. Air travel has been decimated – in some aspects permanently.

Here’s a point that really should be illuminated. This Covid pandemic is not like a disaster for which nature is responsible, although many if not most politicians would dishonestly have us believe so, or at least stay silent to let that falsehood remain in place. Some are gutless. Some want to play politics. Others – yes, let’s say it – have financial connections to companies or other entities doing business in China.

Man-Made Disaster – And It Was Avoidable. This pandemic came from China, and was allowed to spread across the Chinese populace and then the world due to the criminal actions of the thugs running China, a.k.a. the Chinese Communist Party.

There is no question that the spread of this vile disease started in Wuhan. It is proven that weeks after the CCP knew of the nature of the disease, they criminally continued to cover it up, even to the point of encouraging large public events, to “prove” their dishonest point. The disease was out of control, yet they still tried to cover it up. It’s the way things work inside the Chinese Communist Party. The virus was a screw-up, and it’s critical that party underlings cover-up such things.

Yes, It Came From Wuhan, Not From Imported Frozen Fish. There is also more than enough credible evidence that it initiated in the Wuhan Virology facility, which was actively working on bat-sourced corona virus, and even into December and January was actively advertising to recruit researchers for the purpose. It was the only place in China to be heavily involved in this research, which was based on bats imported from another region of China.

(By the way, this is not just conjecture. China is part of our basic work. We’ve independently studied the background, and we’re not getting our information from politically-correct places like 60 Minutes. Want to question this, great. But come prepared with data beyond what the media is babbling – otherwise you’ll be bringing a butter knife to a gunfight.)

Enter The Co-Conspirators. Now we come to the complicity of the World Health Organization. One year ago, it was proven beyond any question that throughout the early weeks of the emergence of the Covid virus in Wuhan, the World Health Organization colluded with the Chinese Communist Party to insist to the world that there was no communicable disease.

The first meetings between the head of the W.H.O. and Don of the CCP, Xi Jinping, resembled a remake of Fantasy Island, just without the white suits and the short guy with the raspy voice.

But it was all touchy-feely good will, with the W.H.O. dude looking like a teenage groupie meeting her rock star favorite for the first time.

This love-in was during the time that the CCP actively suppressed, muzzled and persecuted into silence anyone who dared intimate the truth about the communicability of the Wuhan virus. The W.H.O.’s version of Tattoo could not but have known that. Yet his organization made no mention. Just all good will toward the CCP.

It has been determined that had the W.H.O. actively spoken out, and called the CCP on their dishonesty, this pandemic would have been much less severe, because actions could have been taken to contain the spread sooner.

Instead, the W.H.O. was complicit in the cover-up. As a result, the U.S. government, correctly, pulled out of this corrupt organization.

The W.H.O. Returns To The Crime Scene – To Prove There Was No Crime. Now, one year later, the W.H.O. is in a high-profile media stunt, coming back to Wuhan to “investigate” the source of the virus.

To completely destroy any credibility, they actually started out – before they did any work – declaring that it could not have come from the Wuhan Virology facility. The CCP was blameless.

When asked about this by a BBC staffer, they responded that the matter had been investigated by “others” and such was the result. The “others” were the CCP itself. It’s like concluding there’s no organized crime by relying on John Gotti to do the research. This is exactly a repeat of what the W.H.O. did one year ago in January 2020, with disastrous results for the world.

Now there is also information that this bogus W.H.O. task force isn’t getting much cooperation from the Chinese government, in any case. Data is being withheld, and as for the Virology lab – the only place that bat-based corona virus was being researched – the indications are that the W.H.O. spent almost no time – reportedly less than four hours- looking around. But the clowns running the W.H.O. at the top don’t seem too concerned.

It’s A Corruption Double-Header… Except Not In Washington, Anymore. Okay, so now we have proof again that the World Health Organization is in absolute cahoots with the criminal CCP that created this pandemic. No ifs ands or buts, the W.H.O. is a part of the cabal that allowed the pandemic to spread, and today they are doing a rerun of their 2020 performance.

