The Alaska/Hawaiian Deal
A Change In Ownership, Not A True Merger

To cut to the chase and through what will likely be a media-wallow about the evils of a constricting airline system, let’s just hit the bullet-points:

• No significant route overlap with Alaska. Like, only a couple of routes from mainland to Hawaii.
• The two route systems have little in the way of market synergies. They are completely different in scope and traffic base.
• Alaska brings mainly the advantage of combining administrative overhead, reducing the cost structure at Hawaiian.
• Hawaiian faces temporary issues with Pratt & Whitney engines on new Airbus airliners – so do many other airlines.
• Hawaiian under Peter Ingram’s leadership has turned HA into a viable carrier with a carefully-crafted route system optimizing demand for Hawaii vacations.
• No downside for consumers. There are no routes to be cut.
• No major market expansion opportunities due to the combination.
• Hawaiian focuses on one product – Hawaii, which is a very niche market.
• 717 replacement in the near future. A200-300s? Can do inter-island and mainland routes.
• It is a change of ownership and not really a combination of airline route systems. Reportedly, the identities will remain distinct as will the route systems

A positive deal for all involved.

Period

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Quick Recap:
The Thanksgiving Meltdown
That Didn’t Happen

The holiday is over. The scenes of mass confusion and huddled masses yearning to enplane flights massively delayed were not to be.

Every year, without fail, the national media goes into hypercycle – predicting chaos at airports. They stupidly – and I do mean stupidly – assume that there will be a crush of passengers causing gridlock in the skies above America.

‘Course, they don’t bother to understand two basics: first, flights today tend to be close to full just about all year long. Thanksgiving is not the huge bump they mislead people into believing. The second is that there are not materially more airliners in the air over the holiday – certainly not to the extent that will choke the ATC system anymore than it is normally.

Gotta remember – a few years ago one network sent a top correspondent to the FAA center in Virginia, so they would be the first to let the public know when and where Thanksgiving flight delays were developing. She sat there like a potted plant all day.

But do take a look at current media stories. It seems that the new focus is on whether the nation’s in for another Southwest meltdown over Christmas. Understanding the facts behind what happened last year and why isn’t necessary.

Anything for a story.

Boeing Loss – Beyond the Numbers

How Boeing does will affect the USA economy, not to mention the health of the aviation industry.

A $1.6 B loss on $18.1 B in revenue is what Boeing just reported. For the folks spinning things from the stock price side, that is not pretty.

But looking at things from the long-term global airline demand picture, the real issues are not as dire as the numbers might indicate. Bright, actually.

Yes, Boeing is still having teething problems with the MAX, and the 787 program as well. Reportedly, they are locked into big-time loser contracts to build two 747-based Air Force One transports. These are being worked out, albeit expensively.

Re-Entry To China? Plus, it has been an unmentioned issue that Boeing has politically been mostly shunned out of the China market for net-new orders. This may change as Airbus is facing huge order backlogs, even with expansion of production at Mobile, Alabama and Tianjin, China. Airbus will be challenged in meeting global demand for the A-320neo series and the A-350/1000 widebodies.

But further down the horizon, the collapsing economy in China might make a lot of on-the-books orders turn into vapor. Also, unlike Airbus, Boeing doesn’t have exposure to a production line in China. It has a finishing facility only. In the longer term as things in China get more and more dicey, that might not be as much of a disadvantage as it may seem.

Airbus v Boeing Production. Boeing intends of build 38 737s per month by the end of 2023. Airbus is projecting 65 A320s per month in 2024.

The impact of this will go on to affect suppliers – engines, avionics, flight systems, etc. These companies are critical in crafting sales deals with airlines. For example, engine manufacturers like Pratt & Whitney and Rolls and GE come to the party in these agreements, with arrangements where their profits will be from future maintenance and support agreements over time, and not necessarily the sales price of the engines – which often is not completely factored into the airplane prices.

Their play is long term support agreements. With Airbus building more narrow-bodies than Boeing, this could put Boeing at a disadvantage in crafting sales deals in the future.

Nevertheless, Boeing Faces a Strong Demand Future. All this notwithstanding, there are still only two games in town when it comes to global airliner demand. The recent huge commitment from Southwest for 737-7s is an example. In any case, both Boeing and Airbus will have orderbook dance cards pretty much fully occupied into the future.

