THE CIRIUM AIRLINE INSIGHTS REVIEW 2020 Including The On-Time Performance Review 2020 2020 IN SUMMARY
Airlines worldwide struggled to match their schedules with travel demand, performing surgery as close as four weeks before travel.
Many large widebodies were retired sooner than anticipated—while the 737 Max finally returned to the skies at year-end.
Cargo was a bright spot—earning airlines precious revenue—with many airlines converting passenger aircraft to carry cargo.
Airlines and their airport partners had better on-time performance than ever before, but not for reasons they anticipated.
Confident travelers flew domestically, adjusting to new travel measures. Many travelers received travel credits and vouchers, and business travelers stopped flying.
The question on everyone’s mind: how quickly will the industry recover? And what will it look like when it does?
The Cirium Airline Insights Review 2020 2 | cirium.com CONTENTS
4 From Cirium’s chief executive officer
8 The On-Time Performance Review 2020
12 Flights flown: the year in review
15 The Cirium On-Time Performance Board
17 Outlook from the OTP Board The US airline passenger outlook for 2021 by Henry Harteveldt Reshaped tourism sector to emerge by Dr Mario Hardy 2020: the end of airline industry data silos by Mike Malik
24 Airline Insights 2020
37 Industry voices The path to aviation industry recovery by Richard Evans European LCCs feel the strain by David White Shifting sands: matching flight schedule capacity with demandby Will Livsey Airlines go big on early retirements by Michael Gubisch Asia-Pacific lights aviation’s path to recoveryby Simin Ngai Greener on the other side by Andrew Doyle Cabin cargo: a bright spot by James Mellon The changing trading dynamics for lessors by Max Kingsley-Jones China’s lessors spread their wings by Michael Allen The return of the Boeing 737 Max by Max Kingsley-Jones
66 All the data that’s fit to print
67 Appendix: Usage and attribution
68 Appendix: Glossary of terms
The Cirium Airline Insights Review 2020 3 | cirium.com FROM CIRIUM’S CHIEF EXECUTIVE OFFICER
In 2020, everyone was on time. Here’s the bigger story
Jeremy Bowen Chief executive officer Cirium
This time last year, we announced the airlines What follows in this report is a retrospective and airports with the best on-time performance on 2020. I hope that it will become an in 2019. Cirium’s model for on-time annual tradition, just like The Cirium On-Time performance is watched closely and widely Performance Review. reported. It is the gold standard. Our teams painstakingly analyze data from more than 600 Our team considered the impact of a well- sources to judge the airlines of the world. trodden scheduling system thrown into chaos. Still others considered the impact of fleet The 2019 best performing mainline airlines retirement. From sustainability to cargo, what globally were Aeroflot, ANA and Delta Air Lines, follows are excellent insights from a talented respectively. At airline headquarters around the team supported by The Cirium Core, a very deep world, teams no doubt rallied to find ways to and very wide data lake. improve their performance and looked forward to a solid 2020. Data is our strength. The pandemic challenged airlines like never before, and real-time data This year—as you undoubtedly know first-hand— became indispensable. Data illuminates. the story is different. So I’d like to spend some time reviewing the The airlines were largely on time in 2020. A insights from the year and discuss seven trends shame for the traveling public, airlines and that Cirium envisions for 2021. aviation firms worldwide who didn’t benefit from it. The factors that cause delays—congested First, let’s review the precipitous decline in flight airspace, taxiways or even a Captain patiently schedules and the rapid increase in cancelations, waiting for connecting passengers—simply did that first shook Asia before challenging the rest not exist in 2020. of the world.
Travel and tourism accounts for more than 10% The first peak of cancelations (in yellow) of global GDP and is an industry that drives occurred in February as a result of the closures the business and leisure economy. The industry in Asia. The follow-on effect was closures in the has been hit hard. Our data shows that global rest of the world as the virus spread. Flights fell passenger airline traffic in 2020 was reduced to off a cliff (in green). 1999 levels. That means that some 21 years of growth was wiped out in a matter of months. The airlines couldn’t adjust their schedules quickly enough and so a second peak in Worse, though: many of us have suffered cancelations occurred in March and April. personal tragedy as a direct result of the ongoing That big gap in white between completed COVID-19 pandemic, and for that I am sorry. flights this year and the black line? That’s the
The Cirium Airline Insights Review 2020 4 | cirium.com FROM CIRIUM’S CHIEF EXECUTIVE OFFICER
Global passenger flight disruption 2020 Scheduled flights 2019 Flights not flown 2020 Completed flights 2020 120,000
100,000
80,000
60,000
Number of flight s 40,000
20,000
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020
Source: Cirium Core, schedules and flights tracked data, date filed December 21 2020
incredible drop in flights from 2019 levels when levels until 2024. That is one of the more daily scheduled passenger flights were at over optimistic scenarios. 100,000 per day. There were some positives however. Only 10% of Flights started to recover in June but only in the A320neo aircraft are currently in storage, with domestic markets. The northern hemisphere’s domestic travel returning first. Carriers welcomed summer, China’s recovery and relaxed travel the opportunity to return newer aircraft, especially restrictions alleviated some of the strain and the A321neo workhorse to the skies. They are passenger flights returned anew, albeit at still more fuel efficient, used for short- and long-haul record lows. routes, and likely to be further away from the next maintenance check. It explains why airlines Unfortunately, a second wave of COVID-19 cases were keen to see the Boeing 737 Max return. hit Europe and North America and the recovery Nevertheless, some 30% of the global passenger plateaued. This was offset somewhat with travel fleet remains in storage and those aircraft in during key travel periods such as the Golden service are flying significantly fewer hours. Week in China and Thanksgiving in the US. Aircraft are one part of the story but balance Thanksgiving is usually the peak US travel period sheets are another. IATA reported that airlines of the year and despite the slight uptick based have added $220 billion of debt to their balance on previous months, passenger flights were still sheets through the crisis. By the end of June, it down 36% year-over-year. was reported that airlines had only about eight and a half months of cash left (as a median) As you can see, there are miles to go to return and so cash burn will be a critical factor for to 2019 levels particularly as international travel airline survivability moving in to 2021. IATA is significantly down. At the recent International are forecasting that the industry as a whole is Air Transport Association (IATA) annual general projected to turn cash positive in late 2021. meeting, it was predicted that the number of flying passengers would not return to 2019 So, what about the future?
The Cirium Airline Insights Review 2020 5 | cirium.com FROM CIRIUM’S CHIEF EXECUTIVE OFFICER
At Cirium we believe there are seven key trends:
1. Consolidation of airlines In addition to over 40 commercial airlines that have ceased or suspended operation since the start of the year, more airlines struggle as the cash burns. Airlines have already consolidated several times in the past in EMEA, the US and China into three main full-service groups and one or two large low-cost carriers (LCCs). It is possible that mid-sized carriers in the US will merge or will be acquired by their larger competitors. This trend hasn’t yet occurred in Asia-Pacific to a similar extent, so we expect to see movement in the region. Larger airlines may acquire smaller carriers and some may merge. For example, Korean Air acquired its local rival, Asiana. We expect more domestic competitors will consolidate. However, cross-border consolidation in APAC is unlikely due to ownership control rules.
2. New-generation aircraft in service Newer aircraft will return to the skies, a huge monthly cost-saver on fuel burn. In addition, the airlines have clear objectives for “greener skies” and so we will see domination by aircraft with the latest technology. This year has seen more narrowbody aircraft fly, mainly as domestic flights are recovering versus international. The popularity of the Airbus A321neo is evident. The Boeing 737 Max is now making a return to the skies. Each of these aircraft have the latest technology and excellent range, are the furthest away from the next maintenance check, and are the most fuel efficient.
The Cirium Airline Insights Review 2020 6 | cirium.com FROM CIRIUM’S CHIEF EXECUTIVE OFFICER
3. Aircraft retirements and reconfigurations There will be a surplus of aircraft. This is no surprise with 30% of the global fleet still grounded and with future demand looking slow in its recovery. Larger aircraft such as the Boeing 747 and the Airbus A380 will be retired sooner than expected. Some aircraft types will be converted to cargo. We are projecting around 66 aircraft conversions to be completed this year and we are forecasting a significant increase in 2021 and a further rise in 2022. This is likely to be driven by strong growth in the e-commerce market, helped by customers making their purchases online.
4. A new way to forecast demand During Q4, bookings were down 78% compared with the same period in 2019. That is even worse than the summer period of 2020—and even then, we were seeing 40% of bookings being made last minute—as little as one to three days before travel. Airlines have a harder time to use historical data to forecast future demand and need new indicators instead—mainly search and sentiment. This will include online searches people make, price comparison sales data, and social media activity. Airlines looked to these indicators previously, but as a secondary source. Moving forward, these are likely to become primary indicators for predicting demand and developing pricing strategies.
5. Airline operational flexibility The six- to eight-month flight scheduling window has changed to a quarterly or six to eight week planning process due to volatility of this year. We will see more of this dynamic scheduling activity as airlines develop quicker reactions to demand pricing and equipment use. This will help break down the legacy silos that existed between commercial planning network teams and revenue management. The airlines will need operational resilience and seamless collaboration between their planning and operations.
6. Digital traveler experience Real-time traveler information in the form of notifications and alerts is critical to airlines and their passengers. The booking window is now close to the day of travel, so proactive communications are needed in a short timeframe. This is essential in times of disruption and is crucial to building traveler confidence. Experiences at the airport and in flight will also need to be touchless and safe, so the implementation of AI technology will accelerate, and we will likely see new technologies launch to improve the experience of flying.
7. The rise of aircraft leasing With the financial struggles of airlines as a result of the pandemic, the leasing sector is likely to take on an even greater role. We expect to see leasing companies push past the 50% ownership share of the global fleet, which has been coming for some time. Sale-and-leasebacks in particular are an immediate source of cash, something airlines so desperately need.
The Cirium Airline Insights Review 2020 7 | cirium.com THE ON-TIME PERFORMANCE REVIEW 2020 The Cirium Airline Insights Review 2020 THE ON-TIME PERFORMANCE REVIEW 2020
The On-Time Performance Review 2020
David White VP of strategy
Jim Hetzel Head of product management, air operations
Here’s why Cirium is focusing on the broader commercial aviation industry for 2020 and not just OTP
Cirium has monitored airline and airport on-time qualities of airlines and/or a key performance performance (OTP) for more than a decade. Our indicator by airline C-suites. The public, in OTP awards program recognizes outstanding particular the corporate traveler, was keen to know performance by airlines in an array of categories how the various airlines performed so that they and regions. OTP, up until the COVID-19 crisis, could make good choices for trips that required had become a differentiator for the operational an on-time arrival or a lower risk of disruption.
OTP comparisons of key airports and regions, September 2020 versus 2019 (A14%)
London Heathrow (LHR)
John F. Kennedy (JFK)
Narita International (NRT)
Intra-Europe
North America
Intra-Asia-Pacific (excl China)
0 10 20 30 40 50 60 70 80 90 100 OTP percentages
September 2019 September 2020
Source: Cirium Core, on-time performance, date filed October 2020
The Cirium Airline Insights Review 2020 9 | cirium.com THE ON-TIME PERFORMANCE REVIEW 2020
Winners in the various categories typically as well. Many current airline schedules still use achieved OTP percentages of anywhere from block times (the total time expected for a flight a high 80s to the low 90s. Considering the to get from gate-to-gate) set for pre-COVID-19 complexity of operating hundreds or even conditions. thousands of flights each day, these levels of OTP stood out. They assume taxi in and out times and a level of congestion that simply don’t exist today—and This year, demand took an extreme dive starting probably won’t for the foreseeable future. Block in China in February 2020 before spreading to times are padded and, therefore, it becomes the US and Europe in March-April. much easier to experience an on-time arrival.
