To Start This Week…

Forecasting The Rest of 2020

While still cloudy, it still appears that the economy may start to come out of the caves in June.

In such case, the airline industry will likely move to new approaches to accommodate the return of passenger traffic. It is certain, however, that there will need to be some very aggressive actions and procedures implemented to stop the contagion.  Emirates is experimenting with blood tests at the boarding gate. (Do Platinum flyers get pin-pricked first?)

Others are talking about leaving the middle seat open in economy, which is more of a PR stunt than anything else. If you’re lucky enough to be on an A220, that’s just 19 inches of separation. On a 737 it’s closer to 17 inches. In any case even if this could make money, the close proximity of customers is still there.

Solutions will be found. Nevertheless, we believe each airport should have a perspective of what they might expect in regard to traffic, and when they can expect it.

We are accomplishing CCP-COVID recovery traffic forecasts for airports across the country. The program reviews destinational profiles, incumbent airline strategies, and a range of other factors to deliver a 12 month starting point forecast.

Give us a call or click here and we can discuss your airport’s future.

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DOT Scores Another Misfire.

Political Correctness First.

Let’s Financially Weaken Our Airline System.

Just when we thought there were signs of a scintilla of common sense at the US DOT, our hopes are dashed.

They never have had much understanding of the 21^st century air transportation system. One look at the BTS/DOT reporting of air carrier data (which some lightweights still peddle off in raw, un-adjusted form on unsuspecting airports) is clear proof that they still think this is 1975. Then take in the rationale for EAS and SCASD programs, and it’s clear that these folks are still listening to music on 8-track players.

And it continues. In its veneer wisdom, and even less understanding of the situation facing the US airline industry, the DOT has rejected applications for service waivers at a number of airports where there simply isn’t any real traffic.

Now, if the CARES money were underwriting flight operations, the decision could have some validity.

But all those dollars are only to protect the income for airline employees, within a market where airlines cannot continue to use, or need, anywhere near the pre-CCP-COVID pandemic staffing. By itself, that is still a sound concept, pending a restoration of the workings of the economy.

But to unilaterally force airlines to keep flying empty airplanes at huge financial losses – which has minimal effect on the places served – is politically-motivated stupidity. And a total lack of leadership gumption.

Then, on cue, there are the tear-jerk stories on how the DOT policy will keep smaller airports connected. Connected with what? Connecting who? The whole reason for this is that there aren’t any passengers at those small communities which shallow-end reporters are so concerned about.

Cut List or Service Reduction – The Prudent Strategy Is To Let The DOT Know. We have advised our airport clients to take pen to paper and advise the DOT of their support for these airline actions.Whether or not the airport is on a complete cut list, or whether incumbents are massively reducing capacity and schedules, go on record as supporting such actions in light of the current crisis. The DOT policy is simply an attempt to regulate a market that even in the best of times they completely don’t understand.

Wasting Cash Needed For A Return To Service. Airports and airlines are in this together, and anybody with an I.Q. exceeding the temperature of a chilled martini knows full well that these DOT decisions only weaken airlines, drain off cash needed to get back into the sky, and thereby making a return to full service even more distant. Take a real hard guess which categories of airports will be materially harmed. The politicians that the DOT is pandering to certainly haven’t.

We would again suggest that airports and communities move now to advise the DOT that their determinations are, under the current situation, anti-consumer. That’s because every dollar an airline has to burn flying mandated empty flights is one less that can be used to quickly bring airplanes back into the sky.

Do so directly to the DOT, with a copy to the airline, and to the local congressional delegation, which might or might not have a clue. No fluff… be short and powerfully to the point. Just make it clear that you support the carrier’s pro tem choice to keep their financial powder dry, in regard to service reductions to get through this crisis.

Just the facts and your point of view, with a list of civic supporters. The Docket to refer to is OST 2020-0037.

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A Bit More On The CCP-COVID Pandemic

For folks interested in following events unfolding in regard to the handling and the effects of the CCP-COVID pandemic, we’ve posted an update at BoydGroupChina, regarding some bogus information on how it all got started.

Beating A Dead Dragon. There is no doubt regarding the responsibility and complicity of the Chinese government and the World Health Organization in this pandemic.

But some of the talk show narratives get off the straight and narrow of the facts. One of them is that the Chinese government supposedly quarantined all the folks in Wuhan, except international travelers, allowing the virus to intentionally spread across the globe and protect China.

The CCP should have been so lucky… they had no such control before millions of Wuhan residents skidaddled out of town for the New Year. So that conspiracy theory is not accurate. The CCP and the WHO are still with blood on their hands, anyway.

CCP-COVID Torpedoing The Airframe Industry. Here’s another tidbit. We are reviewing our global fleet demand forecasts for the next three years. There is no doubt that the overhang of over 4,000 relatively low time, grounded and orphaned A320/321s and 737-800/900s are going to have aircraft leasing companies in turmoil. One reason is fuel prices. These leasing companies have lots of new A320/321s on order. 737MAXs, too. They burn 15% less jet-A.