One observation: production-wise: Boeing can resolve certain supply chain issues and has the ability to go back to levels of 737 production approaching 60 per month.

Tilting At Chinese Windmills. Naturally, we have the internet gadflies warning that this is a real market opportunity for China’s domestic COMAC. Gee, the C919 looks a lot like an A320, so it might be the beneficiary of backlogs at Airbus and Boeing, right?

No way. Write this down: the DC-6B has a better chance than the C919 of breaking into the global airliner market.

The C919 is a performance dog and an embarrassment to China. COMAC has no global base, even if it weren’t produced by a government like the CCP, which makes Nazi Germany pale by comparison. Not exactly a great promotional issue for new buyers.

Like a lot of data coming out of the Middle Kingdom, the fact is that the COMAC orderbook is cooked with supposed demand from financial institutions and captive airlines. The only two airlines physically outside of China to order these planes are actually companies controlled by Chinese entities.

Future: Boeing is behind the curve compared to Airbus as far as single-aisle orders are concerned. And they reported some heavy financial losses.

But behind is not being out.

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Touch & Go December 1 2023

The Small Community Air Access Conundrum
It’s Not A Pilot Shortage.
It’s A Fleet Evaporation

Here’s a hard fact:

Too many small communities are banking on recruiting air service for which there won’t be any airliners.

Check it out. Do a media search for” small community air service.”

You’ll find lots of stories where small communities are being convinced that as soon as we get more pilots, air service will be flooding back. Yessir, the studies all show great traffic.” There are 22 bazillion passengers generated in our “catchment area” and all they need is an airplane to get on.” And the usual pablum: “Several airlines are interested… it’s just a matter of having the incentives ready!”

Sounds great. Only problem is that a lot of this is based on facts not in evidence. Or more correctly, airliners that won’t be in existence.

Yup, it sounds like bah-humbug, but it still means that the connective airline Santa Claus isn’t going to show up.

The pilots may be back, but they will be flying much larger airliners. The point that the media misses, and most consultant ASD schemes shamefully ignore, is that the entire category of airliners that once could economically access small community revenues is evaporating.

It’s no secret that 50-seat jets are becoming unable to deliver the financial goods. The average age of the roughly 300 still in USA service is over 20 years. That means maintenance expense heading northward. Pilot pay is now going up. The recent Air Wisconsin ALPA agreement delivers 38% higher compensation over the life of the contract. It won’t be the only one.

Then there’s fuel. When these machines entered service, the cost per gallon of jet-A, adjusted for inflation, was under a buck a gallon. Today it’s three to four times higher. The cost of launching a 50-seater is making the term “ROI” hard to find when the route analysis is done.

Okay, that’s not the end of the world, right? What about larger “small jets?” Be great if they were growing in number, but as for expansion to truly small local airports, the hard fact is that there essentially are none. The CRJ-700s and CRJ-900s are out of production – again, for economic reasons. The only jet airliner under 100 seats still in production is the Embraer E-175, which is at 76 seats.

Okay, lets do the fleet math. There are just over 300 50-seat ERJ/CRJ airliners in service. But the next-up in capacity – the E-175 – only has a trickle of firm orders – firm orders. Like, just under 50 units, spread across American, Delta and United. And this dearth of orders is again due to the march of economics. Even these larger small jets are being affected by the spike in operating costs.

So, there are 300 semi-economic 50-seaters that will be retired over the next 18 months, and other than these 50 or so E-175s, the next capacity step in roughly 120 seats.

Drop the hype. Chico and Topeka and Youngstown are going to have a hard time convincing a major carrier to apply a $70+ million A319 to a small local airport that is entirely unserved. Time to get real. A ULCC to ‘Vegas, maybe. But that is not air service access. Just impulse leisure service. The rest of the flying public are not going to be in the picture… nor at the local airport.

Conclusion: in the near-term future, the capacity floor for network branded service will be 76 seats. But these are already pretty much spoken for already. The next step up will be 120 or so seats. It is time that this be recognized and put into the planning mix. Again: too many communities are banking on recruiting air service for which there won’t be any airliners.

There are two messages here. The first is that a lot of small community air service at the local airport is simply not going work, regardless of the hype to the contrary. That means economic development is the new future.