Airlines could not find the bottom in the demand Granted, some of that time is consumed by and made drastic cuts in their schedules. additional sanitation requirements. Nonetheless, Crowded skies and airports emptied out. The Cirium data shows that block time reliability has only good news is that high levels of OTP are risen right along with OTP. now the norm rather than the exception. Completed flight percentages, also known as In January and February 2020, just over 10% of the Completion Factor or CF% (the percentage of top 300 carriers had achieved an on-time arrival scheduled flights that actually operate), have percentage of 90% or higher, similar to 2019. historically been a key performance reliability indicator, and are often associated with OTP. Since then, over 60% of the top 300 airlines have done so. There are two factors at play here. The Prior to COVID-19, the industry completed roughly lack of congestion in the airspace and at airports 98% of their scheduled flights. When flights were contributes significantly to time saving. But a canceled they were typically for operational issues second, less obvious factor carries some weight such as weather or maintenance.
Completion factor by major US airlines, January to November 2020
105 100 95 90
o r 85
a c t 80 75 70 65 o m p l e t i n f
C 60 55 50 45 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
(DL) Delta Air Lines (AA) American Airlines (UA) United Airlines (WN) Southwest Airlines
Source: Cirium Core, flights tracked, date filed December 1 2020
The Cirium Airline Insights Review 2020 10 | cirium.com THE ON-TIME PERFORMANCE REVIEW 2020
In the current pandemic state of the industry the • Scheduled changes inside four months of overall CF% dropped to only 82% in March 2020 departure were minor and 66% in April 2020. • Once crew assignments were in place, only These cancelations were primarily not day-of-departure operational issues would operationally-related, but rather indicated cause a flight cancelation that schedules were far too optimistic and that decisions on whether or not to operate a • Airlines flew +98% of their published schedule scheduled flight were made on a day-to-day basis depending on demand. Post-COVID-19, the airlines:
Cancelations skyrocketed. Completed flight • Did not finalize their schedules until four to percentages have since risen back into the eight weeks prior to departure mid-nineties for many airlines as they became more savvy in aligning their schedules and • For some, schedules are changing within a capacity with actual demand. However, demand week of departure forecasting remains very difficult especially with nearly 40% of bookings happening within three • Schedules are being updated multiple times days of a flight. per week
The US airline market represents this dramatic This scheduling strategy change has helped swing in CF. restore completion factors to near-normal rate and increased the perceived reliability of airline As the completion factor chart above illustrates, adherence to the schedules published. the unprecedented drop in travel demand due to COVID-19 resulted in mass cancelation Outside of the US, we foresee there will continue through March and April 2020 as the airlines to be historically high cancelation rates and lower were unable to adjust flight schedules fast completion factors for airlines that are unable to enough to keep up with the speed of the employ dynamic schedule planning strategies, outbreak’s impact on travel. such as those employed by the US major airlines.
Entering May 2020 with dramatically lower This will result in more non-operational demand and the need to run operations as lean cancelations within three days of the flight, as possible to conserve precious cash flow, the lower completion factors and less adherence to US major carriers sharpened their pencils and the published schedule. This will result in a lot changed how airlines will plan schedules. This of potential to negatively impact passengers’ will as a result reduce cancelations to a more perception of the airline’s operations. normal rate. These and other factors led Cirium to move away Pre-COVID-19, the airlines: from our focus on OTP temporarily and to take a broader view of the commercial aviation industry • Published their schedules six to 11 months in for the 2020 year-end report. This has been an advance extraordinary year by any measure. n
The Cirium Airline Insights Review 2020 11 | cirium.com FLIGHTS FLOWN: THE YEAR IN REVIEW
This section provides insight into flights actually operated with significantly reduced international flights—a total of this year, by airline, by airport, most flown aircraft and by 3.8 million—due to closed international borders and limited two-way routes. business travel.
From January 1 to December 20, 2020, 16.8 million scheduled For comparison, there were 21.5 million domestic flights in the passenger flights were completed globally. Year-over-year same period in 2019, which equates to domestic travel being (YoY) this is a 49% drop in flights as 33.2 million flights were down 40% for 2020. As expected, international flights are tracked over the same period in 2019. significantly down with a 68% drop YoY, as there were 11.7 million international passenger flights in the same period of 2019. The year started out with over 95,000 scheduled passenger flights tracked globally on January 3—the busiest day of 2020 Global Revenue Passenger Kilometers (RPKs)—which in terms of flights. represents passenger traffic—are significantly down this year with only 2.9 trillion recorded. The global RPKs are estimated In contrast, the day with the least flights globally was April 25 to be down 67% in 2020, versus 2019 which saw 8.7 trillion. where only over 13,600 flights were tracked—at the peak of air Asia-Pacific airlines continued to handle over a third of world travel disruption. This means that there were 86% fewer flights passenger traffic. on April 25 versus January 3. All data is from The Cirium Core and is based on January 1 to Of the scheduled passenger flights flown this year, the December 20 2020 and on specific criteria, including all flights majority have been domestic flights—a total of 13 million— matched to a tail number.
All regions experienced dramatic declines in passenger jet flights in March as shown below. Asia-Pacific and North America—home to the large Chinese and US domestic markets respectively— were fastest to establish themselves on the long path to recovery. Recovery of scheduled passenger flights flown -49% By region, January to December 2020 YoY passenger flights flown 40% (2019 vs 2020) 20%
0
oY -20%
-40% Percentage Y -60% -67% -80% YoY passenger -100% traffic Jan 2020 Apr 2020 Jun 2020 Jul 2020 Oct 2020 (2019 vs 2020) Feb 2020 Mar 2020 May 2020 Aug 2020 Sep 2020 Nov 2020 Dec 2020
Africa Asia Pacific Europe Latin America Middle East North America
Source: Cirium Core, flights tracked, date filed December 21 2020
The Cirium Airline Insights Review 2020 12 | cirium.com FLIGHTS FLOWN: THE YEAR IN REVIEW
Top five operators Asia-Pacific North America Operator Flights Operator Flights by region China Southern Airlines 500.7k Southwest Airlines 869.8k By scheduled passenger China Eastern Airlines 310.1k American Airlines 604.1k flights flown, January to Air China 300.5k Delta Air Lines 599.4k IndiGo 268.2k SkyWest Airlines 575.2k December 2020 Shenzhen Airlines 189.3k United Airlines 358.4k
Europe Middle East and Africa Latin America
Operator Flights Operator Flights Operator Flights
Ryanair 207.3k Qatar Airways 84.1k Azul Airlines 138.5k Turkish Airlines 145.7k Saudia 81.0k GOL Airlines 110.8k Aeroflot Russian Airlines 135.9k Emirates Airline 65.1k LATAM Airlines Brazil 110.7k Lufthansa 124.3k Ethiopian Airlines 43.2k Volaris 89.0k Air France 118.3k Etihad Airways 31.3k Aeromexico Connect 58.8k
Aircraft OEM Flights Aircraft OEM Flights Top 10 most flown family tracked family tracked aircraft families A320 Airbus 6.07 million DHC-8 De Havilland 531.3k 737 Boeing 5.05 million A330/A340 Airbus 353.1k By scheduled arriving EJet Embraer 1.27 million ERJ Embraer 323.6k passenger flights flown, CRJ Bombardier 1.10 million 777 Boeing 323.6k January to December 2020 ATR ATR 572.7k 787 Boeing 292.1k
Top 10 most flown Top 10 busiest airports bidirectional routes By scheduled arriving passenger flights By airport, January to December 2020 flown, January to December 2020
Two-way routes by airport Flights Arrival airport and city code Flights tracked
CJU (Jeju) - GMP (Seoul) 71.9k ATL Atlanta US 250.8k HAN (Hanoi) - SGN (Ho Chi Minh City) 30.7k ORD Chicago US 228.0k FUK (Fukuoka) - HND (Tokyo) 27.2k DFW Dallas US 227.2k CTS (Sapporo) - HND (Tokyo) 25.8k DEN Denver US 194.1k SHA (Shanghai) - SZX (Shenzhen) 22.8k CLT Charlotte US 175.7k GMP (Seoul) - PUS (Busan) 21.6k CAN Guangzhou CN 158.7k CAN (Guangzhou) - SHA (Shanghai) 20.5k LAX Los Angeles US 150.8k JED (Jeddah) - RUH (Riyadh) 18.6k CTU Chengdu CN 144.2k CAN (Guangzhou) - CTU (Chengdu) 18.1k SZX Shenzhen CN 134.4k CJU (Jeju) - PUS (Busan) 17.6k SEA Seattle US 132.4k
The Cirium Airline Insights Review 2020 13 | cirium.com FLIGHTS FLOWN: THE YEAR IN REVIEW
Top five busiest Asia-Pacific North America Operator Flights Operator Flights airports by CAN Guangzhou CN 158.7k ATL Atlanta US 250.8k arriving region CTU Chengdu CN 144.2k ORD Chicago US 227.6k SZX Shenzhen CN 134.4k DFW Dallas US 227.2k By scheduled arriving KMG Kunming CN 128.4k DEN Denver US 194.1k passenger flights flown, HND Tokyo 127.8k CLT Charlotte US 175.7k January to December 2020
Europe Middle East and Africa Latin America
Operator Flights Operator Flights Operator Flights
AMS Amsterdam NL 98.4k DXB Dubai AE 62.7k MEX Mexico City MX 98.0k LHR London GB 89.8k DOH Doha QA 45.9k GRU Sao Paulo BR 63.8k CDG Paris FR 88.8k RUH Riyadh SA 41.5k BOG Bogota CO 42.0k FRA Frankfurt DE 86.0k JED Jeddah SA 38.0k CUN Cancun MX 39.5k ISL Istanbul TR 78.9k JNB Johannesburg ZA 25.0k GDL Guadalajara MX 30.4k
The Cirium Airline Insights Review 2020 14 | cirium.com THE CIRIUM ON-TIME PERFORMANCE BOARD
Henry H. Harteveldt President/industry analyst Atmosphere Research Group
Henry Harteveldt is one of the travel industry’s most Research’s global head of travel research. Before becoming respected analysts. He started the Atmosphere Research an analyst, Henry spent more than 15 years in marketing, Group—a San Francisco-based independent, objective product, planning, PR, and distribution roles at a variety travel industry market research and strategic advisory of leading travel firms, including Continental Airlines, firm—in 2011, following a nearly-12 year career as Forrester Fairmont Hotel Management Company, and GetThere. n
Dr Mario Hardy Chief executive officer Pacific Asia Travel Association (PATA)
Dr Mario Hardy has been the chief executive officer he serves on the advisory boards of the Global Tourism of the Pacific Asia Travel Association (PATA) since 2014. Economic Forum, the Global Tourism Resilience Centre, He is also a past Chairman of the Board of Trustees of Hong Kong Polytechnic University Hospitality and the PATA Foundation—a non-profit organization with Tourism School, Guilin Tourism University and the Middle a focus on the protection of the environment, the East Travel and Tourism Development Network Centre. He conservation of culture and heritage, and support for was honored as a “Global Ambassador of Peace Through education. With 30 years of specialist, aviation businesses Tourism” by the International Institute for Peace Through experience, focusing on data analytics and technology, Tourism. n
Luis Felipe de Oliveira Director general ACI World
Luis Felipe de Oliveira joined ACI World in June 2020 Latin America and Caribbean at World Fuel Services, and after leading the Latin American and Caribbean Air before then he spent 10 years at IATA, leading fuel and Transport Association (ALTA) since October 2017. A airport campaigns with governments, oil companies, fuel chemical engineer by training, he has decades of technical service providers and airports for the Americas, Africa and experience in the field of aviation fuel. Prior to joining the Middle East. Since May 2019, he has served as a board ALTA Luis was vice president of Supply Development for member of the HERMES Air Transport Organisation. n
The Cirium Airline Insights Review 2020 15 | cirium.com THE CIRIUM ON-TIME PERFORMANCE BOARD
Jeremy Bowen Chief executive officer Cirium
Jeremy Bowen is the chief executive officer at Cirium. Cirium aligned company operations, driven a new collaborative is part of global information-based analytics company RELX culture and completed the recent acquisition of Snowflake PLC and Jeremy originally joined its FlightGlobal brand, the Software, to further expand Cirium’s data lake and aviation arm of RELX in 2018. He became chief executive technology offering. officer in 2019 during the same period as the company rebranded to Cirium. Jeremy has worked in the data and analytics world for his career. He was previously with RELX’s Accuity business for eight This was after significantly growing its portfolio with years—a company focused on the financial services sector. acqusitions of Diio, FlightStats, Ascend, and Innovata. At the same time, Jeremy led the divestment of its legacy Prior to this role, Jeremy spent 15 years with data insights publishing business, FlightGlobal. During this leadership company Dun & Bradstreet in leadership positions in the UK, position, Jeremy has set a new vision and strategy for Cirium, Australia and New Zealand. n
Mike Malik Chief marketing officer Cirium
Mike Malik is the chief marketing officer for Cirium. He and business intelligence company. He spent nine years at joined the company in 2018 and rebranded the company Sabre and completed postings in London and then Hong from FlightGlobal and brought together other brands Kong where he was vice president, Asia-Pacific. While in the company had acquired in the last decade under one Hong Kong, he was a special consultant to the executive umbrella brand. management team of Cathay Pacific Airways.