The proposition of a new airliner isn’t what it was three months ago. Fuel prices since January have gone from $1.87 a gallon to somewhere near 60 cents. The prognostications would indicate a fuel capacity glut for the next 18 months. So for an airline, why take on a few million in increased lease payments for a new airliner compared to a used one, just to save, maybe $200,000 in annual fuel expense. The industry isn’t in a growth mode.

China International Air Traffic – Back At Least 15 Years. Another one of the findings is that, while the rest of the world can and will return to some semblance of the pre-CCP pandemic, China’s air transportation system will shrivel to the point of being stuck with approximately 450 excess widebody airliners. One reason is that the pre-pandemic traffic levels won’t return because of changes in China. As for U.S.-China air traffic O&D, figure 2021 being approximately 400,000. That’s about 5% of what it was in 2019. That will have some localized economic ripples.

We’ll be coming out with a report shortly.

The New Source of CCP-COVID Insight. For the latest intelligence updates on the CCP-COVID situation, click here to go to BoydGroupChina.

The difference between this and other COVID-related sites is that Boyd Group International focuses on futurist projections and research. Most other sites and unsolicited “data” emails just repeat what’s happened. We cover issues that directly and also indirectly affect aviation. We are doing constant outreach and research from sources inside and outside China, including periodicals and reports in both English and Mandarin.

We will be updating the site throughout the month, and we’re planning some unique features in the coming weeks.

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For an update on the aviation future due to CCP-COVID, Click Here.

Toss Out Traditional Planning – It’s A New World

CCP-COVID: Re-Configuring The U.S. Airline Industry

Boyd Group International’s Airports:USA® has accomplished an independent projection of the effects of the CCP-COVID pandemic on the U.S. air transportation industry.

Not pretty… But better than the rest of the globe, where entire fleets have been orphaned when their former operator goes out of business.

But it is still huge losses. Basic U.S. forecasts for the next 12 months indicate a fare revenue decline of at least $95 billion. Billion with a B. That’s just fares.

Total O&D loss for U.S. airports: 440 million. That’s a lot of lost airport revenue.

Foundational Requirement: Emerging From The Cave. Soon. The basic criteria of this projection are founded on a recovery starting in June, and gradually increasing to a stabilized situation by the end of the year 2020.

There are a range of assumptions blended into this forecast, and there are no guarantees. One key factor is that unless the economy starts to get reopened within the next two months, the airline industry is going to simply have to completely rethink entire operations.  Entirely.

Unfortunately, “stabilized” is not the same as going back to 2019 levels.

New Fleets: Accelerated Opportunities. In particular, international traffic will have a smaller role, and it will affect the entire system. Historically, 32% of all U.S. enplanements have been directly or indirectly driven by international demand. “Direct” is to and from foreign destinations. “Indirect” are the domestic journeys that a portion of these passengers accomplish within the USA.

The picture is not all bleak. To be sure, a material part of this traffic will not return – the E.U. is badly mauled by the CCP pandemic, and leisure traffic will be badly deflated for the near term.

Trans-Atlantic traffic will return, but will be more diffused – good news for mid-size airports east of the Mississippi. As we have pointed out before, there will be fewer wide-body airliners – which mostly have to rely on hub-feed, and more new generation multi-mission narrow body airliners such as the A321XLR and A220. These will be a major part of restructured major airline fleets, on both sides of the Pond.

They will widen the air access for non-hubsite commercial centers – including international. E.U. airlines will be in need of additional feed for their connecting hubs, and these airliners will be the modality to access airports such as Albany, Norfolk, Cincinnati/Northern Kentucky, Columbus and several more.

China: Air Traffic Suicide. The Pacific will be where the real international changes will be seen. Shifting business and political trends will tend to enhance some demand to secondary points such as Vietnam, Malaysia, the Philippines, and Indonesia. Business investment is going to shift – big time – from China.

But these changes won’t anywhere make up for the plunge in U.S.-China traffic, which is headed directly into the air transportation ceramic fixture, and will not recover to anywhere near where it was in 2019.

In fact, changes in the Chinese economy, changes in business and industrial relationships, changes in CCP policies toward foreigners (not inconsequential), and diplomatic shenanigans around the globe, will cause China-international traffic to crater.

As for China-U.S. air traffic demand, it will drop like a baby grand out of the 8^th floor window. Our BoydGroupChina projections point to 2021 traffic in the 400,000 O&D range – down from 8.2 million in 2019.

And it’s not temporary. China as a leisure destination – the majority share of the  China-U.S. volume – has now been self-destructed by the CCP. There’s nothing like visiting a country where foreigners are now officially blamed for the pandemic (which is like John Gotti complaining that the police caused organized crime) and often accosted on the streets and prohibited from entering restaurants, or where hotels don’t want the business. Things there have changed in the last year. U.S. carriers should be very careful in planning their future China strategies.

We’ll be completing the China-U.S. revised forecast this week and will post the highlights at www.BoydGroupChina.com

In the meantime, Boyd Group International is accomplishing CCP-COVID forecasts for individual client airports, focused on the specific and unique characteristics of each… hard and direct data which can deliver perspectives on the future ahead.

Give us a call or hit the contact tab, and we’ll deliver a view of the future – clear and unvarnished.