The second is that the operators leasing lift to major carriers – the misnamed “regional airlines” – are facing a world where they are no longer viable. They are caged into operating airliners that have declining value to their major partners.

Any air service development plan that doesn’t consider this dynamic is like planning to be on the Titanic’s next Caribbean cruise.

Unfortunately, there’s a lot of that going on.

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The “Amateur-Act Airlines” Saga Continues
Commercial Service v Air Access

Red Way Airlines.

Super idea! Nonstop day-of-week service to Nashville, Minneapolis/St.Paul, Austin, Atlanta. No question, this would be a slam-dunk at Lincoln, its planners decided.

Unfortunately, nobody seemed to ask the consumer, who had the option of much better air access options at not-so-distant Omaha. It took this grand Red Way idea just weeks to burn though close to three million dollars in seed money – mostly from public sources.

At least from a financial perspective, it was appropriately named.

Red Way was one more example of how “local service” can only survive if it is has travel-time and cost-effective advantages over alternatives. Just having flights at the local airport won’t cut it for consumers.

So, the whole Red Way shooting match went 86 in short order. Naturally. But this original airline amateur hour continues to affect Lincoln.

There seems to be several hundred consumers who months after this fiasco’s collapse are still due refunds. Incredibly, the amateur act management of the airline is supposedly claiming that Lincoln owes them something like $700K in promised subsidies, and when that comes, so will the refunds. In short, the airline is blaming the airport for consumers getting stiffed.

Oops. As with the marketing analyses, Red Way was also short on basic airline revenue accounting requirements. There is a core requirement for handling “unearned revenue.” This is the gelt paid by consumers and is required to remain in the till – and is not the “property” of the airline – until the flight is operated. It has to do with passenger-derived revenues, and is not dependent on any other sources of income, as Red Way is trying to claim.

The Red Way system was apparently founded on what appears to have been a Pollyanna assumption that if the plane parked itself at the gate, the passengers would come a runnin’. The concept of competition from well-served and nearby Omaha was ignored in the planning.

It was not ignored by the consumer.

This is a poster child for what is massively wrong with a lot of air service development programs. The assumption is that the goal is “commercial flights” instead of defined and planned air travel access. Red Way gave no such access, just point to point flights to a few destinations. The options at OMA – even with a drive time – had much more value to Lincoln consumers.

The soap opera continues as both the airport and the state of Nebraska do audits of Red Way.
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Just A Reminder:

In our work, we rely on Cirium for aviation data.

The future is going to be very different, but that requires a strong understanding of the core dynamics and economics of all areas of the industry.

Capacity, tracking airline trends, projecting strategic shifts all demand market and aviation support. Cirium is our choice.

The End of The “Regional Airline” Sector
Is Now In Sight

Summary: The costs at small lift providers (a.k.a. misnamed “regional airlines”) are going up beyond levels that the fleets they are allowed to operate can economically support. That means these operators need to find revenue streams other than leasing jets to large carriers, or they simply will cease to exist.

A reported 38% increase in compensation.

That’s over the life of a new pilot contract negotiated by ALPA at Air Wisconsin. In general, it tracks with recent contract trends at major carriers Delta, American, and United.

While the Air Wis contract is positive and solid news for employees, it is also another factor that most people in the industry refuse to recognize: the value and role of small lift contract carriers, still mischaracterized as “regional airlines,” now have a very short half-life.

The raw economics of the model no longer work. Between changes in operating costs and the retirement of the airliners they fly, the facts can no longer be ignored. Operators whose business is restricted to small jets have a limited future. In its current form, maybe five years. Maybe less. In any event, the role of these operators will be far less than today.

Stuck In A 76-Seat Cage. The hard fact is that entities such as this one, and SkyWest and particularly those owned by major carriers, such as Piedmont and Envoy, are locked into a market limited mostly to flying airliners of 76 seats or less, give or take, and doing so strictly as part of major carriers. They have no route system of their own. They are leasing companies, and the airliners they now lease will continue to have less and less economic contribution to major airlines.

The nonsense implied by the Regional Airline Association notwithstanding, these operators have almost zero stand-alone business. Again, to be clear: they are essentially leasing airliners and crews to larger airlines. As pointed out in the past, this is fundamentally no different than what AirLease or Jackson Square, or BOC or ILFC does with larger airliners.