Mike has been in the airline and aviation industry As an executive consultant to several airlines, Mike has throughout his career and has held several executive level assisted them in deploying new software technology positions. Mike was chief commercial officer for UBM into their operations. This included Lufthansa for day-of- Aviation, president of Aloha Air Cargo & Aloha Tech Ops, operations control, Swissair for pricing, and Cathay Pacific and chief information officer for Aloha Airlines. He was Airways for revenue management, crew management, and also one of the founding team members of Maxjet Airways, maintenance operations. where he was chief marketing and information officer. Mike is currently an advisory board member to Aerobrand, Prior to this, he was president and chief executive officer an airline branding and design company that completed of Shepherd Systems, an airline sales force automation the rebranding of Lufthansa Airlines in 2018. n
The Cirium Airline Insights Review 2020 16 | cirium.com OUTLOOK FROM THE OTP BOARD
The US airline passenger outlook for 2021
Henry H. Harteveldt President/industry analyst Atmosphere Research Group
What does airline passenger demand look like Should any vaccine become available to the for 2021? general public by the end of June, and if enough people are vaccinated, in as many That is one of the most frequently asked countries as possible, we believe airline questions I have been receiving since late recovery may be accelerated. summer. Although my firm, Atmosphere Research Group, has an extensive amount Passengers want to fly—just not necessarily on of data, the harsh truth is this: no one really your airline. knows. Airline passengers can’t wait to hear the The COVID-19 situation constantly fluctuates— phrase “prepare for departure”. In the US, too often in the wrong direction—creating nearly four in five business passengers and a dynamic and unreliable public health 84% of leisure passengers are eager to travel landscape that impacts people’s comfort with again.3 US passengers are also ready to travel air travel. Lockdowns, travel restrictions, and abroad, where they can. quarantines add to the uncertainty. Almost all US passengers own a passport.4 Of The result: historic airline demand patterns, these passport-holders, most—61% of US business traveler pricing sensitivities and booking passengers and 52% of leisure passengers—agree behaviors have been scrambled like eggs. In a with the statement “I find an empty new passport Q3 2020 research study we conducted of 43 exciting, and a passport filled with stamps of airline executives, they told us they currently destinations I’ve visited satisfying.”5 expect it will take 3.1 years from when one or more vaccines become available to the general Capturing these customers, however, won’t public for the industry to return to 2019 pre- be easy (not that it ever was). US passengers’ COVID-19 levels of traffic and revenue.1 traditional flight shopping priorities, such as schedule, price and on-time performance, As we write this, a beam of hope has begun to have been usurped by COVID-era factors, such shine. On November 10, 2020, pharmaceutical as hygiene and cleanliness, which they need company Pfizer reported that its COVID-19 to feel comfortable and confident enough to vaccine appears to be 90% effective in resume traveling again (see Figure 1). preventing the virus.2 US airline passengers’ loyalty to airlines is The timeline for Pfizer’s vaccine approval, as weak.6 Even before the pandemic began, well as those of other vaccines, along with the passengers fragmented the airlines they flew. timeliness for manufacturing and distributing For example, in 2019, 25% of United’s business enough vaccine doses to serve the general passengers flew Southwest at least once, and public, remain uncertain. 5% flew Frontier.7 About 22% of American’s
The Cirium Airline Insights Review 2020 17 | cirium.com OUTLOOK FROM THE OTP BOARD
leisure passengers flew Southwest at least However, just 28% of those firms’ employees once in 2019—and 25% flew Delta.8 traveled long-haul. These business passengers averaged 2.7 long-haul round-trips in 2019, at Passengers who experienced problems an average fare of $1,433. Domestically, just receiving refunds from canceled flights—as 4% of their travelers were allowed to book a 18% of US business passengers and nearly 12% paid premium cabin fare in 2019. For long- of leisure passengers did earlier this year—say haul travel, that increased to 31%, although they will not forget these problems, and are “premium cabin” now includes premium likely to consider taking other airlines when economy as well as business and first class. viable options exist.9 There’s an important message here: no airline really owns its The US travel managers currently believe their passengers. 2021 domestic travel will be 47% less than their domestic 2019 business travel, and that their With many airlines adjusting their route average airfare will be around $546, about networks, dropping routes here, adding routes 7% below their 2019 average (they anticipate there, passengers may face new options— business airfares will be lower, due to softer some more convenient, others less. Add to this demand, and 52% expect to further restrict differing airline policies on everything from the number of employees allowed to book eliminating change fees to blocking middle premium cabin domestic travel). seats to the onboard experience. Don’t expect passengers to habitually book your airline as All 44 travel managers whose firms had long- they may have done pre-COVID. They’d likely haul travel in 2019 expect to resume long-haul shop around. travel in 2021, provided doing so is permitted by their duty-of-care policies.11 Corporate travel managers expect 2021 will be a fraction of 2019 activity. However, these travel managers currently expect only 20% of their employees will travel For business travel activity, we’re going to long-haul next year, and expect them to make turn to the monthly research we have been 75% fewer long-haul flights compared to 2019, conducting since April 2020 with corporate at an average fare of $1,289. This group, too, travel managers worldwide. Among the 61 expects to curtail their premium cabin travel, US-based travel managers who participated in but it’s a more modest cut—18%—compared to our October 2020 survey (the latest available domestic. at time of writing this report), a slim 1% believe business travel will return to 2019 levels in Most leisure passengers intend to spend less on 2021.10 travel in 2021 than they did in 2019.
Most don’t expect to see full recovery until What about leisure passengers’ travel 2023-2024, 30% are uncertain about when intentions? As they say on social media, it’s they’ll return to “normal” and 7% currently complicated. don’t expect to ever return to 2019 spending (see Figure 2). Let’s start by remembering leisure travel is almost entirely discretionary. If someone wants In 2019, these travel managers report that their to travel, has the time and money to do so, and domestic travelers (which includes business there are no obstacles (e.g. lockdowns, travel travel to Canada and Mexico) averaged 6.6 restrictions), they travel. That said, this is 2020, round-trips, at an average fare of $587. A total and nothing is as it was. of 44 travel managers (72%) had employees who traveled long-haul (e.g. Europe, South We know passengers’ passion to travel is America, Asia, etc). strong, but what about their savings? A point
The Cirium Airline Insights Review 2020 18 | cirium.com OUTLOOK FROM THE OTP BOARD
for airlines is this: in our Q2 2020 survey, 56% haul trips at an average reported fare of of US leisure passengers said travel was a $563.18 priority for their budgeting and saving efforts, and this held steady in Q4 2020 (55%). Airlines will face a tough commercial environment trying to attract these leisure A solid majority (57%) of leisure passengers passengers. Our Q4 2020 survey shows six view themselves as spontaneous, and 34% will in 10 US leisure passengers expecting to cut consider affordable “last-minute” travel offers their 2021 travel spending compared to 2019, that provide compelling value. averaging 20%.
But, 2020 is the year that likes to siphon Just 17% plan to boost their spending next year any speck of hope it can find. In our Q1 2019 above 2019 levels, with the expected increase survey, 55% of US leisure passengers said averaging 14%. they could afford to take leisure trips as often as they wanted.12 By Q4 2020, reflecting the Ancillary products to the (financial) rescue. pandemic and the weak US economy, this fell to 39%.13 To borrow lyrics from Bette Midler, the wind beneath airlines’ wings in 2021 may be more We don’t mean to suggest US leisure airline than air—it will likely be the various optional passengers are poor. They’re not. Far from it, products carriers offer their passengers. their average household income was $85,000.14 This was down markedly from the $95,000 Although business passengers are more average in 2019.15 Still, leisure passengers’ Q4 likely than leisure to show interest in the household incomes are approximately 24% optional products that make a journey more higher than the US average of $68,703.16 comfortable, reduce perceived hassle or stress, or provide better, more responsive service, But, to better understand this audience, and both segments show healthy interest. their plans for 2021 leisure travel, we need to explore some key details regarding their In what may be a bright spot for airline finances. Some 59% of leisure passengers work managers, interest in optional products part- or full-time. Among these employed remains fairly consistent regardless of whether passengers, 46% earn hourly wages. passengers intend to reduce or increase their leisure travel spending next year. For example, In addition, 22% are earning less due to the 62% of US leisure passengers who intend to pandemic. One-third are worried they may lose spend less for their 2021 travel, and 64% who their jobs in the next six months. Nearly one in plan to spend more, express interest in optional five leisure passengers say they, their spouse/ products that provide additional comfort.19 partner, or both have already lost their jobs due to the pandemic. Sobering. What’s behind this? Both groups are equally likely to say they have a separate source In our 2019 traveler research—the most recent of funds—what Atmosphere Research calls year we consider personal travel spending the “second wallet”—for optional travel valid—US leisure passengers reported taking purchases, which include ancillary products.20 an average of 2.6 round-trip flights within But, if airlines hope to successfully tap into North America, spending $336 per person on this potential goldmine, they need to have each round-trip, or nearly $874 per person the proper airline retailing and commerce for the year.17 Of these, 21% took a long-haul infrastructure—especially data, technology, international leisure trip, averaging 1.1 long- marketing prowess, digital channels—in place.
The Cirium Airline Insights Review 2020 19 | cirium.com OUTLOOK FROM THE OTP BOARD
Airlines need to incorporate flexibility into So what does this all mean for airlines? 2021 strategies. Incorporate flexibility into every business scenario and strategy being considered for Travel managers appear to be confident of 2021. It’s highly likely that 2021 will, at the end, their expected 2021 behavior, but acknowledge not turn out to look anything as we currently that external factors such as the virus’s imagine it will. What we all hope for, what we unpredictable nature, economic conditions, all need, is that 2021 turns out to be a much and even office reopening plans could better year than expected. n drastically change their plans.
