2020: More Cuba Reality to Come.

Remember all the enthusiasm regarding the “opening” of air service to Cuba?

Last summer, FedEx dropped plans to operate cargo flights to Cuba.

Gee… wonder why.

Most of the reporting on this event just focused on comments about tighter restrictions on US-Cuba travel implemented by the Trump Administration.

The implication often was that they are capriciously trying to cut off what was developing into a huge wallow in Cuba-US friendship and eventually new shipments of grain from North Dakota, cars from Flint and Lansing, consumer goods at new Cuba-based Walmarts, and gazillions of tourists from all over the USA.

Fake news in its highest form.

Needless to say, a lot of this reporting made no concrete discussion of hard facts. Just the innuendo that somehow, the Administration has choked off a potentially lucrative connection between the US and the Worker’s Paradise 90 miles off our shores.

Which is baloney.

The fact is that there is no business base in Cuba… no exports, and no industries that need air cargo. There’s also no freedom of speech, no elections, and food rationing from time to time. And you can take it to ‘Vegas and make book that none of this will change in the near term.

Typically, when it comes to reporting on Cuba-US relations, all this is conveniently ignored. Nevertheless, for air cargo, there’s not a lot of businesses in Matanzas needing to get that package to Omaha tomorrow morning. Sending FedEx freighters to Cuba is like trying to import air conditioners to the Antarctic.

As for the cabin-busting passenger demand originally implied by travel organizations, there are a number of airlines that found they were carrying a lot of sailboat fuel, and quietly got out of the market. Outside of VFR traffic from South Florida, which was there before the grand “opening,” the flood of traffic just wasn’t – and isn’t – there.

All this was obvious from the start when Obama “opened” Cuba in 2014. In the coming year, this is not going to change, unless the cleptocracy running the island pack up and leave.

Boyd Group International was the only research and consulting firm that pointed this out from the start. That’s because we provide our clients with independent, fact-based consulting and forecasts. Not hype.

If your organization is looking for aviation consulting that doesn’t run with the pack, give us a call.

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Finally… Big Changes In Airline Planning In 2020…

You need to take a hard look— within the context of the changes coming in airline fleets, strategies and competitive planning.

Air Service Strategy Diagnostics – check it out. Is your planning consistent with the new corporate directions of the U.S. airline industry? Click here for details.

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Before We Get Into 2020 Predictions…

Hyatt Regency Cincinnati announced as the venue for the 25th Annual International Aviation Forecast Summit.

In today’s Monday Insight, we’ll be touching on general trends to expect in the coming year. They will question a lot of the shopworn, trend-line ambient thinking that’s seen all too often in aviation

On August 23-25, in Cincinnati, USA we’ll be holding the #1 event that questions and challenges status-quo thinking… directly from the aviation leaders who will be shaping the future.

This is the only industry forecast event. We avoid predetermined “panels” that corral open thinking and exploration. It’s the thought leaders – industry CEOs and senior executives that will give us their unvarnished view of the trends and dynamics of the future.

This year, we’ll be rolling out additional new forecast sessions, too. And we’re planning a very exciting pre-Summit workshop program, as well. Data and information that dares to question ambient thinking and the status quo.

An exciting venue… not only is Cincinnati Northern Kentucky International easy and cost-effective to access, but we’ve chosen the beautiful Hyatt Regency Cincinnati as the venue for the 25th annual IAFS.

We have negotiated a special rate of $159 per night, plus taxes and fees. There will be a link on the IAFS website shortly.

For more information, and outlines of this #1 aviation event, click here. Special early registration rates are in effect.

Aviation leaders from around the world will be there. Be one of them.

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BGI Overall Aviation Predictions For 2020…

Strategic Clarity. Identifying New Air Transportation Paradigms

We’re going to post our 2020 trend projections a little differently.

Each year, Forbes outlines the predictions of a number of forward-visioned – and usually iconoclastic – aviation thinkers. There are no straight jacket rules – just the unvarnished visions of what each of these folks sees happening in the year ahead.

Boyd Group International is honored to be included in this august group.

We’ve posted our predictions on Forbes, and rather than just repeat them, click here.  We’re honored, also, that it was chosen an an Editor’s Pick article, as were our 2019 predictions as well.

We welcome feedback, as-is, where-is. So if you have any input or thoughts regarding the year 202o in aviation, hit the contact button above, and let them fly.

And we at Boyd Group International want to wish you the best for the New Year!

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Preview: Planning For The New Year

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

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

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

Then things get real different, real fast.

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

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

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

It’s all about the capacity.

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

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

Airline Fleets – New Dynamics

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

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

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

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

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

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

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

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

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

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

Internationalization Of Interior Markets

One word, Benjamin: A321XLR.

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

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

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

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

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

That’s changed completely.

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

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

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

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

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

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

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

Lots happening – we’ll talk next week.

