CCP-COVID Traffic Rebound

We will start with this… our Airports:USA® CCP-COVID forecast projections are starting to play out.

While May was more of an economic disaster than expected, resulting in around a 95% elimination of consumers allowed to take trips, it appears that the second half of June will still be the stark turnaround point.

According to TSA, Memorial week-end delivered a couple of near 350,000 passenger days. Anecdotal information indicates that ULCC leisure traffic is rebounding strongly. As just one example, our client Latrobe will be gaining back independent nonstops to Orlando, and it appears that Frontier, Allegiant and Spirit are experiencing traffic comebacks.

On the fleet side, the picture is also positive…

… Delta is going ahead with the acquisition of an additional seven A-350s from Qatar airlines. That portends well for the near future.

… Allegiant indicates it has brought a net 22 more A319/320s back into service.

… Southwest has parked another 70 737-700s, but brought 62 back into service. Since these data are just a one-day snapshot example, this would indicate at the least a wash.

Point: fleets are starting to return.

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It’s Time To Fricassee Chicken Little

Okay, the argument could be made that as far as air service was concerned, the sky was falling. But only temporarily. It’s coming back.

Going out on a forecast limb… by the end of June, daily passengers going through TSA checkpoints will be over 1.0 million and by January we will be back to 85% of 2019 levels. A major factor in it not returning to full 2019  demand is international traffic… it will remain weak, particularly in trans-Pacific markets. USA-China traffic will plunge – and stay – at @20% of prior levels. As for the E.U., leisure traffic will be a fraction of before to and from North America.

It all has to do with the economy being allowed to come out of the caves. It has to do with an increasing understanding of people who are and are not at risk.

Domestic Air Service Access Restoration – Certain, But Trickle-Down. The pandering veneer media stories are rampant that it will take years to get air travel back to where it was before the CCP and WHO allowed this pandemic to spin out of control and eventually spread from Wuhan to just about everywhere. They are wrong.

(Yup, that last comment is a red herring for the folks who are trying desperately to mislead the public into believing that the Chinese government isn’t responsible for the pandemic. Or worse, contending that holding them responsible is just a “distraction” or even more dishonestly, racist. Got a problem with that, then bring it on. We have facts. When all this settles out, the CCP must be held accountable.)

Back to the U.S. air transportation system – we are seeing the ULCCs starting to gain traction. For major carriers, mainline O&D traffic between hubsite airports is felt to be gaining strength, and by the end of June, the they will be adding spokes to more secondary feed markets.

Damage Done. New Approaches. New Airline Industry. But the system will be different. As we’ve noted, the air transportation industry is not unlike parts of the economy… the CCP-Pandemic has damaged the underpinnings of the entire transportation system… so when the dust settles, not all will be as before.

Some smaller communities will see their air service accessed at airports other than the local one. The mid-size airport metro-peripheral air service trend over the last 20 years will be affected as well. Consumer and businesses have found that some air travel can be replaced – or is no longer necessary – due to electronic communication channels.

Traditional Air Access Approaches – Here’s a Flash – There Is No Tradition. The key factor to remember is that airlines will be operating different fleets, with different market strategies and revised revenue goals. Traditional “true market studies” and “leakage analyses” measure (and often not well) the pre-CCP-COVID airline industry, not the future one.

Post-CCP-COVID, air transportation will have a different development trajectory and different route-decision metrics.

Forecasts – Not Past Data. At Boyd Group International, what sets us apart is that we are a forecast and research firm, with a 30-year track record of assisting clients with futurist planning. Our work with airlines and aircraft manufacturers in identifying emerging trends – from new aircraft platform feasibility, to specific airliner demand, to shifts in national and regional traffic patterns –has been our advantage in assisting clients develop effective air access programs.

The point is that BGI is better postured to identify the fundamental changes and emerging opportunities emerging from this pandemic.

If your airport is looking at crafting new-generation plans for the future – including long term strategic opportunities, click here to send an email, or just give us a call. We’ll get right on a tailored air access strategy program based on the future – not old data.

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FROM ALL OF US AT BOYD GROUP INTERNATIONAL, WE WISH YOU A SAFE AND HEALTHY WEEK AHEAD!

Update on CCP-COVID Wreckage

There are mixed messages coming out of the airline industry.

Delta has returned to service a net-plus 27 CRJ-900s, operated by Endeavor Air. Seven 50-seat CRJs are also being put back in the mix.

Congratulations Client to Latrobe… Spirit has been doing well combining PIT-LBE to MCO, and at least one flight in the next ten days already is fully-booked. The plan is to re-instate LBE-MCO nonstops next month.

A note regarding realities of airline/airport relationships. LBE implemented an aggressive strategy to support Spirit, right from the start, back when the carrier was proposing to reduce flying to conserve cash several weeks ago.

Short-Sighted Planning – Sowing Seeds For Future Air Service Reductions. In contrast, there are some small airports in the nation that apparently have tried to play hardball with incumbents in regard to flying empty airplanes in and out. Reminder: as of October, when the CARES requirements expire and airlines will be able to economically restructure, they will remember which airports supported them and which didn’t.

Traditional ASD Approaches Are Not Going To Work, Anymore. This will be particularly true in regions with secondary, metro-peripheral airports. Delta’s latest route-drops are clearly in this realm. The open question is to what degree such service will be reinstated in 2021, and that will be dependent on a new-structure in the airline industry.