Likewise, although leisure passengers express About Atmosphere Research: intense passion for traveling, they are a fragile Atmosphere Research is an independent, segment, with more currently expecting to objective and unbiased travel industry strategic reduce their personal travel than maintain marketing research and advisory firm based current levels or travel more. If there is a in San Francisco, CA. Atmosphere conducts bright spot for the industry, it’s passengers’ consumer and industry research worldwide on willingness to spend for the optional services a variety of commercial and technology topics. they believe will improve the quality or For more information, please email convenience of their journeys. [email protected]
1 Source: Atmosphere Research Group’s Airline Industry COVID 11 Four of the 17 travel managers whose firms did not have any Recovery Online Study, Q3 2020. long-haul travel in 2019 said their organisations were currently 2 Source: Pfizer and BioNTech announce vaccine candidate against considering business strategies that may require long-haul travel in COVID-19 achieved success in first interim analysis from phase 3 2021. study, November 9, 2020, Pfizer Inc. https://www.pfizer.com/news/ 12 Atmosphere asked survey participants to agree or disagree, on a press-release/press-release-detail/pfizer-and-biontech-announce- five-point scale, with the statement “I can afford to travel for leisure vaccine-candidate-against as often as I want”. Some 55% of the US leisure airline passengers 3 Source: Atmosphere Research Group’s US COVID Travel Online answered “agree” or “strongly agree.” Source: Atmosphere Study, Q3 2020. Research Group’s US Travel Online Study, Q1 2019. 4 89% of US business passengers and 80% of US leisure passengers 13 Source: Atmosphere Research Group’s US COVID Travel Online own a valid passport. Source: Atmosphere Research Group’s US Study, Q4 2020. COVID Travel Online Study, Q3 2020. 14 Source: Atmosphere Research Group’s US COVID Travel Online 5 Source: Atmosphere Research Group’s US COVID Travel Online Study, Q4 2020. Study, Q3 2020. 15 Sources: Atmosphere Research Group’s US Travel Online Study, Q1 6 In the US, 24% of business passengers and 12% of leisure 2019; and US COVID Travel Online Study, Q4 2020. passengers view themselves as extremely loyal to one airline or 16 Source: Income and Poverty, 2019, US Census Bureau. https://www. alliance. Source: Atmosphere Research Group’s US COVID Travel census.gov/library/publications/2020/demo/p60-270.html Online Study, Q3 2020. 17 Source: Atmosphere Research Group’s US Travel Online Study, Q1 7 Source: Atmosphere Research Group’s US COVID Travel Online 2019. Study, Q3 2020. 18 Source: Atmosphere Research Group’s US Travel Online Study, Q1 8 Source: Atmosphere Research Group’s US COVID Travel Online 2019. Study, Q3 2020. 19 Source: Atmosphere Research Group’s US COVID Travel Online 9 Source: Atmosphere Research Group’s US COVID Travel Online Study, Q3 2020. Study, Q3 2020. 20 Among US leisure passengers who intend to spend less on their 10 The base for all corporate travel manager-referenced research in 2021 personal travel compared to 2019, 53% establish a separate this report is 61 US-based corporate travel managers who belong budget for discretionary travel purchases. Among those who to Atmosphere’s corporate travel manager panel. The source for all intend to spend more in 2021 than they did in 2019, 57% have a travel manager-referenced research is Atmosphere Research Group’s “second wallet” they use to pay for optional purchases. Source: Corporate Travel Manager Worldwide Online Monthly Study, October Atmosphere Research Group’s US COVID Travel Online Study, Q3 2020. 2020.
The Cirium Airline Insights Review 2020 20 | cirium.com OUTLOOK FROM THE OTP BOARD
Reshaped tourism sector to emerge
Dr Mario Hardy Chief executive officer Pacific Asia Travel Association (PATA)
Mario Hardy, of the Pacific Asia Travel Association (PATA), explains how the COVID-19 pandemic has plunged the region’s tourism sector into unprecendented crisis—but also created the opportunity for a reset
The rapid development of air connectivity together. The implementation of green in the Asia-Pacific region over the past two corridors/travel bubbles and standardized decades has been a massive driving force health protocols are currently required for a for the exponential growth of the travel and safe reopening, which will lead to a slower tourism industry. The main driver of growth restart of air travel. It will likely take years has been the phenomenal increase of the before travelers can enjoy the same direct Chinese outbound travel market, which grew in access and frequency of flights as before the the space of 10 years from 57 million in 2010 to outbreak of COVID-19. 154 million in 2019. Our view is that the tourism industry will not The current COVID-19 pandemic presents an see full recovery to pre-COVID-19 growth levels unprecedented challenge and has drastically until 2024. However, the Asia-Pacific region is changed the entire travel and tourism well positioned to lead the recovery. The region landscape. has contained the number of COVID-19 cases; health and safety protocols are being adhered A recent United Nations policy brief outlining to by citizens; and there has been progress on COVID-19’s impact on the tourism industry the development of green corridors. said that if a solution to reopen borders and rebuild consumer confidence were not found We know from sentiment analysis surveys we in the months to come, over 100 million direct have conducted with our partners in recent tourism jobs would at risk globally and $1 months that there is still an immense desire for trillion in international visitors’ spending could people to travel. This gives us hope that when be lost. borders safely reopen, we can expect a path to recovery. This would amount to a loss of 1.5-2.8% of global GDP, and the most vulnerable would Nevertheless, the current situation has also be directly affected by this severe economic given the industry an incredible opportunity impact. to restart tourism and reassess the sector’s interdependent relationships with the broader Contrary to previous crises, we expect the economy, the environment, and society. Here recovery to be progressive and likely feel is a chance to develop a more sustainable and like trying to assemble a million-piece puzzle responsible tourism sector. n
The Cirium Airline Insights Review 2020 21 | cirium.com OUTLOOK FROM THE OTP BOARD
2020: the end of airline industry data silos
Mike Malik Chief marketing officer Cirium
Mike Malik discusses the need for more data fluency between industry enablers in a secure, accurate and seamless manner
2020 has given airlines plenty of cause to Our industry is notorious for having legacy scramble. They seek revenue wherever they data silos. Data silos present challenges in our can find it—standing down long-used revenue ability to make good, intelligent decisions. management tools in favor of cash flow. And, They hamper optimized revenue maximization they are doubling down on cost-saving measures and cost savings—and there’s no good reason with new gusto. Paradoxically, it has also given they should exist today. Data fluency can help airline managers time to pause. At many carriers, save the day. Those airlines that are poised to chief technology officers are using this time of succeed post-crisis will be those whose data can depressed travel to adapt their organizations to cross the organization and be used by disparate the new travel reality. Marginal innovations are parts. The winners and losers of this battle are making way for wholesale technology changes. being decided now.
The Cirium Airline Insights Review 2020 22 | cirium.com OUTLOOK FROM THE OTP BOARD
Imagine a scenario where managers could inform incredibly sensitive personal information, there an operational decision, instantaneously, based are few acceptable reasons why an airline’s on aircraft asset values. The flight operations owned data should be locked away from team could better manage variable costs by managers. choosing the right aircraft for a particular route. Fluency gives the operations team the ability to Cirium is working to democratize as many data differentiate between Boeing 737s in its fleet. points as possible in this space. That concept is Should they assign a Max versus a 737-800—and built into our company’s DNA, where we have which one—based on how it is financed and its assembled the largest data lake (The Cirium operational characteristics? These calculations Core) in the aviation space, spanning the globe can’t be done in a manager’s head. This kind of and for everything from schedules and traffic decision-making is the holy grail. data to aircraft asset values and financing details. Our strength is to make this data and Similarly, consider the growth in electronic new sources available to our customers, to boarding gates and the facial recognition help them meet their myriad benchmarks. The software that underlies it. In 2018 and 2019, primary beneficiary of this work will be the flying e-gates were shiny, new innovations—a novelty public—more convenient connections, better seen at a handful of airports worldwide. It’s value—and fewer lost bags. only through the cooperation of the data holders, airports and technology providers We know the traveler is coming back. We that these innovations will quickly become the know from our own experience that a virtual new normal, worldwide. The technology itself meeting isn’t nearly as effective as a face-to-face is remarkable; speedy, reliable, and mostly moment. We know that we’ve collectively faced touchless. The lubricant to make it work, a challenge, and from what we can tell, 2021 will however, was a collective decision to create data be the very beginning of the recovery. But from fluency between providers—secure, accurate my vantage point, I see data silos being erased and seamless. No silos here. And if it can be as a direct consequence of this crisis. And we’ll done between independent organizations with all be better off for it. n
The Cirium Airline Insights Review 2020 23 | cirium.com AIRLINE INSIGHTS 2020 The Cirium Airline Insights Review 2020 By Megan Henry Lead data AIRLINE INSIGHTS 2020 analyst at Cirium
Region - Global 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 21,735,767 56.47% 60,377 29.79 min
Flights by Week for 2020 to Date
500K 10%
0K 0%
-10% -500K Flights Scheduled Week Over Week Change % -20% -1000K
-30% Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
American Airlines China Southern Airlin.. Delta Air Lines Southwest Airlines United Airlines
100% 200K
50% 100K Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 25 | cirium.com AIRLINE INSIGHTS 2020
Region - Global 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/21/2020 12/21/2020 17,019,609 4,716,158 22,277 9,568
Year to Date Status of Aircraft Storage, Global In Service, Global
30K
25K
20K
15K Total Aircraft
10K
5K
0K Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
ATL CAN CGK DEN DFW
100K 100%
50K 50% % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 26 | cirium.com AIRLINE INSIGHTS 2020
Region - Asia-Pacific 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 8,685,575 66.41% 24,127 32.67 min
Flights by Week for 2020 to Date
200K
10% 100K
0K 0%
-100K
Flights Scheduled -10% Week Over Week Change % -200K
-20% -300K Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
Air China LTD China Eastern Airlines China Southern Airlin.. IndiGo Lion Air 150%
100K
100%
50K 50% Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 27 | cirium.com AIRLINE INSIGHTS 2020
Region - Asia-Pacific 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/21/2020 12/21/2020 7,831,198 854,377 7,697 1,855
Year to Date Status of Aircraft Storage, Asia-Pacific In Service, Asia-Pacific 10K
8K
6K
Total Aircraft 4K
2K
0K Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
CAN CGK CKG PEK SZX
100% 40K
50% 20K % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 28 | cirium.com AIRLINE INSIGHTS 2020
Region - North America 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 6,069,051 57.68% 16,905 29.87 min
Flights by Week for 2020 to Date 200K 20%
100K 10%
0K 0%
-10% -100K Flights Scheduled Week Over Week Change % -20% -200K
-30% Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
Alaska Airlines American Airlines Delta Air Lines Southwest Airlines United Airlines 200K 100%
100K 50% Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 29 | cirium.com AIRLINE INSIGHTS 2020
Region - North America 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/20/2020 12/20/2020 5,660,869 408,182 6,236 2,828
Year to Date Status of Aircraft Storage, North America In Service, North America
8K
6K
4K Total Aircraft
2K
0K Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
ATL CLT DEN DFW ORD
100K 100%
50K 50% % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 30 | cirium.com AIRLINE INSIGHTS 2020
Region - Europe 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 3,703,885 44.29% 10,317 22.71 min
Flights by Week for 2020 to Date
40% 100K
20%
0K 0%
Flights Scheduled -20% Week Over Week Change %
-100K -40% Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
Aeroflot Ryanair S7 Airlines Wideroe Wizz Air 60K
100% 40K
50% 20K Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 31 | cirium.com AIRLINE INSIGHTS 2020
Region - Europe 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/20/2020 12/20/2020 1,517,242 2,186,643 4,581 3,060
Year to Date Status of Aircraft Storage, Europe In Service, Europe 8K
6K
4K Total Aircraft
2K
0K Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
AMS CDG FRA LHR SVO
100% 60K
40K 50%
20K % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 32 | cirium.com AIRLINE INSIGHTS 2020
Region - Latin America 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 1,743,696 51.27% 4,857 27.49 min
Flights by Week for 2020 to Date
40%
50K
20%
0K 0%
Flights Scheduled -20% Week Over Week Change % -50K
-40% Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
Aeromexico Azul Gol LATAM Airlines Volaris
100% 40K
20K 50% Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 33 | cirium.com AIRLINE INSIGHTS 2020
Region - Latin America 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/20/2020 12/20/2020 1,277,560 466,136 1,634 663
Year to Date Status of Aircraft Storage, Latin America In Service, Latin America 2500
2000
1500
Total Aircraft 1000
500
0 Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
BOG CUN GRU MEX SJU
40K 100%
30K
20K 50%
10K % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 34 | cirium.com AIRLINE INSIGHTS 2020
Region - Middle East & Africa 2020
Total Scheduled Flight Volume Compared to Average Daily Average Delay of Delayed Flights 2019 Flights Flights 1,533,560 49.07% 4,272 28.25 min
Flights by Week for 2020 to Date 60K 60%
40K 40%
20K 20%
0K 0% Flights Scheduled Week Over Week Change % -20% -20K
-40% Week 3 Week 5 Week 7 Week 9 Week 11 Week 13 Week 15 Week 17 Week 19 Week 21 Week 23 Week 25 Week 27 Week 29 Week 31 Week 33 Week 35 Week 37 Week 39 Week 41 Week 43 Week 45 Week 47 Week 49 Week 51
Top 5 Airlines Flight Volume Compared to 2019
Ethiopian Airlines Pegasus Qatar Airways Saudia Turkish Airlines
30K 100%
20K
50% 10K Flights Scheduled % of Total Flights in 2019
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 35 | cirium.com AIRLINE INSIGHTS 2020
Region - Middle East & Africa 2020
Aircraft in Service on Aircraft in Storage on Total Domestic Flights Total International Flights 12/20/2020 12/20/2020 732,740 800,820 2,120 1,095
Year to Date Status of Aircraft Storage, Middle East & Africa In Service, Middle East & Africa
3K
2K Total Aircraft
1K
0K Jan 1 Mar 1 May 1 Jul 1 Sep 1 Nov 1 Jan 1
Top 5 Airports Flight Volume Compared to 2019
DXB ISL JNB RUH SAW 30K
20K 2000%
10K 1000% % of Total Flights in 2019 Flights in Current Year
0K 0% April April April April April June June June June June August August August August August October October October October October February February February February February
Copyright Cirium 2020. Please view appendix for attribution requirements. The Cirium Airline Insights Review 2020 36 | cirium.com INDUSTRY VOICES The Cirium Airline Insights Review 2020 INDUSTRY VOICES
The path to aviation industry recovery
Richard Evans highlights the new global aviation recovery scenarios and how they differ by region
Six months ago, Ascend by Cirium outlined three of COVID-19, and the recovery of air travel, but it potential recovery scenarios and have since does not appear as simple as this. remodeled two new scenarios—scenario four and scenario five. Australia has succeeded in lowering the number of new COVID-19 cases to almost zero, In hindsight, the original scenarios—scenario one but domestic traffic remained down 89% in By Richard Evans, and scenario two were hopelessly optimistic. September. In contrast, Brazil has been one of the Senior consultant at At the time of developing these scenarios, the worst affected countries, but has seen a steady Ascend by Cirium phases of recovery were contextualized as being: recovery in domestic flights and traffic since July.
