How do you prepare for recovery in a drawn-out pandemic scenario? What factors into fleet planning in an industry that has seen an unprecedented disruption, and is it even possible to forecast the future when circumstances are changing on a daily basis? Aviation Week’s webinar on 13AUG20, titled “Route to Recovery: Fleets, Planning and Forecasting for 2020 and Beyond” took a look at the Covid-19 challenges on business planning processes.
Moderated by Air Transport World’s Editor-in-Chief, Karen Walker, the panel included Nico Buchholz, Special Advisory Board Member at KGAL, Dan Williams, Senior Fleet/Flight/Forecast Data Analyst at Aviation Week Network, and Aidan Mooney, Vice President Consulting at ASM Global Route Development.
Route to Recovery
When it comes to gearing up again, it is a completely new kind of chicken/egg problem. Corona has forced fleet groundings, airport closures, limited handling services, and completely disrupted everything connected with air transportation, pushing many companies to the brink of existence and having to implement extreme cost-cutting measures. Supply has been throttled, but demand is a huge question-mark too. Aidan Mooney asked the rhetorical question “has the demand actually gone away or is that demand for travel just being not allowed to travel?” and then showed slides tracking the willingness of people to fly again soon, or in the next 6-12 months or later.
As the pandemic continued, the optimism regarding the willingness to return to flight travel has waned.
IATA recently revised its forecast of the air industry recovering to pre-Covid-figures to 2024, instead of the previous 2023, though Aidan Mooney believes “We're not going to recover back to where we should have been. The impact of this is going to be very, very, very long term.”
From corona-crisis to economic crisis
That slowing willingness to return to air travel does not yet factor in the long-term economic effects of this crisis. The UK last week announced it was in recession for the first time in 11 years. Other countries are heading in the same direction. Across the globe, people are furloughed or have lost their jobs, and this will impact the travel industry going forward, too. When it comes to airlines and airports, the trend is moving to consolidating traffic in hubs and even selected terminals in those hubs while passenger figures are still low.
Regional airports face a very uncertain future, with the move to hub-to-hub networks. When it comes to preparing for a return to operations, there are so many aspects that require consideration and preparation, from the security, handling, maintenance, flight control, commercial processes, etc. at the airport itself, to which airlines are planning to operate and at what scale, and how many passengers are expected.
All those factors are also very dependent on the other end of each network connection – how are airports in other countries preparing and what are the various country policies regarding air travel, also in relation to the COVID-19 case developments there?
Forecasting on a very detailed level
The more granular and frequent, the better, when it comes to forecasting. “The challenge now for airports, is looking in detail, a lot of detail, and not just for the rest of the year or next year, is looking at that detail over a three to five year period, almost as if you are re-forecasting your business, so that you have the flexibility to use the changes that come and be able to apply them,” Aidan Mooney advised, adding that “using anything other than a predictive beyond five years, becomes nigh on impossible.”
“The more detailed your knowledge is of your business, the better you will be able to draw advantage of it and adapt,” Mr. Mooney added. He demonstrated catchment areas around airports as business indicators.
In a similar vein, Karen Walker presented a couple of CAPA slides showing, for example, the correlation between COVID-19 cases in the USA and domestic seat projections for 2020, compared to previous year values.
In the case of the USA, a very slow return was forecast with perhaps the first real increase happening near Thanksgiving in November 2020, yet still ending the year at roughly only half of the number of seats of 2019.
Fleet-planning heads for flexibility and smaller aircraft
Dan Williams presented the latest forecasts in numbers of aircraft orders expected over the next 10 years, with significant reductions in all cases, but with a very clear preference towards narrow-body aircraft, which allow for greater flexibility in operation and better match the lower passenger numbers now and in the next few years. “There's probably going to be the removal of almost all four engine passenger airliners except the 747-8 and probably Emirates and British Airways with the A380s”, he predicted, which is, of course, bad news for cargo. Nico Buchholz, who had opened the call with a look at unit costs of aircraft operations, with the largest cost factor being fuel, and with no real reduction in operating costs over the past three decades, illustrated the considerations airlines would be taking with regard to fleet planning and retirement: “In general, what I would see is focus on cost and environment. So for a lot of the aircraft, because now they are not needed in large quantities, the focus will be on retiring a lot of the less environmentally friendly aircraft - basically related to fuel-burn and noise. And the second element would be cost. When I say cost, it's not only the cost per seat, but it's also those aircraft, which have significant checks coming up, like say a D-check, and those aircraft which may need to a complete cabin configuration. Airlines may think twice before they do these configuration changes to an old, or maybe actually not that old plane.”
With so many of those “not that old” planes parked up long-term and burning money on the ground, the one clear forecast is that the follow-on effects of this crisis are long-term, not to mention all the knock-on effects of reduced travel and tourism on national economies and personal livelihoods. Perhaps, from a cargo point of view, the silver-lining is that there is a large stock of potential conversion aircraft available.
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