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FROM ALL OF US AT BOYD GROUP INTERNATIONAL, HAVE A MERRY CHRISTMAS AND A HAPPY HOLIDAY!

Before We Start This Week…

It’s Official! Clear Your Calendars For August 23-25, 2020!

The 25th Annual Boyd Group International Aviation Forecast Summit will be hosted by:

Aviation’s only global forecast conference will be hosted in 2020 by the Cincinnati Convention & Visitors Bureau and the Cincinnati/Northern Kentucky International Airport.

This will be our 25th year, and we are planning an event that will deliver more data, more information, more insight, and more clear-no-nonsense future perspectives than ever before.

The Boyd Group International Aviation Forecast Summit is the one event that professionals from across the industry and across the globe attend year after year. That’s because it delivers direct data, free and clear of any second agendas. Political correctness isn’t allowed in the door.

We’ll be publishing the agenda and Workshop program over the next few weeks…

Click here for more information on the IAFS, and to register now at the special early rate.

We look forward to seeing you in Cincinnati USA!

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United A321XLR Order – New Fleet Imperative: Mission Flexibility

Coming: A Re-Ordering Of Interior U.S. Traffic Gateways

Last June, we published a press release discussing our research on emerging fleet trends at US airlines.

The prediction was that new-generation narrow-body airliners offering in-fleet mission flexibility would be the future. This would materially eclipse stratified airliner categories. It’s happening – the United XLR order should not be viewed as just 757 replacements… the wide mission capability of these airliners represent demolition of traditional fleet categories – across the entire airline industry.

The A321XWB is a prime example. It can fill the need for Newark-London, as well as operate the schedule between Newark and Detroit.

Try that with an A380, except in limited tag-markets to position the airplane, but burn enough fuel to panic the CFO.

Super Long Haul Also Coming… But It’s A Limited Application. There is a lot of buzz around Qantas’ Project Sunrise, promising nonstops to New York and London from Australia. But that mission demands an order for just just 12 A350-1000s. Super long-haul markets exist, but they’re few and far between compared to the rest of the air transportation system. The United XLR order was for 50… and toss in the rest of the backlog across the industry, it’s hundreds of new units.

As we outlined in our Global Fleet Trend & Demand Forecast delivered at last year’s International Aviation Forecast Summit, the new mission capabilities of the A321XLR and (eventually) the 737MAX are complete game-changers for U.S. airport planning.

We were the first to outline how secondary American commercial centers represent rich feed for EU and UK carriers, and the mission capabilities of these new airliner variants make it possible.

That’s happening, and with these new narrow-body, trans-Atlantic capable machines, plan on a lot of interest is what Columbus and Cincinnati can feed through SkyTeam’s hub at CDG and the Star Alliance operations at Frankfurt, Munich and Istanbul.

Airports & Communities of All Sizes Need To Get Innovative, or Get Passed Up. At the IAFS, we’ve outlined the regional and local characteristics that are start points needed for an airport to attract this coming tsunami of international access.

It’s a whole lot more than lovely brochures with pictures of the region. It’s a whole lot more than trade junkets. This is business, not a social outreach. Future applications of $50 million aircraft assets will be determined by hard, raw economics, not elaborate social events.

It means identifying the specific future economic global characteristics that match the flows over the international target carrier’s connecting hub. A lot of data, and a lot of work and a lot of futurist perspectives, such as the regional draw that such service will attract. Traditional catchment areas and leakage studies are vacuum tube approaches in a digital economic global world.

Challenges For Smaller Airports, Too. It also represents opportunities for smaller communities. Identifying where international trade and economic flows will manifest should be a key part of every airport’s long term air access program. These new international flights at secondary cities will also tend to increase draw from a much wider geographic area – and there are aggressive plans that smaller airports need to develop to address this.

Give Us A Call. Our research indicates a whole constellation of new dynamics that will attract international service at secondary points. A  futurist approach, not a wallow in woefully inaccurate DOT international O&D tables. We don’t rely on past data, but instead on illuminating emerging trends that will drive support for new global access.

If your region is interested in exploring development of a Global Strategic Blueprint, give us a call, or click here to set up a discussion time.

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Flash!

On-Line Financial Site:

Air Canada Judged Financially Superior To Cadaver Carriers

Congratulations to Air Canada. Maybe.

Folks in the front offices in Montreal might be thrilled. Or, more likely, justifiably offended.

On December 9, a financial on-line source announced that in comparing key metrics at two airlines, Air Canada and Great Lakes Airlines, the Canadian carrier swept the ratings in six of the seven categories investigated.

Great Lakes was judged superior in only one area – institutional ownership. The article stated, “Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.”

Actually, this is a tremendous achievement for small, Wyoming-based Great Lakes.

Particularly in light of the fact it went completely out of business over two years ago.