1. Contraction/shutdown In reality, it is the application of government 2. Hibernation/stabilization travel restrictions, or the absence of them, that 3. Recovery/rebuild has the most direct correlation. It is particularly 4. Normalization/return to growth noticeable that in North East Asia, there is still almost no international traffic, even though the Now, in Q4 2020, different regions and countries new case rates in each country are a fraction of are at different points in their recovery. A second those in Europe or the Americas. wave of COVID-19 cases will cause renewed impact on air travel demand. It would be simple The first chart shows the evolution of global, to say that there is a clear correlation between Chinese, and Asian International traffic the success of a country in containing the spread (measured by revenue passenger kilometres
Evolution of 2020 traffic, Asia versus Rest of World 10%
0
-10% ) -20%
-30%
-40% e a r c h n g y -50% e r - v -60%
e a r - o -70%
-80%
R P K s ( y -90%
-100%
-110% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
China Asia International World Cirium Scenario one (2-yr recovery) Cirium Scenario three (4-yr recovery)
Source: CAAC, IATA, Ascend by Cirium analysis, date filed October 2020
The Cirium Airline Insights Review 2020 38 | cirium.com INDUSTRY VOICES
or RPKs) in 2020. It also shows the month-on- for our new long-term Cirium Fleet Forecast, month assumptions for two of the three Ascend assumes a slow recovery, with 2019 traffic levels scenarios constructed in late March 2020. not being reached until 2024.
The sharp contrast between Chinese traffic and Scenario five assumes that once effective Asian international traffic is apparent. The data vaccines are widely available, perhaps in mid- for China shows a huge differential between 2021, there is a rapid recovery in international the domestic market, where IATA reported demand, led by leisure travelers. In this case, 2019 September RPKs were only down 3% year- traffic levels are exceeded in 2023, at a global over-year, and international markets, where the level. Civil Aviation Administration of China reported August RPKs down 96%. In contrast to our April scenarios, the latest two include specific month-by-month assumptions for These scenarios were constructed with a each of the eight domicile regions that make up simple criteria at the global level, with monthly our forecast. assumptions from 2020 to 2023 for: Thus the global picture is the result of summing • traffic (RPKs), each recovery profile, capacity level, and • load factors (and hence capacity in available resultant fleet requirement together. The month seat kilometres or ASKs), at which each region matches 2019 RPK levels is • the split of capacity between single-aisle and summarized in the accompanying table. twin-aisle aircraft, • productivity per aircraft. The implications of the new scenarios are that 2021 traffic will only see a modest year-on-year Scenario one envisaged a return to 2019 traffic growth against 2020. However, this masks the levels (on a global basis) in mid-2021, whereas fact that Q1 2021 will continue to show 60-70% scenario three had a slower recovery profile, with declines versus Q1 2020, but by December 2021, traffic recovering in 2023. traffic will be 65% higher than 2020, even in the slower recovery case. Monthly traffic to-date has evolved very closely to the profile included in scenario three. However, The annual traffic is summarized in the second this assumed the recovery would continue each chart, highlighting the much reduced traffic month through the winter of 2020/2021. In reality, levels now assumed in 2021 compared to the it became clear in September that demand is not most pessimistic of our three earlier cases. The likely to continue to improve. “rebound” year is now pushed back to 2022, with scenario five having an almost 80% year-on-year In particular, European airlines revised their increase. forward schedules downwards, as did many airlines in North America. Asian airlines remain The consequent impact of lower demand on the constrained by very strict international travel in-service commercial passenger jet fleet has restrictions. Recent lockdowns in Europe will also been dramatic. However, we have actually reinforce this trend. seen a higher number of aircraft in use than was anticipated back in April. This has been for two Ascend by Cirium thus constructed two new main reasons. Firstly, average aircraft utilizations scenarios in September. These both assume have been much less than expected, with single- that traffic will level off at 60-70% down on aisles currently flying just six to seven hours a day, 2019 during the winter, with little meaningful compared to nine to 10 hours a day in Q3 2019. increase in capacity until the northern summer season commences in April 2021. Thereafter they Secondly, many passenger twin-aisles are being diverge. Scenario four, which forms the baseline used on all-cargo flights due to the shortage
The Cirium Airline Insights Review 2020 39 | cirium.com INDUSTRY VOICES
Ascend by Cirium recovery scenario forecast by annual traffic
10,000 ) 9,000
8,000
e r s ( R P K 7,000
6,000
5,000
4,000 s e n g r K i l o m t
a s 3,000
2,000 e n u P
v 1,000 e R 0 2019 2020 2021 2022 2023 2024
Scenario three Scenario four Scenario five
Source: Ascend by Cirium analysis, date filed October 2020
of belly-hold cargo capacity caused by the Projected recovery scenarios by region cessation of most regular long-haul passenger services. Region Scenario four Scenario five
It is difficult to assess exactly how many aircraft Asia-Pacific May 2024 Mar 2023 this applies to, but Ascend estimates that at least Europe Mar 2025 May 2023 half of the 2,000 twin-aisles flying each day are North America Dec 2024 Sep 2023 deployed on cargo-only flights. China Apr 2023 Sep 2022 Since April, many airlines have announced plans Latin America Oct 2024 Jul 2023 to permanently remove aircraft from their fleets. Middle East Jan 2025 Apr 2024 Over 400 aircraft have also been returned to Africa Jun 2025 Mar 2024 lessors, of which over 300 remain in storage without an airline operator identified. Russia/CIS Jul 2024 Jun 20223 World total Aug 2024 May 2023 It is challenging to evaluate exactly how many aircraft are surplus to requirements. In November, Source: Ascend by Cirium analysis there were over 6,500 stored single-aisle and twin-aisle passenger jets, up from 1,900 at the end of 2019. However, this figure would be and capacity, in 2024. Thus, crudely, there will be several thousand higher if utilization rates were as many permanent retirements in the next four at optimal levels. years as there are deliveries.
Our scenario four case has the in-service fleet Older, less fuel efficient aircraft that are parked increasing from roughly 15,000 single-aisle/ today, or are earmarked to be permanently twin-aisle passenger aircraft today to 16,500 by removed from airlines’ fleets shortly, are unlikely the end of 2021, and around 18,000 at the end to return to service when demand grows. of 2022. Airlines are more likely to reactivate the most Not surprisingly, the fleet doesn’t return to 2019 modern types from the parked fleet and prioritize levels until around the same time as does traffic new deliveries, assuming they can be financed.
The Cirium Airline Insights Review 2020 40 | cirium.com INDUSTRY VOICES
In-service commercial passenger jet fleet evolution 2019-2020
22,000
20,000
18,000
16,000 e fl t 14,000
12,000
10,000
8,000
6,000
N u m b e r o f i n - s v c 4,000
2,000
0 Fleet Dec 31 2019 New deliveries Retirements Freight conversions Net into storage Fleet Oct 31 2020
Total Additional
Source: Cirium Core, fleets data, single-aisle and twin-aisle aircraft, date filed October 2020
The implications of the strong traffic recovery— parked by their airline owners. It also seems clear whenever it occurs—are that many aircraft that that, eventually, there will be many airline failures, are currently parked will return to service in especially among smaller, non-government- two to four years’ time. Whether this is actually backed carriers. practicable is another question. However, it is equally open to question whether airlines will Over the last six to seven months, we have learned seek to place new aircraft orders, or pull forward a lot about how governments are reacting to delivery slots deferred in the interim period, to the crisis. Hopes for a recovery in travel are now allow Airbus and Boeing to ramp up production pinned to the release of effective vaccines, but much before 2025. there is no guarantee when this will happen.
Airbus and Boeing deliveries in 2020 look There has been very little international co- set to total around 650 aircraft. This seems ordination of responses to the crisis, or of certain to increase substantially in 2021, to over how to facilitate the restart of travel. It will be 1,000 aircraft, driven largely by the Boeing 737 challenging to plot a path as to how nations Max returning to service, and the two leading will recognize that inbound passengers have OEMs will do everything they can to maintain received an accredited vaccine and/or have production and delivery rates at these levels or tested negative for COVID-19. Hence, we assume above into 2022-2024. a relatively slow recovery in demand from Q2 2021 in scenario four. What does seem clear is that for the foreseeable future there will remain substantially more We will continue to monitor the market supply of aircraft than there is demand. developments against our scenarios in our Aviation Monitor analyses. The key focus is to This includes supply of new-build aircraft, mid- continue to work closely with the industry to life assets returned to lessors, or aircraft simply define the right recovery path.n
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European LCCs feel the strain
David White reviews the fluctuating European low-cost carrier market, where airlines scaled back flight operations in the last weeks of November
European low-cost carriers (LCCs) are facing Percentage difference—Q1 2019 vs Q4 2018 a worsening crisis that will potentially put unbearable strain on their finances through the Airline Flights Seats ASKs rest of 2020 and into 2021. The notion of seeing a sustained and measurable recovery during the Eurowings -9.4% -10.3% -13.4% fourth quarter looks to be a false hope. Ryanair -7.5% -7.3% -8.0% By David White, easyJet -8.6% -8.2% 10.0% VP of strategy, market Rather than ramping up operations this autumn, development at Cirium Europe’s low-cost airlines further scaled Vueling -13.8% -13.6% -14.5% back their flight operations in the face of the Wizz Air -8.7% -8.5% -8.6% continent’s ‘second wave’ of COVID-19 cases Total -8.9% -8.7% -9.7% and associated travel restrictions and quarantine requirements. Source: Cirium Core, historical schedules, date filed October 2020
The principal operating divisions of Eurowings, There appears to be no momentum to the Ryanair, easyJet, Vueling Airlines and Wizz Air recovery that might carry over into Q1 2021, a have collectively clawed their way back to fly quarter that is often a write-off for the LCCs more than 50% of 2019’s level of scheduled during normal times. flights on peak days during August. Last year saw the LCCs’ Q1 ASK (Available Seat But as of November 30, this figure had sunk Kilometers) capacity nearly 10% below the previous back to less than 13%. Total daily flights by all quarter (Q4 2018) and over 25% below the European operators have declined by more subsequent quarter (Q2 2019). Indications are that 6,500 since the end of August on a seven-day Q1 2021 will see continued erosion in demand and average basis, to below 4,200 on November 30. supply from (Q2 2019)—as shown in the table. n
European LCCs daily flights tracked 5,000 4,500 4,000 3,500
e d 3,000
a c k 2,500 2,000 1,500 1,000
D a i l y fl g h t s r 500 0
y 20 v 20 a Jul 20 ug 20 o Mar 20 Apr 20 M Jun 20 A Sep 20 Oct 20 N
Eurowings Ryanair easyJet Vueling Airlines Wizz Air 2019 Combined (7-day rolling average)
Source: Cirium Core, flights tracked, date filed December 1 2020
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Shifting sands: matching flight schedule capacity with demand
Will Livsey identifies a new normal in airline scheduling
I write this from 37,000ft, aboard an American their levels of service. Once inside four months, Airlines Boeing 777-300 flying from Honolulu airlines would lock down equipment type, and to Dallas. My wife and I booked this trip only the time of day. Inside two months, most of the five days in advance. With our Thanksgiving changes would be from operational issues such plans scrubbed, we decided to jet to Hawaii last as crew, maintenance and facility changes. minute. In 2020, that was both possible and economical. Once the schedule had the crew assigned— Will Livsey, about a month out for the start of the crew Customer support, The same applies to airline network planning month—something major would have to happen product development at and scheduling. Go ahead and throw out the for there to be a change: a hurricane or erupting Cirium old textbook for day-of-week scheduling for volcano, say. Or, of course, a pandemic such as business travel. It’s time to write a new book. SARS or COVID-19.
