Air France Retires First of A380 Fleet

Air France has pulled its first of a fleet of ten A380s out of service.

It joins five others previously retired by Singapore, one of which has been scrapped for lack of second-hand customers. The other nine AF 380s will be gone by 2022.

This evolving situation again underscores the need to question ambient trend-line thinking.

Twenty years ago, every major airport had “VLJs” – very large jets – as part of their must-have future capacity planning, with the future need to handle airplanes transiting 1,000 passengers (500 arriving and 500 departing) at a clip.

With a few exceptions – Boyd Group International being one – the me-too consensus in the aviation consulting business was that the A380 was going to be the future flagship of international air commerce. And why not – bigger and bigger has been the trend ever since the DC-3 eclipsed the Boeing 247, and it and its followers being leapfrogged by larger and larger airliners, right up to the 747, DC-10, and L-1011.

We, along with a only couple of other firms, urged caution, pointing out issues such as total changes in the character of the air transportation system, the raw number of A380 units needed to be sold to cover development costs, as well as the A380’s limited mission flexibility, were demand-limiters that were not being considered.

Monday November 18, 2019

Moving Information & Business Intelligence

Out of The Past

You’ve probably noticed, aviation has changed. Airline structures and route systems have changed. Consumer patterns have changed.

Remember all that intra-regional air service in the 1980s? It’s gone. Air transportation evolved, and it is still evolving. The economic underpinnings and business base of aviation aren’t the same as just a decade ago. It’s not the same business, and it’s economic role has shifted and continues to do so.

But aviation intelligence and data sources are still stuck in the past. They measure yesterday.

Do Those Historical Metric Channels  Apply To An Industry Now With A220s, 787s, and A321s? The answer is no. The aviation industry is evolving, and so, too is its role within  communication channels and modalities.

The future is in identifying and quantifying the trends that will shape the future. It’s great to have access and analysis of historical data, but when the very foundation drivers of those data are changing, relying on past data is a certain way to stay there. In the past.

Sure, it’s great to have access to historical O&D and T-100 data and other metrics. But increasingly, these are reflective of an air transportation industry that in three years will be fundamentally different. Measuring yesterday is not viable for planning for tomorrow.

New approaches to developing futurist planning metrics are needed. New data and research approaches – beyond just BTS information – are imperative. At Boyd Group International, we’re working on it.

New Fleets. New Missions. A New Communication Channel. It’s a future where whole new fleets are changing the structure of airline route systems.

One example is internationalization – it’s coming to airports in the U.S. where even such a suggestion ten years ago would have called into question the chain of custody of a person’s last drug test. Okay, what are the baseline metrics in regard to forecasting which interior U.S. airports will see trans-Atlantic flights? What are the performance measures – remember, current DOT O&D reporting of international traffic is a disaster. Developing new approaches to measuring these data isn’t a priority at the BTS.

Then there’s the ULCC model,  which has shifted not only travel usage, but even the role of travel as part of consumer discretionary spend. It’s not filling air service voids – instead it’s creating a new profitable use of airliners. Where are the fertile opportunities? What “submarine” markets may emerge? Tossing out an O&D report from 2019 won’t do diddly in that regard.

Local Air Service At Some Small Communities Is Increasingly Obsolete Air Service. Consumer preferences at smaller cities – civic hubris notwithstanding – has combined with raw economics to make regionalization of air access a superior option to trying to “lure” flights back to the local airport – flights that nobody will use, and often on airlines right from the start of the “true market study” simply don’t exist.

Yet these programs are continually being foisted on unwary small airports, when it’s obvious to any ethical professional that in the new airline realities (fleets, costs, strategies and consumer trends) there is zero chance of gaining flights that are consumer-competitive with other existing channels consumers are already using. This stuff will peter out in the future, the victim of reality.

In addition, there’s been a lot of well-intentioned efforts, too. Remember the big study done by the Transportation Research Board a couple of years ago, aimed at finding solutions to “small airport air service?” Lots of fine folks participated, and the final report was issued almost  two and a half years ago. Many suggestions provided.

The results? Zero. Nada. That’s because they were focused at bringing flights to small airports, instead of the real objective – assuring air access for consumers. Actually, the consumer and the concept of comparative consumer preferences and – importantly – the emerging of qualitative superiority of air service at alternative airports, were ignored completely.

New Aviation Logistical Channels Need New Metrics. As we covered at the 24th Boyd Group International Aviation Forecast Summit in Las Vegas last August, drone – UAS – technology is shaping up to transform the logistical base of America, bringing new economic growth to rural airports, lack of scheduled passenger service notwithstanding.

