The Effects of The 737 MAX Grounding

Hitting The Three Affected US Airlines A Lot Harder Than Consumers

There’s been some widely-repeated stories implying that the grounding of the Boeing 737 MAX is fixing to dump some real hurt on air travelers this summer.

It’s going to be a nasty summer, according to the reports. Less flights, more demand, and lots of cancelled flights, too.

This is a story angle with lots of staying power.

So, over the next couple weeks,  plan for seeing the panting reporters blurting out the dire warnings on the 6PM Ken-And-Barbie evening news show. Reporting live from the local airport – as if that means diddly regarding the subject matter –

“…Airlines will be cancelling thousands of flights this summer due to the MAX grounding, just when record numbers of passengers will be flying…”

Sounds like hard news. But it’s another example of what happens when the media gets hold of data they don’t understand, and still let loose.

Let’s put this in context… which again should remind us that not everything that comes across the TV screen, or on the ‘net is within several zip codes of accurate.

Some hard numbers…

… 6,750 – the number of turbojet-powered airliners in US fleets as of June, 2019, according to the Boyd Group Global Fleet Trend & Demand Forecast.

… 74 – the number of 737 MAX aircraft in US fleets as of the date of grounding… that’s barely more than one percent of the fleet.

…  110 – the estimated number of 737 MAX airliners that would be in US fleets in July, had the grounding not been implemented.

So… do the math… the MAX fleet, even if it were fully in operation today, would represent barely 1.6% of all the airliners operated by US airlines. And that means the “thousands of cancellations” due to the MAX grounding that will supposedly be causing havoc at airports across the country are a drop in the bucket as far as consumers are concerned.

The flights reported to have been deleted from the potential US airline domestic schedule in July and August are under 10,000. Do the math on that  as a percentage of the 1,476,000 departures still in the schedule, and that’s a lot decimal points before you get to a number.

That’s no financial comfort for United, American and Southwest, which would have zero problems putting paying passengers into those seats on over 100 additional airliners. They are losing a lot of sure-thing revenue.

A Flight Not Scheduled Is Not A “Cancellation.” But that’s not the same as operationally flummoxing the US air transportation network this summer, which seems to be a headline staple. Remember, too, that only three carrier systems – to be sure, three of the four largest ones – are affected.

Schedule planning at carriers such as Delta, JetBlue, Alaska. Frontier, Spirit, Allegiant, and Sun Country are not affected. So, ATL won’t turn into chaos-city. Neither will MSP or SLC, or DTW or SEA.

As a matter of fact neither will any other major airports, even those where the one of the three MAX-affected airlines have major hub operations… which gets us to the concept of the thousands of “flight cancellations” that are noted in media tomes.

In most of these cases, this is capacity that may have been planned, but was culled out of the schedule. This has already been baked into the inventory and schedules offered by the three affected airlines.

Not to rain on a media frenzy, but passengers are not going to show up at O’Hare next month and find their flight suddenly cancelled at the last minute due to the MAX grounding. Consumers that were early-booked on such planned flights have been mostly re-accommodated, just as is routinely the case when an airline does a schedule change.

Oh, and the impact of these fewer flights on the total transportation system? Let’s look at the July and August schedules for this year v last year:

We put the three MAX-affected carriers in bold.

Domestically, all three will still be offering more departures and more seats than last year… the industry as a whole will be seeing 2.9% more capacity.

There is no question that with a booming economy, increased spending power, and strong consumer confidence, the three US airlines affected by this grounding are taking a financial hit in lost potential revenue.

But to imply that for the consumer the summer travel season will resemble a re-play of the fall of Saigon is flat inaccurate.

It makes great headlines, though.

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Monday Insight – May 27, 2019

Due to the US holiday on 27 May, we are again including that week’s update.

Weekly Insight #1…

IAFS To Deliver A “Tour” of China’s Air Transportation System…

In A Little More Than A Year, It’ll Be The World’s Largest

If you haven’t been to China and seen its emerging air transportation system, the International Aviation Forecast Summit will be good alternative.

This year, we’re excited to announce that the Airports:China session of the International Aviation Forecast Summit will be more than just the only independent forecast covering that nation’s top 50 airports.

We are also going to “tour” the many facets of how China is emerging as a factor in global air transportation – and how what is decided in Beijing can affect Bangor, too.

A couple of points that we’ll be covering:

China – The Opposite of Las Vegas. BGI is the only firm that independently researches China-US aviation development. At the IAFS, attendees will get a robust view of how what happens in China, doesn’t stay in China.

China: The #1 Air Traffic Market. BGI’s forecasts of the top 200 airports in China indicate that the folks at the CAAC in Beijing should break out the bubbly in October of 2020. That’s when China will eclipse the USA as the world’s largest air passenger market.

Lots of China-US Demand – But Mostly For Chinese Carriers. Any material increase in allowed China-US frequencies will mainly enhance Chinese carriers. The growth in China-US traffic will continue, albeit somewhat slower. But the majority of the demand will be carried by Chinese airlines. One reason: China has no true US-style mega-connecting hub operations. That means the majority of service will be from large Chinese cities where US carriers have low/no chance of building brand identity. United Airlines’ experience at Xi’an and Hangzhou are cases in point. But by 2023 the three main Chinese airlines will have connecting hubs at Beijing and at Shanghai, and these will feed their US partners at those airports.

Non-Hubsite US Airports Need Not Worry… China Nonstops Aren’t Coming. The target for nonstops between the US and China will be focused mostly on three categories of destinations in the US: a) major metro areas (NYC, SFO, LAX, ORD, etc.), b) connecting hubsites of US carriers aligned with one of the three major Chinese airlines, and c) several large important leisure destinations.