Commenting under a very comprehensive metrics chart that deftly compared Air Canada’s billions in latest revenue to a total of, well, zero for Great Lakes, the article concluded with admirable insight:

“Air Canada has higher revenue and earnings than Great Lakes Aviation.”

Ya think?

You can’t make this stuff up… But it is a good example of a lot of the aviation reporting out there in webland.

Caveat reader.

Take a look by clicking here.

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FROM ALL OF US AT BOYD GROUP INTERNATIONAL, HAVE A GREAT WEEK!

The Passenger Facility Charge Controversy:
This Emperor Needs A Haberdasher, Fast

To mix metaphors, this week, we’re going to grab a third rail.

(Folks who are not familiar with the NYC subway system may want to Google it. Simply put, it’s a subject matter that’s politically dangerous to get near, so nobody wants to mess with it.)

We’re talking about the issue of raising the cap on passenger facility charges above the current $4.50. It seems that it’s all one side or the other… you’re pro-PFC or anti-PFC. Those seem  to be the only options.

The battle lines are firmly drawn… the airport industry v the airline industry. But they’re fighting the wrong enemy.

In the airport industry, there is complete agreement that America’s commercial airports desperately need additional funding to meet future needs. That is entirely accurate.

Almost all commercially-served airports (not all, but almost all) are adamant that an increase in the current PFC is essential if the U.S. is to have the air transportation system needed to compete in the global economy.

The airline industry, spearheaded by Airlines For America (A4A), agrees that funding airports is critical, but they also maintain that the consumer already pays enough taxes and fees on air travel, and that there is plenty of money available for airport infrastructure.

Okay, here’s the tug on that third rail nobody else seems to want to touch:

They are both absolutely correct.

The issue isn’t whether the funds are there – but in the case of the money collected via the aviation excise tax, it’s not easily available via mechanisms that accommodate the financial systems of airport investment.

Episodic Grants, Yes. Long Term Consistent Funding, Not So Much. The situation today is, at its base, politically artificial – the product of questionable federal policy, questionable politics, plus a lot of convoluted thinking trying to not address some hard realities. It is like the emperor with not a stitch: a lot of folks seem convinced that what they’re seeing isn’t really what it is.

We need to tumble to the fact that the aviation excise taxes are being misused – or at the least, mis-administered within a dysfunctional system.

We Have The #1 Airport System In The World… But A Clumsy Funding System. First, the U.S. airport system is facing a future where existing infrastructure needs to be rebuilt, replaced and expanded. Whole new support systems need to be developed for future technologies, and there is uncertainty regarding some current operational revenue streams.

Access to effective funding sources is imperative, and the PFC program has been shown to be one that can deliver it. It circumvented the lack of financing access to the excise tax funds.

But the airline industry is also entirely correct: there is plenty of money already being collected in ticket excise taxes and other sources to fund the nation’s airport needs. The problem is that it’s not in a system that is structured for the 21st century, and it’s been allowed to become a cookie jar for the feds.

And that’s naked emperor which it seems everybody is reluctant to recognize and verbalize. The resolution is in addressing the political theft and outdated structuring of the aviation excise tax. Seems that’s not front-and-center.

This comment may not go well in certain sectors, regardless of the fact that it’s accurate – there isn’t a funding problem… it’s a political one.

Congress and its irresponsible use of aviation excise tax revenues are the issues. It’s just been band-aided over the years. It is time to call it like it is.

If the emperor in this case has no clothes, the PFC issue is an entire nudist colony.

PFCs: Going Around – But Not Solving – The Problem. Maybe it’s time to mention one hard fact:

The passenger facility charge was conceived as a mechanism to provide airports with funding in lieu of the excise taxes already collected from consumers for exactly the purpose of assuring airport and airway infrastructure.

See, those excise taxes gouged today out of the hides of passengers aren’t really fully available for the purpose intended. Congress uses these dollars for whatever, not necessarily aviation. That was hard political reality. And still is. So, the PFC was conceived as a replacement.

The Band-Aid Works… But At A Consumer Cost. Functionally, it’s worked well… applications of PFC funds are very strictly monitored… they can only be used for projects that really do enhance airport efficiency. It’s been seen across the nation, and without a PFC system, there are a lot of projects that could not have been financed via the way aviation excise taxes are disbursed.

As one example, Boyd Group International worked a number of years ago with Bloomington/Normal, Illinois in that airport’s successful project to use PFCs for a much-needed new terminal. It was the first “small hub” airport to use PFC revenues for bonding. At the time, there simply weren’t other viable avenues of financing support. The structure of the air ticket excise tax could not easily be used to support bond financing. That’s still the case.

Actually, it would be hard for anybody to point to where PFC funding has been used for other than its intended purpose. It may be the only government funding channel in the history of mankind that can’t be squandered or diverted into political nonsense.