However, what is missed by the RAA and most of the media is that the entire economic role for small jet airliners is disappearing. Actually, those fleets physically are disappearing – both in numbers and in operating economics. The aircraft that these small lift providers are leasing are becoming of less value to major airlines.

Applying Labor Costs To Gain Maximum Return. Small Jets No Longer Qualify. Point: The labor costs of levitating an airliner – pilots, flight attendants, maintenance, fuel, ground handling, airport costs, etc. are going up. That means the aircraft involved need to have sufficient revenue-generating capacity to cover these increasing expenses. If there is a limited number of pilots, that means the highest and best use is in operating an airliner with more seats, not less.

It is no secret that 50-seaters are going out for specifically this reason. Next are 65-76 seaters, which in reality are getting older, and the only one still in production – the E175 – has only a trickle of deliveries.

It does not take a degree in astro-economics the tumble to this one.

That Small Airport “True Market Study” Is Now Fiction. Draw your own conclusions. Because of the naked economics of air transportation, network air service will be dependent on larger capacity airliners. That not only paints a picture for the companies who are in the “regional airline” business, but for a whole lot of airports across the nation.

If the local demand can’t support frequency with 100+ seat jets that is competitive with other consumer air access options, even with a drive, that means a number of small communities need to review other economic development options for the local airport. Scheduled passenger service is problematic.

We’ll deal with this aspect in the coming weeks. A lot of the consultant ASD jive being fed to small airports is skirting closer and closer to edge of professional ethics. Or beyond, by implying there is potential for new service operated with airplanes that will no longer exist.

In the meantime, small lift providers need to scramble to find future revenue streams. Mainline airline labor unions are not likely to relax any current scope clauses, and that locks these operators into flying planes that have declining contributive value to the majors now leasing them.

One example of moving on is Mesa, which is expanding into cargo 737 operations.

Lots of fallout from this one. Stand by.

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Client Pow Wow

The fourth quarter Boyd Group International Client Pow Wow will be on October 18 at 11:30 ET.

We’ll be covering some key trends that need to be watched. A number of them are positive, such as the continuing strong demand for EU and Caribbean capacity, give or take a war or two.

Airline strategy shifts will be reviewed, too, including some interesting fleet changes.

Another point will be how airports need to assure that airline ground service is delivered professionally. Today, the interface during the airport processing is largely automatic, with no need for one-on-one interaction. That is unless there is a major operational issue. The point is that an abused passenger is also the airport’s passenger.

Clients who have not yet registered can do so by hitting the contact button above and we’ll get the Zoom invite out.

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Israel/Hamas Example:
An Urgent Message For USA Airports

“To a trained terrorist, our airports have the security of a laundromat.”

Mike Boyd quoted  in the Wall Street Journal, July 1997

“There is the potential for multiple hijackings of flights at Boston/Logan.”

FAA Security Red Team Inspector Brian Sullivan in an urgent  report, May 2001.

These are just a couple of observations made by many people before 9/11 regarding the state of airport security, particularly from the FAA’s own security teams.

‘Course, the powers in charge, from an incompetent FAA Administrator, Jane Garvey, to a prestigious US senator, John Kerry, ignored the warnings from these FAA security professional. Persecuted some of them, actually, even after they were proved right.

Reaction Is Not Security. Where Homeland Security and TSA fails Security is a matter of anticipating threats, protecting citizens and the infrastructure they rely upon, and being able to quickly remediate the effects of an attack.

It is a logical fear the none of this is fully in place in our aviation system.

Let’s face it, things like shoes off in security lines, liquids restricted, coats into the scanner, etc., were all reactions to various security threats after events took place somewhere else. They were not due to professional, anticipative security planning and expertise.

Professional security forethought wasn’t involved. Ignore this at our peril: We are not engaged in active, aggressive security planning at our airports. We could be at a point like Israel found a few days ago.

Protect Our Way of Life. Instead of Just Looking For Oversize Bottles of Grecian Formula. Then there is the critical issue of remediation in the event of a security breach. Programs to reduce the infrastructural damage and public dangers after an event. But the chances that this is a part of the gong show of pointy-object detection at our airports is near zero. You can take it to the bank that there is no serious scenario planning whatsoever.