Other airports, even those in US regions with strong investment from China, won’t be in the play for the foreseeable future.

The reason is that typically, the investment is from all over China, and in the absence of true Chinese airport connecting hub operations, there is insufficient traffic to any one Chinese point. US carriers and their Chinese alliance partners can be expected to focus on expanding service to their US hubs and to major metro areas. But as for developing connective air access to US-China gateways, that’s an imperative for all large US airports.

China’s Airliner Industry – Not Ready For Prime Time. In light of the 737Max issues, there’s been talk that domestic Chinese airliners such as the C919 and the ARJ-21 may be in line for a global order-fest. Actually, while China has moved to the top in a lot of industries, airliners are one they’ve missed entirely. We’ll talk about the reasons China needs the 737. Political posturing aside, they have no other options.

Airports:China is just one of the exciting forecast sessions at the International Aviation Forecast Summit… and they are in addition to the candid views and perspectives from the over 20 airline CEOs and senior executives who will be sharing their perspectives.

If you haven’t registered yet – click here for all the latest, and to get the early registration rate.

________________________________

Weekly Insight #2

Small Community “Air Service Development” Programs

Increasingly, It’s Analog Planning In A Digital World

Last week, another brick-and-mortar chain – Topshop – announced the closing of all its stores in the US and the EU. The high-end fashion retailer’s parent company went into bankruptcy. Over 800 employees got pink slips.

The major reason given was competition with e-commerce retailers. Consumers have found these to better meet their needs.

No point in going into the details, but this is just the latest victim of the Amazon-type trend in commerce. Traditional retailing has increasing difficulty competing with this new channel.

It’s a sea-change in communication, and it’s part of whole new consumer options that are quantum leaps away from what was traditionally available.

Air Service Access Planning: Take Note. And it’s another message for some smaller communities and airports that may be still mired in obsolete “air service development” programs, aimed at bringing back the past.

As we pointed out in last week’s update, all communication channels – including the value and application of the air transportation channel – have materially shifted. Yet most small community air service development programs don’t recognize it.

The New Air Service Consumer Template. We’ll be covering these new dynamics at the 24^th Boyd Group International Aviation Forecast Summit this August in Las Vegas, but let’s look at the two market advantages that have established e-commerce. They are pertinent to today’s air access challenges:

… Consumers Want Multiple Product Options… with e-commerce, there’s no wandering around from store to store. A couple of clicks, and the range of options – dozens or more – are displayed and can be immediately determined. That’s a lot different from driving to a shopping mall and wallowing through store after store. It’s also a lot different than having the choice of just two daily flights at the local airport, compared to the dozens that may be available an hour – or even more – away.

… Consumers Want Immediate Results. A couple more clicks, and the desired item can be delivered the very next day in many cases. It’s the same with the higher levels of air access and often more nonstops at that other larger airport down the road. Shoehorning an itinerary into the two flights at the local airport and accessing limited connectivity isn’t consistent with “immediate results” when better options are available.

Lovely Studies… On Yesterday’s Airline System. But take a look – the goals of many of these small-airport ASD programs are the equivalent of trying to re-establish brick-and-mortar channels in an e-commerce world. Often, the service that many small communities can attract to the local airport meets neither of the above criteria.

It’s unfortunate that some small communities have spent hundreds of thousands of dollars on “true market studies” or “leakage/drive” analyses or unscientific consumer surveys, all aimed at getting back traffic that, like at retail stores, has long since left for more effective ways of communicating.

It’s A Consumer Decision – One That Often Can’t Be Changed. The challenge of convincing an airline to toss more $20 million airplanes into the local airport is just the start. The real work is convincing the consumer to come back and utilize what is often an inferior channel at the local airport compared to what’s available elsewhere.

It’s as silly as trying to convince a teenager to dump his iPod and pick up a Victrola instead. Not only does the kid have not a clue as to what such a device is, but it’s a real bear trying to get a set of 45’s into a backpack.

The Foundational Criteria: Consumer Competitiveness. The one basic necessary criteria for small community ASD: a simple question… Can service be established and maintained that is competitive with alternative consumer options? A viable alternative for at least a substantive percentage of the local consumer base?

In many cases, the answer is yes… but in others, the bottom line is not one that is pleasant to hear.

It’s a question that most traditional ASD programs do not address… or try to smokescreen.

Point: a lot of ASD today is DOA because it doesn’t focus on the new communication realities… instead, some of these programs unethically pander to trying to keep civic leaders unaware of such realities, and the need to pursue regional air access alternatives.

The New Communication Roles of Air Transportation. To start with, increasingly, air transportation is in many applications now inefficient and not time-effective. The emergence of new communication channels – Zoom, Skype, email, etc. – has already rendered intra-regional air service largely dead.

Indeed, flying from Pittsburgh to Hartford/Springfield is a non-starter… as just proven by the demise of such commuter service. And while the blame is put on “lack of pilots,” the real reason is lack of passengers.

As for longer-haul travel, for small and rural airports there’s the pesky fact that an hour’s drive to a larger airport – one with a wide range of “products” and the “quick results” of convenient schedules and nonstop flights – is a consumer factor that no amount of jaw-boning, ARC data, MIDT numbers or other voodoo will change to get these folks to use the local airport’s 2-3 flights.

Access Quality Is The Issue. Today, the #1 transportation and logistics goal of every community must be increasing accessibility with the global economy. This means not just local, but regional approaches, and electronic channels must be accepted as a part of this planning.

Air access is, of course, also a part of this – but in all cases, planning must look at the entire emerging communication picture, not “luring” more flights, without regard for whether or not it is connective.

We’ve often used the example of Muskegon… they have excellent air service. But it’s mostly located down I-96 at Grand Rapids. The two local EAS-supported daily flights – even operated by SkyWest – can barely attract 50% load factors. We could point to Youngstown, or Topeka, too. Consumers have better options than what the local airports can support – and they are using them.