FROM ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A GREAT, PROSPEROUS AND HEALTHY WEEK AHEAD.

Areas of Interest This Week…

The Federal Air Package – A Hobson’s Choice

Delta Air Lines has advised that it is burning cash at $60 million a day, flying empty airplanes, even with a reduced schedule and interim cancellations.

Grab the envelope, flip it over, and start doing the math. While it is still possible that the situation could materially change by June, Delta notes that with the current cash burn it will be out of money by then. If the federal grants reduce that burn rate by half (which is way optimistic) the picture is still pretty dire.

If the DOT holds fast to the dictum that carriers receiving aid must keep flying, and continue to serve most points served on March 1, and do so for the next six months, the recovery from June on had better be one steep curve. Plus, it makes very veneer assumptions about how the industry is structured.

Example: it has no relationship whatsoever with the realities of the day-of-week model of ULCCs such as Frontier and Allegiant.

The math here is not re-assuring. Neither is the basic rationale of this airline aid package. The industry will get through this, but the current federal package needs work.
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The Post CCP-COVID Air Service Environment

– It’s Not All Doom & Gloom

When the recovery manifests, the airline industry itself will be very different in scope and fleets.

Our fleet forecasts indicate that the biggest changes will be “at the margins.” The demand and applications for widebody airliners will be reduced materially. On the other end, even with super low jet fuel prices, the range of use of 50-seat jets will also wither. So, as A380s and CRJ-200s are being taken to the knacker, the airline industry will emerge with a whole different set of mission capabilities.

Where the fleet changes will be most obvious is in the middle… 130 – 180 (dual class) airliners. Today, the wide range of missions that can be accommodated by new-technology airliners will transform airline fleets. As examples, the A220 platform has variants that can effectively operate short-haul through trans-Atlantic markets. The A321XLR is a similar aircraft.

Point: this CCP-COVID pandemic will be an event that will accelerate the airline re-fleeting that actually may result in more flexible and wider air service access. To be sure, more regionalization, but when the dust settles, the new fleets may well shift upward a lot of air service access.

Community air access planning needs top take this new dynamic into consideration. Give us a call. Our latest research on the potential outcomes is being updated daily, and we’d be happy to talk about our forecast perspectives.

One thing is certain, the airline industry will be smaller, with fewer and different aircraft. At the moment, airlines are completely focused on survival, not expansion. The tired out “true market studies” are studying yesterday’s air transportation system.

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Unintended Consequences – The Cave-Dwelling Solution

Ravn Air of Alaska has found it necessary to stop flying most of its routes, and ground all but three aircraft.

It’s pretty hard to count any revenue when citizens are urged or ordered to stay home.

The problem unique to Alaska is that most points have no other access except by air. Getting groceries to a rural community isn’t in the cards if air carriers cannot operate.

Alaska is the most obvious example of outcomes of the hide-in-the-cave reaction that virtually all nations are resorting to. Whether it will stop the China virus is uncertain. The economic cost is certain.

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The China Chickens – Airplanes – Come Home To Roost

In the China airline system, the well-known substance just hit the electrical appliance.

We pointed out last week in a Touch & Go update, that, funny, with all airlines around the globe either shutting down or parking huge chunks of their fleets, China is absent on the list.

As a result, parts of the aviation media have been gushing about how China’s airlines should be a model for the U.S. in getting through the CCP-created pandemic. Things, they report, have been going just swimmingly as these heroic and mostly government owned airlines have toughed it though the crisis.

After weeks of folks in Beijing crowing that they had conquered the virus in China (anybody who believes that needs serious adult supervision), big parts of Chinese airline fleets are now officially being “stored” – a big difference from just grounding them and not flying.

Last week the first shutdown of a Chinese airline due to the CCP-COVID pandemic was announced. China Eastern Wuhan was grounded. No big deal in itself – they had a grand total fleet of 2 737s.

But they are a part of China Eastern, which suddenly revealed as of April 2, has put over 25% of its fleet in storage. The country’s largest airline, China Southern, has put in storage 30% of its fleet.

This didn’t happen in a day. While the media “analysts” were glowing about China, these airlines were busily pickling everything from brand new A350s to older E-190s. So far, the estimate is over 600 planes. And that’s just what we know about. China is every bit as transparent as a brick wall.

This is right after CAAC was claiming that the system had climbed to almost half of the pre-pandemic levels and all was returning to normal.

Truth: The storage numbers so far may just represent the level to which China’s air transportation system will naturally shrink into. China’s air transportation system will not rebound to pre- CCP-COVID levels. Its entire revenue foundation has changed. We are covering this at BoydGroupChina.com.

And, again… just a note from BoydgroupChina.com…the virus that the CCP created is not over in China. They now claim a resurgence is all due to arriving foreigners. Sure. At least one county in Henan province, nowhere near an international gateway, has been again quarantined. Believe them not.

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Waiting For The Inevitable…

And Planning For A Whole Different Future

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

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

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

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

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

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

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

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

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

Long Term Changes To Air Transportation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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And Finally…

No, China Is Not An Example For US Airlines

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

That’s complete dishonest reporting.

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

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

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

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

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The Cure Is Killing The Patient

Let’s stop with the fantasy…

The US airline industry is dying. Fast.

