Monday Update – March 30, 2020

Waiting For The Inevitable…

And Planning For A Whole Different Future

The air transportation industry in the USA is not going to “bounce back.”

Instead, it will evolve and accommodate a new set of economic drivers. Not a lot of bounce.

But it will be back… just in a different role in America’s communication system. Every sector of aviation needs to tumble to the fact that the metrics used to define, plan  and implement air transportation have materially shifted.

We’re right now accomplishing CCP-COVID forecasts for a number of clients.  We are looking at the logical outcomes of a situation where the entire business foundation of air transportation has suddenly vanished. The changes to the industry will not all be temporary.

In regard to traffic numbers, for the next several weeks, passenger volume at many mid-size airports will be in the hundreds – total O&D – like, not enough to fill three 737s. Smaller airports even more dire.

Shutdown To Reorganize. The hard fact is that there are no passengers, no customers, no revenue coming in the door.

The federal aid for payroll costs notwithstanding, airlines cannot continue to operate airplanes in the absence of business. Fuel – even when oil is at historic lows – costs money. Maintenance costs money. Administration costs money – and there isn’t much money coming in.

The conclusion is that unless the global approach to this pandemic is modified and soon, it is a short matter of time before airlines just stop flying, pro tem. There simply is no market for this industry, for the time being, as it is currently structured.

So, figure a 7-10 day period to allow airlines to completely re-trench…emerging with a very bare bones route system.

Long Term Changes To Air Transportation.

Fleets: This past week we witnessed the pull-down of what eventually will be the entire world-wide fleet of A380s. We are seeing hundreds of both widebody and single-aisle airliners parked by carriers across the globe, many of which won’t be coming back, either the airlines or the airplanes.

While it would appear that smaller units of capacity might have advantages, the reality is that the fleets of E175 and CRJ airliners operated inside major carrier systems are dependent  on the traffic demand base that was generated by the 737s and A320s that are now being parked.

Aircraft Industry. There will be thousands of excess airliners. And most will be new-generation units – which means when the industry comes back, the orderbooks for new airliners will see a lot of white space. The huge demand seen in the past five years was increasingly based on traffic growth, not replacement. That will have enormous effects on the airframe industry and its supply chain.

Route Systems. We can cut through the fog. While carriers accepting federal aid supposedly will agree not to drop any airports off their route systems, that’s probably a flexible definition.

In the future, air service will be far more regionalized. Less points in a given region with scheduled service. Just do the quick math. Less flying machines will mean less places with flights. This will be a long-term situation and it won’t fully return to pre-CCP-COVID levels.

Airports. GA is dependent on discretionary spending. It’s drying up. But there is the argument that with a shrunken commercial air system, business aviation will grow in importance.

As for scheduled passenger service, it will be a slow recovery, and for a couple dozen small airports, no air service recovery. That does not mean no air service access… just no service at the local airport, and consumers in many of these communities have options at other gateways… which in many cases  they have already been using.

The positive reality, however, is that airports are not just in the commercial air service business. While it will be a very wrenching process, possibly the U.S. airport system faces the brightest (such as it is) future of any component in the aviation system.

Airports large and small are not just places for passengers to go through security. In a future world of UAS (drone) technology,portions of shipping and logistics will shift from over-the-road to across the sky. We are talking about cargo drones that are already being planned. This is not in place today, but it will accelerate over the next five years. Point: airports are economic generators, regardless of commercial service levels.

Getting Ahead of The Curve. As far as past trends are concerned, all planning bets are off. That scraping sound really was an economic iceberg.

The issue now is to determine the future scenarios that aviation will be facing in the coming six months, and determine actions to take to accommodate and optimize them.

At Boyd Group International, we’re assisting clients across the industry in developing forecasts to illuminate how these changes will specifically affect them, and exploring solid options for the future.

Give us a call or an email and we can discuss your specific situation and use our industry-leading forecast expertise to plan the new future.


And Finally…

No, China Is Not An Example For US Airlines

There have been a lot of stories covering how China is the example for us to follow in regard to dealing with the CCP-COVID pandemic, and a template for the return of the U.S. airline industry.

That’s complete dishonest reporting.

First, the stories from lightweight analysts who know nothing about China claiming that the air transportation system there is roaring back are nonsense. The CCP maybe are forcing airlines to fly, but traffic levels are questionable.

To trust anything coming from the Chinese government is the height of stupidity, yet there are the usual suspect consultants and media types taking whatever they say like trained seals snapping up tossed fish.

Furthermore, don’t buy into the stuff that they have their home-created pandemic under control. First, nobody has any solid knowledge other than what the CCP puts out, so “journalists” that repeat the party line without intense skepticism aren’t very professional at what they do.

Plan on another “outbreak” of the virus in China to be announced in the next 60 days. They will blame it on arriving foreigners, and not the truth that it’s never been fully under control. Think about it – a nation of 1.4 billion suddenly gets to zero new cases, and a lot of the U.S. media reports it as gospel, even though the source has repeatedly been proven to be the globe’s #1 Pinocchio.