This is not to imply that all air access is out of the picture for many smaller airports. Often, there is the role of being a secondary access point to a region.

But there are consumer realities, communication realities, and complete changes in business and personal interaction channels that a lot of ASD schemes completely ignore by trying to recreate the past.

The Clear New Air Service Template. What has made e-commerce successful is what will determine whether local air service is successful.

It’s a pretty clear template. When there are better options, consumers won’t shop at the local stores – and it’s a functional evolution based on new communication technologies.

It’s the same with the local airport. To ignore these new channels is to ignore the future.

Before We Start This Week…

_________________________

Weekly Insight #1…

IAFS To Deliver A “Tour” of China’s Air Transportation System…

In A Little More Than A Year, It’ll Be The World’s Largest

If you haven’t been to China and seen its emerging air transportation system, the International Aviation Forecast Summit will be good alternative.

This year, we’re excited to announce that the Airports:China session of the International Aviation Forecast Summit will be more than just the only independent forecast covering that nation’s top 50 airports.

We are also going to “tour” the many facets of how China is emerging as a factor in global air transportation – and how what is decided in Beijing can affect Bangor, too.

A couple of points that we’ll be covering:

China – The Opposite of Las Vegas. BGI is the only firm that independently researches China-US aviation development. At the IAFS, attendees will get a robust view of how what goes on in China, doesn’t stay in China.

China: The #1 Air Traffic Market. BGI’s forecasts of the top 200 airports in China indicate that the folks at the CAAC in Beijing should break out the bubbly in October of 2020. That’s when China will eclipse the USA as the world’s largest air passenger market.

Lots of China-US Demand – But Mostly For Chinese Carriers. Any material increase in allowed China-US frequencies will mainly enhance Chinese carriers. The growth in China-US traffic will continue, albeit somewhat slower. But the majority of the demand will be carried by Chinese airlines. One reason: China has no true US-style mega-connecting hub operations. That means the majority of service will be from large Chinese cities where US carriers have low/no chance of building brand identity. United Airlines’ experience at Xi’an and Hangzhou are cases in point. But by 2023 the three main Chinese airlines will have connecting hubs at Beijing and at Shanghai, and these will feed their US partners at those airports.

Non-Hubsite US Airports Need Not Worry… China Nonstops Aren’t Coming. The target for nonstops between the US and China will be focused mostly on three categories of destinations in the US: a) major metro areas (NYC, SFO, LAX, ORD, etc.), b) connecting hubsites of US carriers aligned with one of the three major Chinese airlines, and c) several large important leisure destinations.

Other airports, even those in US regions with strong investment from China, won’t be in the play for the foreseeable future.

The reason is that typically, the investment is from all over China, and in the absence of true Chinese airport connecting hub operations, there is insufficient traffic to any one Chinese point. US carriers and their Chinese alliance partners can be expected to focus on expanding service to their US hubs and to major metro areas. But as for developing connective air access to US-China gateways, that’s an imperative for all large US airports.

China’s Airliner Industry – Not Ready For Prime Time. In light of the 737Max issues, there’s been talk that domestic Chinese airliners such as the C919 and the ARJ-21 may be in line for a global order-fest. Actually, while China has moved to the top in a lot of industries, airliners are one they’ve missed entirely. We’ll talk about the reasons China needs the 737. Political posturing aside, they have no other options.

Airports:China is just one of the exciting forecast sessions at the International Aviation Forecast Summit… and they are in addition to the candid views and perspectives from the over 20 airline CEOs and senior executives who will be sharing their perspectives.

If you haven’t registered yet – click here for all the latest, and to get the early registration rate.

________________________________

Weekly Insight #2

Small Community “Air Service Development” Programs

Increasingly, It’s Analog Planning In A Digital World

Last week, another brick-and-mortar chain – Topshop – announced the closing of all its stores in the US and the EU. The high-end fashion retailer’s parent company went into bankruptcy. Over 800 employees got pink slips.

The major reason given was competition with e-commerce retailers. Consumers have found these to better meet their needs.

No point in going into the details, but this is just the latest victim of the Amazon-type trend in commerce. Traditional retailing has increasing difficulty competing with this new channel.

It’s a sea-change in communication, and it’s part of whole new consumer options that are quantum leaps away from what was traditionally available.

Air Service Access Planning: Take Note. And it’s another message for some smaller communities and airports that may be still mired in obsolete “air service development” programs, aimed at bringing back the past.

As we pointed out in last week’s update, all communication channels – including the value and application of the air transportation channel – have materially shifted. Yet most small community air service development programs don’t recognize it.

The New Air Service Consumer Template. We’ll be covering these new dynamics at the 24^th Boyd Group International Aviation Forecast Summit this August in Las Vegas, but let’s look at the two market advantages that have established e-commerce. They are pertinent to today’s air access challenges:

… Consumers Want Multiple Product Options… with e-commerce, there’s no wandering around from store to store. A couple of clicks, and the range of options – dozens or more – are displayed and can be immediately determined. That’s a lot different from driving to a shopping mall and wallowing through store after store. It’s also a lot different than having the choice of just two daily flights at the local airport, compared to the dozens that may be available an hour – or even more – away.

… Consumers Want Immediate Results. A couple more clicks, and the desired item can be delivered the very next day in many cases. It’s the same with the higher levels of air access and often more nonstops at that other larger airport down the road. Shoehorning an itinerary into the two flights at the local airport and accessing limited connectivity isn’t consistent with “immediate results” when better options are available.