It is now clear that Congress is more concerned with playing social reconstruction games than preserving our industries in this China pandemic. (Got a problem with that title for the epidemic? See below.)

Anybody who thinks that the airline industry can now just return to where it was in January is dreaming. It has been badly and structurally wounded. And changed.

Airlines are cash-bleeding. Consumers as of now have little likelihood of coming back to airports  anytime soon in this panicked environment. The costs of maintaining an airline – even if most of its fleet is parked – can only be covered so long.  They will evaporate as operating entities if some temporary aid isn’t implemented immediately.

Yet some of the powerful clowns in congress want to hijack and delay any federal aid by tacking on all sorts of pet second-agenda political wish lists. Stuff that has no bearing on the immediate crisis

And, in regard to the airline industry, these walking bits of protoplasm in congress are aided by the consumerist gadflies that now see this as a way of getting even with airlines, demanding all sorts of tag-ons, even to the point of regulating seat sizes, forcing them to serve small communities that have no consumer demand, and attacking ancillary fees.

Every day that these politicians play games reduces the future size and viability of the very existence of the US air transportation industry. Those thousands of grounded airliners won’t just pop back into the sky.

In addition, federal aid or not, it’s very clear that the path being taken by virtually every country in the world to deal with this crisis – which is to hunker down in caves and don’t move – is essentially like just waiting for the grim reaper to arrive. It certainly will do so for the economic foundation of the globe.

Stepping out on a limb… this is a sanitation crisis. Think about it. It is clear how it spreads, and it is clear who is at risk, and who is not so much at risk. It is also clear that this is not the bubonic plague, dangerous as it may be.

And if 140+ nations across the world continue to pursue the path hiding inside until it just goes away, or until a vaccine is found, they are probably right. But when it’s all over, as far as economic foundation, there won’t be anything left to rebuild on.

Including an air transportation system.

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It Is The Chinese Pandemic

Sorry if that offends politically trendy folks.

Because it affects aviation, it is appropriate to comment on the pandemic and how we deal with it. The air transportation industry in America has been fundamentally damaged because of the spread of a virus that started and was for all intents and purposes allowed to incubate and expand across the globe due to criminal malfeasance by the Chinese government.

It is important that the Chinese government – collectively referred to as China – be held accountable. This has nothing to do with ethnicity – the Chinese people are the victims, too.

Let’s stop the politically motivated nonsense. This entire situation is directly the result of actions and non-actions taken by the Chinese government. This is not conjecture or opinion, it is demonstrable truth.

But now we have politicians demanding that we not hold the Chinese Government responsible… to the point of ridiculously telling us that to label this epidemic for what it is – the Chinese pandemic, or more accurately, the CCP (Chinese Communist Party) Pandemic –  is to be racist.

The only racists in this argument are those issuing such ignorant and politically motivated accusations in the first place. It’s as transparently stupid and pandering as claiming FDR was racist for declaring that Japan had attacked Pearl Harbor.

The CCP – the Chinese Government – has lied its way through this since November. Destroyed evidence. Cover-ups. Persecution of citizens. Encouraging citizens to mingle in Wuhan, to “prove” it was safe, knowing that the coronavirus was communicable. Allowing millions of infected people to freely travel in January across China and the world.

Nothing that comes out of that source should be trusted, and it’s unfortunate that some politicians in the U.S. are making a political football out of trying to smokescreen that fact.

Worse, outlets like the New York Times, are lauding the “success” of China in controlling the epidemic – relying solely on representations made by the CCP, which has lied since this started. Says clearly what the value of the New York Times is as a source of reliable reporting. According to that paper, China is a star, regardless of their clear criminal acts in spreading this disease.

If you want some facts, we’ve covered this on a March 16, 2020 Intelligence Update at BoydGroupChina. 

Our economy and that of the world (not to mention China itself) is in tatters because of the Chinese government. It is a Chinese pandemic.

It sure would be nice if a couple of pandering state governors would be more concerned with holding them accountable than playing dishonest politics. Click on the link for some facts, not political doggerel.

By the way, we are building and adding to BoydGroupChina.com to be a source of insight and perspectives on China aviation. Intelligence updates are added from time to time, and which cover areas missed by the rest of the aviation media.

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Briefly –

What To Expect This Week & Beyond

A Bit of Context, First

To Start… Numbers found in media and CDC sources:

The US population is 330,400,000.

As of today, it is estimated that @7,500 people in the USA are known to be infected. Figure the actual number may be a multiple of that – maybe ten times – as it is reported that most cases are not severe.

Deaths in the USA reported as of 3/16/20 are at 69

Putting this in context, 40 of these are in just one state – Washington  – and a major percentage of those occurred in one elderly-person nursing home.

Doing the math – not to minimize the danger of the virus – gives a very different perspective from the news videos of panicked people fighting over a box of Charmin at the supermarket.

Global – Not Local – Air Service Reductions

It’s not just the USA, the China virus is causing airlines across the globe to literally shut down partially or entirely.

The reason is simple – the demand is not there. Some of the reporting in the media is quite shoddy, implying that it’s all just a matter of government decision-making. It’s due to people staying home. Here and across the world.