Rethinking Metrics & Data. So, over the next several weeks, Boyd Group International will be undergoing a complete review and update of our information systems, including AvaitionPlanning, Airports:USA, Aviation DataMiner, and even our newest addition now under development,

We will be tackling this issue and revising our own research and forecasting outreach.

But one thing is certain: a lot of the air service planning in the works today does not have access to the analytical support it really will need.



Flight Shaming

Flight Shaming – Let’s All Live In Clean Caves

The media seems to be mesmerized by the concept of making people ashamed of getting on an airplane.

“Flight shaming” is based on the head-in-the-sand luddite concept that to travel on an airplane is to blatantly and selfishly destroy the environment… to deny polar bears the ice to live on, and cause the ozone hole to expand into a human-lethal gap in the sky.

Yup. Just staying put is far more responsible than flying to see grandma. You can do that electronically, anyway.

The media reports on flight shaming as if it is a natural option that should be explored across the globe, when in fact it represents a fundamental concept that is anti-human. It it causes carbon, it must be bad, and therefore anyone who creates a “carbon footprint” is evil.

Regardless of any information, science, or technological input that may moderate or in some cases completely refute this panic-call to end carbon emissions, flight shaming and other supposed measures are not to be questioned. It’s decided. Air travel is evil to the environment – it is not to be questioned.

Let’s grab a third rail. The airline industry has mostly just gone along with th

Monday Update – November 11, 2019

Holiday Capacity Will Be Up –

MAX Issues Notwithstanding

Remember the dire warnings last spring that this would be the summer of chaos at airports, due to the grounding of the 737 MAX?

Didn’t happen.

Now we can likely expect more veneer reporting, warning about how seats will be tight this holiday season, due to the constantly-extended grounding of 737 MAX aircraft.

Here’s the data. Between November 1 and December 31, there will be 4.3% more seats departing U.S. airports – and that’s well ahead of the current 3.6% growth rate for 2020.

True, the four carriers in the USA that are on the MAX order list are taking a hit to potential revenue, not to mention the benefits of lower operating costs, with the 737s being parked across the country.

But American and United have continued with the rest of their fleet plans, which has included additional A-319s, as well as adding more E-175s and outsourcing their operations to entities such as Mesa and SkyWest.

Southwest is in a more difficult situation. They don’t have any outsource partners, as do AA and UA. Plus, most of the available used 737-700s across the world have been already picked clean. Until the MAX is cleared for operations, WN will be looking at highest-and-best use alternatives, such as they did in cutting EWR from their route map.

But what needs to be kept in mind is that the U.S. air transportation system is not being as dreadfully affected as it might appear due to the absence of 737 MAX airliners.

The difference between cancelling flights and not scheduling them in the first place continues to confuse some corners of the Fourth Estate.



Monday Update – November 4, 2019

The Emerging Landscape for 2020

With just two months to go to the New Year, we thought it might be an idea to look into a couple of emerging key issues facing air transportation in 2020…

Enplanement Growth: Look For @ 2.5% to 3.0%

It’s not that the economy isn’t strong. The facts are clear in that this is one of the most robust situations in half a century.

But air travel growth will moderate to under 3.0% in 2020 – maybe even to under 2.5%

The reason… capacity. Contrary to the antediluvian assumptions in traditional traffic forecasting, airlines are no longer the caboose on the economic choo-choo, to badly mix metaphors.

An analysis of the fleet plans at US carriers shows that in 2020, it’s airline capacity that will be the major factor in airport traffic growth. Load factors will continue to average in the 80%+ range, and, as will be noted below, it’s dollars on board, not necessarily passengers, that will be the driving factor.

This doesn’t mean that seat pitch is going to increase, but the trends over the horizon are indicating that airlines will be looking at service-related initiatives as the future.

And, as noted next, that doesn’t necessarily mean more fees and charges – the goal will be to entice the consumer with more perceived value for a higher spend.

Trend: Revenue Factor v Load Factor

Following from the above, United’s plan to take what are basically 70-seat CRJs, and configure them for 50 seats, including a reportedly “self-serve” first class section, may be the harbinger of a wider trend in the airline industry.

The accepted wisdom is more seats, not fewer. United may be in the process of setting up some new “wisdom.”

The success of premium economy – which, admittedly is mostly in the international sector of the airline product mix – does point to the potential discovery of a wider pool of consumers willing to pay a slight bit more for what is perceptually a higher product.

The United CRJ-550 concept may be the start of a wider trend toward pursuit of revenue share, instead of just more passengers.

Indications will be clear by 4Q 2020.

Prediction: Clearer Market Differentiation – ULCC v Mainline Airlines

Heresy: An airline seat is not a consistent commodity – at least not anymore. It depends on the category of tushy sitting in it.

The Allegiant seat out of Concord, NC is not the same product as the AA seat out of Charlotte.