Lovely Studies… On Yesterday’s Airline System. But take a look – the goals of many of these small-airport ASD programs are the equivalent of trying to re-establish brick-and-mortar channels in an e-commerce world. Often, the service that many small communities can attract to the local airport meets neither of the above criteria.

It’s unfortunate that some small communities have spent hundreds of thousands of dollars on “true market studies” or “leakage/drive” analyses or unscientific consumer surveys, all aimed at getting back traffic that, like at retail stores, has long since left for more effective ways of communicating.

It’s A Consumer Decision – One That Often Can’t Be Changed. The challenge of convincing an airline to toss more $20 million airplanes into the local airport is just the start. The real work is convincing the consumer to come back and utilize what is often an inferior channel at the local airport compared to what’s available elsewhere.

It’s as silly as trying to convince a teenager to dump his iPod and pick up a Victrola instead. Not only does the kid have not a clue as to what such a device is, but it’s a real bear trying to get a set of 45’s into a backpack.

The Foundational Criteria: Consumer Competitiveness. The one basic necessary criteria for small community ASD: a simple question… Can service be established and maintained that is competitive with alternative consumer options? A viable alternative for at least a substantive percentage of the local consumer base?

In many cases, the answer is yes… but in others, the bottom line is not one that is pleasant to hear.

It’s a question that most traditional ASD programs do not address… or try to smokescreen.

Point: a lot of ASD today is DOA because it doesn’t focus on the new communication realities… instead, some of these programs unethically pander to trying to keep civic leaders unaware of such realities, and the need to pursue regional air access alternatives.

The New Communication Roles of Air Transportation. To start with, increasingly, air transportation is in many applications now inefficient and not time-effective. The emergence of new communication channels – Zoom, Skype, email, etc. – has already rendered intra-regional air service largely dead.

Indeed, flying from Pittsburgh to Hartford/Springfield is a non-starter… as just proven by the demise of such commuter service. And while the blame is put on “lack of pilots,” the real reason is lack of passengers.

As for longer-haul travel, for small and rural airports there’s the pesky fact that an hour’s drive to a larger airport – one with a wide range of “products” and the “quick results” of convenient schedules and nonstop flights – is a consumer factor that no amount of jaw-boning, ARC data, MIDT numbers or other voodoo will change to get these folks to use the local airport’s 2-3 flights.

Access Quality Is The Issue. Today, the #1 transportation and logistics goal of every community must be increasing accessibility with the global economy. This means not just local, but regional approaches, and electronic channels must be accepted as a part of this planning.

Air access is, of course, also a part of this – but in all cases, planning must look at the entire emerging communication picture, not “luring” more flights, without regard for whether or not it is connective.

We’ve often used the example of Muskegon… they have excellent air service. But it’s mostly located down I-96 at Grand Rapids. The two local EAS-supported daily flights – even operated by SkyWest – can barely attract 50% load factors. We could point to Youngstown, or Topeka, too. Consumers have better options than what the local airports can support – and they are using them.

This is not to imply that all air access is out of the picture for many smaller airports. Often, there is the role of being a secondary access point to a region.

But there are consumer realities, communication realities, and complete changes in business and personal interaction channels that a lot of ASD schemes completely ignore by trying to recreate the past.

The Clear New Air Service Template. What has made e-commerce successful is what will determine whether local air service is successful.

It’s a pretty clear template. When there are better options, consumers won’t shop at the local stores – and it’s a functional evolution based on new communication technologies.

It’s the same with the local airport. To ignore these new channels is to ignore the future.

To Start:

Frontier CEO To Participate At International Aviation Forecast Summit

We are honored to announce that Mr. Barry Biffle will be joining the distinguished line-up of aviation CEOs and senior executives at the 2019 International Aviation Forecast Summit in Las Vegas, August 25-27, 2019.

As our regular attendees will attest, the IAFS is the #1 event in delivering insights and perspectives regarding where aviation is headed. That’s because the individuals shaping the future gather annually at the IAFS.

If you haven’t registered, click here, and also reserve your space at the our venue, the Wynn/Encore resort. We look forward to seeing you, and exploring the future together!

____________________

Monday Insight:

Futurist Trends That Aviation Planners Need To Consider – Now

One of the most egregious planning mistakes being made today is assuming that the future is a trendline of the past. Here are three main emerging trends that are largely missed today.

Trend #1: Air Transportation Within Whole New Communication Channels

The illustration below is one we use to show clients that air transportation has an entirely different – and evolving role – in how people communicate.

The entire communication system has evolved… channels we once depended on are now supplanted by alternative technologies…

So, the point here is – why are most “air service development” approaches still focused on an airline industry structure that was in place when pay-phone banks were the main communication channel when one was traveling, or when commuter airlines were vibrantly carrying people on business trips between BDL and LGA?

Think about it…  And then give some futurist consideration to other emerging technologies that will further change the role and value of air travel.

Trend #2: New Fleets – New Air Transportation System

Time to recognize the reality that not having scheduled passenger flights at every local small community airport is not a sentence to economic starvation.

Regardless of civic hubris and enough “true market studies” to fill the fiction section of Barnes & Noble, small communities across the nation that have seen local air service evaporate have not turned into ghost towns.

Consumers in places like Youngstown and Chico and Stockton and Topeka have found far superior alternatives than what the local community can attract to keep them from driving to larger airports.

They have air access – but it reflects the new economics of air transportation. These are hard economics that more jive “leakage/drive” analyses – the ones that usually show the community’s catchment area to be only slightly smaller than the Louisiana Purchase – won’t change.

Stand by… The New Air Transportation System. But, taking a cue from Trend #1, there are new fleets coming on line that are going to create a whole new, different and robust air transportation system.