Almost 33% of all US enplanements are driven directly and indirectly by international traffic flows, which are now essentially gone. The economic damage across the globe would indicate a very slow recovery of this sector.

A Skeleton System Is Possible

Remember, the five major network-based carriers – AA, DL, UA, WN and AS – are based on revenue systems, not individual “routes.” This means that reduced capacity at one airport or at a connecting hubsite will affect more than just the nonstop market itself.

What needs to be kept in mind is that air service at the vast majority of small to mid-size communities depends on the aggregation of traffic at these carriers’ connecting hubs. (Yes, and in many cases, that includes WN.) Reduced flights and capacity at the carriers’ connecting hubs will affect these airports first… constricting traffic flows from smaller feed markets.

Regionalization is likely – within regions, watch for consolidation of an airline’s service into fewer airports.

Hotel & Resort Closures – Flights Notwithstanding, No Place To Stay

We are seeing entire resorts in Las Vegas lock the doors, in some cases until May. That may spread across the country to entire sections of the hospitality industry. This means that discretionary travel will drop for the next six weeks. Airports with significant percentages of ULCC traffic need to take a hard look at reduced revenue streams.

Restructured Airline Fleets

Airline margins are thin. If this crisis situation continues for an extended period, it is not out of the question that a complete re-structuring of the air transportation system could be in the cards.

As one example, a lot of 50-seat jets have been living on the wave of a strong economy and very strong demand. Even with lower costs of jet-A, the rebound may leave a lot of these airplanes in the desert.

Point: a number of hub-feed markets might not be back.

BGI Clients Standby For Updates…

Boyd Group International will be monitoring events and will be in contact with our clients throughout the week as events unfold

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BGI Stands Ready…-

Forecasts & Contingency Planning –
Effects of COVID-19 On Your Air Service

U.S. carriers are now making capacity cuts and fleet shifts in order to deal with the COVID-19 epidemic. International traffic was first.

Now, domestic restrictions are coming – big time.

The rapid decline in domestic bookings has route planners dissecting the financial status of every route and market.

The question is, do you and your board and community have a clear picture of what to expect? There’s a lot of blind speculation.

You need hard facts and unvarnished forecast projections, not guesses or wandering media suppostion.

Boyd Group International can help with a professional COVID-19 forecast analysis.

As the leading forecast firm in aviation, which entails ongoing and in-depth research on airline strategies and fleet trends, we have the data, expertise and industry knowledge ready now to provide you with a comprehensive COVID-19 Traffic & Trend Forecast, based on known and potential scenarios that are specific to your incumbents and the projected timelines of this epidemic.

We would strongly recommend that the effects on your air service access be fully researched and understood. Take control of the information stream with hard, factual data and projections.

• Every airport has different vulnerabilities and strengths. The traffic shifts and capacity changes caused by the spread of this disease will be driven by a range of factors that are specific to the unique traffic base at each airport.

• For example, your local passenger mix is a critical factor. Leisure traffic – and particularly highly-discretionary leisure traffic – will be affected differently than business travel. In many cases, corporations large and small are slashing air travel, while there are at least anecdotal indicators that some leisure sectors are not as heavily affected.

• The effects on propensity to fly will be different from airport to airport. One thing we are assured of is that there will be airline capacity changes. Fleets will be shifted. Some markets capacity-reduced, others even cut completely. Airlines are losing money, and they will take drastic actions should this epidemic continue to spread. Also, even after it is over, some of the changes made could be more than temporary.

• Each Airline has different fleet and market strategies. American is parking most of its wide-body airliners for the next six weeks. Delta is pulling down a reported 300 airliners. The very different passenger stratas on ULCCs will also result in different reactions to the crisis. The point is to determine where they find highest and best use of the remaining fleet.

Get A Professional Forecast – Now. The Boyd Group International team will literally dissect your current air service situation, in light of the expected and possible capacity and route determinations by each of your incumbents.

The BGI Forecast Deliverables:

• Step One: Destinational Review & Consumer Segments. The current O&D patterns and revenue-generation at your airport will largely determine what changes incumbents may pursue. We will analyze your top markets, including load factors, revenue factors, hub-feed delivery, capacity, current fleet, and other dynamics.

• Step Two: Vulnerabilities of Current Air Service In The New Environment. The forecast will review the key aspects of your current service in regard to strength and weaknesses within the marketing and hub-feed strategies of each incumbent carrier, in response to the effects of the epidemic. Remember, airlines are revising their entire route systems – what’s done at other airports can and will affect yours.

• Step Three: Forecast Scenarios – High, Baseline and Low. Boyd Group International will prepare a 12-month forecast, based on several scenarios, including capacity changes, fleet substitutions, length and severity of the epidemic. Included are key vulnerability areas specific to your airport.

• Step Four: Recommendations & Planning. The Forecast will include professional recommendations regarding outreach and liaison with incumbents, as well as outreach to the community and stakeholders. The data and the message need to be clear and understandable to all stakeholders

Time Is of The Essence. Boyd Group International understands the rapidly-evolving nature of this crisis. Because forecasting is our business, and because we’ve built extensive traffic and forecast databases, we can deliver your data quickly.