The PFC system has worked… but the consumer is getting zapped at the altar of political correctness and expediency because it’s there to replace tax money that’s being diverted or otherwise unavailable to support aviation infrastructure.

But that doesn’t change the fact that the entire PFC program was designed to sidestep the misuse (yes, misuse) of aviation ticket excise taxes, not to mention a disbursement system that is near-useless in the modern world of financing projects.

One Team, Not Adversaries. It’s time that the airport and airline industries joined together to address this. They both have the same goals. And the same adversary – government irresponsibility.

The federal aviation excise tax needs to be restructured to allow airports to use it just as is being done with PFCs, with similar restrictions and controls on how and on what the dollars are spent.

Yes, that would likely take enormous amounts of work to accomplish, but the first step is to recognize the real issue: the consumer is getting gouged by an excise tax funding system that is thirty years out of date.

Today’s controversy is aimed in the wrong direction. It’s congress that’s the problem, not airports or airlines.

But as long as that remains something that folks see, but are reticent to acknowledge, the situation won’t change.
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FROM ALL OF US AT BOYD GROUP INTERNATIONAL, HAVE A GREAT WEEK!

General Aviation Electric Aircraft…
A Coming Shock For Small Airports

The Boyd Group International Aviation Forecast Summit, now in its 25th year, has earned the reputation of being the #1 forum for illuminating new and disruptive trends in the industry.

In 2003, it was the first to predict that the fleet gap that drove huge demand for 50-seat “regional jets” was essentially filled, and the future orders would be heading south. The IAFS™ was also the forum where manufacturers such as Embraer announced new upgrades to their E-175/195 program.

The Summit was also the place were new concepts such as the Boom supersonic airliner, and over the horizon hypersonic air travel were showcased.

At the 2019 International Aviation Forecast Summit, another technology that is well known and well underway was reviewed.

Electric-propulsion.

Bye Aerospace of Denver delivered a compelling presentation on their line of 2-place and 4-place airplanes. The range is a few hours – which is sufficient for a lot of GA applications, particularly pilot training, which can be done at a fraction – a small fraction – of the hourly cost of existing (and aging) aircraft. Re-charging is about 20 minutes – reasonably competitive with taxiing up to the self-serve 100LL facility.

Say what? This is no big news. Electric aircraft are already flying. In regard to small general aviation aircraft, it’s actually old hat.

It certainly is. But what’s not recognized, and is “new” is that the entire structure of general aviation airports will need to change in the next ten years. Those that don’t will be out of business.

Small Is The Immediate Future. While the energy-storage technology curve gets into Moon-launch configuration as the size of aircraft increases, and we are (at this moment, at least) years away from a large electric airliner, the current technology at the entry end of the aviation system is proven.

This has given rise to lots of enthusiasm and giggling and near-euphoria in parts of society. Wow! they chortle, this is the beginning of the end of that nasty, carbon-generating internal combustion engine!

We all know, right, that electric aviation propulsion is clean, environmentally-friendly, and as it expands, polar bears can grow more confident that their habitat will be safe and secure.

Really? Has this actually and dispassionately been thought through? All aspects?

The Advantages Are Clear. The Immediate Ones, At Least. One thing is absolutely certain. The fundamentals of electric propulsion at the lowest end of aviation absolutely represent an economic – and, yes, an environmental – breakthrough.

But it will toss the entire underpinning of general aviation on its ear. Expensively. This will be felt at small GA airports in particular, where operations as we know them, will be based on entirely new economic and operational foundations.

Concurrently, it is this sector of the airport industry that has the least ability to absorb costly changes in facilities and support systems. In effect, the evolution of significant parts of general aviation into electric propulsion could spell a lot of trouble for airports at the very bottom of the system.

Let’s take a 10,000’ overview – assuming that electric propulsion will take over in, say, ten years.

Obsoleting Entire Supply & Support Chains. Think about it. That electric powerplant is entirely different from internal combustion engines. That means that support mechanisms need to completely change. None of these changes are difficult, but they will be costly to implement.

Electric Fuel – It Will Drip Zero, But Generate Zero Into-Plane Fees. This part seems obvious, but overlooked. As more electric light aircraft come into operation, the demand for traditional fuels – 100LL and jet-A – will decline. At large airports, this will be minor, as GA is a small part of the operations.

But what about small all-GA airports? At facilities where the majority of operations are with small singles and twins, that dependence on into-plane fees as a main revenue stream will get threatened, big-time, as the mix of electric aircraft increases.

Then there is the issue of assuring adequate re-charging facilities for both based and transient aircraft.

Who Will Control Electric “Fuel” Distribution? Oh, and should there be prohibitions on owners charging their aircraft privately at their tie-downs or in their hangars? Maybe the airport will need to require that all “refueling” be done at charge stations provided by the airport, to assure that there is some revenue stream to replace that lost with traditional into-plane fees.