No, scheduled flights aren’t coming back to Nacogdoches. But the effects of the Bombardier CSeries – now Airbus A-220 – have started major airline systems – American, United, Delta, and yes, Southwest – to re-think the economics of service to  mid-size commercial centers. It’s a mainline aircraft with new economics… and don’t think for a second that Boeing isn’t sharpening its pencils to get the 737-700 in a market position to compete.

Plus, new-technology aircraft such as the A-321XLR and A-321LR are going to drive the next wave of long-haul expansion – opening secondary markets in the East to not only trans-Atlantic nonstops, but also trans-con flying. ALB-LHR and ALB-SAN are now possible… and that’s just the start.

Again, linear thinking is a great way to play ostrich.

Trend #3: New Metrics

The latest FAA Aerospace Forecast has just been issued. It’s a wallow in trying to apply yesterday’s metrics to today’s air transportation system.

One fun example is that the FAA is still separately forecasting “major” carriers and “regional” carriers. This despite the fact that there is no “regional” airline system anymore. The FAA still thinks that these “regionals” have separate route systems and independent traffic sectors.

It’s unforgivably sloppy work.

What were independent regional airline brands 35 years ago are either out of business or have evolved into companies that lease aircraft and crews to major airline customers. SkyWest, Envoy, ExpressJet, Compass, etc. are not “airlines” – yet the FAA misleads the public by not understanding the structure of the air transportation system.

Then, there are BTS data. There are journalists and consultants that download this stuff and purport it to be the final word. There are annual reports from college professors that re-jigger these numbers into not-to-be-questioned tomes that define airline “quality.”

It’s the quality of their numbers and their understanding of the airline industry that’s at issue.

BTS/DOT data are based on reporting that, like the FAA, assumes an airline industry that no longer exists. As a result, these sources can be considered only as the starting point for analysis of key metrics such as O&D, fares, yields, and passenger itineraries.

The reason is that the sampling and the methodologies used are out of date. For example, because the BTS system of determining itinerary breaks is often questionable, their data will show 300 to 500 annual passengers making connections at Bangor… when there is no such service.

Or, missing whole sectors of metrics due to the fact that AA, DL, UA, and AS are a combination of certificated carriers, each of which some of the BTS data still assumes to be independent brand operators.

If The Traffic All End in Zeros – That’s The Value of The Report. This gets back to a lot of the data peddled by some sources. Here’s a surefire indication to grab your wallet and head for the door when somebody tries to peddle “quarterly” traffic reports:  all the airport traffic data end in zeros…. that means that raw BTS sample data is being used.

The problem is that these numbers need to be reconciled against other sources – such as T-100 and even airport-reported statistics – to accommodate often major shortfalls in BTS reporting.

These are a few of the factors that make Airports:USA a superior data source… it’s on line 24/7, updated consistently, and provides professional – not raw BTS – planning assistance.

Point: In planning for the future, it demands the understanding the that the air transportation system has evolved fundamentally, and its role as part of the communication system has also evolved.

It also means that the future air transportation system will also continue to evolve – and that means identifying emerging trends and planning accordingly. Regardless of what outdated channels of information may indicate.

This is the approach and foundation of the International Aviation Forecast Summit – it looks beyond ambient thinking and gets the perspectives of the leaders who will drive the future.

Click here for more information and to register. We have a lot more trends to cover.

 

Before We Start…

Twenty-two airline industry leaders to present their views of the future at the 24^th Boyd Group International Aviation Forecast Summit...

We’re excited to announce that we’ve confirmed Peter Ingram, CEO of Hawaiian Airlines and Maury Gallagher, CEO of Allegiant to join us at the 2019 IAFS™.

They will be discussing their perspectives of the future at the IAFS™ on August 25-27 at the Wynn/Encore in Las Vegas.

Insights Unlimited. Note that we’re in line to hear their views, and their perspectives… other conferences pre-set subject matter “panels” and then shoehorn speakers into focusing on only that issue. At the IAFS™, aviation leaders are free to express their views on the issues that they feel most important.

It’s what sets the IAFS™ ahead of other events… and why the IAFS™ is the most incisive and valuable event of its kind.

Actually, it’s the only event of its kind – an aviation forecast conference. In addition to key airline industry leaders from across the globe, the IAFS™ delivers a range of industry forecasts – from the exclusive Airports:USA® enplanement projections, to aircraft manufacturers’ fleet projections, to a session with John Heimlich, Chief Forecaster at A4A.

International trend and traffic projections, too, including Airports:China™ which will outline what US airports can expect in the next five years in regard to China-US air travel.

Oil prices will drive the cost of jet-A, and that can have material effects on how airlines plan schedules and apply fleet resources. Ben Brockman of OPIS will again be with us to cover what we can expect in the year ahead. We’d point out that his forecasts presented at the IAFS have often been counter to “ambient thinking” – but have been right on the money.

Open Forum – Not Closed Subjects. Our format is one of open discussion and free-form presentations by the leaders in the aviation industry.

At most aviation conferences, it’s not highly informative to sit through boring group sessions, the subjects of which are determined months in advance by conference organizers, and then “moderated” – read, controlled – by somebody with near-zero knowledge of the issue.

Instead, join your colleagues at the IAFS and discover what airline and aviation decision makers see for themselves.

Click here for the latest information and the list of confirmed presenters… and to take advantage of early registration rates.

We look forward to seeing you in Las Vegas!

_____________________________________

Year 2019 Airport Traffic: Trending With Capacity.

Forecast: Slower Growth

The year-to-date indications are that US air passenger traffic is trending at @3.6% up from 2018.

That’s a lot slower than the full-year 2018 growth of 5.1%, but it does track with airline capacity for the first quarter of the year…

Departure capacity was up at 3.9%, which is in the ballpark with traffic expansion, especially in light of the increasing average aircraft size.