New Traffic Generation Patterns… New Airline Strategies. At BGI, we are developing entirely new forecast approaches for airports in the cross-hairs of what will be shrinking fleets in the 4Q of this year. Point: the traffic generation in some regions will not rebound because the economic foundations have been damaged by the COVID pandemic. Think petroleum regions. Think auto-focused regions. Think international markets supported by specific industries.

The traditional approaches to “air service development” – the overstuffed “true market studies” – won’t have any bearing on the fleet realities and strategic realities facing U.S. airlines. Fleets will be a core driver in the process, not lists of raw and obsolete BTS O&D data. Give us a call or email and we can discuss the specifics for your community… the nation’s economic base has changed, and so will the airline system.

Airliner Groundings… Shifting Toward Future Fleet Optimization. There are increasing indications that the multi-fleet network carriers – AA, DL, UA – are doing triage with parked airliners, exchanging in-fleet units with some parked earlier. The ongoing process is still net fewer airliners, but at the least, they are re-planning fleets for the future.

Miami Air Goes 86. Arguably one of the best and most professional charter carriers, Miami Air has filed bankruptcy and is liquidating. No sports teams in operation means one major revenue stream evaporated. It took out the carrier, too.

USA Jet Airlines – a supplemental carrier – has also shut down, at the least. Heavily focused on the auto industry – the CCP-COVID pandemic has shut that industry down, too.

United Airlines has cancelled an order for 96 B-737-10 MAX airliners. This may put the backlog at Boeing below 4,000.

This tracks with the apparent economic reality that when facing a global glut of 737-800/900s that may be available for, say, $50 million a pop, the economics of a new airliner at double (or more) ownership costs get real foggy… especially in the specter of very low jet-A prices. The backlog at Airbus is likely in the same line of fire.

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And, Finally,

A Word About Our Pandemic Sponsor, China’s CCP

Make no mistake. The day is coming when the Chinese government’s bluster and babble won’t be able to cover up for their criminality in the start and spread of the pandemic. They inflicted this on their own population, as well as the rest of the world.

Countries, states and even individuals have initiated, and others are planning to initiate, legal action against China’s un-elected government, otherwise essentially the Chinese Communist Party, or CCP. There are issues with suing a sovereign nation. But that isn’t the issue… it’s the Communist Party of China – a pack of thugs that have been in business just short of 100 years – that is responsible, and they are not a nation. They also have connections with Chinese-owned businesses across the globe. Billions of dollars in value. That may be fair game.

The first line of defense for the CCP is to fan the dishonesty that going after a political party – one not even selected by the people of China – is “racist,” which is a complete lie. A political party – particularly one like the CCP – is not an ethnic entity.

There Will Be Some Recompense. As we’ve noted in the past, airports should gain a clear and unvarnished understanding of the negative impact that has been inflicted due to China’s CCP. Likely, it will be some mechanism generated by the U.S. government, probably not a lawsuit, that will be the modality.

Guilty & Caught Red-Handed. Yes, this virus came from China, and the CCP was calling the shots, often to the lethal detriment of the Chinese people. Yes, the proof is beyond question that it was the CCP’s actions from November on (at least) that allowed this to become a pandemic.

There is no question that the CCP must be held responsible.

When All Else Fails, Deny Reality. All of that notwithstanding, the CCP has a formidable first line of defense – almost a fifth column – in the U.S. that is lining up to defend them.

One bulwark is parts of the media, now spinning the dishonest narrative that to blame the CCP is only an attempt to take pressure off of the alleged U.S. failure to act soon enough. Or, worse, the dishonest allegation noted above that to accuse the CCP of this crime equates to racism. Let’s put it on the table once again: the CCP is a political party, not an ethnic group. An un-elected political party, to be more precise.

In short, the CCP strategy is to rely on fantasy and hope it won’t be questioned. It also is relying on U.S. entities that do business in China to ally with the CCP to protect their investments there. With the now history and facts surrounding the CCP’s involvement, doing business in China is going to be a lot less lucrative and a lot more risky. So the idea is to aggressively defend the CCP.

‘Course, this runs counter to the actual facts, but that makes no difference. Just keep telling the party-line story over and over.

Criticize The CCP & You Threaten Special Interest Rice Bowls. Another bulwark is made up of the “philanthropists” and special interests that are defending the incompetence of the WHO and want to smokescreen what the CCP has done. And a third line of defense is the many professional firms that have lucrative branches in China. (The good news, such as may be, is that U.S. airlines have not had – and actually would not be in line to have – a major role in China’s international access.)

Furthermore, there are stories that the CCP has an army of wu maos – people paid to file comments in channels such as Facebook and Linkedin supporting the regime. It’s common in China where people are paid half a yuan (five tenths or “fifty cents”) to post bogus negative comments.

The whole process is based on trying to create the fantasy that China is really the hero in this whole mess.

To that end, this week there is an Intelligence update at BoydGroupChina that relates to the fantasy that China’s air transportation system is coming back and is an example for the U.S.

Click here to take a look.

Before We Start This Week…

CCP-COVID Damage Estimates

It is now clear that the U.S. government, as well as those in Australia, Germany and the U.K., will be taking off the gloves and going after the CCP in China to recover losses from that organization’s total coverup of the Wuhan-originated virus.

The CCP – Chinese Communist Party – is essentially the un-elected government of China. And, globally, there are lots of assets that are connected to the CCP. They are now in the cross hairs of governments across the world.

At some point, and in some manner, there will likely be some mechanisms for public entities, such as airports, to pursue damages.