We’ll Be There As Events Evolve. In addition, this is completely new territory, so  count us on-board for the following 60 days to keep you updated with recommendations and insight as events may dictate.

Give us a call, or click here to email now to get started. There are some tough times ahead, and the more you understand, the easier it will be to bring your community on board.

THE BOYD GROUP INTERNATIONAL TEAM

February 17 Update

737 MAX – A Kiwi Until The Fall?

According to reports, the scrutiny of the 737 MAX may have uncovered some additional issues that could delay the return of these aircraft to the global skies.

For American and United, not great news, but they do have other single-aisle airliners coming on line, both new and used, operated both in-house and outsourced. The lightweight media stories about cancellations are misleading… these are seats that aren’t being put into the schedule in the first place.

Southwest, as of now, has no real options. Even prior to Max issue, they’d already scoured the earth for used -700s, and maybe looking at used -800s, although there are not many out there on the market.

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Bombardier Exits Airliner Business – After Shaking It Up Big Time

Bombardier of Canada – once arguably the #3 global airliner manufacturer – has now divested itself of most of its involvement in the aircraft business.

At least it goes out with an increasingly loud bang, and one enormous legacy.

Bombardier’s CSeries – now the Airbus A220 – already has 764 orders on the books, with over 300 of these from carriers in North America.

Teething problems attendant to any new airliner aside, the A220 is the game changer that pushed industry giants Airbus into the A320Neo program and Boeing into the 737MAX.

Not too shabby for a relatively small company in Canada.

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Coronavirus & U.S. Airport Readiness…

We can start with this: for the time being, most U.S. airports and airlines have no real immediate threat from the coronavirus epidemic.

Overall, the U.S. has pursued an aggressive and pro-active program to identify potential entry points for the disease. And it is a nasty, highly-contagious and highly deadly disease.

One sometimes-repeated bit of nonsense is that it’s no worse than the common flu… and buttressed by the non sequitur and stupid statistic that more people died from it than coronavirus. That bit of malarkey has gone silent now that the “official” death tally in China is over 1,600. (Take that and treble it, and you’ll still probably be short of the real number.)

People don’t fall down dead or almost dead on the streets of Omaha due to the common flu. But that’s happening in cities across China.

China Air Transportation System: It’s Not Going To Fully Recover. For airports across China, this is a nightmare… Based on reports from inside China, domestic air traffic right now is down as much a 70%, depending on the source.

Don’t buy into the babble from the usual “analyst” suspects that this will be just like the effects of the 2003 SARS epidemic – the traffic will bounce back soon after the crisis is over.

No way… this is a whole different situation than 17 years ago. For one thing, airports in China were handling less than 300,000 passengers then. In 2019, that figure was 1.4 billion. For another thing, this epidemic has likely exacerbated the challenges that were already facing the Chinese economy.

Lots of Open Gates. Lots of Room On The Great Wall. As of this date and with the information at hand, our Airports:China™ forecast is for China’s airports to handle over 400 million fewer passengers in 2020 – a 30% decline, after a decade of 10% annual growth.

And that’s a best-case scenario.

We cover this in an update at www.BoydGroupChina.com. The situation is dire, and the formerly exciting expectations for China-U.S. air traffic of just a year ago are gone.

You Betcha – Flying Is “Safe” In China– Just Don’t Get Close To Anybody. The bungling – or, worse the cover-ups – in handling this epidemic by the Chinese Communist Party – has been shameful.

Even as they are quarantining millions, they publicly are denouncing countries that are cutting off air service. This whole mess started because they let millions of people travel from Wuhan – after they knew full well that there was a virus epidemic. Political correctness and avoiding embarrassment, don’t ya know.

This isn’t doing Chinese airlines – which have increasingly earned global reputations for first-rate air service – any favors. But is putting the kibosh on a lot of future air travel to China. Given the shenanigans of the PRC government, there’s going to be a “enter at your own risk” sign on the national door for a long time to come.

One ridiculous missive recently put out in China states that it’s safe to take an airplane trip – in fact, it’s the safest way to travel, they tell us – as long as you don’t sit too close to others, as transmission of the virus is unlikely more than a couple seats away. Oh, and a window seat will give you the least exposure, too.

They must think we all just fell off a turnip truck to believe this malarkey.

North American Carriers: Limited Effect on Bottom Lines. What will bounce back, however, are the three U.S. airline systems that have found it necessary to cancel all service to China. While this is a short-term fleet planning disruption, American, Delta and United have other opportunities with that capacity.

Perspective: In 2019, there were approximately 7.8 million air trips between the U.S. and China, via all routings – nonstop and over other Asian connect hubs. That’s within approximately 560 million total U.S. air trips. (Trips, not enplanements, by the way.)

To get some information on the coronavirus as it is affecting air service, take a look at our latest updates on BoydGroupChina,com. Click here.

There are a couple of insights that a lot of the media have entirely missed.

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ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A GREAT WEEK!

Before We Start This Week:

The advance bookings for the 25th annual Boyd Group International Aviation Forecast Summit are running at a record pace.