Who’s Going To Fix & Maintain These New Flying Machines? Airport-based support needs will change. Today the traditional A&P mechanic addresses propulsion units entirely different than electric motors. Where is the training for this function? What are the future requirements for qualification of technicians to repair and inspect these electric systems? Standards?

Emergencies… A Battery Burns Differently From Jet-A. The CFR systems at small airports are based mostly on the need to address and remediate accidents involving airliners powered with petro-fuels.

What are the new challenges involved with battery-powered aircraft? These machines will have a lot of different chemicals and chemical reactions to deal with in case of an accident. What additional training and equipment will be needed? FAA: do you have any plans for funding these needs?

Environmental – Near Term & Locally, Great. But Long-Term? There is no doubt that there are differences in emissions directly from an electric 2-seater and one powered by an internal combustion engine. Like, essentially none in the case of the electric motor.

Then there are a lot of positive corollary impact variances attendant to electric propulsion. There are no fuel spills to clean up. No storage tanks. No hoses. No fuel tank, per se, on the airplane itself. All of these represent precautions and maintenance attention that are not needed at a charging station.

Ok, great. But long-term… going out 20 years… are there other environmental issues that need to be considered?

Such as, what is the impact of making the storage units (batteries) for electric vehicles? Maybe not a lot, and maybe a whole lot – it’s an open question whether independent and dispassionate studies have been done.

What about the environmental impact of re-cycling vehicle battery systems? They do wear out, right? And where do they go to get processed? What is the cost – financially and environmentally? Does the technology even fully exist to handle the future volume?

Bottom Line: Electric Isn’t Coming. It’s Here. The immediate benefits – on paper – of electric propulsion are not in question.

But for the aviation sector that will be most affected in the early stages of this transformation – general aviation airports – the entire financial, operational, economic and regulatory foundations will need to be modified.

That will take money. More critically, it will take solid, futurist planning.

Both should be a right-now priority for the airport industry…

… Lest they get shocked by the changes driven by electric propulsion.

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Finally…

Thanks For The Feedback On The “Coupe de Ville”

We want to thank the folks who took the time to comment on last week’s review of what we define as “Cracker Jacks” air service development schemes, where small communities are sold a bill of goods, promising things that simply are out of reality. If you missed it, click here.

It seems a lot of people see through the game of promising what feels good, but can’t be delivered.

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BEST WISHES FOR A GREAT WEEK AHEAD FROM THE TEAM AT BOYD GROUP INTERNATIONAL!

Small Communities Beware…
Cracker Jacks Air Service Development

Okay, Cue the Music… Softly, Gently…

“… there ain’t no Coupe de Ville, hiding at the bottom of a Cracker Jacks Box…”

– Entertainer Meat Loaf, Two Out of Three Ain’t Bad, 1978

(Millennials may need to google this. Some probably think “Coupe de Ville” is a seafood entrée at a French restaurant. As for the box thing, they’re completely stumped.)

Hint: it’s a reference to a candy that came with a little toy inside. Popular in the 1940s and  1950s and still sold today. A big marketing draw – kids eagerly gobbling the stuff down, all excited to find the reward at the bottom.

Let’s move into today.

This line is sagely advice and a cautionary comment for any small community in regard to exploring air service access for the future.

It’s an increasingly tough job to be a civic leader involved in trying to assure that their small or rural community has access in the future to the global air transportation system.

It takes hard and realistic analysis and understanding of air transportation realities to make determinations regarding assuring air access to a given region, even when passenger service at the local airport is economically not possible. Recognizing this, and crafting alternative access plans, is a very challenging and politically-delicate undertaking.

For these civic leaders, it often takes great effort to deal with otherwise well-meaning local entities that often pop up, demanding “flights” at the local airport, with very little understanding of the economic realities.

Enter The Cracker Jacks Approach. But unfortunately, sometimes these folks are fair prey to get hooked into air service development (ASD) programs that are every bit as ridiculous from the gitgo as trying to find an automobile at the bottom of a 4″x 8″ box of gooey caramel popcorn.

The starting point in the Cracker Jacks air service development approach is to convince the client  (or, more commonly, make sure they are not disabused of) the fantasy that there’s always an air service prize at the bottom of the box. Just keep digging.

The story line is enticing. That Coupe de Ville of air service might really be there, even if the community is very small, has low regional population, and might have another, larger airport in driving range that has service access the local airport couldn’t get within a gust of propwash in matching.

Not to worry. All that’s needed is to have faith and a big budget. Just shell out for a ponderous “true market study” and, also maybe, a geographic-focused “leakage analysis.” Then, maybe a monthly fee to “keep in contact” with “target airlines” which in many cases don’t exist.

Then, be patient, because fantastic new demand for air service might be discovered, even though every set of metrics, every fleet and strategic trend in the airline industry, not to mention ethical common sense, disproves this voodoo right from the start.