We are assisting airports in determining the traffic hits due to the CCP-COVID pandemic. It is important that when the time comes, airports also have a clear and defensible estimate of the financial hit this has caused, and be able to – through whatever systems are established – file for recompense.

Give us a call or email and we can discuss.

For more insight and intelligence on the evolving CCP-COVID scandal, check out the Intelligence tab at BoydGroupChina.com.

Unlike other information “sources” on China, we don’t have the intellectual constraints of an office in that country. A lot of these “sources” have to walk a careful line to assure their staff and businesses in China are not “affected” by government actions, should they say something not in line with the CCP.  Click here to explore.

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Future Factors To Consider…

The COVID pandemic has changed everything.

Air travel economics, airline strategies, airport facility needs, consumer trends, new multi-mission airliners – everything in air transportation will have a new playbook. And from the wreckage brought by the CCP-COVID epidemic there will be new opportunities.

The old assumptions and planning metrics no longer apply.

Fleets. Move to the middle. It will be multi-mission 737MAX, A321neo and A220s that will emerge. Airlines will have different fleet mixes that will shake traditional route planning to its core. Fewer widebody airliners, a reduction in smaller 50-70 seat airliners. This will change how airlines approach route planning. Within these new strategies, the term “air service development” will be shifted to “air service retention.” It will be highest and best use of resources.

Post-September Restructuring. Standby for uncertainty. The CARES money is intended to preserve pay for airline employees through September… employees that, based on current demand, are largely redundant. It will depend on the rebound in the economy regarding what airline systems will look like after the CARES program ends. It is not beyond the realm of possibility that there will be only limited reductions in labor force. All depends on how rapidly the economy comes back.

More Regionalization. At least to some degree. All of the four main network systems have indicated that they will emerge smaller. Combined with new fleet mixes, this means concentration on fewer regional feed spokes. DOT programs such as SCASD, which is intended to preserve the past, will be even more obsolete. New airline focus: revenue concentration, not rural route expansion.

Consumer Travel Demand Patterns – Longer Not Shorter – There have been some prognostications that the new air  transportation system will give rise to more short-haul, close radius O&D air travel demand. We would submit that this is nonsense. Increasingly, air is less and less time-efficient for short-haul transportation. The coming excess of small jets will put a strain on demand for parking space in the desert, not more intra-regional flying.

International Traffic – Opportunities. By the end of 2021, alliance hub operations in the E.U.  and U.K. will be prowling for more trans-Atlantic feed. With new fleets of multi-mission narrow-body airliners, it will be secondary, non-hubsite commercial centers in the U.S. that will be in the cross-hairs of planning departments across the Pond. This was already in play before the CCP-COVID pandemic, but will gain more focus in the next 24 months.

Excess Airliners Around The Globe. Messing up the demand for new jets, basic math indicates at least 2,500 economically-viable airliners will be on ramps and in the deserts across the globe. The potential for new entrants is probably less than it would appear, but it will depend on regional economies.

A New Playbook. The conclusions are clear: pre-CCP-COVID planning and strategies are out. Airlines will be different in structure, and the consumer base will be, too.

There are a lot more factors and fallout to consider… airports will have different  facility needs. Consumer travel patterns will shift, and in some cases evaporate. Suppliers will need to adjust to the fallout caused by the changes in airline fleets. And more…

Get Prepared For the New Future… These will be just a small part of the range of new dynamics that we’ll be exploring with industry leaders at the 25th International Aviation Forecast Summit, August 23-25 in Cincinnati, USA. We will not be rehashing what has taken place – we all are aware of that. Instead, we’ll be illuminating the new future that each sector of the industry will be facing.

Click here for more information regarding the reasons industry leaders will be at the only aviation forecast event… and writing the new aviation planning playbook.

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The Coming China CCP Litigation

Airports Might Have Recourse…

But Beijing-CCP Has Lots of Buddies In The USA

Let’s be absolutely clear.

U.S. airports are in line to incur billions in financial losses this year. Seattle alone has indicated a quarter-billion loss for the rest of 2020.

The entire U.S. airport system – the most extensive in the world – is now mostly quiet terminals with an occasional empty scheduled flight and possibly some limited business and GA operations.

The fact is that the CCP-COVID pandemic has destroyed our air transportation system for the time being, and has inflicted long-term damage to airports across the USA. It is not a natural event… the proof is clear that it is the criminal malfeasance of the Chinese Government that allowed this to happen.

Every airport has indeed been a victim of the CCP-COVID pandemic, and may want to pursue whatever determinations are made by the U.S. government regarding the total culpability of the Chinese government. As this situation winds down, there will be enormous pressure to revisit the disgusting and intentional way the CCP manipulated and mishandled the virus. Rather than again go over the sordid details, you can log onto BoydGroupChina.com, and check out the Intelligence tab.

Is a Political Party The Same As A Country? In regard to getting recompense, one of the open questions appears to be whether a sovereign nation can be sued or held accountable for criminal actions and damages resulting from them.

So, the question that the legal and diplomatic entities involved in these suits will be probably considering is whether officially and technically the Chinese Communist Party – which was calling the shots – is a “sovereign nation,” or is it a political party that just happens to operate in China.

It is the de facto government of China, to be sure. But is the CCP itself the same as “China?” As a political party, they’ve been in business since the 1920s… it’s only since 1949 they’ve had a monopoly on the political gig in China.

What Really Are the Damages – Hard Defensible Numbers. We are not in the litigation business, but if you are considering any such participation, it will be imperative that you have a solid projection regarding the actual damage that the CCP-COVID pandemic has done to your airport. This is where BGI can help.