Before the COVID-19 pandemic, the airline Nowadays, airlines barely have plans firmed up planning horizon was both long and short term. beyond a month prior to departure, as they react New markets were typically announced and to the overall uncertainty in customer sentiment loaded six to 12 months in advance. Closer in, about travel. changes comprised of day-of-week adjustments, retiming, and capacity changes from swapping Changes are frequent and short term. Most in larger or smaller aircraft, all with the goal of impact flights only four to eight weeks out. For matching supply with demand. instance, consider the year-over-year percentage changes for American Airlines, Ryanair, and Spirit Airlines typically didn’t really focus on their Airlines. schedules outside six months. Those schedules were extensions of the closer-in schedules with As of the beginning of December, Ryanair seems known seasonal adjustments. Sometime between to have reasonable forward capacity figures four and six months out, airlines would figure out through February 2021. Compare that with
Industry flight schedules in 2020—what’s changed?
PRE-COVID-19 POST-COVID-19
Six—11 months in advance Airlines are waiting four to eight weeks prior —few changes inside four months to departure to firm up their schedules
Many changes one to two weeks prior to Very limited once crew bids went out departure, multiple updates per week
Many non-operational cancelations within +98% completion factor one/two days of departure
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Spirit Airlines, which has positive year-over-year the planning and changes many of us faced with capacity for January 2021 and beyond. This is holiday travel during the pandemic, the airlines indicative of scheduled months that are merely are in similar situation where they are having to a placeholder until the teams have a chance to make decisions closer to departure in response firm up what they will ultimately fly. Much like to a rapidly changing world. n
Forward-looking flight schedule adjustments in 2020
Mkt AL Date As of Oct 10 2020 As of Oct 3 2020 Week-over-week 2020 Year prior (2019) Year-over-year % diff Scheduled flights Scheduled flights scheduled flights Scheduled flights Scheduled flights
American Dec-20 110,055 110,055 0 197,299 -44.2% Airlines Jan-21 111,453 111,453 0 192,499 -42.1% Feb-21 160,722 160,722 0 181,893 -11.6% Mar-21 217,818 217,818 0 199,066 9.4% Ryanair Dec-20 17,777 21,748 -3,971 60,004 -70.4% Jan-21 26,732 26,780 -48 59,518 -55.1% Feb-21 23,206 23,262 -56 55,260 -58.0% Mar-21 30,909 30,997 -88 53,277 -42.0% Spirit Dec-20 14,607 14,641 -34 19,145 -23.7% Airlines Jan-21 23,175 23,175 0 19,329 19.9% Feb-21 22,296 22,296 0 19,059 17.0% Mar-21 25,312 25,312 0 21,427 18.1%
Source: Cirium Core, fligiht schedules, date filed October 2020
Short-term planning allows for short-term experiments: Memphis to Indianapolis
Given the new planning horizon, airlines are forced to experiment with new markets they previously wouldn’t consider. Business travel has declined, and leisure travel makes up the bulk of passengers in the air today.
For instance, in late August, Delta Air Lines announced service from Memphis to Indianapolis, beginning in October. The concept may have been to connect passengers between two FedEx logistics centers.
The service was loaded the weekend of August 31 but was canceled for November and December by the weekend of November 2. The route was previously flown in 2016 by OneJet. You can see the scheduled capacity (flights) as the color bars for each month. Each bar on the x-axis represents the schedule load (by weekend date).
Needless to say, the experiment was short-lived. However, it is an example of how quick and nimble carriers like Delta Air Lines are to add and cut markets in today’s environment.
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Airlines go big on early retirements
Michael Gubisch explores how the pandemic both accelerated withdrawals of large widebodies and spelled the end for some younger, smaller jets too
As airlines parked aircraft en masse amid Another type heavily affected by the crisis is the coronavirus outbreak, the Airbus A380 the A340. Cirium fleet data shows that as of was probably the most prominent type for December 1, the number of A340s in passenger which widespread decommissioning was or cargo service had more than halved to 53 accompanied by uncertain prospects of the from 118 at the end of 2019. The number of Michael Gubisch, aircraft ever returning. A340s stored grew from 70 to 117, and the Cirium Dashboard’s number in retirement from 157 to 175. aerospace editor Air France became the first carrier to permanently withdraw the superjumbo, Iberia withdrew its entire A340-600 fleet from accelerating a plan to prematurely retire its 10 service because of the pandemic. At the end A380s by the end of 2022. Across the border in of 2019, the IAG carrier had 17 A340-600s, Germany, Lufthansa has removed all its A380s including one in storage. and A340-600s from future planning. Lufthansa parked its entire A340-600 fleet Qatar Airways, meanwhile, does not foresee in April. Out of 17 A340-600s operated by its 10 stored A380s returning for at least two the German carrier at the end of 2019, no years, while another Middle Eastern operator, more than 10 are set to be reactivated—and Etihad Airways, likewise with a 10-strong fleet, only in the event of an unexpectedly rapid is awaiting “sufficient appetite to reassess [the recovery. A380’s] viability”. Other airlines that suspended A340 operations As of December 1, Cirium fleets data shows 21 amid the crisis include Air France, SAS, A380s in service—and 219 in storage. Three restructuring South African Airways, and Virgin had been retired. These figures exclude three Atlantic. A380s that Airbus retained as test aircraft. In any discussion of existing widebodies, The A380 program was already in trouble the Boeing 747 naturally looms large. British before the COVID-19 crisis. In 2019, Airbus Airways, once the largest operator of 747 announced the end of the type’s production passenger jets (with a peak fleet of 75 in 1998), after the airframer had struggled for years had 31 747-400s in operation in March. to win new or even follow-on business from airlines beyond Emirates. The Dubai-based Four months later, the airline announced that carrier has eight more on order, and production none would return to service. “It is a heart- is set to end in 2021. breaking decision to have to make,” said British Airways then-chief Alex Cruz. In November, wet-lease operator Hi Fly disclosed a decision to retire its sole A380 by In June, Qantas retired its remaining half- year end and replace it with A330s, noting dozen 747 passenger jets six months earlier that the pandemic had “drastically reduced the than previously planned, and said of its stored demand for very large aircraft”. A380 fleet: “While most of the group’s long- haul aircraft are expected to steadily return Singapore Airlines, the type’s second-largest to service over time, there is significant operator, decided to permanently retire seven uncertainty as to when flying levels will support of its 19 stored A380s because of the crisis. its 12 Airbus A380s.”
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Lufthansa accelerated its 747-400 retirement that it “may continue to consider further plan too. Having previously intended to operate opportunities for early aircraft retirements”. the type until the end of the decade, the carrier has moved the timeframe forward to 2025. American Airlines has retired its A330s, among other aircraft, amid the pandemic—including its For types—and indeed airlines—that were 15 A330-200s, which have an average age of nine already in difficulty, the crisis’ impact has years. The Fort Worth-based major is also retiring been unforgiving. Four-engined aircraft have its 757s, 767s, CRJ200s and Embraer 190s. therefore been especially affected, but airlines have also phased out or accelerated retirement In October, Cirium aviation analyst Syed Zaidi plans for more popular twinjets. highlighted the influence of maintenance costs on aircraft’s post-crisis deployment prospects. In May, Delta Air Lines disclosed a decision to “The 777 overhaul costs are among the highest retire its 18-strong 777 fleet this year (along with, in the industry for any aircraft type, and A330s less surprisingly, its 26 MD-90 narrowbodies). are in oversupply with many younger aircraft And in September, the Atlanta-based carrier available,” he noted. said it would retire its 90 717-200s and 56 767-300ERs by December 2025, and its 22 “The result is the older A330s and 777s getting Bombardier CRJ200 aircraft by December 2023. retired sooner than originally anticipated and being replaced with newer generation, more Noting that these withdrawals were “earlier economical widebody aircraft like the A350 than previously scheduled”, the carrier warned and 787.” n
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Asia-Pacific lights aviation’s path to recovery
Developments in the region—not least Korean’s move for Asiana—may be bellwether for the global airline industry
The Asia-Pacific region has plotted its own shareholder and sovereign wealth fund, Temasek course through the coronavirus crisis. Perhaps Holdings. drawing from the SARS experience in 2003, the region’s airlines acknowledged early on Around the same time, the UK government told the gravity of the COVID-19 pandemic, even airlines and airports that coronavirus-related before it was declared one, and cut capacity in state support would be a last resort after all By Simin Ngai, response to travel restrictions. other options had been exhausted. Cirium Dashboard’s Asia editor International travel was largely curtailed, but Elsewhere in Europe, it was not until May that major domestic markets were the first to bounce Lufthansa secured approval to tap Germany’s back. China’s actually reached an all-time high in economic stabilization fund for a €9 billion ($9.8 2020, while Australian regional carriers Rex and billion) financial package. As the year wore on, Alliance pounced on expansion opportunities. the finer details of individual plans for various European airlines were hashed out. Government support was also prompt and forthcoming in Asia-Pacific, where months Meanwhile, the US offered airlines a helping before it would have been jarring against the hand with the CARES Act, an economy-wide competitive landscape. stimulus bill, but not without a heart-stopping third-quarter deadline against the backdrop of As early as March, Air New Zealand secured political divide in an election year. NZ$900 million ($623 million) standby funding from the government. Soon after, Singapore Daily cash burn weighed on airlines as the Airlines announced a fundraising plan for up to pandemic wore on. Time was of the essence and S$15 billion ($11.2 billion), backed by its largest early action helped preserve some businesses.