Fundamental Demand v Impulse Travel. What remains to be seen are the on-going effects of traffic stimulation due to ULCC expansion… which tends to create net-new passengers, as opposed to filling air service gaps.

Currently ULCCs represent just over 7% of all seat generation. Based on fleet trends at these carriers, this will edge toward 10% by the 1Q of next year. This will tend to assure that passenger traffic remains above 3.5% for the foreseeable future.

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And Finally This Week…

Which Came First… The Chicken Or The Egg?

If You’re In Cuba, Neither.

Buttressing the points made in last week’s Monday Update, Cuba has just implemented rationing of things like chicken, eggs, rice, beans and soap.

Yessir, egg production has fallen 25% short of market needs. The Cuban government claims it’s the fault of the US. It’s the only nation in the Western Hemisphere that can claim it’s being attacked by a national omelet shortage.

There’s nothing more subversive than flocks of revisionist chickens intent on bringing down the Revolution.

Let’s get real… this is just another clear message that the rah-rah enthusiasm for US-Cuba air service was just a bit pre-mature – like a couple years and a change of government early.

Beyond the current traffic profiles to Havana, there is no way that large-scale leisure air service can develop to Cuba from the US… it’s not competitive with other destinations.

Load factors to HAV go all over the board month to month, but hover in the mid 70% range on average, and as BGI forecasts indicated, the majority of traffic is from SE Florida.

No clear indication of costs of operation in Cuba, however.

What to watch: In the coming 18 months, the highest and best use of aircraft resources may no longer be tossing 737s to Havana.

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Before We Start…

Are You Registered For The #1 Forecast Event? It’s Where Industry Leaders Will be, August 25-27

Insights right from the airline and aviation industry CEOs and senior executives… and we mean insight. Other events shoehorn speakers canned into “panels” covering subjects determined ahead of time by the event organizers.

The International Aviation Forecast Summit is unique, in that it is focused on delivering new perspectives, new vision, and exploration of new dynamics that will shape the future. That means we allow the industry leaders to present what they feel is critical – in the format they feel most effective.

Interested In Airline Strategies? Hear Directly From Industry Leaders

Getting the unique insights of airline leaders is one of the reasons many attendees join us year after year.

Here’s just the start of the global airline leaders who will be discussing the future August 25-27 in Las Vegas…

Southwest – Andrew Watterson, EVP & Chief Revenue Officer. Spirit – Ted Christie,  CEO. Korean Air – John Jackson, VP. Delta – Joe Esposito,  SVP. United – Linda JoJo, EVP. Allegiant – Maury Gallegher, CEO. American – executive to be announced. Sun Country – Jude Bricker, CEO. Aeromexico – Anko Van der Werff, CCO. Hawaiian – Peter Ingrahm, CEO (to be confirmed). Aer Lingus – to be announced, SkyWest – Chip Childs, President & CEO. Frontier – Barry Biffle, CEO – to be confirmed, Air Canada/Rouge – Duncan Bureau, President… and more to be announced.

And this is just the airline sessions… we’ll be hearing from leaders from the aircraft industry – including Airbus, Boeing, Embraer and Boom Supersonic.

Plus – forecasts that illuminate the future…  Industry trend forecasts… Airports:USA enplanement and traffic trend forecasts…. airliner forecasts from all global manufacturers… and more. Interested in where the burgeoning China-US traffic will be seen? Our Airports:China forecast has some surprises for a number of US airports.

If you’re not registered yet, early rates are still in effect – and bring your colleagues, too.

Click here for more information and to reserve your space… we look forward to seeing you!

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New Cuba Travel Sanctions:

Restricting What Doesn’t Exist, Anyway

Two weeks ago, President Trump announced that new restrictions will be placed on travel to Cuba.

We’ll probably have the usual sub-ethical types in congress claiming that this will torpedo the flourishing economic ties and exciting air service between the US & Cuba.

Fact is that there isn’t anything to torpedo. The supposed tsunami of air traffic never materialized.

When Obama “opened” the market, and flew down to the Workers Paradise to schmooze with the cleptos running the place, the media stories were gushing about how this would be a bonanza for US businesses, all just hankerin’ to sell stuff in a nation where the average monthly income is less that $250.

The travel industry – they went bonkers, too, extolling how this would be the next Big Thing, with potentially over 800,000 US visitors a year. And the folks in the socio-wacko Peanut Gallery decried that this would introduce capitalism to the island, inflicting the streets of Havana and Santiago and Santa Clara with disgusting things like Kentucky Fried Chicken franchises and t-shirt shops, despoiling over half a century of Marxist-Leninist social progress.

What is amazing is that all of these folks would have passed a drug test.

They really believed this nonsense – without bothering to consider that Cuba is an economic bow-wow, regardless of any photo ops of Obama chasing to Havana to shake hands with leaders in a nation where free speech is verboten, and where there is no business base.

Within the context of realities, most of the expectations of huge travel volume were based on bogus and sometimes huckster-level forecasts. No basis in fact.

Airlines Can Continue To Re-Deploy Assets. The initial comments are that travel will be again restricted to family members. More information coming, according to the DOJ, but it will probably open some airplane time at the few US airlines still flying to Cuba.

It’s not at all bad news for US carriers – Cuba hasn’t lived up anywhere close to the hot air issued by much of the travel industry. That’s because Cuba isn’t a destination.

It’s an economic wasteland. Left out of most of the stories about the evil US embargo, Cuba can freely buy goods from anywhere else in the world – just like the US does.

But they don’t.  Their wonderful socialist system has trashed the place economically. Consumers can’t consume because they have no money… the government has no money, either, and is living off systems like taking oil from Venezuela – another socialist paradise where people literally have to scrounge for food – in exchange for impressing Cuban doctors to work there.