Here’s the very serious issue that every American should be concerned about. Despite the known complicity of the W.H.O., the U.S. government has announced it is sending $200 million to rejoin and support the wonderful work of the W.H.O. – the one run by the people who helped the CCP cover up the epidemic.

Say what?

Please, don’t go into the babble that the W.H.O. does such important work around the world. What they did and are doing regarding the Wuhan virus is flat criminal. People have died around the globe. It’s like claiming Gotti’s neighborhood parties make up for his other activities. These are not mid-level munchkins involved with the Wuhan virus – it’s been from the start the top Capos of  W.H.O.

Our aviation industry is in tatters, along with the rest of the economy, due to the initial criminal actions of the CCP and the support they got from the W.H.O.

And we’re now sending money to them. Anybody concerned?

Monday Insight – February 15, 2021

Why The Air Travel Recovery May Be Slower Than Expected

The Dogma in Washington is now in full swing. Facts not withstanding, real-world outcomes are to be ignored.

Now that the necessary, professional and courtesy ring kissing is over in regard to the new regime, reality has to be dealt with.

Let’s start with this – there’s some positive news out there.

Airlines are adding new markets… Allegiant, American, Delta, United, et al. Leisure destinations as well as new hub spokes to secondary markets. And the vast majority of these were planned and initiated entirely internally at the carriers. No 40-page market studies supplied from the outside. No leakage analyses. Just internal research. Point: the industry is alive and aggressive.

But just below the surface there are some dynamics that are less encouraging.

More Employees Than The Industry Can Absorb. All this notwithstanding, the airline industry is again faced with the need to furlough tens of thousands of excess staff unless another bailout comes from inside the Beltway. Network airlines are generally not heading back to pre-2020 fleets – in size or in mix. AA, DL and UA have all made clear that 50-seat airliners are heading for the knacker. All have indicated that they will evolve into smaller route systems than before. More airline cooperative structures, such as the AA/B6 arrangement, will be likely… not commonplace, but in key regions.

But, in addition to more federal money coming to keep people paid, there’s likely to be a passel of federal interference in the airline industry.

Higher Jet-A Prices. To start with, all that new fuel efficiency coming on line with new 737 Max, A320neo and A220 airliners is going to be eaten up by higher fuel costs. Let’s get our heads straight. The new occupants in D.C. are hell-bent on restricting petroleum production. This unnecessary Dogma will tighten supplies and jack up the cost of all fuels.

Political Game Playing With Traffic. Leisure is shifting to be the segment coming back strongly. Florida is the major lynch pin in this growth. Just this past week, the new inhabitants in Washington have grandly proposed major flight restrictions to Florida destinations. Naturally, it’s couched in dire terms outlining how it has to do with the spread of CCP-Covid.

Sure. Nothing political. This is just one way that the game can be played.

Higher Taxes. How jacking up taxes will help the economy is a question that isn’t asked nor answered within the new Dogma. But even when clouded with babble about it’s just on big corporations and the rich, the argument holds about as much water as a broken screen door.

But along with this, take it to your bookie that there will also be a range of other taxes beyond income and capital gains. Air transportation is evil – just ask the stars of the movement, like that Swedish teenager Greta what’s-her-name, who has no background beyond posing for the cameras looking like a kid that just ate a bad Kosher dill. Any use of moving stuff by other than wind or electricity (which, y’all know, is free and cheap and non-polluting to produce, just take a look at a battery factory) is really, really bad.

Pesky Common Sense Not Welcome. Absolute power – or nearly so – corrupts absolutely. And in this new regime, there isn’t much tolerance for those who question the Dogma.

