Areas of Interest This Week…
The Federal Air Package – A Hobson’s Choice
Delta Air Lines has advised that it is burning cash at $60 million a day, flying empty airplanes, even with a reduced schedule and interim cancellations.
Grab the envelope, flip it over, and start doing the math. While it is still possible that the situation could materially change by June, Delta notes that with the current cash burn it will be out of money by then. If the federal grants reduce that burn rate by half (which is way optimistic) the picture is still pretty dire.
If the DOT holds fast to the dictum that carriers receiving aid must keep flying, and continue to serve most points served on March 1, and do so for the next six months, the recovery from June on had better be one steep curve. Plus, it makes very veneer assumptions about how the industry is structured.
Example: it has no relationship whatsoever with the realities of the day-of-week model of ULCCs such as Frontier and Allegiant.
The math here is not re-assuring. Neither is the basic rationale of this airline aid package. The industry will get through this, but the current federal package needs work.
The Post CCP-COVID Air Service Environment
– It’s Not All Doom & Gloom
When the recovery manifests, the airline industry itself will be very different in scope and fleets.
Our fleet forecasts indicate that the biggest changes will be “at the margins.” The demand and applications for widebody airliners will be reduced materially. On the other end, even with super low jet fuel prices, the range of use of 50-seat jets will also wither. So, as A380s and CRJ-200s are being taken to the knacker, the airline industry will emerge with a whole different set of mission capabilities.
Where the fleet changes will be most obvious is in the middle… 130 – 180 (dual class) airliners. Today, the wide range of missions that can be accommodated by new-technology airliners will transform airline fleets. As examples, the A220 platform has variants that can effectively operate short-haul through trans-Atlantic markets. The A321XLR is a similar aircraft.
Point: this CCP-COVID pandemic will be an event that will accelerate the airline re-fleeting that actually may result in more flexible and wider air service access. To be sure, more regionalization, but when the dust settles, the new fleets may well shift upward a lot of air service access.
Community air access planning needs top take this new dynamic into consideration. Give us a call. Our latest research on the potential outcomes is being updated daily, and we’d be happy to talk about our forecast perspectives.
One thing is certain, the airline industry will be smaller, with fewer and different aircraft. At the moment, airlines are completely focused on survival, not expansion. The tired out “true market studies” are studying yesterday’s air transportation system.
Unintended Consequences – The Cave-Dwelling Solution
Ravn Air of Alaska has found it necessary to stop flying most of its routes, and ground all but three aircraft.
It’s pretty hard to count any revenue when citizens are urged or ordered to stay home.
The problem unique to Alaska is that most points have no other access except by air. Getting groceries to a rural community isn’t in the cards if air carriers cannot operate.
Alaska is the most obvious example of outcomes of the hide-in-the-cave reaction that virtually all nations are resorting to. Whether it will stop the China virus is uncertain. The economic cost is certain.
The China Chickens – Airplanes – Come Home To Roost
In the China airline system, the well-known substance just hit the electrical appliance.
We pointed out last week in a Touch & Go update, that, funny, with all airlines around the globe either shutting down or parking huge chunks of their fleets, China is absent on the list.
As a result, parts of the aviation media have been gushing about how China’s airlines should be a model for the U.S. in getting through the CCP-created pandemic. Things, they report, have been going just swimmingly as these heroic and mostly government owned airlines have toughed it though the crisis.
After weeks of folks in Beijing crowing that they had conquered the virus in China (anybody who believes that needs serious adult supervision), big parts of Chinese airline fleets are now officially being “stored” – a big difference from just grounding them and not flying.
Last week the first shutdown of a Chinese airline due to the CCP-COVID pandemic was announced. China Eastern Wuhan was grounded. No big deal in itself – they had a grand total fleet of 2 737s.
But they are a part of China Eastern, which suddenly revealed as of April 2, has put over 25% of its fleet in storage. The country’s largest airline, China Southern, has put in storage 30% of its fleet.
This didn’t happen in a day. While the media “analysts” were glowing about China, these airlines were busily pickling everything from brand new A350s to older E-190s. So far, the estimate is over 600 planes. And that’s just what we know about. China is every bit as transparent as a brick wall.
This is right after CAAC was claiming that the system had climbed to almost half of the pre-pandemic levels and all was returning to normal.
Truth: The storage numbers so far may just represent the level to which China’s air transportation system will naturally shrink into. China’s air transportation system will not rebound to pre- CCP-COVID levels. Its entire revenue foundation has changed. We are covering this at BoydGroupChina.com.
And, again… just a note from BoydgroupChina.com…the virus that the CCP created is not over in China. They now claim a resurgence is all due to arriving foreigners. Sure. At least one county in Henan province, nowhere near an international gateway, has been again quarantined. Believe them not.