From events over the past 20 years, the directions seems to be to just run and evacuate. Not encouraging. The performance of Alexandro Mayorkas, the Secretary of Homeland Security, is alarming. His basic idea of “security systems” is allowing thousands of completely undocumented and unvetted people from all over the world to be transported by bad actors to our southern borders, where they are being freely allowed entry to the USA.

They are rewarded with money and cell phones, and then transported to points across the nation. We have political theater. One dangerous observation is an increase in “refugees” from China coming across the Mexico boarder – with reportedly many appearing to be fit and able young men, not poor refugees from Fujian or Zhengzhou. Trained, maybe. Fifth column, maybe?

Back at our airports, there are no plans in place beyond getting away from where a perceived threat takes place. The fiasco in a baggage claim area a few years ago at the FLL is one example (Google if you must.) No plan, no concept of crowd safety. People just ran. Some willy-nilly onto the active AOA according to reports. See, it didn’t take place in a supposedly “sterile” area. So, a security remediation or facility exit plan was, well, not needed.

Take a gander at congressional hearings involving Mayorkas. The man is an embarrassment and appears completely and arrogantly incompetent – which most of the participants in these political shows are very comfortable with. Gee, hundreds of people from Haiti show up at a small Mexican town along the Texas border, and nobody dares ask who got them there. Nope, it’s not an invasion, folks. Nothing to see here. Homeland Security has it under control.

Just like Jane Garvey and AVSEC policies did on 9/11.

Now with the lightning-fast strikes against civil targets in Israel, maybe it’s time to take a hard look at AVSEC in America. Naturally, the official response is that the TSA is in control, and all is well.

Sorta like the systems in place the day before 9/11.

Common Sense Security – Think Like A Terrorist. A couple of observations. The current approach at airports tends to be focused mostly on passenger security, with low focus on the security of the infrastructure.

What about the security of HVAC systems? Are all people working on the taxiway rehab intensely screened before entering the work site? Is any real consideration given to the trucks and vehicles taking equipment onto not only the AOA but non-sterile areas as well?

If a security threat or emergency takes place in concourse B, what is the plan to safely move people? What is the plan for concourse C? How about the air cargo facilities? Catering operations? What is the real security-awareness training of staff working at the airport?

Now, the usual toadies in the national media will rush to tell us that the administration has it all in hand. One appalling “national network correspondent” got screaming angry when I told him that we had a lot more to do in regard to AVSEC. Nope. See he’d interviewed the top people at the TSA, and was armed with all the “facts.”

Just like the assumptions about Jane Garvey’s AVSEC before 9/11.

Here’s the point: Aviation security is not just about finding C-4 in a Samsonite. It’s about protecting our way of life, including the systems on which we depend.

The extent and suddenness of what just happened in Israel should not be ignored. Assuming that Homeland Security has it under anticipative control is foolish.

Awareness is imperative. Thinking like a terrorist is the correct approach.

That’s not in place at the TSA.

Rural & Small Community Air Service
In Many Cases, The Aircraft No Longer Exist

It’s a common thread in the air service development field. Gaining more air service access – or any air service access – is the immediate goal for smaller communities. It’s postured as an almost do-or-die economic situation. No service at the local airport means no economic growth is the battle cry.

There are newly-formed task forces and cross-community coalitions to convince congress to jack up Essential Air Service funding to “lure” more airlines into town. SCASD grants are filed, albeit mostly at communities that are not really “small,” with high hopes of getting a flight to a pre-determined destination, almost always with a chart implying that the desired service will tend to lower airfares, which for all intents is something completely lost in the space of economic ignorance.

Just Flights. Not Access. The questions of specifically where the airline will come from, or what the service will actually access are often not in evidence. In these cases, the communities are misled into the belief that “air service” is like running water. You have flights or you don’t. Having them – going wherever – is the final objective.

To be sure, the civic energies are laudable, but the goals are too often crafted in void that is completely outside of the economics and consumer realities of air transportation. Most of these efforts are doomed to fail because they are crafted without a clear understanding of the future of air transportation as a consumer communication channel.

Now there is another factor that most small community ASD programs ignore: fleet trends.

One of the factors that sets Boyd Group International apart in assisting clients plan for the future is that we are involved in fleet trends and airline fleet strategies. Most ASD programs just assume that the right planes will be there, as long as they can make a great case for the airport at the next speed date conference.