Danger of Losing China Air Traffic? Don’t Worry. It’s Vaporized, Anyway. One of the logical concerns for large U.S. airports in taking a stand is that in doing so, any chances of increased air service access to and from China would be out the door.

Whether it’s a rural airport or a huge international hubsite, rest easy. After China’s malfeasance in regard to this virus, and the deflation of its economy, passenger traffic between the two countries is essentially dead. Flat-lined. Draw a chalk line around it. The drivers of that traffic are gone.

In 2019, the total O&D between the U.S. and China was @8.2 million. In 2021 and beyond, our Airports:China forecasts indicate less than 500,000.

The heady days of the moon-shot trajectory of China-U.S. travel are over. BGI has been directly involved in researching this area over the past five years, and now the upward spikes seen year after year from 2003 to 2017 are over. The CCP-COVID situation, as well as major political shifts since the accession of Xi Jinping to the head of state, have completely torpedoed these expectations.

Therefore, any reticence to pursue paths for remediation on the basis of losing lucrative future China flights is misplaced. That damage has been done, and the open question is whether there are avenues for legal redress from the CCP for the damages inflicted by their actions.

Beijing’s First Line of Defense: Buddies In The USA With A Dog In The Fight. Take a look at a lot of what’s been reported on the CCP-COVID pandemic. Despite the overwhelming proof of the actions of the CCP, there are lots of folks in the business world, the media, the philanthropy sector, and the global consulting sector that are front and center defending Beijing.

That’s because they have interests to protect in China. Parochial interests. Any and all efforts to illuminate what the Chinese government has done will be aggressively attacked. The misinformation so far from these sectors is amazing, and it is a lead-pipe cinch that they will be Beijing’s heavy artillery on the ground in the U.S. to shortstop any attempts to hold them accountable.

Where BGI Can Help. This would include reasonable and supportable enplanement and operational forecasts – both pre-CCP-COVID and the realities of post-CCP-COVID air service… the losses in local revenue to the airport… the loss of economic impact as a result… the future loss of revenue and fallout from known or expected changes in airline strategies and fleets. And a lot more.

U.S. airports have been fundamentally damaged directly due to the CCP’s cover-up of the virus. The actual – and defensible – data will be eye-opening.

A complete airport CCP-COVID economic impact report can be a valuable tool in keeping communities aware that this situation is for the time being structural.

Also, there will be a lot more class-action efforts aimed at China, and having hard numbers would be an asset should an airport or community would decide to participate.

At the least, the community needs to understand that this financial hit is not going to get fixed in the near term.

In this regard, give us a call or email and we can discuss putting the numbers together to assure that your community is fully aware of the future.

More Information: We will be expanding on this and posting on the Intelligence tab at www.BoydGroupChina.com. Log on and take a look… it is a source of unvarnished information on the aviation-related effects of the CCP-COVID pandemic.

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ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A HEALTHY AND PROSPEROUS WEEK AHEAD!

To Start This Week…

Forecasting The Rest of 2020

While still cloudy, it still appears that the economy may start to come out of the caves in June.

In such case, the airline industry will likely move to new approaches to accommodate the return of passenger traffic. It is certain, however, that there will need to be some very aggressive actions and procedures implemented to stop the contagion.  Emirates is experimenting with blood tests at the boarding gate. (Do Platinum flyers get pin-pricked first?)

Others are talking about leaving the middle seat open in economy, which is more of a PR stunt than anything else. If you’re lucky enough to be on an A220, that’s just 19 inches of separation. On a 737 it’s closer to 17 inches. In any case even if this could make money, the close proximity of customers is still there.

Solutions will be found. Nevertheless, we believe each airport should have a perspective of what they might expect in regard to traffic, and when they can expect it.

We are accomplishing CCP-COVID recovery traffic forecasts for airports across the country. The program reviews destinational profiles, incumbent airline strategies, and a range of other factors to deliver a 12 month starting point forecast.

Give us a call or click here and we can discuss your airport’s future.

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DOT Scores Another Misfire.

Political Correctness First.

Let’s Financially Weaken Our Airline System.

Just when we thought there were signs of a scintilla of common sense at the US DOT, our hopes are dashed.

They never have had much understanding of the 21^st century air transportation system. One look at the BTS/DOT reporting of air carrier data (which some lightweights still peddle off in raw, un-adjusted form on unsuspecting airports) is clear proof that they still think this is 1975. Then take in the rationale for EAS and SCASD programs, and it’s clear that these folks are still listening to music on 8-track players.

And it continues. In its veneer wisdom, and even less understanding of the situation facing the US airline industry, the DOT has rejected applications for service waivers at a number of airports where there simply isn’t any real traffic.

Now, if the CARES money were underwriting flight operations, the decision could have some validity.

But all those dollars are only to protect the income for airline employees, within a market where airlines cannot continue to use, or need, anywhere near the pre-CCP-COVID pandemic staffing. By itself, that is still a sound concept, pending a restoration of the workings of the economy.

But to unilaterally force airlines to keep flying empty airplanes at huge financial losses – which has minimal effect on the places served – is politically-motivated stupidity. And a total lack of leadership gumption.

Then, on cue, there are the tear-jerk stories on how the DOT policy will keep smaller airports connected. Connected with what? Connecting who? The whole reason for this is that there aren’t any passengers at those small communities which shallow-end reporters are so concerned about.