The key to Cracker Jacks ASD is to keep the client completely in the dark regarding any scintilla of airline industry realities, and to completely ignore current consumer alternatives. As long as that curtain of intellectual darkness can be maintained within the community, it’s boom time for purveyors of Cracker Jacks ASD projects.

They can go on for years at some small airports, with, of course, no results beyond dumping more money into revised studies and increasingly desperate suggestions for “air service.”

Avoiding Getting Mired In The ASD Popcorn. It’s understandable that community and civic leaders can get taken down this path. They aren’t expert in the dynamics and economic realities of 21st century airline realities. A glowing promise to search out and “lure” air service is naturally attractive.

But to people who are aware and versed in airline industry trends, fleets, economics and strategies, these ASD programs have enough red flags to furnish Moscow on Mayday.

A sure red flag is when – conveniently – there’s no up-front mention or identification of just what the desired flights are supposed to accomplish, or what specifically the need is, beyond just “air service” – as if it’s as generic as having running water. Wave that flag.

Another red flag is when the program is to supposedly “lure” flights just to a certain city, again with no mention of what airline. See, the story goes, that type of information can’t be “discovered” without a deep analytical dive into the popcorn box of jive data, and then spoon-fed to the community.

The truth is that for just about any – any – proposed route, the airline target is as obvious as a double-meat Whopper at a vegan wedding. Or, just as non-obvious, in cases were there’s no airline that would have any earthly interest.

More red flags pop up when the program is engineered to avoid actually comparing the proposed service in regard to consumer convenience with that alternatively available at other airport gateways in the region. One flapping red banner is when there’s an online survey, asking profound questions like “will you like to use the local airport?” – without any specifics. Naturally the returns are a landslide in favor.

Okay, use it for what? Based on how may flights per day? At what comparative fares? At what levels of connectivity? None of that detail is typically provided, but, take it to the bank, the “results” from these questionnaires are always touted as proof positive that air service will have ‘em lining up at the ticket counter.

Here’s a consumer reality: A couple of flights a day to connect someplace are not usually competitive with an hour drive – or often even more – to access an array of 25, 45, or 85 flights a day at another airport that also offers a wide range of nonstops to key destinations. And in any case, the failure to convincingly address this issue as a key part of the 50-page “market study” has P.T. Barnum smiling broadly from his grave.

Air travel is about saving time – and shock of shocks – even with that drive to a larger airport, the wider range of flights and destinations can often be a significantly shorter travel time than trying to adjust one’s schedule to accommodate the service that the local airport might be able to attract.

It’s often the coup de grace – not the Coupe de Ville – for consumer use of the local facility.

Assuring Access In The New Global Economy. The most important point in developing an air service access program is that it matches the future economic trajectories of the US economy, consumer needs, changes in future communication channels, and a range of other evolving dynamics.

In the future “air service access” will mean a lot more than just passengers and baggage.

As was pointed out at sessions and Workshops at the 24th International Aviation Forecast Summit in Las Vegas, there are whole new logistical and transportation systems now developing that will change to value equation of all airports – but particularly those in rural and metro-peripheral areas of the nation.

With robot technology, China and Vietnam and Malaysia and places like that no longer will have a manufacturing advantage. UAS technology in many applications has the potential of actually being more cost-effective in transporting goods than by over-the-road. Distribution systems are shifting toward just-in-time and just-in-case.

No, scheduled passenger service at every rural community isn’t economically possible – or even consumer-compatible.

But there’s a whole new set of economic roles for America’s 3,500+ airports where scheduled passenger flights are about as likely as finding that Cadillac in a snack box.
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FROM ALL OF US AT BOYD GROUP INTERNATIONAL – HAVE A GREAT WEEK AND A WONDERFUL THANKSGIVING

Moving Information & Business Intelligence

Out of The Past

You’ve probably noticed, aviation has changed. Airline structures and route systems have changed. Consumer patterns have changed.

Remember all that intra-regional air service in the 1980s? It’s gone. Air transportation evolved, and it is still evolving. The economic underpinnings and business base of aviation aren’t the same as just a decade ago. It’s not the same business, and it’s economic role has shifted and continues to do so.

But aviation intelligence and data sources are still stuck in the past. They measure yesterday.

Do Those Historical Metric Channels  Apply To An Industry Now With A220s, 787s, and A321s? The answer is no. The aviation industry is evolving, and so, too is its role within  communication channels and modalities.

The future is in identifying and quantifying the trends that will shape the future. It’s great to have access and analysis of historical data, but when the very foundation drivers of those data are changing, relying on past data is a certain way to stay there. In the past.

Sure, it’s great to have access to historical O&D and T-100 data and other metrics. But increasingly, these are reflective of an air transportation industry that in three years will be fundamentally different. Measuring yesterday is not viable for planning for tomorrow.