So, when all the hoopla was going on, celebrating the “opening” of Cuba, there was dirth of hard analysis of the market. But a lot of vapor cheering.

Reality Has Come Home To Roost. As Boyd Group International’s 2014 study on US-Cuba travel predicted, the only destination with a snowball’s chance of strong traffic was Havana. We also pointed out that the Pollyanna nonsense coming from politicians about huge business opportunities was just contributing to their sacred fears of human-caused global warming.

No, a little political and diplomatic TLC would not open a flood of new Cuba business – the fact is that Cuba has no business base.

We also pointed out that there was near-zero originating traffic from Cuba to the US – as a matter of reality, Cubans can’t freely leave the Worker’s Paradise of low living standards and an approximate monthly income that should be a leper’s bell to any US business still so naive as to think there’s potential there.

The Potential Hasn’t Materialized – So Cut Bait. Back in 2014, it was noted, however, that US carriers probably had best jump on any Cuba authorities that were made available – back then, the doddering Castro brothers were on their last legs, and it was entirely possible that the whole totalitarian socialist cleptocracy could collapse. In that event, Cuba could be a bonanza of economic investment and growth.

But that hasn’t happened. Last year, there were approximately 1.3 million O&D between the US and all of Cuba. Other than HAV, the load factors have been so-so, and the operational costs – on the books, and, yes, off the books – are estimated to be astronomical. There are better places to put airplanes.

The traffic base indicates 80% origination in the US. Putting this into reality, the bottom line is that what traffic has originated in Cuba is likely other foreign nationals, not excited Cuban consumers.

All of this was obvious from the git-go. Now that we’re a couple years in on this Cuba hoedown, the chickens of reality have come home to roost.

And in coming months, so will more N-registered airliners – with or without new travel restrictions.

(By the way… our 2014 research study – Cuba-US Traffic Potential, The Reality – is available by clicking on the “contact us” link. Media copies are complimentary. Non-media copies are available for $200. The conclusions are generally still valid, and the predictions were accurate – and alone at that time.)

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Looking To The Future?

Let’s Explore Airport Traffic Trends…

On August 25-27, at the Las Vegas Wynn/Encore Resort, aviation leaders from across the globe will once again gather at the Boyd Group International Aviation Forecast Summit to discuss the future of the industry.

In the coming weeks, we’ll be announcing the complete lineup of presenters – the decision-makers from over 15 airlines, plus from aircraft manufacturers, suppliers and airports.

No Pre-Canned “Panels” – It’s going to be a very intense two days of exciting sessions. No other event concentrates on this depth of forecasting, and it’s all from the perspective of aviation leaders – and they are not straight-jacketed into pre-subject determined “discussion panels.”

They are free to tell it like they see it, and our regular attendees will attest that that’s exactly what they do.

Let’s take a look at some of the projections and forecast sessions already planned, and then focus on some of the trends that we’ll be covering specifically in the Airports:USA enplanement forecast session.

Forecast Data & Perspectives Affecting All of Aviation

Indeed, the entire event is geared to getting the future perspectives from the industry leaders from airlines, airports, manufacturers and suppliers that are shaping it.

Whether it’s a global hubsite gateway, or a rural regional airport, or engineering companies, or a law firm engaged in the aviation sector, or those in the labor sector – or any entity that is focused on aviation, the IAFS™ has global forecast sessions that deliver a comprehensive view of where the industry is headed.

Forecast perspectives will be delivered by CEOs and senior executives from over 15 airlines… not supposition, but where they each see the industry headed.

In addition, forecasts and futurist views will be delivered by:

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Highlights:

Airports:USA® – Enplanement Forecasts

Today, let’s touch on some of the airport traffic issues that we’ll be discussing in regard to trends affecting airport traffic…BGI will present its ten-year forecast of airport traffic and the trends that will drive it.

We are looking at 4.0% – 5.0% growth in 2019, but slowing thereafter, and – wrenchingly for some smaller airports – “traffic access redistribution” will be a key factor.

Slowing Growth Rates… The strong economy that has been developed over the past two years has spiked air traffic demand. However, after 2020, this will tend to level off in the future to rates in the 2.2% to 3.0% range.

Based on current fleet projections, airlines simply aren’t going to add much more capacity than that.

Shift In Passenger Routings. We see growth rates in passengers exceeding growth in enplanements. This is due to a number of factors – including expansion of ULCC carriers and a decline in small and rural airport enplanements.

More Multi-Modal Focus. Read: more automobile diversion from a number of smaller airports where a larger facility is within driving distance. The latter point above is going to be a major factor in the coming five years… consumers are finding that even a 60+ minute drive to a larger airport is a superior option than trying to shoehorn an itinerary into the 2-3 flights at a local rural airport.

It’s a consumer issue, and one that more “market studies,” local “task forces” and junkets to “speed date” events to meet with random airlines won’t reverse.

The hard fact is that passenger air transportation is all about time, and it’s a hard reality that in some cases trying to use a local airport can be far more hassle and time-consuming than alternatives in a given region. This reality is going to begin to manifest in the next 3-5 years. Regional access will eclipse local airport access at many smaller communities.

The New Role For Small Rural Airports. All that notwithstanding, America’s rural airports are a competitive advantage in the global economy, and for the few that have already and in the future will lose scheduled service (including those that today may have service that nobody uses, anyway, a.k.a. some EAS points) there is a strong role in the future national economy.

We’ll be discussing this in the session.

Increased Trans-Atlantic Routes. As we outlined at the 2018 IAFS, new technology narrow-body airliners such as the A-321NEO will open formerly unthinkable international options to non-hubsite commercial centers along the US East Coast. From Albany in the north to Jacksonville in the south, focus on assuring a viable FIS is recommended.