Cut List or Service Reduction – The Prudent Strategy Is To Let The DOT Know. We have advised our airport clients to take pen to paper and advise the DOT of their support for these airline actions.Whether or not the airport is on a complete cut list, or whether incumbents are massively reducing capacity and schedules, go on record as supporting such actions in light of the current crisis. The DOT policy is simply an attempt to regulate a market that even in the best of times they completely don’t understand.

Wasting Cash Needed For A Return To Service. Airports and airlines are in this together, and anybody with an I.Q. exceeding the temperature of a chilled martini knows full well that these DOT decisions only weaken airlines, drain off cash needed to get back into the sky, and thereby making a return to full service even more distant. Take a real hard guess which categories of airports will be materially harmed. The politicians that the DOT is pandering to certainly haven’t.

We would again suggest that airports and communities move now to advise the DOT that their determinations are, under the current situation, anti-consumer. That’s because every dollar an airline has to burn flying mandated empty flights is one less that can be used to quickly bring airplanes back into the sky.

Do so directly to the DOT, with a copy to the airline, and to the local congressional delegation, which might or might not have a clue. No fluff… be short and powerfully to the point. Just make it clear that you support the carrier’s pro tem choice to keep their financial powder dry, in regard to service reductions to get through this crisis.

Just the facts and your point of view, with a list of civic supporters. The Docket to refer to is OST 2020-0037.

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A Bit More On The CCP-COVID Pandemic

For folks interested in following events unfolding in regard to the handling and the effects of the CCP-COVID pandemic, we’ve posted an update at BoydGroupChina, regarding some bogus information on how it all got started.

Beating A Dead Dragon. There is no doubt regarding the responsibility and complicity of the Chinese government and the World Health Organization in this pandemic.

But some of the talk show narratives get off the straight and narrow of the facts. One of them is that the Chinese government supposedly quarantined all the folks in Wuhan, except international travelers, allowing the virus to intentionally spread across the globe and protect China.

The CCP should have been so lucky… they had no such control before millions of Wuhan residents skidaddled out of town for the New Year. So that conspiracy theory is not accurate. The CCP and the WHO are still with blood on their hands, anyway.

CCP-COVID Torpedoing The Airframe Industry. Here’s another tidbit. We are reviewing our global fleet demand forecasts for the next three years. There is no doubt that the overhang of over 4,000 relatively low time, grounded and orphaned A320/321s and 737-800/900s are going to have aircraft leasing companies in turmoil. One reason is fuel prices. These leasing companies have lots of new A320/321s on order. 737MAXs, too. They burn 15% less jet-A.

The proposition of a new airliner isn’t what it was three months ago. Fuel prices since January have gone from $1.87 a gallon to somewhere near 60 cents. The prognostications would indicate a fuel capacity glut for the next 18 months. So for an airline, why take on a few million in increased lease payments for a new airliner compared to a used one, just to save, maybe $200,000 in annual fuel expense. The industry isn’t in a growth mode.

China International Air Traffic – Back At Least 15 Years. Another one of the findings is that, while the rest of the world can and will return to some semblance of the pre-CCP pandemic, China’s air transportation system will shrivel to the point of being stuck with approximately 450 excess widebody airliners. One reason is that the pre-pandemic traffic levels won’t return because of changes in China. As for U.S.-China air traffic O&D, figure 2021 being approximately 400,000. That’s about 5% of what it was in 2019. That will have some localized economic ripples.

We’ll be coming out with a report shortly.

The New Source of CCP-COVID Insight. For the latest intelligence updates on the CCP-COVID situation, click here to go to BoydGroupChina.

The difference between this and other COVID-related sites is that Boyd Group International focuses on futurist projections and research. Most other sites and unsolicited “data” emails just repeat what’s happened. We cover issues that directly and also indirectly affect aviation. We are doing constant outreach and research from sources inside and outside China, including periodicals and reports in both English and Mandarin.

We will be updating the site throughout the month, and we’re planning some unique features in the coming weeks.

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For an update on the aviation future due to CCP-COVID, Click Here.

Toss Out Traditional Planning – It’s A New World

CCP-COVID: Re-Configuring The U.S. Airline Industry

Boyd Group International’s Airports:USA® has accomplished an independent projection of the effects of the CCP-COVID pandemic on the U.S. air transportation industry.

Not pretty… But better than the rest of the globe, where entire fleets have been orphaned when their former operator goes out of business.

But it is still huge losses. Basic U.S. forecasts for the next 12 months indicate a fare revenue decline of at least $95 billion. Billion with a B. That’s just fares.

Total O&D loss for U.S. airports: 440 million. That’s a lot of lost airport revenue.

Foundational Requirement: Emerging From The Cave. Soon. The basic criteria of this projection are founded on a recovery starting in June, and gradually increasing to a stabilized situation by the end of the year 2020.

There are a range of assumptions blended into this forecast, and there are no guarantees. One key factor is that unless the economy starts to get reopened within the next two months, the airline industry is going to simply have to completely rethink entire operations.  Entirely.

Unfortunately, “stabilized” is not the same as going back to 2019 levels.

New Fleets: Accelerated Opportunities. In particular, international traffic will have a smaller role, and it will affect the entire system. Historically, 32% of all U.S. enplanements have been directly or indirectly driven by international demand. “Direct” is to and from foreign destinations. “Indirect” are the domestic journeys that a portion of these passengers accomplish within the USA.

The picture is not all bleak. To be sure, a material part of this traffic will not return – the E.U. is badly mauled by the CCP pandemic, and leisure traffic will be badly deflated for the near term.