Recovery. by region, flights tracked year-over-year
40%
20%
0 o Y -20%
-40% e n t a g Y c
e r -60% P
-80%
-100%
20 20 20 20 20 20 20 20 20 20 20 20
y 20 v 20 eb 20 a Jul 20 ug 20 ep 20 o ec 20 Jan 20 F Mar 20 Apr 20 M Jun 20 A S Oct 20 N D
Africa Asia Pacific Europe Latin America Middle East North America
Source: Cirium Core, flights tracked, date filed December 20 2020
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Daily number of aircraft tracked, top five Asia-Pacific markets outside of China
600
500 a f t
c r 400
300
200
100 N u m b e r o f a i
0
20 20 20 20 20 20 20 20 20 20 20 20
y 20 v 20 eb 20 a Jul 20 ug 20 ep 20 o ec 20 Jan 20 F Mar 20 Apr 20 M Jun 20 A S Oct 20 N D
Australia India Indonesia Japan South Korea
Source: Cirium Core, flights tracked, date filed December 14 2020
Between Virgin Australia entering voluntary However, mid-November brought a striking administration in March and relaunching in event in Asia-Pacific, when Korean Air’s plan November, Australia suffered multiple waves for a state-backed acquisition of rival Asiana of COVID-19 outbreaks that erased potential Airlines, another full-service carrier, was upside in the airline’s valuation. It also had to revealed. deal with bondholder dissent and a mid-sale leadership change. This could foretell a new reality for airlines— consolidation is inevitable; governments will be Over in North Asia, airlines capitalized on a pivot in command. to cargo, a renewed focus that returned South Korean and Taiwanese airlines to profitability. State intervention may evoke mixed feelings China Southern Airlines took it one step further but it is the main driving force behind with plans to spin off its cargo subsidiary. travel bubbles in Asia-Pacific—a one-way arrangement from New Zealand to Australia, Never in the history of modern aviation had and quarantine-free travel between Hong Kong a crisis wiped out global air traffic in one fell and Singapore. swoop. COVID-19 kept people apart, and left businesses to compete for a diminished pool of Against a long recovery horizon, travel bubbles opportunities. offer a fragile compromise to a battered industry—Ascend by Cirium expects passenger Cross-shareholding structures failed carriers demand for air travel to bounce back in 2024- that desperately needed shareholder funding 25; domestic and leisure traffic are likely the first support to restructure. Lessors, the bridge market segments to show sustained recovery. between manufacturers and operators, were asked to take haircuts. The aviation industry needs to rebuild and reorganize, even if waiting anxiously for an Testament to an over-heated competitive space effective vaccine is the only long-term solution. before COVID-19, these factors complicated airline In the absence of further clarity on the timeline, restructurings in Asia-Pacific markets, especially Asia-Pacific’s approach could serve as a the ones saturated with budget carriers. compass for uncharted territory. n
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Greener on the other side
Andrew Doyle explains how the crisis may serve to advance aviation’s sustainability agenda
2020 will be remembered for the ‘unimaginable’ fleets of younger, fuel-efficient aircraft—albeit at collapse in global passenger demand in the face higher daily utilization rates—compared with the of the COVID-19 pandemic. It was also the year peak of 2019. But it will also reflect the growing that sustainability was elevated to the forefront acceptance by aviation stakeholders that while of the aviation industry’s drive to reimagine the industry accounts for a small proportion itself. of overall global emissions (approximately 2% By Andrew Doyle, annually, prior to the coronavirus crisis), it will Senior director of Sustainability had already been looming large eventually once again become one of the fastest market development at as the industry’s greatest challenge before the growing. Cirium pandemic. This year’s widely implemented international travel restrictions helped to focus Furthermore, with billions of dollars’ worth of minds on the potentially comparable impacts of state-backed bailouts having been extended to any future climate emergency, which could also struggling operators and aerospace suppliers, the result in the loss of many of the social, economic quid pro quo will be measures to offset future and societal benefits that aviation brings. emissions growth on the path to full ‘net-zero’ carbon impact by the second half of the century. The aviation industry that emerges on the other side of the coronavirus crisis will be The need to apply market-based measures to leaner and greener. This will stem partly from address aircraft emissions in a cost-effective the economic reality that through the recovery manner has long been recognized by industry phase airlines will most likely operate smaller stakeholders.
Percentage change in flight hours flown versus 2019
0 -10%
o Y -20%
-30% -40% -50% -60% e n t a g c h Y
c -70% e r
P -80% -90%
y 20 v 20 a Jul 20 ug 20 o Mar 20 Apr 20 M Jun 20 A Sep 20 Oct 20 N
Flight hours % change in 7-day avg vs 2019 Avg flight hours per aircraft % change in 7-day avg vs 2019
Source: Cirium Core, flights tracked, date filed December 1 2020
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Commercial aircraft in service/storage
25,000
20,000 a f t c r 15,000
10,000
5,000 N u m b e r o f a i
0
7 9 2 3 5 7 1 2 3 7 11 10 12 13 14 15 16 17 18 19 20 19811982 198 1991199 199 20 1980 1983198419851986 1988198 1990 199 1994199 1996 1998199920002002002002004200520062002008200920 20 20 20 20 20 20 20 20 20
In Service Storage
Source: Cirium Core, fleets data, date filed December 1 2020
Aviation’s long-term growth rate—which Arguably, the most significant easy win that has seen the aircraft fleet double in size could be addressed in the near term is solving approximately every two decades—is expected air traffic management (ATM) inefficiency. to resume eventually, driven primarily by emerging markets such as China and India. Airspace congestion pre-COVID-19 particularly afflicted regions such as Europe and South East It will take at least several years to catch up Asia and led to aircraft spending more time the more than 20 years’ worth of traffic growth in the air than they needed to due to indirect surrendered during the crisis of 2020. routings and inefficient runway utilization.
There has always been a compelling economic Fixing these problems requires governments to incentive to minimize fuel consumption as this work together to optimize availability of their typically represents an airline’s second biggest airspace regardless of national borders. operating cost after labor. International Air Transport Association (IATA) Major advances in fuel efficiency have been is confident the industry’s stretch goal of achieved thanks to the use of advanced halving CO2 emissions by 2050 compared lightweight materials in airframes and engines. with 2005 is achievable, while net-zero Aerospace manufacturers and their suppliers have emissions from air transport could be reached invested many billions of dollars into advanced a decade or so later. technologies to eke out as many kilograms of weight from aircraft designs as they possibly can. This would however require a significant shift away from fossil fuels with the widespread However, the resulting reductions in carbon introduction of radical new technologies such as emissions per flight would be offset by electric and hydrogen-powered aircraft, coupled projected growth in flight numbers were other with more efficient ATM. A near-100% shift to measures not adopted, such as offsetting sustainable biofuels would also be required for schemes and wider deployment of biofuels. long-haul operations.
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Aircraft fleet in service and parked by build year
1,800
1,600 1,400
1,200
1,000 800
600 N u m b e r o f fl t 400 200
0
7 9 2 3 5 7 1 2 3 7 11 10 12 13 14 15 16 17 18 19 20 19811982 198 1991199 199 20 1980 1983198419851986 1988198 1990 199 1994199 1996 1998199920002002002002004200520062002008200920 20 20 20 20 20 20 20 20 20
Tracked in Flight Parked / Not Tracked
Source: Cirium Core, flights tracked, date filed December 1 2020
Meanwhile, International Civil Aviation emissions that result from their business Organization (ICAO) member states are operations and report progress to their pressing ahead with implementation of the shareholders. Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), under which A silver lining is the once in a generation airlines will be required to purchase offsetting opportunity to achieve a step change in the credits to deliver carbon-neutral growth from efficiency of airline operations. Cirium’s mission 2020 onwards. is to accelerate this digital transformation by allowing data to flow fluently, making it available This establishes aviation as the first industry how, where and when it is most needed, sector to both implement a global framework regardless of the systems and services where it for addressing emissions and to commit to was created or will be consumed. global targets. By fusing many different data sources including Despite the enormous economic impact of aircraft specifications and performance, flight COVID-19, which has pushed the majority status and tracking and airline schedules, Cirium of airlines deep into the red for 2020 and is working to provide a picture of emissions potentially beyond, the aviation industry is performance by operator, aircraft type or placing sustainability at the front and centre of geographical region, as well as on a historical or its recovery strategy. forward looking per-seat basis.
Consumers are becoming increasingly aware of These insights will empower industry environmental impacts and are changing their stakeholders to quantify and understand the travel behaviours accordingly. Corporations and environmental impact of their operations, but financial investors meanwhile are introducing most crucially to identify actions they can take policies to measure and mitigate the carbon to improve their performance. n
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2020 sustainability highlights (reported on Cirium Dashboard):
January n JetBlue Airways announces it will be the first September US airline to offset all domestic flight emissions, n Greenpeace Netherlands threatens legal effective July 2020 action against Dutch government’s €3.4 billion ($4 billion) state-support package for KLM n BlackRock CEO Larry Fink warns climate unless tougher environmental conditions are risk has undermined core assumptions about attached modern finance and asset values and “sooner than most anticipate” there will be a “significant n Airbus backs away from batteries in favor reallocation of capital”, prompting speculation of hydrogen as a primary propulsion source the investment manager may scale back for future aircraft development, over concerns aviation holdings unless significant progress is battery technology will not advance quickly made on sustainability initiatives enough to adapt to large airliners. CEO Guillaume Faury meanwhile calls for “urgent February reframing” of debate over aviation’s climate n Delta Air Lines pledges to spend $1 billion impact, arguing its “role in society” is at risk on carbon reduction and clean energy over amid growing calls for flight restrictions to curb the coming decade in quest to become first emissions carbon neutral airline October April n Wright Electric—the US firm that is working n French Government urges Air France to slash with easyJet to develop a 186-seat electric domestic flights and work towards becoming aircraft—is awarded funding by the US the world’s “most environmentally friendly” Department of Energy to build an electric airline to satisfy conditions of state bailout propulsion system capable of powering a narrowbody airliner June n Switzerland’s parliament votes in favor of n Microsoft commits to buying sustainable environmental levy on airline tickets, with aviation fuel from SkyNRG to reduce carbon passengers to be charged between Swfr30 footprint of employees using Alaska Airlines ($31) and Swfr120 per ticket “depending on flights from Seattle distance and [travel] class” n Etihad Airways announces $600 million July sustainability-linked sukuk (Islamic bond), n ICAO agrees to change baseline of CORSIA voluntarily adding to its offset obligations global carbon offsetting scheme to only under CORSIA include last year’s emissions instead of an average of 2019 and 2020, in light of the November sharp reduction in aviation emissions due to n UK transport secretary Grant Schapps tells the COVID-19 crisis. The move prompts fierce Royal Aeronautical Society’s Climate Change criticism from environmental groups Conference that aviation must “earn the right to grow by addressing its environmental n US government proposes regulating impact” carbon-dioxide emissions from aviation by adopting ICAO’s aircraft CO2 standard, n Rolls-Royce reveals plan to test Trent engine but environmental campaigners argue with fully sustainable aviation fuel as part of its requirements are “too weak” ‘UltraFan’ development project
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Cabin cargo: a bright spot
James Mellon reports on passenger aircraft with seats removed in the cabin, with research supported by Nigel Fisher and Bin He
In late September, Airbus announced that it “But as the pandemic intensified and global had issued a new service bulletin for the A350, demand for PPE rapidly increased, it became permitting airlines to transport cargo in the cabin. apparent that airlines needed a more radical Removing seats to make way for piles of boxes solution.” in the cabin of Airbus’ flagship airliner—widely lauded for the pleasant passenger experience it Thirty-eight aircraft belonging to 10 Chinese By James Mellon, offers—is a very unusual concept. But of course, airlines have had all or most of their seats Senior aviation data 2020 has been nothing if not very unusual. removed, making up 25% of Cirium’s “cabin research analyst for cargo” fleet. Just over half of those aircraft are interiors and passenger As a result of the COVID-19 pandemic and the Airbus A330s, 14 of them operated by China experience at Cirium requirement to transport more freight by air, Eastern Airlines. Bin He explains: “China Eastern some airlines have been able to maximize the began by operating flights where boxes were cargo-carrying capabilities of their aircraft. In carried in the seats, but by March they were this data insight, we look at the small global fleet removing the seats entirely, further maximizing of aircraft which have had their seats removed, the cargo capacity of each aircraft.” The creating space for cargo to be transported in the A330 has been a popular widebody for these cabin. operations, accounting for 31% of Cirium’s cabin cargo fleet. Cirium’s Passenger Experience research team has identified 155 aircraft that have had most if Ten of the A330s belonging to Lufthansa were not all of their passenger seats removed in order converted into what group chief executive to transport cargo in the cabin. Carsten Spohr coined as “preighter” (a portmanteau of passenger and freighter). This data insight does not account for any Lufthansa Technik obtained approval from aircraft or flights operated where cargo has been the German regulator to convert the cabins to placed into the passenger seats for carriage, carry cargo, removing seats and IFE wiring and or for any aircraft operating cargo-only flights installing fire-suppression measures. where cargo has only been loaded into the hold. Each A330-300 could then transport medical Radical solution supplies from Asia to Lufthansa’s Frankfurt hub. Increased demand for personal protective Cirium’s flight tracking data shows that between equipment (PPE) manufactured in Asia required late-March and late-May these aircraft operated fast distribution across the world. This coincided an average of 50 flights each, after which time with the sudden reduction in passenger flights, they concluded flying these services, and have which sharply cut the amount of cargo capacity since had their seats reinstalled allowing them to available. return to passenger service.