New approaches to developing futurist planning metrics are needed. New data and research approaches – beyond just BTS information – are imperative. At Boyd Group International, we’re working on it.

New Fleets. New Missions. A New Communication Channel. It’s a future where whole new fleets are changing the structure of airline route systems.

One example is internationalization – it’s coming to airports in the U.S. where even such a suggestion ten years ago would have called into question the chain of custody of a person’s last drug test. Okay, what are the baseline metrics in regard to forecasting which interior U.S. airports will see trans-Atlantic flights? What are the performance measures – remember, current DOT O&D reporting of international traffic is a disaster. Developing new approaches to measuring these data isn’t a priority at the BTS.

Then there’s the ULCC model,  which has shifted not only travel usage, but even the role of travel as part of consumer discretionary spend. It’s not filling air service voids – instead it’s creating a new profitable use of airliners. Where are the fertile opportunities? What “submarine” markets may emerge? Tossing out an O&D report from 2019 won’t do diddly in that regard.

Local Air Service At Some Small Communities Is Increasingly Obsolete Air Service. Consumer preferences at smaller cities – civic hubris notwithstanding – has combined with raw economics to make regionalization of air access a superior option to trying to “lure” flights back to the local airport – flights that nobody will use, and often on airlines right from the start of the “true market study” simply don’t exist.

Yet these programs are continually being foisted on unwary small airports, when it’s obvious to any ethical professional that in the new airline realities (fleets, costs, strategies and consumer trends) there is zero chance of gaining flights that are consumer-competitive with other existing channels consumers are already using. This stuff will peter out in the future, the victim of reality.

In addition, there’s been a lot of well-intentioned efforts, too. Remember the big study done by the Transportation Research Board a couple of years ago, aimed at finding solutions to “small airport air service?” Lots of fine folks participated, and the final report was issued almost  two and a half years ago. Many suggestions provided.

The results? Zero. Nada. That’s because they were focused at bringing flights to small airports, instead of the real objective – assuring air access for consumers. Actually, the consumer and the concept of comparative consumer preferences and – importantly – the emerging of qualitative superiority of air service at alternative airports, were ignored completely.

New Aviation Logistical Channels Need New Metrics. As we covered at the 24th Boyd Group International Aviation Forecast Summit in Las Vegas last August, drone – UAS – technology is shaping up to transform the logistical base of America, bringing new economic growth to rural airports, lack of scheduled passenger service notwithstanding.

Rethinking Metrics & Data. So, over the next several weeks, Boyd Group International will be undergoing a complete review and update of our information systems, including AvaitionPlanning, Airports:USA, Aviation DataMiner, and even our newest addition now under development, BoydGroupChina.com.

We will be tackling this issue and revising our own research and forecasting outreach.

But one thing is certain: a lot of the air service planning in the works today does not have access to the analytical support it really will need.

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FROM ALL OF US AT BOYD GROUP INTERNATIONAL, HAVE A GREAT WEEK!

Holiday Capacity Will Be Up –

MAX Issues Notwithstanding

Remember the dire warnings last spring that this would be the summer of chaos at airports, due to the grounding of the 737 MAX?

Didn’t happen.

Now we can likely expect more veneer reporting, warning about how seats will be tight this holiday season, due to the constantly-extended grounding of 737 MAX aircraft.

Here’s the data. Between November 1 and December 31, there will be 4.3% more seats departing U.S. airports – and that’s well ahead of the current 3.6% growth rate for 2020.

True, the four carriers in the USA that are on the MAX order list are taking a hit to potential revenue, not to mention the benefits of lower operating costs, with the 737s being parked across the country.

But American and United have continued with the rest of their fleet plans, which has included additional A-319s, as well as adding more E-175s and outsourcing their operations to entities such as Mesa and SkyWest.

Southwest is in a more difficult situation. They don’t have any outsource partners, as do AA and UA. Plus, most of the available used 737-700s across the world have been already picked clean. Until the MAX is cleared for operations, WN will be looking at highest-and-best use alternatives, such as they did in cutting EWR from their route map.

But what needs to be kept in mind is that the U.S. air transportation system is not being as dreadfully affected as it might appear due to the absence of 737 MAX airliners.

The difference between cancelling flights and not scheduling them in the first place continues to confuse some corners of the Fourth Estate.

The Emerging Landscape for 2020

With just two months to go to the New Year, we thought it might be an idea to look into a couple of emerging key issues facing air transportation in 2020…

Enplanement Growth: Look For @ 2.5% to 3.0%

It’s not that the economy isn’t strong. The facts are clear in that this is one of the most robust situations in half a century.

But air travel growth will moderate to under 3.0% in 2020 – maybe even to under 2.5%

The reason… capacity. Contrary to the antediluvian assumptions in traditional traffic forecasting, airlines are no longer the caboose on the economic choo-choo, to badly mix metaphors.