That means, unfortunately, there likely will be a lot less common-sense traction on the part of the industry organizations such as A4A, ACI and AAAE in dealing with the new seat warmers who will be dictating aviation and air travel policies. The fear is real – these new federal bureaucrats are going to try to have their way with the nefarious ecological killers that use fossil fuel. And that’s not just airlines, it’s the basic consumer who is so misguided as to think that taking an air trip is anything but a mortal danger to polar bear habitats.

How long this situation will go is uncertain. The one thing that is going to be critical is for the airport and airline and aviation industries to fully understand what’s coming down from Washington, and prepare accordingly.

Facts and figures and truth can demolish the Dogma. Be ready.

Log on To Aviation Unscripted. We’ll be covering this on our latest Aviation Unscripted video, which will be posted later today.

Log on for some hard unvarnished perspectives.  Our channel is on Rumble, but for the time being it will also be posted on YouTube.

Originally, we thought it best to delete the YouTube channel. However, with the content we are planning, they will probably do it for us. They are, you know, the arbiter of what people should be allowed to see.

In any case, do log on to our Rumble channel, and subscribe. We question the consensus.

Monday Insight – February 8, 2021

Airlines: Get Ready For Political Target Practice – On You

The perfunctory and necessary courtesies of the travel industry warmly welcoming a new Secretary of Transportation are behind us.

The question now is what is in future store for the U.S. airline industry.

We will be covering this shortly on our Aviation Unscripted video channel on Rumble.

But in the meantime, there are several things that the airline industry should be preparing for.

Environmental & Economic Regulation. Now that there are few political counter-balances, it could be open season for all manner of new “progressive” regulations. While U.S. airlines can accurately claim that they’re aggressively pursuing all possible paths to protecting the environment, the sad reality is that they use jet fuel, and in the emerging apparent thought-boxes in Washington, that puts airlines on the other side of the fence.

There are official dogmas that will be coming into play. It makes no difference regarding the potential future economic and environmental dangers that alternative power sources may represent. The verdict is quietly in: burning fossil fuel is in the cross-hairs.

Then there’s the “consumer” aspects that may be in play. That verdict may be coming soon: airlines must adhere to the “public need” – as defined by politicians who couldn’t pass an Econ 101 mid-term. Add to this, the ascendancy and near-certain acceptance of a whole passel of obsolete and inaccurate assumptions regarding air service, and the airline industry is in for some real challenges.

These are just a couple that may be over the 2021 horizon…

Higher Fuel Prices. Let’s not dance around this. The new inhabitants inside the Beltway are no fans of fossil fuels. The Keystone Pipeline is cancelled. Fracking on federal lands has been exec-ordered to stop. These are indications of what can be expected. Just at a time when traffic is way down, and costs are being adjusted, make no mistake, this type of stuff will jack up fuel prices.

Plan On More Fuel Taxes. There is no telling what the new regime may pursue, both for motor fuels and for aviation jet-A. The airline industry is a very convenient target as a general “polluter,” and it’s likely the political shooting will start in Congress in the next several weeks.

Regulated, Or Quasi-regulated Fares. We’ve noted in the past the ridiculous and fantasy concept of a national “average fare” – there is no such thing. But that won’t stop calls for regulation of ticket prices where they may exceed some percentage of what is concocted based on taking all passenger trips and dividing revenues accordingly. Communities where the local fares are higher will get relief, perhaps in the form of fare ceilings or some other mechanism. Maybe. Again, there are no longer many counter-balances to a lot of these “trendy” concepts.

Mandated Small Airport Service. Regardless of the economics and consumer preferences, there is the potential for righteous politicians who know nothing about air transportation economics and consumer preferences to badger the DOT to cobble together any number of initiatives to get more “air service” to small airports.  Not small communities – many of which have strong air service access – but at airports.

Even if the communities have excellent air access available at other airports, there is still the nonsense being spread that without scheduled flights – regardless of where they may go, or if they connect to anything other than a baggage claim area, at the local airport, the communities will economically crater. Lore.