The first is a vacation/leisure product aimed at discretionary spending. The second can also be aimed at capturing discretionary dollars, but that is mostly secondary to flying planes that meet demonstrated consumer needs.

That brings us to the cloudy examination in regard to where the two models will eventual overlap. Increasingly, it’s becoming apparent that there’s a lot less competition between these models than some veneer analysts may suggest.

Raw example: Allegiant’s service to Florida from Hagerstown represents very little suction of revenues or passengers from carriers at Baltimore. Not only that, but a lot of this traffic segment isn’t of interest or of value to Southwest, American, United, et al., when their load factors are well into the 80% range.

This can get some in the analyst Peanut Gallery a bit confused.

Not too long ago, a profound “competitive review” was issued from some august research firm, proclaiming the deep yogurt Southwest was in at Denver.

Yessir, according to their divination of the numbers, Southwest was just getting competitively hammered.

See, the fact was discovered that Southwest’s average yield at DEN was XXX% (whatever, it was a lot) higher than that of Frontier. Danger! Danger!

This meant, the report concluded, that Southwest was losing out on capturing low-fare travelers, and as a result it was a lead-pipe cinch that WN would soon find it imperative to lower fares, and, yes, “revert back” to charging for baggage and change fees. (“Reverting” to doing something they hadn’t done in the past? Let it go, the analyst was on a roll.)

Now, Southwest at the time was experiencing an 88%+ load factor at Denver. So, according to this guru, they should chop fares to get people into those same seats who want to pay less.

Knowledge of the subject matter, apparently, was not a job requirement.

All this report needed was an organ grinder and a small monkey to complete the visual of where it came from.

The issue, in any case, is to what extent will ULCCs actually competitively affect the traditional air service model. They are adding lots of planes and capacity. Boyd Group International projects that by the end of 2021, ULCCs will exceed 12% of total seat capacity.

But the question is how much of that is essentially in a different business, aimed at different consumer stratas.

We’ll see this get more clear in the next 12 months.

Issue: Boeing 737 MAX

The indications are that the airplane will be approved for service by January or February.

But that doesn’t necessarily mean “in service.”

Remember, even subsequent to the grounding, the factory has been building an average of 42 737s a month – that means somewhere around 400 new MAX airliners are now sitting somewhere, and will need to get un-pickled and be modified. Some will require final completion and installation of customer-specific equipment.

That could take time.

And while the four US airlines affected – AS, AA, UA and WN – want these machines in the sky tout suite, there are issues regarding pilot and maintenance training, plus the raw ability to absorb new airplanes into the fleets.

One thing that has not taken place is the “summer of chaos” at airports, as some predicted. The fact is that the fleet plans at United and American have included addition of other aircraft types, including A-319s coming off lease from other carriers. Southwest, however, has not had that option.

But the Fall of Saigon reenactment – intimated in some sources as a near certainty for large airports due to the MAX situation – didn’t materialize.

Hint, it may be a surprise to a few folks in the media, but when an airline decides not to add flights into its schedule, that is not the same to the consumer as a “cancellation” – which has been the din from some corners of the Fourth Estate.

Prognostication: a smooth recovery in regard to new capacity, mostly at AA, UA and WN.



Monday Insight – October 28, 2019

Before We Start This Week… 

We’re all excited to celebrate the 35th anniversary of Boyd Group International!

This marks three and one half decades since we founded what is today Boyd Group International.

First located in a modest office in a small town in the mountains west of Denver, our goal was to provide a higher level of aviation consulting – one based foremost on futurist industry expertise, independent forecasting, and clear thought-leadership – one that would constantly challenge ambient aviation thinking.

Back in 1984, that was completely opposite of “traditional” aviation consulting, which was typically aimed at first getting the project, and then billing hours learning about the subject matter, and eventually giving the client a report – and an invoice.

We were different, by design. We believed that consultants should be independent subject-matter experts in the future of aviation right out of the box, not just high-level temps.

Not surprisingly, back then a lot of those incumbent consultants considered us to be just iconoclast trouble-makers.

They were right.

Maybe that’s the reason most of them aren’t in business, anymore.

Questioning Norms. Barbecuing Sacred Cows. Today, we assist clients around the globe, from our own headquarters building in Evergreen, Colorado, not too far from our first small office.

From the first independent study of code-sharing, completed in 1986, to the first independent review of the concept of the “regional” jet, to testifying to Congress on matters such as ATC and airline competition, to today, with extensive in-house expertise on global subjects such as new-technology airliners, airline alliances and emerging economic trends, we set our company apart from other consultants, drawing clients from all areas of the industry. We are forecast leaders.

Airports:USA is the only enplanement forecasts accomplished entirely in the private sector. Our Global Fleet Trend & Demand Forecasts have been relied upon by both aircraft manufacturers and suppliers.