Take A Gander. The Planes Are Gone. What they miss is that the fleets of airliners that could accomplish this – even if the traffic were there – no longer are in operation, and airline economics are going in the wrong direction to reverse this.

Sadly, that is becoming more and more akin to primitives creating cargo cults in the South Pacific after World War Two. They built stick airplanes hoping to attract back what they experienced in the heat of those years, with huge amounts of wartime commerce. But those airplanes no longer exist because the economic situation has changed.

It is almost precisely the same situation today in a lot of air service development programs. The sad fact is that the airplanes that these projects hope to attract no longer exist. Today the stick models are replaced with studies and analyses and heat maps and task forces and SCASD grants produced in largely futile efforts to lure back airplanes that aren’t there anymore.

The raw economics of crew costs, fuel costs, maintenance costs, airport costs, regulatory costs have already put turboprops and small jets into the smelter. The financial nut cannot be met with just 30 or 40 or 50 seats generating revenue.

Now, these skyrocketing operational costs are going to start to affect the economics of 76 seat jets.

Drop the blinders – this is raising the bar regarding the amount of revenue that needs to be generated on a per-flight basis at any airport. Simply stated, that means any air service with a frequency to keep folks using the local small community airport needs to have demand that increasingly the immediate region cannot sustain.

As was just covered in the latest Touch & Go newsletter, the emerging economics of passenger air service cannot be ignored any longer. At the moment, the capacity floor for major airline access is moving to 76 seats. In the next three years, as labor and fuel costs continue to rise, that floor will move toward 120 seats – an A319 will be gravitating to be the smallest piece of iron in the fleet. And there are no smaller airliners in the pipeline. Can you say “regionalization” folks?

Cutting to the bottom line, the hard fact is that small communities need to move aggressively to rethink the economic opportunities that exist for the local airport. Increasingly, it will mean looking beyond scheduled passenger service. Regionalization of air access is in progress as consumers find better alternatives at larger distant airports.

More consultant voodoo won’t change this any more than the efforts undertaken by the folks in rural New Guinea. At least the stick airplane models won’t choke the local land fill.

Air Service In 2027 is the focus of this week’s Touch & Go. It briefly illuminates where airline trends are going based on fundamental structural shifts in the airline industry.

If you’re not on the distribution list, hit the contact button and we’ll include you with the over 500 aviation thought leaders who get new perspectives at the end of every week.

Bogus Counterfeit Airliner Parts:
What Is The FAA Plan?

At least four airlines have discovered that some engines have parts with forged airworthiness certificates installed on their airliners.

The details are now growing, but the real issue is how the supply chain was invaded successfully by a fly-by-night front company with a vapor address in the UK.

We are not talking about flush handles for the economy-cabin lavatories. It involves things like turbine blades, according to reports. Serious stuff.

The investigation of this scandal will not stop here, unless the DOT and FAA determine that they are materially responsible (which they are) for this massive and safety-related scandal.

The questions are natural to include whether there are other areas where the sanctity of airworthiness certification has been compromised. It is indeed an international scandal. But it illuminates a ghastly hole in regulation.

The natural conclusion will likely be that the airline industry is at fault. But that’s nonsense because for these carriers the airworthiness regulations and processes are the entire responsibility of the Federal Aviation Administration.

If bogus parts get through, there is a giant hole in the security system. Airlines depend on the FAA to assure this. To blame the airline is the equivalent of blaming a consumer for eating bad food that was mis-approved by the FDA.

The conclusion is that the aviation industry cannot rely on the FAA – and neither can the public.

This is yet another reason that the FAA needs to be run and completely rebuilt by aviation management professionals, not politically chosen candidates vetted by the likes of Senator Chuck Schumer and Mayor Pete.

Let’s see how things develop over the next few weeks.

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Fact: Traditional Airline Economics Are Now Hollowed Out
Stand By For Tectonic Changes
In In Air Transportation

Remember the airline business of year 2023? It’s gone.

American. United. Delta. Spirit.

They have all issued new and very downward investor guidance. Suddenly, the glowing implications and forecasts we saw accompanying the 1Q and 2Q airline financial reports are ancient history.

Collapsing; The Traditional Economic Foundations of Air Transportation. This is not just an issue of a couple of passing spikes in cost of jet-A. It is a shift in what drives the cost and the value of moving people and goods using flying machines.