Trans-Atlantic traffic will return, but will be more diffused – good news for mid-size airports east of the Mississippi. As we have pointed out before, there will be fewer wide-body airliners – which mostly have to rely on hub-feed, and more new generation multi-mission narrow body airliners such as the A321XLR and A220. These will be a major part of restructured major airline fleets, on both sides of the Pond.

They will widen the air access for non-hubsite commercial centers – including international. E.U. airlines will be in need of additional feed for their connecting hubs, and these airliners will be the modality to access airports such as Albany, Norfolk, Cincinnati/Northern Kentucky, Columbus and several more.

China: Air Traffic Suicide. The Pacific will be where the real international changes will be seen. Shifting business and political trends will tend to enhance some demand to secondary points such as Vietnam, Malaysia, the Philippines, and Indonesia. Business investment is going to shift – big time – from China.

But these changes won’t anywhere make up for the plunge in U.S.-China traffic, which is headed directly into the air transportation ceramic fixture, and will not recover to anywhere near where it was in 2019.

In fact, changes in the Chinese economy, changes in business and industrial relationships, changes in CCP policies toward foreigners (not inconsequential), and diplomatic shenanigans around the globe, will cause China-international traffic to crater.

As for China-U.S. air traffic demand, it will drop like a baby grand out of the 8^th floor window. Our BoydGroupChina projections point to 2021 traffic in the 400,000 O&D range – down from 8.2 million in 2019.

And it’s not temporary. China as a leisure destination – the majority share of the  China-U.S. volume – has now been self-destructed by the CCP. There’s nothing like visiting a country where foreigners are now officially blamed for the pandemic (which is like John Gotti complaining that the police caused organized crime) and often accosted on the streets and prohibited from entering restaurants, or where hotels don’t want the business. Things there have changed in the last year. U.S. carriers should be very careful in planning their future China strategies.

We’ll be completing the China-U.S. revised forecast this week and will post the highlights at www.BoydGroupChina.com

In the meantime, Boyd Group International is accomplishing CCP-COVID forecasts for individual client airports, focused on the specific and unique characteristics of each… hard and direct data which can deliver perspectives on the future ahead.

Give us a call or hit the contact tab, and we’ll deliver a view of the future – clear and unvarnished.

FROM ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A GREAT, PROSPEROUS AND HEALTHY WEEK AHEAD.

Areas of Interest This Week…

The Federal Air Package – A Hobson’s Choice

Delta Air Lines has advised that it is burning cash at $60 million a day, flying empty airplanes, even with a reduced schedule and interim cancellations.

Grab the envelope, flip it over, and start doing the math. While it is still possible that the situation could materially change by June, Delta notes that with the current cash burn it will be out of money by then. If the federal grants reduce that burn rate by half (which is way optimistic) the picture is still pretty dire.

If the DOT holds fast to the dictum that carriers receiving aid must keep flying, and continue to serve most points served on March 1, and do so for the next six months, the recovery from June on had better be one steep curve. Plus, it makes very veneer assumptions about how the industry is structured.

Example: it has no relationship whatsoever with the realities of the day-of-week model of ULCCs such as Frontier and Allegiant.

The math here is not re-assuring. Neither is the basic rationale of this airline aid package. The industry will get through this, but the current federal package needs work.
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The Post CCP-COVID Air Service Environment

– It’s Not All Doom & Gloom

When the recovery manifests, the airline industry itself will be very different in scope and fleets.

Our fleet forecasts indicate that the biggest changes will be “at the margins.” The demand and applications for widebody airliners will be reduced materially. On the other end, even with super low jet fuel prices, the range of use of 50-seat jets will also wither. So, as A380s and CRJ-200s are being taken to the knacker, the airline industry will emerge with a whole different set of mission capabilities.

Where the fleet changes will be most obvious is in the middle… 130 – 180 (dual class) airliners. Today, the wide range of missions that can be accommodated by new-technology airliners will transform airline fleets. As examples, the A220 platform has variants that can effectively operate short-haul through trans-Atlantic markets. The A321XLR is a similar aircraft.

Point: this CCP-COVID pandemic will be an event that will accelerate the airline re-fleeting that actually may result in more flexible and wider air service access. To be sure, more regionalization, but when the dust settles, the new fleets may well shift upward a lot of air service access.

Community air access planning needs top take this new dynamic into consideration. Give us a call. Our latest research on the potential outcomes is being updated daily, and we’d be happy to talk about our forecast perspectives.

One thing is certain, the airline industry will be smaller, with fewer and different aircraft. At the moment, airlines are completely focused on survival, not expansion. The tired out “true market studies” are studying yesterday’s air transportation system.

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Unintended Consequences – The Cave-Dwelling Solution

Ravn Air of Alaska has found it necessary to stop flying most of its routes, and ground all but three aircraft.

It’s pretty hard to count any revenue when citizens are urged or ordered to stay home.

The problem unique to Alaska is that most points have no other access except by air. Getting groceries to a rural community isn’t in the cards if air carriers cannot operate.

Alaska is the most obvious example of outcomes of the hide-in-the-cave reaction that virtually all nations are resorting to. Whether it will stop the China virus is uncertain. The economic cost is certain.

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The China Chickens – Airplanes – Come Home To Roost

In the China airline system, the well-known substance just hit the electrical appliance.

We pointed out last week in a Touch & Go update, that, funny, with all airlines around the globe either shutting down or parking huge chunks of their fleets, China is absent on the list.