An analysis of the fleet plans at US carriers shows that in 2020, it’s airline capacity that will be the major factor in airport traffic growth. Load factors will continue to average in the 80%+ range, and, as will be noted below, it’s dollars on board, not necessarily passengers, that will be the driving factor.

This doesn’t mean that seat pitch is going to increase, but the trends over the horizon are indicating that airlines will be looking at service-related initiatives as the future.

And, as noted next, that doesn’t necessarily mean more fees and charges – the goal will be to entice the consumer with more perceived value for a higher spend.

Trend: Revenue Factor v Load Factor

Following from the above, United’s plan to take what are basically 70-seat CRJs, and configure them for 50 seats, including a reportedly “self-serve” first class section, may be the harbinger of a wider trend in the airline industry.

The accepted wisdom is more seats, not fewer. United may be in the process of setting up some new “wisdom.”

The success of premium economy – which, admittedly is mostly in the international sector of the airline product mix – does point to the potential discovery of a wider pool of consumers willing to pay a slight bit more for what is perceptually a higher product.

The United CRJ-550 concept may be the start of a wider trend toward pursuit of revenue share, instead of just more passengers.

Indications will be clear by 4Q 2020.

Prediction: Clearer Market Differentiation – ULCC v Mainline Airlines

Heresy: An airline seat is not a consistent commodity – at least not anymore. It depends on the category of tushy sitting in it.

The Allegiant seat out of Concord, NC is not the same product as the AA seat out of Charlotte.

The first is a vacation/leisure product aimed at discretionary spending. The second can also be aimed at capturing discretionary dollars, but that is mostly secondary to flying planes that meet demonstrated consumer needs.

That brings us to the cloudy examination in regard to where the two models will eventual overlap. Increasingly, it’s becoming apparent that there’s a lot less competition between these models than some veneer analysts may suggest.

Raw example: Allegiant’s service to Florida from Hagerstown represents very little suction of revenues or passengers from carriers at Baltimore. Not only that, but a lot of this traffic segment isn’t of interest or of value to Southwest, American, United, et al., when their load factors are well into the 80% range.

This can get some in the analyst Peanut Gallery a bit confused.

Not too long ago, a profound “competitive review” was issued from some august research firm, proclaiming the deep yogurt Southwest was in at Denver.

Yessir, according to their divination of the numbers, Southwest was just getting competitively hammered.

See, the fact was discovered that Southwest’s average yield at DEN was XXX% (whatever, it was a lot) higher than that of Frontier. Danger! Danger!

This meant, the report concluded, that Southwest was losing out on capturing low-fare travelers, and as a result it was a lead-pipe cinch that WN would soon find it imperative to lower fares, and, yes, “revert back” to charging for baggage and change fees. (“Reverting” to doing something they hadn’t done in the past? Let it go, the analyst was on a roll.)

Now, Southwest at the time was experiencing an 88%+ load factor at Denver. So, according to this guru, they should chop fares to get people into those same seats who want to pay less.

Knowledge of the subject matter, apparently, was not a job requirement.

All this report needed was an organ grinder and a small monkey to complete the visual of where it came from.

The issue, in any case, is to what extent will ULCCs actually competitively affect the traditional air service model. They are adding lots of planes and capacity. Boyd Group International projects that by the end of 2021, ULCCs will exceed 12% of total seat capacity.

But the question is how much of that is essentially in a different business, aimed at different consumer stratas.

We’ll see this get more clear in the next 12 months.

Issue: Boeing 737 MAX

The indications are that the airplane will be approved for service by January or February.

But that doesn’t necessarily mean “in service.”

Remember, even subsequent to the grounding, the factory has been building an average of 42 737s a month – that means somewhere around 400 new MAX airliners are now sitting somewhere, and will need to get un-pickled and be modified. Some will require final completion and installation of customer-specific equipment.

That could take time.

And while the four US airlines affected – AS, AA, UA and WN – want these machines in the sky tout suite, there are issues regarding pilot and maintenance training, plus the raw ability to absorb new airplanes into the fleets.

One thing that has not taken place is the “summer of chaos” at airports, as some predicted. The fact is that the fleet plans at United and American have included addition of other aircraft types, including A-319s coming off lease from other carriers. Southwest, however, has not had that option.

But the Fall of Saigon reenactment – intimated in some sources as a near certainty for large airports due to the MAX situation – didn’t materialize.

Hint, it may be a surprise to a few folks in the media, but when an airline decides not to add flights into its schedule, that is not the same to the consumer as a “cancellation” – which has been the din from some corners of the Fourth Estate.

Prognostication: a smooth recovery in regard to new capacity, mostly at AA, UA and WN.

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FROM ALL OF US AT BOYD GROUP INTERNATIONAL HAVE A GREAT WEEK!