Monday Insight – January 11, 2021


Fleet Strategies:

Harbinger of New Air Transportation System

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

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

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

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

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

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

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

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

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

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

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

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