But never underestimate what this new regime might pursue.This could take the form of more money wasted on EAS service that consumers won’t use, all the way up to even requiring network carriers to provide X% of all ASMs to DOT-determined airports at specific small cities. Or something else just as wasteful.

Stand by… more to come. We’ll be posting the new Aviation Unscripted video shortly.

In the meantime, if you haven’t checked out our latest Unscripted video, click here. We cover the how the Chinese Communist Party is literally celebrating the first anniversary of the pandemic they created, plus we take a look at the emerging dire issues facing Canada’s air transportation future.

________________

Latest Airports:USA® 2021 Forecast

The New Airline Structure Is Taking Form.  A Smaller One.

Based on current projections, the Airports:USA® forecasts indicate a sluggish plateauing of U.S. enplanements through the remainder of 2021.

We’re analyzing both expected capacity and airline strategies, including re-fleeting. There are very few dynamics now in place that can support any return to 2019 enplanement levels before late 2023 – at the earliest.

Note that the airline industry has made it clear that when the federal support dollars run out, it’s a one-way ticket to furlough city for thousands of employees. It’s a smaller industry because the market base is smaller. In some aspects, that’s temporary. In others, permanent. The unknown is the size of the impact and where that impact will be in the marketplace.

The traffic isn’t rebounding, and the major reasons are based on bungling and uncertain state handling of the China-CCP pandemic and – far more fundamental to the situation – the role of air transportation as a communication modality has been permanently changed.

Regardless of the downsides, the raw cost advantages of electronic business cannot be argued with.

And, business consumers aren’t arguing. Or flying as much, either.

For airports looking to take advantage of the new future, click here to take a look at our Runway To The Future program. No, it’s not more market studies… it’s a review of the new realities that no other planning firms can match. Take a look…
__________________

Monday Insight – February 1, 2021

Canada’s Air Transportation System – (Not) On Life Support

The China-CCP Virus Continues to Win.

Last week’s Aviation Unscripted video covered the dire situation faced by Canada’s airline system.

Air Canada had cut back to 20% of its year-ago level of operations. WestJet not far behind. Porter grounded… just for starters. Borders between provinces restricted. Premier Ford basically shutting things down in Ontario. U.S. border restricted.

Then, a day after we posted the Unscripted, virtually all international traffic was for all intents and purposes shut off, via quarantine requirements for returning consumers. Spring vacations cancelled – and Canada’s air transportation system further cut. There wasn’t much left, anyway.

To this point, government support for Canada’s airports and airlines has been mostly vapor. In a huge nation that has just 37 million population, air connectivity is more critical than in probably any other developed country.

The open question is how much long-term economic damage is being done to the air transportation system. The question must be asked if there is an alternative to just shutting Canada down.

Canada is America’s #1 trading partner… an essential part of several U.S. industries. So, if the situation in Canada is so dire as to kill off its air transportation industry, it bodes very unwell for our own economy.

If you’re interested in more about this, click here for the Aviation Unscripted video… take a couple of minutes for some straight talk on a couple of third-rail issues that you won’t find anywhere else.

_______________

HAVE A GREAT WEEK AHEAD!

Monday Insight – January 25, 2020

The “Average Fare” Fantasy

It’s a quarterly ritual.

The BTS publishes “average fares” for airports across the nation, and summarizes an “average national air fare.”

Then the media stories start, confidently comparing the local “average fares” to the national average, and coming to conclusions regarding how consumers are getting zapped or how they are benefiting from the local average fare being higher or lower than the “national average.”

Hey, it’s gov’met data, so it must be gospel.

Nevertheless, great coverage of something that is totally meaningless.

The “product” – what consumers are buying and represented by air fares-  is different at every airport. Therefore, comparing the price of that product between airports is a wallow in nonsense.

The bogus assumption on which these comparisons are made is that an air trip has the same intrinsic value and is exactly the same wherever it takes place, sort of like a gallon of gasoline, or a Big Mac, or a dozen roses. An air travel consumer at Albany is assumed to be buying the same “product” as consumers in Orlando or Yuma or Rochester. Sheer nonsense.