As a result, parts of the aviation media have been gushing about how China’s airlines should be a model for the U.S. in getting through the CCP-created pandemic. Things, they report, have been going just swimmingly as these heroic and mostly government owned airlines have toughed it though the crisis.

After weeks of folks in Beijing crowing that they had conquered the virus in China (anybody who believes that needs serious adult supervision), big parts of Chinese airline fleets are now officially being “stored” – a big difference from just grounding them and not flying.

Last week the first shutdown of a Chinese airline due to the CCP-COVID pandemic was announced. China Eastern Wuhan was grounded. No big deal in itself – they had a grand total fleet of 2 737s.

But they are a part of China Eastern, which suddenly revealed as of April 2, has put over 25% of its fleet in storage. The country’s largest airline, China Southern, has put in storage 30% of its fleet.

This didn’t happen in a day. While the media “analysts” were glowing about China, these airlines were busily pickling everything from brand new A350s to older E-190s. So far, the estimate is over 600 planes. And that’s just what we know about. China is every bit as transparent as a brick wall.

This is right after CAAC was claiming that the system had climbed to almost half of the pre-pandemic levels and all was returning to normal.

Truth: The storage numbers so far may just represent the level to which China’s air transportation system will naturally shrink into. China’s air transportation system will not rebound to pre- CCP-COVID levels. Its entire revenue foundation has changed. We are covering this at BoydGroupChina.com.

And, again… just a note from BoydgroupChina.com…the virus that the CCP created is not over in China. They now claim a resurgence is all due to arriving foreigners. Sure. At least one county in Henan province, nowhere near an international gateway, has been again quarantined. Believe them not.

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Waiting For The Inevitable…

And Planning For A Whole Different Future

The air transportation industry in the USA is not going to “bounce back.”

Instead, it will evolve and accommodate a new set of economic drivers. Not a lot of bounce.

But it will be back… just in a different role in America’s communication system. Every sector of aviation needs to tumble to the fact that the metrics used to define, plan  and implement air transportation have materially shifted.

We’re right now accomplishing CCP-COVID forecasts for a number of clients.  We are looking at the logical outcomes of a situation where the entire business foundation of air transportation has suddenly vanished. The changes to the industry will not all be temporary.

In regard to traffic numbers, for the next several weeks, passenger volume at many mid-size airports will be in the hundreds – total O&D – like, not enough to fill three 737s. Smaller airports even more dire.

Shutdown To Reorganize. The hard fact is that there are no passengers, no customers, no revenue coming in the door.

The federal aid for payroll costs notwithstanding, airlines cannot continue to operate airplanes in the absence of business. Fuel – even when oil is at historic lows – costs money. Maintenance costs money. Administration costs money – and there isn’t much money coming in.

The conclusion is that unless the global approach to this pandemic is modified and soon, it is a short matter of time before airlines just stop flying, pro tem. There simply is no market for this industry, for the time being, as it is currently structured.

So, figure a 7-10 day period to allow airlines to completely re-trench…emerging with a very bare bones route system.

Long Term Changes To Air Transportation.

Fleets: This past week we witnessed the pull-down of what eventually will be the entire world-wide fleet of A380s. We are seeing hundreds of both widebody and single-aisle airliners parked by carriers across the globe, many of which won’t be coming back, either the airlines or the airplanes.

While it would appear that smaller units of capacity might have advantages, the reality is that the fleets of E175 and CRJ airliners operated inside major carrier systems are dependent  on the traffic demand base that was generated by the 737s and A320s that are now being parked.

Aircraft Industry. There will be thousands of excess airliners. And most will be new-generation units – which means when the industry comes back, the orderbooks for new airliners will see a lot of white space. The huge demand seen in the past five years was increasingly based on traffic growth, not replacement. That will have enormous effects on the airframe industry and its supply chain.

Route Systems. We can cut through the fog. While carriers accepting federal aid supposedly will agree not to drop any airports off their route systems, that’s probably a flexible definition.

In the future, air service will be far more regionalized. Less points in a given region with scheduled service. Just do the quick math. Less flying machines will mean less places with flights. This will be a long-term situation and it won’t fully return to pre-CCP-COVID levels.

Airports. GA is dependent on discretionary spending. It’s drying up. But there is the argument that with a shrunken commercial air system, business aviation will grow in importance.

As for scheduled passenger service, it will be a slow recovery, and for a couple dozen small airports, no air service recovery. That does not mean no air service access… just no service at the local airport, and consumers in many of these communities have options at other gateways… which in many cases  they have already been using.

The positive reality, however, is that airports are not just in the commercial air service business. While it will be a very wrenching process, possibly the U.S. airport system faces the brightest (such as it is) future of any component in the aviation system.

Airports large and small are not just places for passengers to go through security. In a future world of UAS (drone) technology,portions of shipping and logistics will shift from over-the-road to across the sky. We are talking about cargo drones that are already being planned. This is not in place today, but it will accelerate over the next five years. Point: airports are economic generators, regardless of commercial service levels.

Getting Ahead of The Curve. As far as past trends are concerned, all planning bets are off. That scraping sound really was an economic iceberg.

The issue now is to determine the future scenarios that aviation will be facing in the coming six months, and determine actions to take to accommodate and optimize them.

At Boyd Group International, we’re assisting clients across the industry in developing forecasts to illuminate how these changes will specifically affect them, and exploring solid options for the future.

Give us a call or an email and we can discuss your specific situation and use our industry-leading forecast expertise to plan the new future.

