Monday Insight – September 13, 2021

Airports:USA® Fourth Quarter 2021 Forecast Revised
… Downward

  • Inflation has reportedly hit 8% this past week…
  • One major grocery chain has warned of much higher prices to come
  • Not only are there indications of soft future bookings, airlines are seeing actual cancellations of current bookings…
  • The CCP-Covid information circus confusion continues…

These are no longer vague tea leaves on the future of air traffic in the USA. The indications are that we will be seeing more than seasonal demand decline in the coming 12 weeks.

As a result, Boyd Group International’s Airports:USA® will be publishing a contingency-driven forecast this week, outlining the airports that are likely to be most exposed to the factors above.

A Decline Or A Plunge? From preliminary projections developed in the last week, it is possible that the year 2021 could clock in with under 650 million enplanements, way down from the 670 that were estimated based on trends as recent as July.

The concern is that with the appalling kabuki theater Washington has made in regard to vaccinations, masks, new revelations on high level officials having actually been involved in Wuhan-related research, and now major inflation, the number one fallout is consumer uncertainty.

Consumer uncertainty is always certain to curtail air transportation demand… and apparently that’s already in progress.

Weakening Demand Points – But Not Across The Board. Paradoxically, what we can expect is that different travel demand sectors will be hit differently.

While it is logical that leisure traffic would be the first – and it will be – the decline will not be evenly spread across the board, and will affect weaker sub-sectors of this category first. High-end leisure travel such as ski vacations will be hit the least (at first), while purely personal (VFR) traffic will see near immediate downturn.

As for business travel, which some analysts seem to think is the enormous revenue cavalry about to burst over the hill with lots of new traffic, please, please, write this down – it isn’t coming. As we’ve pointed out in the past, most of what’s going to be returning has already done so.

This is in addition to the reality that not only has the value of air transportation been partially eclipsed as a business tool (due to more efficient communication channels), but the diaspora of many corporate offices has dispersed the enplanement generation of such travel. That three floors of workers in New York are now working from “home” which can be anywhere across the nation, and not necessarily concentrated near LaGuardia.

Basically, what to watch for in the coming weeks…

Circling The Airline Hubsite Wagons. Some pull back in weaker feed markets. United is already culling and trimming its feed system, dropping places like Tallahassee, Abilene, San Angelo and Rochester, and “postponing” expansion at other points. Watch for more of this at other carriers.

The Sustainable Jet-A Dragon On The Way? The demand mix for jet fuel has been affected by declines in travel in the rest of the world. However, between supply and demand eventually stabilizing and – unmentioned in the trendy news – the higher costs due to the push for “sustainable” alternative sources, the cost of airline fuel will be going up. Along with other inflation-driven factors.

Less Trans-Atlantic Flying. Some planned restoration of international capacity will be quietly cut back. The E.U. is a game board of different CCP-Covid responses. Denmark has dropped all restrictions, while the E.U. itself is recommending restrictions on travel from the USA. Bank on it, that fun vacation to the South of France will be 86’d.

Some Demand Transfer To USA Destinations. That brings up the other paradox. Some of that long green that was planned for a vacation to Europe will shift to domestic destinations, in part shoring up some of the decline in domestic leisure travel.

Airports:USA® Subscribers: More Updates This Week. We will be honing the new alternative enplanement projections and advising our subscribers.

Plan on a lot of complex volatility.


9/11 Anniversary Review

As expected, 99% of the coverage of the 20th anniversary of 9/11 was focused on retrospectives on where people were, how they coped, and how air travel is sooooo different today.

Unfortunately, many of these stories were accessorized with vapor-brain reviews of how wonderful airport screening is today, usually with a discussion of all the proscribed items that have been intercepted. Not terrorists intercepted. Just items. No discussion of other security aspects.

This Thursday, the Aviation Unscripted™ video will do a wrap up directly addressing what actions were taken after 9/11, and how well they addressed the threat.

Mark your calendar.


Boeing, China & Other Issues

We had planned to review the general prospects for Boeing, in light of the 787 issues and its precarious position in regard to selling more aircraft in the #2 market – China.

We’ll be getting to that in the future. Here’s a hint: in the wider perspective of the future global airliner market, Boeing is in a lot better shape for the long term than the news stories are (accurately) indicating where it is right now.

And we’ll get into the potential enplanement effects on some specific U.S. airports as the relationship between the USA and China continues to deteriorate.

The rapidly-evolving dynamics regarding enplanement demand simply gobbled up a lot more time than we expected.