The fact is that the average fare paid in San Antonio is based on air travel that is very different from that at Newark, or Spokane, or Las Vegas. The average length of passenger trip varies. The mix of leisure v business travel varies, the itineraries differ – BTS data is on consumer spend, not necessarily on comparable one-way fares. All of this delivers factors that are different and unique airport to airport.

Point: the BTS data is useless in determining the relative value of air travel at one point v another.

Airports need to be ready to correct local media when this drivel gets published. These types of veneer-researched stories are very damaging to public image.

This is another reason that raw BTS data is not for amateurs. The reporting processes are in many cases outdated, and are based on an airline industry structure that has changed materially. Plus, there are the amateurs who take raw O&D data, T-100 data, and even on-time data – and assume they came directly from an Excel sheet done by Zeus.

Here’s a hint: In 1997, more than two decades ago, the GAO reported that BTS/DOT O&D data were inaccurate because the reporting system was out of date. Guess how much has been done? Today, when you see some “analyst” post O&D numbers that all end in zero, it’s the leper’s bell of somebody who doesn’t have a clue.

Or, accurate data.

_______________________

Boeing 737 Max Orderbook – Indicator of Future Airline System Structure

Last week, another 93 737 Max orders were cancelled.

Boeing still has just approximately 4,093 Max machines still on the order books – that’s an eight year backlog, assuming 42 coming off the line each month. But this is still a hit – and a forecast indicator that needs to be recognized.

It’s not just the cancellations that give us some insight to the future… it’s who is doing the cancelling. It’s not airlines, but mostly leasing companies. These entities generally order airplanes based on their internal forecasts of future air traffic demand. One thing they don’t want is having any of their inventory “on the ground” a.k.a. unleased. One large leasing company has cut more then 150 Max orders.

The message here is that these companies are seeing a global airline industry that is going to be much smaller than what was seen before the China-CCP virus spread across the globe.

Add to this the projected mix of post-pandemic unplanned retirements in the next 12-18 months – ranging from older narrow-body fleets, to 50-70 seat jets, to older long-haul widebodies – and we can get a clearer picture of the type of air transportation system we will be seeing in the next five years.

A nasty monkey wrench being tossed into traditional air service development planning: it will be airline corporate strategies, based on fleet mix decisions that will be the key determinant of the future airline system.

This is one advantage we bring to our airport consulting and forecasting projects: Boyd Group International maintains its own internal data on airline fleet shifts. This allows us to more closely adjust airport planning to the realities that will be emerging as a result of carrier restructuring.

It’s also a key part of our Runway To The Future programs we are delivering to our clients. We develop specific-factor trend and traffic forecasts that are not based on obsolete government data and methodologies, but instead on the future.

Click here to get a perspective on how we can deliver new perspectives and new planning metrics with a Runway To The Future program.

_____________________

One Year Anniversary of the China-CCP Epidemic

Let’s see… U.S. air travel is down by more than 50% – some places more. Airlines are losing tens of millions a day. Airport revenues are decimated. The entire economy is torpedoed. But the China CCP  is celebrating!

Which is not a positive sign on how long this pandemic will continue to be inflicted on the rest of the world.

January 20 marked one year since the Chinese Communist Party and their toadies at the WHO tossed in the truth towel and told the world that, yeah, they had a major epidemic on their hands. This after weeks of intentionally lying about it and muzzling anyone who came out with facts. Weeks where the virus was spreading across China and to the rest of the globe.

And now, they’re doing a rerun of the exact propaganda stunts that spread this disease in the first place. In Wuhan, no less. They are holding huge communal events – no social distancing here – to again “prove” there’s no chance of communicating the Covid-19 disease.

That’s exactly what they did last year, and which was the cause of the spread of this plague. Nice folks, the ones running this political party in China.