This year, our line-up of distinguished aviation executives – each delivering their own vision of the future – will be the most exciting yet. For more information and to register, just click here.

We look forward to seeing you in Cincinnati USA on August 23-25!

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Today, Issues & Trends To Watch

Thia week, we’re going to take a snapshot look at a number of issues around the aviation industry.

Last A380 Shipset Coming Together – But Airbus Is On A Roll

The final wing assembly for the A380 program is on its way from Northern Ireland to the final assembly operation in France.

Attendees At The IAFS™ Got A Contrarian Forecast. We’d point out that when this technological marvel (which it certainly is) was first announced, and when the first one rolled out of the factory in 2005, Boyd Group International was among the very few research firms that predicted that there would be – at max – global demand for 350 to 400 of these machines, in stark contrast to the 1,000+ predicted by various sources.

The aviation media was generally giddy, with articles predicting how all major airlines all around the globe would be ordering the A380. Our forecasts presented at the annual IAFS back then ran way counter to the “consensus.”

As it turns out, even we were a bit optimistic. At the end of the production, which is scheduled to be around late 2021, there will be 269 A380s produced. Just 14 airlines entered the orderbook, and all but 4 were in Asia or the Middle East.

The Real Story: Airbus Not Missing A Beat. Amid this difficult situation, Airbus has simply moved on, developing the A321 into a world-beating, multi-mission airliner, and has also acquired from Bombardier what is arguably the world’s most performance-advanced airliner platform, the A220. Then take a look at the performance of the A-350Neo.

The A380 may have failed to meet projections… but the rest of the Airbus inventory is more than making up for it.
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New Report: U.S. Airports To Need Scuba Gear By 2100

According to an organization called the World Resources Institute, by 2100, several airports in New York, Florida and California should plan to be waterfront properties, unless, they warned, we act now to curb climate change.

Yessir, there’s nothing like a safe, completely unverifiable forecast. One that predicts something that’s 80 years away, and when it turns out this is another event in a decades-long contest among advocacy groups to out-Cassandra each other, these august and rarely questioned experts will be long gone, without any need to discuss their findings.

Do an internet search. Going back a century you can find these types of predictions galore.

Point to consider. We have a severe intellectual challenge. Anyone, including folks with impeccable professional climatology expertise, who dare to so much as question any aspect of the current narrative on the causes and issues surrounding “climate change” and they are uniformly ignored, or attacked.

But let some oh-so-concerned 16-year-old Swedish kid, Gretta What’s-Her-Name, likely with not much more climate research or expertise beyond knowing how to boil an egg, come out and demand action, and she’s a global hero, with world leaders swooning over her. Who is kidding who?

Message to airports… reducing emissions and getting green is of course a necessary objective. But we’d suggest that Palm Springs not just yet request discretionary funding for a new marina to serve the airport.

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Millions In Technology Brought To Its Knees By A Low-Fat Latte

European aviation regulators have issued instructions to have “liquid free” zones in the cockpits of A-350-900/1000 airliners.

There have been instances where a spill on the center console between the pilots has caused uncommanded engine shutdowns.

So, that means in-seat cockpit coffee breaks may be verboten in the future.

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Breaking!
New Trans-Atlantic – U.S. Service In The Pipeline. Soon.

The mess and total lack of credibility created by the Chinese government in handling the coronavirus epidemic will – write this down – materially affect levels of Chinese air traffic, both domestic and international for the long term.

That, however, should have large, secondary non-hubsite U.S. airports preparing to accommodate more trans-Atlantic service.

Let’s explain:

We are in the process of revising our Airports:China™ forecast, covering the top 200 airports. The initial findings are that total domestic traffic in 2021 will be down at least 30%.

But plan on at least 75% of the pre-epidemic international capacity getting cut. That represents a lot of airplanes – including U.S. and E.U. carriers – suddenly out of the schedule. Over half of the China-international traffic is based on leisure passengers, and that’s a segment that’s heading for the drainpipe, taking with it a lion’s share of the revenue previously supporting long-haul nonstops.

On the Chinese side, that sector will be blocked by concerned countries banning folks from the Middle Kingdom from arriving. Not anybody’s fault but the hubris of the PRC government, which actively covered up the epidemic, and in the process allowed millions infected citizens to travel from Wuhan during the Lunar New Year holiday, spreading the disease across all of China

Regarding inbound traffic to to China, after all that’s come out about the PRC’s handing of the epidemic, not to mention the increased scrutiny of foreigners, the exciting future we saw with our ChinaNiHao Project just four years ago for China-U.S. traffic is gone.

So, on this side of the Atlantic, we have Delta, American and United, stuck with some big airplanes sitting on the ramp, all dressed up with nowhere to go in China. Even more than that, it has left foreign carriers such as Lufthansa and British Airways with excess aircraft, too.

They need to apply this lift somewhere, so look for some unexpected fleet shifts this summer, leading to an accelerated expansion of trans-Atlantic capacity from both major and secondary U.S. airports.

And it won’t just be U.S. airlines, either.

ALL OF US AT BOYD GROUP INTERNATIONAL WISH YOU A PROSPEROUS WEEK AHEAD!