Today, our Airports:China program is the only outside forecast of the 200 largest airports in the world’s second-largest economy, as well as insights regarding future trends in China-US air service.

Plus, the International Aviation Forecast Summit is now the leading event of its kind, globally. Actually, it’s the only event of its kind. In 2020, the IAFS celebrates its 25th year… so plan on some really exciting additions.

We’ve come a long way in the last 35 years. And we’re not done, by a long shot.

We want to thank all of our current and past clients for validating our approach to futurist aviation consulting, We don’t stand still – if it involves aviation trends, Boyd Group International will be front and center in the forum of data, perspectives and discussion.

After 35 years, we’re still into the future. And so are our clients.


Cuba Air Service Restrictions –
A Sigh of Relief from U.S. Carriers?

The US has now restricted scheduled flights to Cuba to just Havana.

For the airlines involved, it’s not necessarily bad news…

Let’s look at this candidly…

…Airlines having route authorities to a set of destinations that represent probably the most lucrative future expansion points on the planet – literally hundreds of millions of dollars – is a real asset.

That’s Cuba.

…Airlines having to operate route authorities that now and for the foreseeable future are essentially economic dogs, is not necessarily an asset.

That’s Cuba.

It’s been five years since the initial euphoria about flights to Cuba. A quick look at load factors for the first part of this year on US flights from Cuban airports – those that are still served – tells the story.

What these data do not reflect are the ground handling and other “expenses” of flying to these airports, which are likely onerous.

Keeping the Route Authorities Pending a Change in Havana. The question is how long could U.S. carriers tread financial waters operating sub-performing flights, waiting for any material change that will allow Cuba to evolve from a socialist worker’s paradise into one that can attain the economic miracle that would be possible with a free and open political system.

The fly in the medianoche is that this opportunity will be cashed in only upon a change in government in Havana. Five years ago, that was the unstated bet – airlines could get the authorities now, and once the doddering Castro regime fell, economic reform would be full speed ahead.

Go Back to The Polly-Anna Assumptions. Back in 2014, when restrictions were initially loosened on air travel to Cuba, the ambient thinking – much of it baseless babble – was that Cuba would soon open up to huge new US business investment, regardless of the fact that the island was on a subsistence economy and no consumer or business base existed.

Plus, upon hearing the great news of new flights to Cuba, the travel industry gushed on about how some mythical “pent-up demand” for Cuba travel would soon hit the shores of the island, a veritable Normandy invasion armed with American Express cards.

Okay, it’s been five years, and just as our 2014 study on Cuba-US air traffic forecasted, Cuba – in virtually all aspects – has come up a cropper.

Cuba air service is a dog.  As a market, it’s a one-way bow-wow… and it’s not the US embargo. They can buy oil and wheat and soap and consumer goods from anyplace else in the world. Their political system has trashed the place, and until that changes, the dreams of air service success will remain at that level. Dreams. Under current conditions, it can’t work.

But now airlines can delete flying to these markets, without (presumably) losing these authorities for the future.

US carriers may well be giving a sigh of relief…

Another flight to Manchester-Boston, or opening Golden Triangle, or or another DFW frequency to Traverse City, would be a leadpipe cinch to be more lucrative than the airplane time flying to any of these places in Cuba.

Not as politically-cosmic, but probably a lot more contributive to the bottom line.



Congratulations To Bozeman

For the 2019 – 2020 ski season, Bozeman will be the nation’s best-served ski resort gateway.

The air access point for the Big Sky Ski Resort, BZN will have daily nonstop flights to 13 airline connecting hubs, making nonstop and single-connect service  available from most commercially served airports in the nation – far more than any other U.S. winter sports venue.

As its air service consultant, Boyd Group International is honored to have assisted Bozeman in recruiting and retaining this access.

Monday Update – October 21, 2019

Before We Get Started This Week…

Taking Flight Symposium – Regional Air Service & Beyond

Boyd Group International was invited to take part in the Taking Flight event held by the Washington Post In New York City, October 7. As a major aviation research and forecast firm, the Post was interested in our perspectives on a range of emerging air travel dynamics.

The event included discussion sessions regarding the challenges facing air transportation and logistics. New technologies in communication and in consumer options were front and center at the event.

Sponsored by Mitsubishi Heavy Industries, which now has a re-designed 100 seat airliner under development, the focus was on how air travel – and travel in general – will evolve in the next decade.

On the session specific to regional air access, Mike Boyd and former FAA Administrator Michael Huerta candidly took on very incisive questions from Washington Post transportation reporter Libby Casey.

Hot button issues, such as trendy suggestions to “shame” people from flying due to alleged harm to the environment, the concept of “high speed” rail, airport congestion and the pilot situation, were tackled directly and concisely.

