Monday Insight – December 23, 2019

Preview: Planning For The New Year

It’s sort of like the old story of the guy who leaps off the 100-story building.

There’s jumping. Then a lull. Then impacting.

Going over the ledge itself isn’t much of an event. And for some period of time, nothing happens, really.

Then things get real different, real fast.

That’s what aviation forecasting is all about – identifying the leap – the initiation of events and trends that will evolve into major changes – before they start to mess up the status quo, and in time sufficient to make plans to address new opportunities and challenges they represent.

We will be covering these in more detail next week, but here’s a few of the top trends. Some are just now jumping. Others are impacting.

Enplanement Growth – Still Estimated At @ 2.75% – 3.5%

It’s all about the capacity.

Enplanement growth is now a function of how much capacity airlines will plan to add, and where they make the determination to add it. That means a clear understanding of airline trends – fleets, capacity, strategies and corporate tactical objectives – will determine traffic shifts in the future.

Our Airports:USA® forecast will be outlining this in February – along with projections of the effects of shifts in airline strategies at key airports.

Airline Fleets – New Dynamics

Gentrification Of The Product. United’s strategy to take 70-seat CRJs and put in a premium 50-seat cabin goes entirely counter to accepted thinking. Which is one reason it will probably be successful and set a new trend.

Southwest: The Unthinkable Is Now On the Table. The Boeing Max situation may cause airlines to re-think fleet plans. Might Southwest actually shift to other aircraft from the 737?

They may have no choice… but have limited alternatives. The only other game in town is Airbus, and the A320 platform line is full – although Airbus might make an accommodation for Southwest.

For the amateurs who talk about this being an opportunity for Chinese airliners, take a look at a) the performance of what they offer, and b) the fact they can’t get these lead sleds like the C919 out of the factory in a timely manner. The ARJ-21 rolled out in 2008. There are barely two dozen flying in scheduled service.

Internal speculation only: The A220-300 could be a path for Southwest. The production lines are still being developed, and the incredible performance of the A220 would fit well with Southwest’s system.

Please tune out the din from the Peanut Gallery, babbling about the wonderous benefits of having only one type of aircraft. With the addition of the Max to the Southwest NG fleet, a lot of that isn’t accurate, anymore, anyway.

Change In The Parallel Air Transportation System – ULCCs. Small Airports Less Desirable

Take a look at Frontier’s latest route shifts. It’s a bombshell regarding the direction of the ULCC model.

What’s clear is that the day of experimenting with small secondary markets such as Jackson and Lafayette may be transforming into longer-haul and larger revenue sources from large metro areas.

Open question… whether this will impact – if at all – the primary air transportation system. A daily ONT-MIA flight may just be a market stimulus… or viewed as a threat by AA to its LAX-MIA market.

Internationalization Of Interior Markets

One word, Benjamin: A321XLR.

It is the 707-300 of the 21st century in size, but with economics that will make international and trans-Atlantic flights routine at large non-hubsite airports across the eastern USA.

Going forward in 2020 – 2021, watch for all three major alliances announcing at least five more large secondary, non-hubsite U.S. airports for trans-Atlantic flights.

If pre-clearance is established at LHR, CDG and FRA – and maybe even Istanbul – that number could triple.

China-US Air Traffic: Business Flows Stable. Leisure Traffic To Go Splat.

Three months ago, our Airports:China™ forecasts indicated a near term decline in China-US air traffic demand, with a recovery sometime in the next 24 months.

That’s changed completely.

The $140 billion in Chinese investment in the US will continue to represent very strong business traffic demand.

But as for leisure traffic – it is going to fall like a baby grand out of an 8th floor window. And stay there for the foreseeable future.

The “trade war” has nothing to do with it. Changes in political and social structures coming from Beijing will materially reduce leisure visitation to the US. Then look at some of the economic factors in China, and this supposedly-growing Chinese consumer economy that some global consulting firms talk about is largely just an illusion.

Plus, new policies on the part of the PRC government will make travel to the Middle Kingdom a lot more problematic.

Factor: Just how many folks are going to want to plan a trip to distant China, when technically, even with a visa, they can be denied access at the boarding gate? (True)

And that super high-speed train system that can whisk them to see the terracotta warriors in Xi’an? Sorry, unless you have a Chinese ID card, forget using the kiosk to buy your ticket. You’ll have to wait in long lines to get a ticket at a window. Also, in the hinterlands, a lot of hotels will now not even accept foreigners.

We will be covering China-US aviation on our revised website in the first quarter of 2020.

Lots happening – we’ll talk next week.