Before We Start This Week…

Southwest Airlines At the IAFS

Andrew Watterson, EVP & Chief Revenue Officer To Participate At the #1 Aviation Event of The Year

The International Aviation Forecast Summit is the event that delivers over-the-horizon perspectives of the future of aviation… perspectives that give our attendees the competitive edge.

This is another reason that the international Aviation Forecast Summit should be a part of your calendar for 2020. This is the event where you get real direction and perspectives from the airline and aviation leaders who will shape the future.

Southwest can be expected to deliver some exciting new dimensions in route and market direction in the second half of 2020. With the expected return of the 737 MAX, it’s an airline that’s ready to bring their brand of service to more places, more often. This is one part of the IAFS not to miss.

Planning Air Service Outreach? Stop shooting in the dark. Make sure you join us in Cincinnati USA on August 23-25. The IAFS is where you get the straight understanding of the strategies of airlines and their market planning… right from the executives making the decisions. This allows our airport attendees to sharpen their outreach efforts, honing them to the real tactical directions of target airlines.

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The Coronavirus

Facing The Air Travel Damage

As noted earlier, initial revisions to Boyd Group International’s Airports:China™ and Airports:USA® forecasts indicated as much as a 75% reduction in China-U.S. air traffic through June.

It’s no longer “as much” – it’s really “at least.”

Nonstops To/From China? – By 4Q, Maybe. The three U.S. airlines operating to points in China have chopped flights through March or April, depending on carrier, and with the mess evolving in the Chinese government response to the epidemic, it is a near lead-pipe cinch these cancellations will be extended.

We are seeing melt-down – justifiably so – in consumer interest in visiting China. The inept and politically-motivated cover-up of this epidemic until just about two weeks ago, and through the start of the super-dense Lunar New Year travel cycle, is an outrage.

When the facts are made clear, the PRC has single-handedly torpedoed what until recently was fixin’ to develop into the most exciting air travel growth situation in history.

The legitimate fear is that this one enormous event is going to make leisure travel to China in the future very unattractive, and travel from China not welcome due to medical uncertainties.

This could be for months, and the reputation of China as a destination damaged for years. Maybe. It will depend on the folks in Beijing.

As of today, our forecasts are predicting at least a 75% reduction in China-U.S. travel for the full year 2020, and at least a 15% decline in domestic air travel in China.

The Background Story Isn’t Going Away. It’s not just the coronavirus. It’s the handling and policies and propaganda that will leave a mark on China as a leisure destination… and as a business destination, too.

Just touching on this, the coronavirus and its propensity to be rapidly spread. was discovered in late December. Doctors and journalists, however, were warned by the PRC government to not “engage in false rumors” in claiming it even existed.

Then, to prove to the people that there was nothing to worry about, the government barely two weeks ago staged a massive community Lunar New Year Celebration of 40,000 families in Wuhan. Even though there were dozens of cases of the virus already reported.

We’re again showing the newspaper headline trumpeting the fun and frivolity of the event on January 18.

It has been ignored in the media, which too much is taking whatever comes out of China as rock-solid dogma.

Right after that, thousands of those that attended this hoedown left town for the traditional holiday migration. That spread the coronavirus across the entire country, as well as to points across the globe.

Newsreels v Reality. Only now, the PRC government, to the delight and kudos of the WHO (of which China is a major member, by the way) and the swooning of some in the media to whom checking facts is unnecessary, is taking firm and “aggressive” action.

They are sending hundreds of doctors to Wuhan to treat the illness. They are, in some cases literally, boarding up people in their homes. They are, according to their groupies in the international media, building hospitals almost overnight.

Wow. Action.

But the question comes up… do those doctors have protective garments? Do they have any sort of face masks? Are those “hospitals” really operative? And how come just several days ago, they were telling the world that Wuhan had adequate facilities?

At one point, the official media proudly showed a picture of the first built-in-days new hospital. Oops. It wasn’t a hospital at all. The picture was actually a photo lifted off of a website of a company advertising modular buildings.

The bottom line for air travel is that the underlying realities of how this situation has been dealt with is not one that’s very encouraging.

It Started Before The Coronavirus. From the very robust growth in travel and trade with China that we saw just four years ago, the entire situation has changed. Even before this epidemic, the fraying China economy was in line to put a big dent in travel to the U.S. Plus, the prior welcome that foreigners experienced in China started to decline, as political realities began to sink in.

How Do You Say “Chutzpah” In Mandarin? Now that the U.S. has implemented quarantine for citizens coming back from China, and has effectively advised Americans not to go there because of the continuing spread of the coronavirus, the PRC government is quite miffed.

They are claiming that such actions are not “friendly.”

Return To “Normal” – There Is No Normal. The PRC government has bungled this situation into what has spread as a health crisis in China, and one expanding to the rest of globe.

Combine this with other pre-epidemic trends and policies that have been implemented in China, such as increased restrictions on foreigners and travel within China, and we unfortunately would conclude that the vision that existed four years ago for China-U.S. travel is now gone.

When this health epidemic winds down (when?) and if there are changes in policies in Beijing in regard to foreigners, a new paradigm for U.S. – China travel will emerge. Maybe stronger than before.

But it is going to depend on actions in China. Not outside.