Also on the agenda were Robin Hayes of JetBlue and Blake Scholl of Boom Technologies, which is well along with a 65-70 seat supersonic airliner.

According to numbers from the Post, over 150 people attended, and the live podcast attracted 45,000 visitors.

Boyd Group International is honored to have been included at this high-profile event.


This Week’s Insight…

The China Opportunity –
It’s All About Economic & Political Evolution…
And A Clear View of The Future

Lots of smoke. Lots of mirrors. And a whole lot of economic gravity about to assert itself.

That latter part about gravity might soon resemble the economic equivalent of a baby grand getting tossed out of the eighth floor window.

We are talking about the near-term evolution of business and air travel demand between the China and the US.

A Temporary Mirage – Or Part of  A Developing Economic Roller-Coaster?. Just three years ago, the China-US picture was looking about as rosy as one could imagine.

Foreign direct investment – FDI – from China was booming – reaching nearly $50 billion annually. EB5 programs were in vogue, bringing more Chinese investment into projects across the US.

General Electric sold its white goods appliance business to Haier, in the pattern of IBM selling its computer and server businesses to Lenovo. Things like new Chinese-owned tire factories in rural North Carolina were regular news. Economic cooperation was in full swing.

And back in China, things were just marvy, too. Forty years after economic liberalization, China is developing a middle class that in many ways is a dead-ringer for the USA. Television shows in China typically showcase happy families in comfortable American-style homes and apartments, commuting to clean white-collar 9-to-5 jobs in their Buicks or Toyotas or Volkswagens, living a life that isn’t too far off what Americans see in shows like “Friends” or “Seinfeld” or (has this gone too far?) “Leave It To Beaver.” One popular Chinese TV sitcom actually includes a character who has a late-night call-in radio show…open and free discussion, when he’s not meeting friends at sleek cocktail bars.

It’s Not Your Father’s Red China, Anymore. It’s on a totally different planet from the 50s, 60s and 70s, with blood-thirsty mobs chanting slogans, marching to support a defined-for-the-next-ten-minutes “cultural revolution,”  aimed at ferreting out evil  bourgeoisie running dogs of capitalism, and sending families wholesale to reeducation camps. At least the traffic in Beijing was less congested. There wasn’t any.

In the 1970s, folks leaving mainland China were escaping, not traveling on return tickets. Today, air travel has been delivering huge movements of Chinese consumers eager to see the USA. Growing every year, finally reaching over 3 million by 2017. Chinese visitors are increasingly common across the USA. Accommodating them and their $6,000 per-visitor spend, has been big business at venues all across the USA. Amid soaring if geographically-uneven economic expansion, China is – or now, was – on track to be a huge consumer powerhouse.

Cracks In The Foundation – But Repairable. Alas, this new economic model is now in line for some heavy re-structuring. Along with the economic boom, a correction – or set of economic corrections is in motion.

This is important for air service planners to understand when crafting programs for China access – including at communities that will be accessing the Middle Kingdom via connecting itineraries. The rapid expansion in air service access will slow temporarily, but they need not be misled into believing it’s over. Planning for 2023 and what will be a huge flow of new business and travel demand from China is still imperative.

It just won’t look much like we’ve seen in the last five years.

For the moment: a lot of the economic expansion seen in China is not fully founded on solid reality. For the next 12-18 months, there will be significant corrections in economic growth directions in China as they affect air access to and from points in the USA.

In the last 12 months, FDI from China has almost completely evaporated. For the first time, Chinese visitors to the US dropped in the first quarter of 2019 – by six percent, and Boyd Group International forecasts indicate a decline of more like 12% by the middle of 2020.

It’s The Economy, Ben-dan… The Chinese Economy.  Okay, we will start with the hard news… the China-US air travel picture will be a lot more sugglish near term (12-18 months) than now being assumed. There are major issues – all relevant to events in China – that are in play.

As for the decline in FDI, the market has changed. Both the capital available in China and the low-hanging targets to buy in the US have largely been picked clean. Over-investment on the part of Chinese conglomerates like HNA and Anbang has led to their shedding of many former investments in America. It’s not politics in this case – it’s a need for a market correction.

In China, a lot of the discretionary money generated by the real estate boom in major cities is starting to evaporate. Auto sales in China are down a whopping 15% – a sure red flag that discretionary income is slipping big time… that’s the same income sector that drives Chinese tourists to Yellowstone, Niagra Falls, and Chocolate World.

Huge Chinese real estate projects – many generated by municipalities playing fast and loose with investment laws – are coming up croppers. There are literally entire cities that have been built on spec and are empty. Financially, a lot of investors are getting schnookered. Banks are getting shaky. One relatively small bank in northern China reportedly needed a $90+ billion bailout earlier this year.

