Monday Insight – May 11, 2020

Update on CCP-COVID Wreckage

There are mixed messages coming out of the airline industry.

Delta has returned to service a net-plus 27 CRJ-900s, operated by Endeavor Air. Seven 50-seat CRJs are also being put back in the mix.

Congratulations Client to Latrobe Spirit has been doing well combining PIT-LBE to MCO, and at least one flight in the next ten days already is fully-booked. The plan is to re-instate LBE-MCO nonstops next month.

A note regarding realities of airline/airport relationships. LBE implemented an aggressive strategy to support Spirit, right from the start, back when the carrier was proposing to reduce flying to conserve cash several weeks ago.

Short-Sighted Planning – Sowing Seeds For Future Air Service Reductions. In contrast, there are some small airports in the nation that apparently have tried to play hardball with incumbents in regard to flying empty airplanes in and out. Reminder: as of October, when the CARES requirements expire and airlines will be able to economically restructure, they will remember which airports supported them and which didn’t.

Traditional ASD Approaches Are Not Going To Work, Anymore. This will be particularly true in regions with secondary, metro-peripheral airports. Delta’s latest route-drops are clearly in this realm. The open question is to what degree such service will be reinstated in 2021, and that will be dependent on a new-structure in the airline industry.

New Traffic Generation Patterns… New Airline Strategies. At BGI, we are developing entirely new forecast approaches for airports in the cross-hairs of what will be shrinking fleets in the 4Q of this year. Point: the traffic generation in some regions will not rebound because the economic foundations have been damaged by the COVID pandemic. Think petroleum regions. Think auto-focused regions. Think international markets supported by specific industries.

The traditional approaches to “air service development” – the overstuffed “true market studies” – won’t have any bearing on the fleet realities and strategic realities facing U.S. airlines. Fleets will be a core driver in the process, not lists of raw and obsolete BTS O&D data. Give us a call or email and we can discuss the specifics for your community… the nation’s economic base has changed, and so will the airline system.

Airliner Groundings… Shifting Toward Future Fleet Optimization. There are increasing indications that the multi-fleet network carriers – AA, DL, UA – are doing triage with parked airliners, exchanging in-fleet units with some parked earlier. The ongoing process is still net fewer airliners, but at the least, they are re-planning fleets for the future.

Miami Air Goes 86. Arguably one of the best and most professional charter carriers, Miami Air has filed bankruptcy and is liquidating. No sports teams in operation means one major revenue stream evaporated. It took out the carrier, too.

USA Jet Airlines – a supplemental carrier – has also shut down, at the least. Heavily focused on the auto industry – the CCP-COVID pandemic has shut that industry down, too.

United Airlines has cancelled an order for 96 B-737-10 MAX airliners. This may put the backlog at Boeing below 4,000.

This tracks with the apparent economic reality that when facing a global glut of 737-800/900s that may be available for, say, $50 million a pop, the economics of a new airliner at double (or more) ownership costs get real foggy… especially in the specter of very low jet-A prices. The backlog at Airbus is likely in the same line of fire.


And, Finally,

A Word About Our Pandemic Sponsor, China’s CCP

Make no mistake. The day is coming when the Chinese government’s bluster and babble won’t be able to cover up for their criminality in the start and spread of the pandemic. They inflicted this on their own population, as well as the rest of the world.

Countries, states and even individuals have initiated, and others are planning to initiate, legal action against China’s un-elected government, otherwise essentially the Chinese Communist Party, or CCP. There are issues with suing a sovereign nation. But that isn’t the issue… it’s the Communist Party of China – a pack of thugs that have been in business just short of 100 years – that is responsible, and they are not a nation. They also have connections with Chinese-owned businesses across the globe. Billions of dollars in value. That may be fair game.

The first line of defense for the CCP is to fan the dishonesty that going after a political party – one not even selected by the people of China – is “racist,” which is a complete lie. A political party – particularly one like the CCP – is not an ethnic entity.

There Will Be Some Recompense. As we’ve noted in the past, airports should gain a clear and unvarnished understanding of the negative impact that has been inflicted due to China’s CCP. Likely, it will be some mechanism generated by the U.S. government, probably not a lawsuit, that will be the modality.

Guilty & Caught Red-Handed. Yes, this virus came from China, and the CCP was calling the shots, often to the lethal detriment of the Chinese people. Yes, the proof is beyond question that it was the CCP’s actions from November on (at least) that allowed this to become a pandemic.

There is no question that the CCP must be held responsible.

When All Else Fails, Deny Reality. All of that notwithstanding, the CCP has a formidable first line of defense – almost a fifth column – in the U.S. that is lining up to defend them.

One bulwark is parts of the media, now spinning the dishonest narrative that to blame the CCP is only an attempt to take pressure off of the alleged U.S. failure to act soon enough. Or, worse, the dishonest allegation noted above that to accuse the CCP of this crime equates to racism. Let’s put it on the table once again: the CCP is a political party, not an ethnic group. An un-elected political party, to be more precise.

In short, the CCP strategy is to rely on fantasy and hope it won’t be questioned. It also is relying on U.S. entities that do business in China to ally with the CCP to protect their investments there. With the now history and facts surrounding the CCP’s involvement, doing business in China is going to be a lot less lucrative and a lot more risky. So the idea is to aggressively defend the CCP.

‘Course, this runs counter to the actual facts, but that makes no difference. Just keep telling the party-line story over and over.

Criticize The CCP & You Threaten Special Interest Rice Bowls. Another bulwark is made up of the “philanthropists” and special interests that are defending the incompetence of the WHO and want to smokescreen what the CCP has done. And a third line of defense is the many professional firms that have lucrative branches in China. (The good news, such as may be, is that U.S. airlines have not had – and actually would not be in line to have – a major role in China’s international access.)

Furthermore, there are stories that the CCP has an army of wu maos – people paid to file comments in channels such as Facebook and Linkedin supporting the regime. It’s common in China where people are paid half a yuan (five tenths or “fifty cents”) to post bogus negative comments.

The whole process is based on trying to create the fantasy that China is really the hero in this whole mess.

To that end, this week there is an Intelligence update at BoydGroupChina that relates to the fantasy that China’s air transportation system is coming back and is an example for the U.S.

Click here to take a look.