Standby, we’re covering this in the next Aviation Unscripted video, which we plan to post this week.

Not positive news. Despite sunshine stories, China is not free of the CCP’s viral handiwork. Not by a long shot.

The video is planned to be up by COB tomorrow (January 26).

For access to Aviation Unscripted videos, click here and bookmark it. We are now on Rumble, for several reasons, and in 2021, we’ll be tackling issues that may from time to time not follow the Accepted & Required Narratives.

____________________

Monday Insight – January 11, 2021

____________

Fleet Strategies:

Harbinger of New Air Transportation System

U.S. airlines are fundamentally shifting fleet plans. Quietly.

It will be the metal airlines choose to operate that will determine the structure of the air transportation system in the future. This will combine with changes in consumer travel demand – particularly business travel – that will shape airline strategies

One thing is certain for the near term. Network carrier fleets are not expected to grow back to pre CCP-Covid levels for several years. That’s because the demand drivers for air travel have changed. As for ULCCs, the picture right now is more positive, but whether the marketplace for leisure and impulse travel will remain strong is an open question.

Fleet Flipping, Not Fleet Restoration. The trend of airlines swapping parked and operating airliners continues. But the full-scale restoration of pre-CCP Covid fleets isn’t likely.

New units are in the pipeline – but as replacements, not net new aircraft. As 737 Max units, A220s, and A320neos come back into operation, the main effect will be to replace older aircraft, not necessarily expand fleets. The latest Max order from Alaska is to retire the A320s acquired in the Virgin America merger.

Last week, Southwest took delivery of three 737 Max aircraft… and registered parking seven 737-700s. Delta continues to pull down its 717 fleet as well, with another seven sent to the knacker in the last few weeks.

The airline fleet action to watch will be the A220, now being also built in Mobile. Delta has most of its -100s already delivered, with 8 -300s on the property and another 50 or so in the pipeline. These will arrive with the continued retirement of 717s. The A220 represents the most mission-flexible platform available.

On the long-haul side, the picture is more ominous.

International traffic – a key part of the financial underpinning of U.S. airline revenues – is not going to rebound in 2021. The U.K. and much of the E.U. are either closed or materially constricted. Asian traffic is going to be down. The robust global connect hubs set up in the Middle East by carriers such as Emirates are deflating. Plus, geopolitical issues are very troubling. Watch China. Nasty stuff may be in the offing. We will leave it at that.

The new trans-Atlantic routes for mid-size cities that the Airports:USA forecasts predicted one year ago are now far in the future.

Different Route Systems… New Opportunities At Mid-Size Airports. We are facing a smaller revenue base and reduced demand for air travel in 2021. This means air transportation will be very different across the country. In most cases, however, the new fleets will open new market potential at dozens of mid-size communities. Airlines will adjust – and be smaller than previously forecasted.

But it will be driven by revenue opportunities allowed by new generation airliners operating in a new context of the value of air transportation as a communication modality.

Monday Insight – January 4, 2021

Before We Start…

Airline Relief Is Welcome –
But Is It More of A New Gas Cap In An Emerging Tesla World?

The relief funding for airlines is great news… over 30,000 employees with at least their income restored, and airlines adding back service (as required by the legislation) to points which were dropped since the last relief funding expired in October.

The only fly in the ointment is that all this can vaporize after March when the funding expires.

It’s near certain that some of the airports that have received reverse-pink slips in the past two weeks will ultimately retain the service after the expiration of the relief. But not all.

Where the uncertainty is found is in the consumer and economic shifts in the basic structure of the air transportation system. Currently, the goal seems to be restoring the air transportation system to its pre-2020 structure.

That, unfortunately, is a near-impossible objective. The economic system on which the industry was dependent has changed fundamentally.

Point: the relief is positive. But it does not address the future changes that will be necessary in the coming year. We touch on this below,

______________

New Metric: Traffic Composition Replaces Traffic Volume

Get with it. We’re not going back to 2019.