Then, there is a massively slowing economy – officially it may be below 7% this year, and actually may be a lot lower. There are factories that are closing and the fact is that, socialist doggerel aside,  there isn’t much in the way of a social safety net in China. Also, China is finding that a lot of what they export can also be made elsewhere in the world, cheaper and with less bureaucratic hassle. Then comes robotization of factories – which erases much of China’s labor cost advantages.

Oh, and the politicians and some in the travel industry on this side of the Pacific who can’t control themselves from blaming this on “Trump’s trade war” – they’d be well advised to get some facts, first. Actually the fallout of the U.S.  “trade war” on China is the equivalent of whacking a small dent in the fender of a pick-up truck that’s already been t-boned at a railroad crossing.

So, Where From Here?. Economic corrections tend to be positive processes. There is a huge sea-change coming in the basic foundation of the Chinese economy. Our Airports:China forecasts are based on the actual growth generating at most an annual 5.5% increase in air traffic in China over the next five years.

But what we’re going to be seeing emerging in the next 12-18 months in regard to China-US travel and investments will be fundamentally different and a whole lot stronger long-term (36-60 months) than expected. Lots of structural changes. Take it to the bank… by 2023, China-US air travel demand will skyrocket. To be sure, a lot fewer tour buses descending on US shopping malls, disgorging Chinese intent on buying a Louis Vitton clutch. But more business and FIT travel.

Even Montana May Benefit. Example: Yellowstone will likely see a decline in Chinese tour movements, and a decline in total visitors from China. But it will see an increase in individual travelers … the category that tends to make flight connections to interior points, rents a car, and sets its own itinerary. That means that as a result, airports such a Bozeman will be seeing an increase in Chinese travelers. Not enough to build a new rental lot, but another 2,500 – 3,000 annual passengers that weren’t there in the past.

Another key point is that it will be Chinese airlines that will be the major players – either to their US alliance partner’s hubs, or via one of the emerging independent Chinese carriers. As the graph indicates, today traffic on US airlines metal is less than 40% of the total… and as the market even grows, that share will still decline to less than 25% by roughly 2025.

But it’s still a growing pie. Today, due to the structure of China’s air service system, our forecasts indicate that less than 12% of the total potential demand for China-US travel is being met. Without true connecting hubs, and actual restrictions in airline-to-airline interlining, that natural demand is simply cut off.

But along with the economic re-structuring, China’s air transportation system is also changing. Interlining is being implemented at the 29 largest Chinese airports, which today account for more than half of all passenger generation. There will be two US-style airline connecting hubs at the new Beijing Daxing airport, another at Beijing Capital, and a fourth at now-expanded Shanghai Pudong.

Put this together – a growing economy based more on realities that unbridled optimism, and four giant airline connecting hubs, and this is the green light for every US hubsite airport, and it’s full speed ahead in planning for for every US secondary airport that is in a geographic centroid of Chineses business and educational investment.

Point: strategic planning demands looking over the horizon. It requires having a clear vision of future dynamics. It often requires the need to put “ambient” thinking and trend-lined data aside and make independent determinations of the future.




Monday Insight – October 7, 2019

Before We Start This Week…

BGI Participates In Washington Post Futurist Aviation Event

Boyd Group International is honored to participate this week in the Washington Post’s Taking Flight Investigative Program, held at NASDAQ headquarters in New York City.

The program brings together top-level government and business leaders, emerging voices and newsmakers to discuss and explore the most pressing national and global aviation issues of the day.

This week, BGI President Michael Boyd will be with former FAA Administrator Michael Huerta to discuss the material effects of new airliner platforms and how they will affect the U.S. air transportation system.

Other participants in the event include Robin Hayes, CEO of JetBlue, noted aviation author Captain John Nance, Richard Cotton, Executive Director of the Port Authority of New York & New Jersey, Eric Allison, Head of Uber Elevate, and Blake Scholl, CEO of Boom Supersonic.

Plan on some fun discussions and a wide scope of perspectives.

The event will be live streamed at 9 AM EST. Click here for details on the event.


Monday Update….

Guide To Some Aviation Reporting: Stop. Listen. Then Ignore.

In a recent story regarding “decaying” US airports, a major cable news source issued this shocking observation regarding the state of air travel in America:

“Today, at U.S. airports, passengers are forced to wait in long security lines and then line up for fast food before boarding overcrowded airplanes with no free meals. So why are U.S. airports so cash strapped?”

Blanket statement. No qualifications. No reference to any source. No factual back up.

Just take to story on faith… “at U.S. airports…” (all of them, apparently) decay is rampant.

