Monday Insight – November 23, 2020

Latest Projection: 2020 Traffic To Further Lag…

Year 2019 Levels: Not Until 2024

Some positive news – Thanksgiving travel is shaping up to be relatively strong… despite “warnings” from a semi-discredited CDC. Plus, some leaders in the airline industry are seeing positive signs of business travel recovery. Southwest, Spirit and Allegiant are announcing new markets.

But Will The Destination Be Open? On the other hand, political moves across the country are tossing a monkey wrench into the air travel picture. Philadelphia is closed. California, too, for all intents and purposes. Colorado’s governor is fixing to do things to zap that state’s ski season, without any real plan.

It is becoming more and more clear… The lights at the end of the tunnel may be getting more numerous, but also more distant.

We have an airline industry that simply has not yet adjusted to the economic damage done by the China/CCP Covid pandemic. By the end of the 2Q 2021, the U.S. air transportation system will be very different and a lot smaller than was projected just nine months ago. Nevertheless, we are now charged with finding new solutions in very different business and leisure environments.

Unexpected: December Sag. Boyd Group International’s Airports:USA forecasts now indicate that enplanements will be a few percentage points lower than expected in December, due to the massive travel uncertainty resulting from ad hoc travel and business restrictions at points across the country. The fact is that consumers simply are deterred from taking air trips. It is uncertain if a vaccine will make a near term change.

As of now, the U.S. airline industry will be handling 1.3 billion fewer enplanements between 2021 and 2023, compared to pre-pandemic forecasts.

The U.S. airline industry will have no choice but to adjust fleets, routes and market strategies.

Add to that other fundamental shifts, such as the trend toward electronic meetings, diffused working arrangements and other consumer-driven dynamics, and the fact cannot be dodged any longer: Airports and communities need to start to re-plan for the future – NOW.

Reliance on past metrics and air service development approaches is like doing a demand forecast for manual typewriters. A total non sequitur to the new market realities. Not only have the metrics changed, but so, too has the consumer base for air travel.

2021-2023: A Much Lower Structural Level of  Demand. That means that we have much less need for capacity. That means we need fewer airliners to serve the demand. The airline industry is in the process of going to Plan S… survival in a new marketplace.

It is a matter of reassessment and managing expectations.

As a trend, it is likely that any small airport that prior to 2020 was viably served by either two or all three of the full network carrier systems (AA, DL, or UA) will likely retain air access from at least one of the incumbents. But those on the revenue cusp – which includes single carrier airports where drive time to another airport is 60 or even 90 minutes away – may not fare so well. In addition, the trans-border drive traffic to and from Canada has evaporated.

As one example, the specific traffic-source U.S. airports that depended predominantly on Canadian leisure traffic, such as Plattsburgh and Ogdensburg, are already seeing this change. Border closed. Traffic vaporized. Leisure flights are gone. Until the border re-opens and Canada’s economy recovers, the belief that “other carriers” will flock in is pure fantasy. One would hope some consultant isn’t selling this bill of goods to these airports. It’s like looking for gold after it’s proven that the mine is completely exhausted.

It is true that some business travel is coming back, but it’s sort of like Gorden Bethune was reported to opine a few years ago. Going from 300 feet underwater to 100 feet underwater is a nice metric – but you’re still underwater.

It doesn’t take a Wharton MBA degree to identify these dynamics. Unfortunately, a lot of airports and communities have yet to recognize this new future, which is understandable, up to a point.

Vulnerable Widows In Boca, And Small Community Civic Leaders – Con Men Call Them “Marks.” And let’s be blunt – some small communities are being actively misled. It’s one thing for the mayor of a small town to believe that there are “lots of airlines” just hankerin’ to replace the one that left. He or she is paid to be a positive civic spark plug, and typically doesn’t know the air transportation industry. But it’s quite another when an outside “advisor” whisks into town, promising deliverables that can’t be delivered, and intentionally misleading the community for a market study and a fast buck. Shameful.

This is the time for professional results-focused and futurist-based economic planning, not rah-rah civic hubris to bring back the past. The role of airports is changing within this new economy… in some cases, it will be a positive dynamic, as more and more logistics shift to immediate-need air cargo. In other cases, the hard realities of evolving airline economics need to be recognized and innovative alternative economic paths explored and developed.

It is not all doom and gloom – but it is necessary for airports and communities to take stock of the fact that aviation and the air transportation industry will be undergoing huge changes… and the ones that act now, with solid data, forecasts and perspectives of the future, will ultimately prosper.

Again, we invite airports that want to seek new paths to join us with a Runway To The Future project – a program that cuts to the realities with no sugar coating and no political correctness.

This is not another “market study.” Instead, it is a candid and granular analysis of the new air transportation industry in America, and of the specific new dynamics affecting the local airports… air service shifts, consumer trends, facility issues, expected changes in other revenue streams, regional changes at other airports that will affect the local facility.

It’s about identifying the new runway to the future. The forecast expertise of Boyd Group International is our clients’ advantage.

Invest ten minutes in your future – let’s talk.

Click here for more information – then drop us an email to set a time to chat about the future.