There is no longer any question that the role of air transportation as a communication modality has now been changed completely due to the economic damage done by the China-CCP pandemic.

Airports and aviation-related businesses need to recognize this – and start to plan accordingly, NOW.

It’s basic, unshakable economics:  When the utility and veracity of any product declines, the core consumer demand will decline and take a new role in the marketplace.

This is exactly what has happened with air transportation.

Its utility has been materially changed by the acceleration of the trend toward electronic means of communication. This has been a trend for the past 25 years, as demonstrated by the increasing economic obsolescence of short-haul air service. But with the forced lock-downs across the country in the past year, the stampede away from business air travel to virtual communication has gone into warp speed.

As a modality for business communication, some sources estimate as much as a 20% decline… which may be accurate. But the impact will be registered based on the mix of business v leisure travel in each region and each airport.

What to watch for in 2021 as a result of this shift:

Short-haul business markets will continue to atrophy.

This will likely be most severe in markets that were already declining, such the WAS-NYC-BOS corridor.

It will likely also be experienced in former strong business/commuter markets like PHL-PIT, and any point-to-point segment where the travel time for a day trip (total time, not just the time sitting in 13A breathing through one’s increasingly uncomfortable mask) is more than 4 hours.

That’s a rough estimate, but do the math when it’s a three-hour meeting or less. The immediate interaction via a modality that admittedly still looks like a hostage video is a lot more cost-effective and vastly more time-effective.

Even some west coast markets that were previously less affected by the electronic dragon, such as the LAX – SFO area markets and any short haul intra-regional routes involving declining city battlegrounds such as PDX and SEA will likely see major declines.

Leisure traffic less affected. It’s less sensitive to travel time.

Getting to Boca to see the family usually is a much less time-centric process than having to be at a 10:30 meeting in Chicago.

Therefore, we will continue to see domestic and near-domestic (such as Caribbean) experience some recovery. And there will be more airline planning focus on shifting capacity into such markets.

But do not tumble to the concept that this will replace the decline in business traffic, either in volume or in revenue.

International demand is kaput for the rest of the year… maybe longer

This is more of a hit than it may appear. The airport enplanements driven by international traffic flows – direct and indirect – represented about 31% of the total U.S. airport traffic. Very uneven across the nation, but still near a third of our traffic. We can safely project that this will be slashed at least in half.

Nobody is planning a magic vacation to the lake country of Italy this year. One cannot do business in the U.K. when it gets closed from time to time. Doing an unexpected 14-day quarantine on arrival at a foreign destination is not what a family of four is hankerin’ to do.

Australia is not only fundamentally cut off from the air service world, but even domestic travel between states is restricted. Want to go to northern Ontario for a fishing trip? This year, phone it in. The trout get to relax. The border is essentially closed.

It’s Traffic Composition, Not Traffic Volume

In the coming year, the #1 challenge for the air transportation industry, including airports, will be accurately adjusting to the fallout from the shifts in the basic structure of the consumer base.

Give some thought to the levels of infrastructure and facilities at a given airport that will change due to the fundamental changes in the role of air travel in the economy.

At the terminal, what about the accommodation for black cars, which will be in less usage at many large airports.  Then at smaller airports, keep in mind that those rental car counters were supported largely by business travelers. We’ve already seen some companies pull out of such airports.

That very appropriate business lounge the airport built will have less demand. Maybe at some larger airports, that major airline membership club might not be needed. How about any changes in the concession mix?

The point is this. Much of the planning that’s been in place for the last twenty years will be challenged with the new consumer mix. At Boyd Group International, we’re applying our industry-leading forecast expertise in assisting our clients to identify, adjust, and optimize these changes.

If you’re interested in pursuing a new-generation strategic plan for your airport, just hit the contact button, and we’ll set a time for a conversation regarding our Runway To The Future™ program, tailored to your airport.