It’s an impressive visual… after being treated to Ellis Island-like conditions at TSA check points, hapless passengers must then again queue up in long, snaking lines to just to order a Double Cheese Whopper, before getting on airplanes that are implied to be like the 7th Avenue subway at rush hour – one that’s also a flying food famine.

Remember, this is from a huge news outlet, (actually, one that usually delivers some of the best business coverage available anywhere) so, naturally it should not be questioned. But today, the name of the game is reader/viewer/listener beware… you’re on your own to determine facts, and they’re sometimes galaxies away from stories like this one.

Does Anyone In The Airport Industry Take Notice? This type of dishonest rhetoric should not be ignored. It needs to be actively addressed and corrected. Plus, the media outlet that let this garbage get published should urge the writer to pursue a new career – he’s not very good at professional journalism.

Long lines? Specifically where? Well, according to what’s almost stated outright, it’s everywhere. All airline passengers are victims, all the time.

“Overcrowded airplanes?” Okay, so this is due to airports being “cash strapped?” And, according to this source, the implication is that airlines are over-stuffing more passengers than what’s legal into airliner cabins. Of course, we all know that flights leaving airports elsewhere in the world aren’t full, right?

ACI, AAAE, Chime In, Please. This is ditsy, inaccurate and unprofessional doggerel, masquerading as hard journalism. Airport planning in the U.S. doesn’t need half-baked ignorant “reporting” such as this. The nation actually has a world-beating airport system – a complete system – that no other nation can match, and which postures America for the new global generation in air transportation channels, such as UAS. But this would take reporting that isn’t consistent with the me-too trendy conclusion that our airport system is an obsolete collection of collapsing terminals and crunchy runways.

Therefore, the folks representing the American airport and airline industries should not let snarky, inaccurate drivel like this stand without responding. It’s materially inaccurate and misinforms the public.

Or, just say nothing. Yes, silence is golden. In this case however, silence is de facto agreement with reports like this one.

… And some folks still claim there’s no such thing as fake news…


Another Fun Media Missive…

Just like the above, at some local news outlets, it seems that ignorance of the subject matter is no barrier to “investigative reporters.”

The M.O. is pretty much the same around the country. Gin up a flashy headline about crummy air service, then go out to the local airport and do some 6PM B-roll, asking pre-prepped passengers what they think about the already-suggested-by-the-reporter conclusion of poor local airline service.

“We really need direct flights to Tucson,” one traveler demands, regardless of the fact that there isn’t enough daily traffic to fill a Ford Econo-Van. “We go there twice a year, and have to make connections to get there…”

Bring In The Clowns. A newspaper at a midsize city in the South recently went this route, exposing that the local airport is falling behind because it “only has three airlines.”

Only three! This is depriving the local populace of air service,  the report implies, with righteous finality. Without more airlines, the local economy is headed directly into the ceramic fixture.

At the airport in question, those three insufficient airline brands are American, Delta and United, which can get businesses from around the entire globe to this city, in many cases with just one connection. But the local TV station, which has spent at least 15 minutes at a coffee break doing research, thinks that there’s a faceless mass of airlines just hankerin’ to come into town.

Usually in these profound investigative tomes, there’s the tag-team telepromter report on the Ken & Buffy Evening news, neither of whom could tell an airline route map from a grocery list. “We’re asking that the airport advise us what they are doing to address this lack of airlines… Our I-team will stay on top of this story and  will be reporting back.”

Subject matter knowledge need not apply. Facts and clear discussion are such a downer.

Again, it’s caveat viewer.


Monday Insight – September 30, 2019

How A New Airport In China Will Affect US Air Travel

The New Beijing Airport – Positive For US Air Traffic

There’s been a lot of media coverage on the opening of Beijing’s new airport – but beyond the fluff, most have missed the real story in regard to how this event will affect China-US travel volume in the future.

So, we thought we’d cover a few bases on how airport capacity changes at Beijing (and, overlooked, also at Shanghai Pudong) will positively affect travel between China and the US, and will open dozens of Chinese commercial centers to easy air access to and from points across the USA.

Take It To the Bank… In the course of the next five years, virtually every mid-to-large airport in the US will see positive traffic effects directly due to these – and other – airport capacity projects in the People’s Republic of China.

Looking Over the Current Political Barricades. We could get into the dynamics of the current China-US market, and how it is events and changing economics in China that are – pro tem -causing this segment to decline. (No, it’s not the “trade war” – the revenue streams driving visitation and investment in the US started to dry up long before any tariff activity.)

But, instead, we’ll jump to the data and look at the future.

First, a quick glance at the forecast of passenger traffic through China’s top 10 airports:

These Airports:China™ forecasts are conservative and derived from analyses of known and expected shifts in traffic drivers at each airport.

