Fourth Quarter, 2021…
After December, The Deluge?
Air Traffic Demand 2021 – Saved By Momentum
… And Non-Refundable Tickets, Too
The new forecast for the last quarter of 2021: a total of 192-198 million enplanements at U.S. airports.
That’s more than 50% above the same period in disastrous 2020, but approximately 20% below enplanements before the CCP-pandemic in 2019.
The Role of Air Travel Has Indeed Changed. This fits with known and expected changes in the foundational drivers of air transportation demand. Even as some international traffic is being restored, it is unlikely to see the levels of leisure demand experienced prior to the pandemic rebound right away.
Business air travel will come back only to the extent that it is more effective as a communication modality than other emerging channels.
Therefore, enplanement levels approximating 85% – 90% of pre-CCP-Covid clearly could represent the new core demand for air travel in the USA for the rest of 2021.
After that, no guarantees.
Follow The Available Dollars… Or Decline of Same. What also needs to be observed is part of the underpinning of this core demand is based on leisure travel. Leisure travel is dependent on discretionary dollars in the economy.
It is also heavily based on advance travel decisions, where the economic factors when the trip takes place may be materially different from when the determination – and the actual spend – was made to take the journey. Non-refundable tickets and hotel reservations will tend to keep this spend in place, regardless of changes in consumer sentiment.
That is likely what will underpin air traffic volume in the 4Q of 2021, and into the 1Q of 2022. The money’s been committed (and typically spent) already, and a lot of it is simply not refundable. So, the “demand” is there… it was set there months ago, mostly, when economic factors were different.
Again, The Three Nasty Musketeers Of Economic Change. So, let’s get back to that concept of changing economic factors between time of travel decision and time of travel.
We have covered this in recent Touch & Go newsletters as well as in Aviation Unscripted videos… but let’s look once again at the changes that are becoming apparent now, and were not much so just 60 days ago…
Factor One: Inflation: Food prices just hit a seven year high, and it’s likely a trend, not a spike. Gasoline is up double digits since January, and is still climbing, with the incompetent people in the Marble Playpen in Washington actually contemplating a phalanx of stupid new regulations that will just drive it higher.
It does not take a high school diploma to figure out how this and other spiked commodity costs will affect decisions to take a leisure (or, business) trip in the future.
Factor Two: The CCP-Covid Political Fiasco. The politicization of the entire pandemic situation has made any attempt at logical thinking or free and open intellectual discussion impossible.
There are now political – not medical – dictums regarding how we must adhere to dealing with the disease. Masks, but no determination of what a mask really is, or what it does, or how to utilize them. Vaccinations – complete confusion, with any open discussion handled quickly by accusations of being anti-social. There has been no real explanation of the requirement – set by politicians, mainly – to wear a mask on a three-hour airplane trip.
The word came out this week that a requirement for all airline passengers to be vaccinated – regardless – is not yet on the table. It’s the “yet” that tells the story.
This does not engender propensity to take air trips – and these dynamics will affect such spend from this point on – affecting traffic volume in January and beyond. Bank on it.
Big Time Factor Three: The Coming Retail & Commercial Turbulence. Coming very soon. Actually, already here, and it will be a barrier to air travel spend.
Sorry, we just can’t ignore the China thing – we’re connected at the economic hip, unfortunately.
This just in: major rain has curtailed output in two major coal production provinces in China. Nothing for us to be concerned about, right? Wrong. It is just one more part of a collapsing Chinese economy – one on which much of our retail sales and industrial output depends.
In addition to a spreading economic collapse and the CCP-Covid spreading also, China is also in a major energy crisis, with reportedly two thirds of the mis-governed country facing industrial-crippling blackouts. Whole cities, traffic lights, hospitals, the entire place, darkened. That means factory production – already curtailed by a major new spread of CCP-created Covid – will continue to decline.
And so will the physical ability to make and ship goods to the rest of the globe, including stores in Omaha and factories in Kentucky and North Carolina.
Not a good horizon, as the USA has become hugely dependent on China, which itself is undependable.
Point: The 2021 holiday retail season may be one well short of what’s typical. The iPhones may be on backorder. The clothing racks may be a bit thin at Target and Nordstrom and Macys. That new barbecue grill won’t be on display at Ace Hardware. That steering component from the factory at Zhengzhou won’t be available for the truck production line in Detroit. Take it from here.
Oh, yeah. The rare minerals to make the batteries for all those EVs and hybrids could come to a halt, too. The supply chain is largely Chinese-controlled.
Bottom Line: The Spend Is In Place For 4Q. But Wallets May Now Be Closed. United Airlines has announced that it’s adding what appears to be close to 3% more capacity for the remainder of 2021.
Paradoxically, it’s a sound move… because the travel spend has mostly been committed through the end of the year.
The real bellwether will be bookings for mid-January on.
Bottom Line. Yes, these are points that most analysts haven’t noticed. Yes, the stuff about China really seems way out, too. But it is real, and monitoring and being aware of these dynamics are critical to accurately forecasting the future traffic at airports across the USA.
We’d invite you to log on to www.AirportsUSA.com and take a look at the snapshot tab. We’ll be updating it weekly, as these events continue to unfold.
And for professional, futurist forecasts of aviation areas, Boyd Group International is ready.
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