It means that the veracity of air travel and the consumer base that uses it are changing. For airports and suppliers this is a critical factor that requires a complete shift in future planning.

Ignore this at your peril. What is going on today is the start of shifts that have made obsolete much of the thinking in regard to the airline business.

When fuel unexpectedly jumps 20% it’s one thing. But in the last three weeks, other concrete fundamental changes in the operating environment have come to light that represent a nasty economic cocktail that’s fixin’ to hit the airline industry. Airports and communities need to go into full metal jacket mode to envision and plan for these shifts.

The cost of the communication channel called “air transportation” has materially and structurally increased. That means the customer base and the value of air travel have changed as well. This will become obvious over the next six months.

The Nine New Forecast factors for 4Q 2023 & 1Q 2024:

Jet-A costs will not materially decline. Oil has hit $90 a barrel, and there are zero indications of any trends that will knock it down. The policies of the current administration have clearly torpedoed any chance of a return to USA energy independence. That means changes in air transportation economics. That means a lot of sharpened red pencils in the route planning department. Air travel will be viable in fewer market applications.

 Yield softness. Exacerbating this, airlines will have limited fare flexibility. The not-to-worry concept of “fewer passengers at higher yields” we heard earlier this year is out the door.

Labor costs are changing how airlines can fly. New and anticipated airline labor agreements will start to spike operating costs immediately; That will also affect route and market decisions. Big time. And there are more on the way.

The fantasy of re-attracting “air service” at many small communities is all too clear. For small and rural airports, the trends are not encouraging. The new raw economics of aviation point to more rapid reductions in this sector. Another jive consultant “market study” won’t deter a lot of the cuts coming at small airports. Communities need to re-think airport development beyond scheduled airline service.

Fleet shifts will change the players and structure of air transportation. Over two decades ago, the existence of independent regional airlines went into the same historical dustbin as brick-and-mortar travel agents. Gone. That transportation sector evaporated and a lot of the players with it.

For the remainder, which now are not airlines, but lease lift to major carriers, a lot of the economic ground is turning to quicksand. The limited number of 76-seat jets – the new capacity floor for branded airline service – will be under cost pressure as the (misnamed) “regional” lift providers also see the economic effects of higher labor and fuel, hemmed in by existing contracts with major airline customers.

Majors will need much less contract lift. Expanding on the point above, in 2024-2025, the small lift provider sector – which is still mis-labeled as “regional airlines” – will be in an economic vice between lowered need from major airline customers on one hand, and the declining economics of a substantial number of feed markets. In effect, the small lift provider segment of airline leasing will substantially atrophy. Consolidation, chapter 11 filings, complete shutdowns, etc.

 The air traffic control system will continue to flummox air travel. Nothing new, but there is no improvement to a situation that has festered into 40% or higher staffing shortages at ATC centers. It’s likely to get worse. This will again reshape how airlines will be strategizing the future.

 News Flash: Electric aircraft are not the future, at least as things stand today. The Advanced Air Mobility programs will begin to hit a number of brick walls in mid- to late- 2024, as the environmental and social damage of current battery supply chains increasingly become impossible to gloss over. Changes in battery technology and in the access of materials that go into batteries will be critical. Short of this, the AAM sector will be a colossal black hole.

Plan on as much as a 10% decline in ULCC leisure-destination impulse revenue by the start of 2024. Call it a recession, or call it what the wags in Washington care to label it, the economy is not going in the right direction. Consumers are seeing budgets decimated by higher food and living costs. Not conducive to a fun trip to the Florida sun.

Airports: Proactive/Futurist Planning Is Now Critical.

Every airport will be affected by some degree or another. However, it’s important that airports immediately do a forensic analysis of the fundamentals of that traffic.

With that, aggressive and pro-active liaison with the carrier(s) involved is necessary to keep them fully aware that the airport will do all possible to assure their success. And to get clear indications on the future direction of air access.

Call Us for Futurist Air Access Planning. Strategic planning – no scatter-gun studies – will be necessary. In that regard, do consider a Runway To The Future™ program from Boyd Group International.

It’s our tailored approach that takes into account all areas that affect traffic demand – airline strategies, fleet changes, consumer demand factors, shifts in regional air access competition, and more. It delivers a clear view of the future.

More Information – click here. Let’s talk and get ahead of what’s coming down in the next 18 months.

This is no longer business as usual.