Increased Service At Metro-Peripheral Large Airports… Population clusters are expanding, opening new opportunities for service at larger metro-peripheral airports in some regions. The Airports:USA forecast has identified a trend toward more service at larger metro-peripheral airports inside major population regions. Airports such as Providence, Manchester will see a reverse-leakage trend return as airlines seek to capture revenues at alternative airports in a metro region.

Increased ULCC Disruption. The forecast projects that ULCC carriers will comprise over 10% of seat capacity by 2021, up from approximately 7% today. The nature of the ULCC model – which BGI compares to the “wildcatter” sector of the oil business – is to open a route and if it works, fine. If not, the route is pulled, toute suite. In all cases, the airports involved benefit with net new traffic, if even for a short period. But it causes enormous traffic volatility, too.

Rapid, Internally-Driven Airline Route Strategies. As seen in the last 12 months, network carriers are getting aggressive in expansion, based on comprehensive independent internal planning. In many cases, a new market entry had zero to do with any activity on the part of the airport itself, regardless of the post-announcement from the mayor’s office regarding how hard the community worked to attract this service, when it was essentially responding to an email requesting facility availability.

This means that the new imperative is to anticipate and identify airline market strategy changes and fleet shifts, and approach the carrier accordingly. That’s a lot different that the traditional approach focused on educating the airline on a specific market.

These are just some of the data and trends that will be discussed just at one session at the IAFS… The other sessions will be just as incisive. Plan on two days of insight that no other event gets close to. It’s one reason that the IAFS is now essentially the only true aviation forecast event.

Register Now For The Early Rate…

So, if you really want to get perspectives on the future – from all aspects that will affect air transportation in the US – register now for the International Aviation Forecast Summit. Click here to go to the IAFS registration site.

August 25-27 at the Wynn/Encore resort in Las Vegas… special room rates have been negotiated for IAFS™ attendees, too.

We look forward to seeing you!

Media “Air Fare Comparison” Stories

…Actually, Most Are Just Fake News…

There are lots of warning labels out there…

“Don’t try this at home…”

“Closed course – professional drivers only…”

“Dangerous if used by untrained individuals…”

“Read instructions first…”

And, now we need to add another one, in regard to BTS and DOT quarterly reports.

“Raw BTS data requires analysis by knowledgeable professionals only…”

In the past week, we’ve been inundated by amateur-act news stories, comparing “air fares” from airport to airport, mostly by media folks who have not a clue regarding what BTS data represents.

Sorry to pop some bubbles out there, but these stories are about as valid and accurate as comparing the price of mangoes in Anchorage with the cost of a set of wrenches at a Sears bankruptcy close-out in Omaha. The two metrics are entirely different… so is the product that consumers buy in regard to “air fare.”

Here’s a shocking clue that the media – and even some supposed aviation “experts” – miss completely when they wallow into the BTS website to report on numbers they don’t understand in the first place:

“Air fares” are NOT like a gallon of gas, or a head of lettuce, or the cost of a BigMac. Those things are a consistent and uniform product wherever they are sold.

Air fares, to the contrary, are representative of what folks are spending on a product that is different from community to community, and is representative of the unique business and economic business bases specific to each airport and community… they are not representative of a uniform and comparable product  – and therefore not comparable airport to airport.

The media needs to get clued in on this.

True, this reality can put a pinch on those media types who pull down internet data without a scintilla of understanding of what they are, and then trumpet them like they just got a confidential email from Delphi.

To be clear … air fares at each airport are the result of a vast combination of consumer, demographic, operational and geographic factors… an “air fare” at Branson is not the same product as an “air fare” at Atlanta. The money spent on air fares buys very different things, based on the consumer base, size of the market, business and leisure base, and the specific nature of the destination/region.

Let’s do a quick comparison of 2018 4Q fare data… On the left we have Syracuse, and on the right we have Midland, Texas.

Take a look… the destinational spreads are entirely different… folks spending money on “air fare” are doing it to entirely different places.  The average length of passenger trip is entirely different…  The economy of SYR is generating average trips of 1,141 miles – MAF air travelers are averaging just 814 miles.

No Excuses – Not Bothering to Understand the Source Is Bad Reporting. So the type of air travel being purchased at MAF is not the same as what’s being bought at SYR. The cost per mile of flying into and out of town is different. This is because the two markets are completely different in regard to the local needs and utilization of air travel.

So these silly stories comparing air fares between communities are essentially fake news.

Not malicious fake news, but still it’s bogus information, notwithstanding. Regardless of the intent, the fact remains that the media has the responsibility to understand the source of their information before trying to fill several column inches with bad conclusions and blatant misinformation.

As another recent example, they may want to investigate the comprehensiveness – or, lack of same – in the recently-issued “Airline Quality Report.”  Rather than parroting how “authoritative” it is, a glance on the specific data relied upon to rank airlines has professionals cringing.

But it makes great news. But still, fake news.

If You’re Looking for Solid Data – Aviation DataMiner Is The Choice.  Raw, unfiltered information is indicative of a lot of current aviation data sources – particularly some wildly-overpriced “Quarterly” airport reports. If you’re in the market of real research data, don’t waste your money.

For less than what some sources charge for providing giant printed tomes every quarter of raw BTS data for just one airport, BGI can provide on-line access to current and historical O&D, T-100, fare, and other metrics for all US airports – with customizable reports – on-line, 24/7.

Again, for less than getting a giant, cookie-cutter report containing static charts and graphs Aviation DataMiner delivers the ability to cross-reference and analyze airports across the nation – with data going back to year 2000.

So, click here to request a trial subscription… including a one-on-one training review with a professional at Boyd Group International.

We’ll show you a better source of planning intelligence.