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And Finally…

No, China Is Not An Example For US Airlines

There have been a lot of stories covering how China is the example for us to follow in regard to dealing with the CCP-COVID pandemic, and a template for the return of the U.S. airline industry.

That’s complete dishonest reporting.

First, the stories from lightweight analysts who know nothing about China claiming that the air transportation system there is roaring back are nonsense. The CCP maybe are forcing airlines to fly, but traffic levels are questionable.

To trust anything coming from the Chinese government is the height of stupidity, yet there are the usual suspect consultants and media types taking whatever they say like trained seals snapping up tossed fish.

Furthermore, don’t buy into the stuff that they have their home-created pandemic under control. First, nobody has any solid knowledge other than what the CCP puts out, so “journalists” that repeat the party line without intense skepticism aren’t very professional at what they do.

Plan on another “outbreak” of the virus in China to be announced in the next 60 days. They will blame it on arriving foreigners, and not the truth that it’s never been fully under control. Think about it – a nation of 1.4 billion suddenly gets to zero new cases, and a lot of the U.S. media reports it as gospel, even though the source has repeatedly been proven to be the globe’s #1 Pinocchio.

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The Cure Is Killing The Patient

Let’s stop with the fantasy…

The US airline industry is dying. Fast.

It is now clear that Congress is more concerned with playing social reconstruction games than preserving our industries in this China pandemic. (Got a problem with that title for the epidemic? See below.)

Anybody who thinks that the airline industry can now just return to where it was in January is dreaming. It has been badly and structurally wounded. And changed.

Airlines are cash-bleeding. Consumers as of now have little likelihood of coming back to airports  anytime soon in this panicked environment. The costs of maintaining an airline – even if most of its fleet is parked – can only be covered so long.  They will evaporate as operating entities if some temporary aid isn’t implemented immediately.

Yet some of the powerful clowns in congress want to hijack and delay any federal aid by tacking on all sorts of pet second-agenda political wish lists. Stuff that has no bearing on the immediate crisis

And, in regard to the airline industry, these walking bits of protoplasm in congress are aided by the consumerist gadflies that now see this as a way of getting even with airlines, demanding all sorts of tag-ons, even to the point of regulating seat sizes, forcing them to serve small communities that have no consumer demand, and attacking ancillary fees.

Every day that these politicians play games reduces the future size and viability of the very existence of the US air transportation industry. Those thousands of grounded airliners won’t just pop back into the sky.

In addition, federal aid or not, it’s very clear that the path being taken by virtually every country in the world to deal with this crisis – which is to hunker down in caves and don’t move – is essentially like just waiting for the grim reaper to arrive. It certainly will do so for the economic foundation of the globe.

Stepping out on a limb… this is a sanitation crisis. Think about it. It is clear how it spreads, and it is clear who is at risk, and who is not so much at risk. It is also clear that this is not the bubonic plague, dangerous as it may be.

And if 140+ nations across the world continue to pursue the path hiding inside until it just goes away, or until a vaccine is found, they are probably right. But when it’s all over, as far as economic foundation, there won’t be anything left to rebuild on.

Including an air transportation system.

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It Is The Chinese Pandemic

Sorry if that offends politically trendy folks.

Because it affects aviation, it is appropriate to comment on the pandemic and how we deal with it. The air transportation industry in America has been fundamentally damaged because of the spread of a virus that started and was for all intents and purposes allowed to incubate and expand across the globe due to criminal malfeasance by the Chinese government.

It is important that the Chinese government – collectively referred to as China – be held accountable. This has nothing to do with ethnicity – the Chinese people are the victims, too.

Let’s stop the politically motivated nonsense. This entire situation is directly the result of actions and non-actions taken by the Chinese government. This is not conjecture or opinion, it is demonstrable truth.

But now we have politicians demanding that we not hold the Chinese Government responsible… to the point of ridiculously telling us that to label this epidemic for what it is – the Chinese pandemic, or more accurately, the CCP (Chinese Communist Party) Pandemic –  is to be racist.

The only racists in this argument are those issuing such ignorant and politically motivated accusations in the first place. It’s as transparently stupid and pandering as claiming FDR was racist for declaring that Japan had attacked Pearl Harbor.

The CCP – the Chinese Government – has lied its way through this since November. Destroyed evidence. Cover-ups. Persecution of citizens. Encouraging citizens to mingle in Wuhan, to “prove” it was safe, knowing that the coronavirus was communicable. Allowing millions of infected people to freely travel in January across China and the world.

Nothing that comes out of that source should be trusted, and it’s unfortunate that some politicians in the U.S. are making a political football out of trying to smokescreen that fact.

Worse, outlets like the New York Times, are lauding the “success” of China in controlling the epidemic – relying solely on representations made by the CCP, which has lied since this started. Says clearly what the value of the New York Times is as a source of reliable reporting. According to that paper, China is a star, regardless of their clear criminal acts in spreading this disease.

If you want some facts, we’ve covered this on a March 16, 2020 Intelligence Update at BoydGroupChina. 

Our economy and that of the world (not to mention China itself) is in tatters because of the Chinese government. It is a Chinese pandemic.

It sure would be nice if a couple of pandering state governors would be more concerned with holding them accountable than playing dishonest politics. Click on the link for some facts, not political doggerel.

By the way, we are building and adding to BoydGroupChina.com to be a source of insight and perspectives on China aviation. Intelligence updates are added from time to time, and which cover areas missed by the rest of the aviation media.

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