We included the two Beijing airports together for the purposes of comparison, and we show only the expected 2019 total for PEK.  We forecast that in the 4Q of 2019, PKX will see between 3 and 6.5 million passengers, but this is dependent on factors such as the assumption that all of the traffic at the now-closed Nanyuan Beijing Airport will shift to PKX, and that other shifts from PEK will be completed by the middle of the quarter.

But the Airports:China™ forecasts accomplished by Boyd Group international indicate that the new Daxing International Airport will handle 45.3 million passengers in 2020… making it immediately China’s #9 airport.

Connecting Hubs Will Open Floodgates of Access That’s Not There Today. But these data are mostly within the current structure of the Chinese air transportation system. To be sure, the new gate capacity at Daxing (and also the new 83-gate addition to Shanghai Pudong) will open new flight capacity.

But that’s just the start, because the real expansion will be over the next five years as the three main Chinese airlines, along with their controlled subsidiaries, open true connecting hub operations at Daxing, Beijing Capital, and Shanghai Pudong.

Just to get an idea of what the Chinese air transportation system represents, here’s a snapshot of YTD July numbers from the Airports:China™ database:

The Data Show A Different Airline System. Take a look at the current level of passengers that are “flow” – connecting. Across the entire Chinese air transportation system, it’s just 2.4% of the total.

That means that 97.6% of passengers in China today are on point-to-point itineraries, and most of the connection activity, such as it is, is at just two airports, PEK and PVG. In the US, only 59% of passengers are on pure point-to-point itineraries.

That’s because today, the demand is so strong between points in China, that aggregation of passengers at intermediate connecting points is not needed, nor productive. So, there really are no US-type connecting hubs in China.

Even the largest airports – Beijing Capital and Shanghai Pudong – have less than 14% of their enplanements representing connecting passengers. By US standards, that’s nowhere near a “hub” – indeed, CLT is 70% connect, for example.

What this also means is that the business traveler in Louisville who needs to visit a supplier in Zhengzhou has a bear of a time working out itineraries to get there. With the opening of new true connecting hub operations at PKX, PEK and PVG, that is going to change, and it means a significant jump in passenger traffic between the two countries.

Trade wars and economic shifts in China notwithstanding, Airports:China data indicate that the true demand for China-US traffic is seven times what’s being carried today, and with new connectivity through these hub operations, a lot more of this will be captured.

Between now and 2023, as the three main systems – China Southern, China Eastern and Air China – build more capacity at their respective airports – PKX, PEK and PVG – this will result in connecting flights to and from the rest of China, with nonstop spokes to US airline hubs to distribute traffic across the country.

Ten Million More Visitors… By 2023,  BGI forecasts indicate that US airports could see another ten million passengers coming into the USA from China. The demographics will change, moving toward more FIT (non group)  travelers, which will completely change spend patterns and travel patterns.

In addition, the vastly increased access between internal US cities and internal Chinese commercial centers will tend to spike new industrial investment from the Middle Kingdom.

Growth Killer: Internal Political Turbulence. There are, however, some distant and troubling noises coming from inside China that could affect this picture. In fact, if certain political and policy planets align the wrong way in China, all bets could be off. Not likely, but possible, and these considerations must be included in future planning.

One is the growing economic uncertainty, such as the declining real estate bubble and over-investment in that area.  Banks may be an issue, with one in northern China reportedly needing a $90 billion bailout. If that is much more than a one-off, there are big problems ahead.

Also, there are political issues and some indication that the blossoming Chinese business base may be in line for renewed political intervention. Furthermore, the basic underpinnings of the Chinese economy are evolving. China is finding that much of its manufacturing base can simply move to other countries. China has grown and prospered in the last 40 years by reducing government control. If that reverses in any significant way, all bets for future China-US travel growth are off.

The assumption is made in this forecast that these dynamics will evolve in a market-positive manner.

The take-aways are these:

  • The true potential is enormous. Despite any political differences, the true unmet demand between China and the USA could decline by 50% (it won’t) and still represent a huge jump in traffic.
  • There will be at least four newly-developed airline connecting hubs in China by 2023, allowing easy feed between Chinese cities and US cities, with connect hubs on both sides of the Pacific.
  • Alliances between Chinese airlines and US carriers will focus on feeding Chinese carrier hubs. Outside of the top 6 Chinese cities, and a few one-off situations, there will be limited opportunities for US carriers to enter non-hubsite markets in China.

For More Insight… Boyd Group International is the leader in analysis and research in the China aviation sector. For communities and airports looking to build outreach with China, the current situation represents a strong opportunity.

There are major economic revisions going on in China. Some are of concern; others indicate an inevitable shift to additional trade. BGI monitors these dynamics as they will affect China-US aviation, and we are the only firm in the US that has this as a core competency.

If you’re interested in gaining more insight, or further specific research on China, just click here and we’ll get back to you.