Cirium aviation data researcher Bin He notes: “At Widebodies make up the majority of the cabin the beginning of the pandemic, Chinese airlines cargo fleet: 80% of the aircraft are Airbus and distributed essential cargo across the country Boeing twin-aisle jets. In addition to 49 A330s, on board passenger aircraft. Boxes of PPE were 45 Boeing 777s have been employed by 16 loaded into the hold, but were also placed into different airlines, including the operator of the the passenger seats too. world’s largest 777 fleet.
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Emirates has modified 10 777-300ERs to operate The timeline shows that the peak number of as “Mini Freighters” supplementing its 11-strong cabin cargo aircraft in service simultaneously fleet of 777 freighters. was reached in June with only minor fluctuations to the total since then. Each of the 360-seat three-class aircraft have had 305 economy seats removed, creating space This has occurred because some airlines in the cabin for up to 132 cubic metres or 17 reinstalled seats on aircraft, which then returned tonnes of cargo, in addition to the 40-50 tonnes to passenger services, while other carriers capacity in the hold. commenced cabin cargo operations during the second half of the year. Emirates senior vice-president of worldwide cargo operations Henrik Ambak notes: “We So far, 60 aircraft, equating to 39% of the cabin have operated flights on the modified Boeing cargo fleet, have completed their cargo duties, 777-300ER aircraft with around 60-70 tonnes with the majority returning to passenger service. of cargo payload per flight.” The first of these aircraft commenced cargo services from Dubai Some others have not: 20 aircraft, representing in mid-June. 13% of the cabin cargo fleet, have gone into storage. The rate of aircraft being converted has By then, demand for urgent distribution of PPE slowed, but has not stopped entirely. During the by air had softened, as supply chains settled and second quarter, 116 aircraft had seats removed; shippers turned to less time-sensitive and more since then, just 32 aircraft during the third and cost-effective modes of transport such as land fourth quarters combined. and sea. In May, Air Astana announced the creation of a With far fewer passenger flights operating, the dedicated cargo division, Air Astana Cargo, with lack of aircraft hold capacity restricted the ability the intention of removing seats from all three to ship traditional consumer goods. of its 767-300ER aircraft to operate cargo-only services. The first example entered service Ambak adds: “While supplies of PPE such as in late-May and, the airline states, “has been masks and gloves tend to be more frequently reasonably busy operating cargo charter flights”. transported, we have also loaded items such as garments and textiles, fresh cut flowers, Despite the initial plans, Air Astana has not fruits and vegetables, pharmaceuticals and proceeded to convert a second aircraft, manufacturing components.” however. “We cannot yet be confident there
Cabin cargo aircraft operating without seats by region
From March to Region Total of aircraft Total of aircraft December 2020... with seats with seats removed removed still in use as cargo
A total of 155 cabin cargo Africa 6 5 aircraft have operated with Asia Pacific 62 44 seats removed. Europe 58 27 Latin America 8 3 Out of these, 96 cabin cargo Middle East aircraft are still operating 12 10 without seats, as per North America 9 7 December 2020 Total 155 96
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will be sufficient demand to fully employ two operate aircraft with cargo loaded in the belly semi-freighters, and there have been welcome and on the seats if required.” indications of market demand to operate this aircraft carrying passengers again to some For the time being, Emirates says it will leisure destinations.” “continue to use the modified aircraft for cargo operations across our network. Given that global While the number of converted aircraft is cargo demand continues to evolve rapidly, it is constant for now, what comes next for cabin hard to make any predictions for the medium or cargo aircraft? Has this been a short-lived trend, the long term.” or is there still a viable future for aircraft to be operated this way, particularly if cargo capacity In the short term the industry is faced with is required while passenger traffic is slow to what IATA chief executive Alexandre de Juniac return to pre-pandemic levels? describes as “the biggest airlift in history” as COVID-19 vaccines begin to be distributed Chris Seymour, head of market analysis at Ascend across the world. by Cirium, offers this perspective: “Early in the pandemic, there was an urgent need to move The complexities of transporting vaccines, cargo quickly. Now that things have settled down, particularly those requiring cold storage, point to airlines are looking at how to move cargo cost- them being placed in aircraft holds, so it seems effectively. Loading cargo into cabins requires a unlikely that they will be carried in the cabin. lot of manpower, compared with loading it into Nevertheless, until carriers are able to reintroduce aircraft bellies in containers and on pallets. routes and frequencies of passenger services, thereby increasing global air-freight capacity, the “The issue for airlines is whether they spend cabin cargo fleet will perhaps still play a role in money on reconfiguring cabins, or to simply global distribution, for the time being at least. n
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The changing trading dynamics for lessors
Max Kingsley-Jones reviews lessor transaction volumes during 2020
The impact of the coronavirus pandemic on the deliveries on lease) involving lessors exceeded leasing sector continues to play out as many 430 aircraft (including 97 delivered new on airline markets react to a second wave, which has lease). The comparative figure for 2019 is 763 stymied the chances of an early, solid recovery. aircraft. A further 113 aircraft are known to be However, data from the first nine months of the committed for the remainder of 2020. virus highlights the effect it has had so far on aircraft transactions, both new and used. But crucially, the number of used PLB By Max Kingsley-Jones, transactions in 2020 is already more than twice Senior consultant at Commercial jet deliveries this year are already that for the whole of 2019 (216 versus 98). In Ascend by Cirium down two-thirds like-for-like compared with contrast, due to reduced delivery levels, the 2019, which has had a commensurate effect on number of new aircraft leased (either on delivery the number of aircraft delivered via the leasing or via PLB on delivery) is significantly down. sector. Cirium’s fleets data shows that some 119 The decline in deliveries has also significantly mainline (93 single- and 26 twin-aisle) jets reduced the window of opportunity for were subject to PLBs on delivery in January operating lessors to complete purchase and to September 2020, with at least a further leasebacks (PLBs) of new aircraft on delivery. 35 known to have been committed for the However, lessor activity in the used market has remaining three months. By comparison, increased significantly during 2020. Cirium’s fleets data records 329 PLBs on delivery during the whole of 2019. Cirium’s fleets data shows that during the January to September period, the total number The operating lease market has grown in 2020, of 2020 single-aisle and twin-aisle passenger with its share of the global fleet increasing by jet lease transactions (new/used PLBs and new one percentage point to nearly 49%.
Lessor lease transactions 2019/2020
800
700
600
a n s c t i o 500
400
300
200
N u m b e r o l a s t 100
0 2019 9 month 2020
Deliveries on op. lease PLB on delivery PLB used
Source: Cirium Core, fleets data, date filed October 2020
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Lessor purchase and leasebacks 2019/2020—single-aisle
350
300
250
200
c h a s e n d l b k 150
100
50
N u m b e r o f p 0 2019 9 month 2020
PLB used PLB on delivery PLB committed (new/used)
Source: Cirium Core, fleets data, date filed October 2020
Given the cashflow crises facing airlines, the This year, due to a multitude of factors, the ratio leasing community has stepped in and deployed has pivoted through almost 180˚ with around capital and in doing so increased their portfolios. 65% of the transactions involving used aircraft.
As Air Lease chief executive John Plueger said As shipments have declined significantly this year during a recent webinar: “In the good times, then so have deliveries to airlines via operating airlines want [lessors] for our delivery positions lessors, although the ratio is shadowing previous and in the bad times for our balance sheets.” years: 97 new deliveries to operating lessors in the first nine months of 2020 (26% of total) The effect of the pandemic appears to have versus 336 in the whole of 2019 (28%). redefined transaction dynamics, as in recent years typically around 75% of PLBs have Ascend by Cirium calculates that there are involved new aircraft, and just 25% used. around 9,000 unencumbered mainline aircraft
Lessor purchase and leasebacks 2019/2020—twin-aisle
110 100 90 80 70 60 50 c h a s e n d l b k 40 30 20 10
N u m b e r o f p 0 2019 9 month 2020
PLB used PLB on delivery PLB committed (new/used)
Source: Cirium Core, fleets data, date filed October 2020
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Purchase and leaseback transactions by aircraft type 2020
k 110 100 90 80 70 60 50 c h a s e n d l b 40 30 20 10 0 N u m b e r o f p 7 8 777 7 50 7 NG amily amily 3 A220 A330 A3 7 Max A380 7 3 eo f 7
A320neo f A320c
Used On delivery
Source: Cirium Core, fleets data, date filed October 2020
in the global fleet, of which around 4,000 are months slightly exceeded the number during less than 10 years old. This illustrates that there the same period last year. The big difference is remains a huge opportunity for lessors to expand around the change in emphasis between new their portfolios and help support cash-strapped and used aircraft. airlines liquidate some of their valuable assets. The Airbus single-aisle families have been the The trajectory indicates that lessors are most traded aircraft in 2020 PLB deals (new on course to surpass the magic 50% fleet- and used), accounting for over 200 of the 335 ownership mark sooner rather than later. transactions in the first nine months.
Taking transactions involving new and used Of these, 91 were new aircraft—predominantly aircraft together, 2020 PLB activity overall has Airbus A320neos. A big factor in this year’s PLB been very similar to 2019—in fact, the volume landscape is of course the absence of Boeing of single-aisle transactions during the first nine 737 Max in the delivery cycle. The grounded type did record 10 used PLBs, while there were 33 PLBs of 737NGs (including one new aircraft). 2020 leading lessors by number of transactions In the twin-aisle sector, the 777 is the lead type Aero Capital Solutions 25 with 22 transactions (all used aircraft) with the Altavair 25 787 following on with 16 transactions, which BOC Aviation 25 were entirely new-build units. BBAM 23 Airbus types recorded 26 transactions in total, Standard Chartered Aviation Finance 20 comprising 16 used A330s and A350s along Avolon 19 with 10 new airframes. BoComm Leasing 16 From a lessor perspective, the leading Fortress Investment Group 16 transactors in 2020 to date have been Aero Castlelak 13 Capital Solutions, Altavair and BOC Aviation TrueAero 13 each with 25 PLB transactions (new and used), followed by BBAM (23), Standard Chartered Source: Cirium Core, fleets data, date filed October 2020 Aviation Finance (20) and Avolon (19).
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Notable by its absence is AerCap, for which mirrors that of the mainline market, with the Cirium’s fleet data shows just one confirmed number of used PLBs significantly up this year PLB during 2020 so far—a LATAM Airlines while PLBs on delivery are down. A350-900 PLB on delivery. Used PLBs involving operating lessors for the Further to the above data, with such large first nine months of 2020 has risen to 16, from proportions of the global fleet being grounded, six during 2019. PLB on delivery activity has trading of aircraft between lessors has seen a declined from nine in 2019 to just three in 2020 significant decline so far in 2020, compared so far. Falko has been the most active regional with 2019. Sales of aircraft with leases attached jet lessor in PLB terms during 2020, completing during the first nine months stood at 153, against a total of 11 transactions, all of which were for over 540 for the whole of last year. used aircraft.
The number of used passenger jets leased into With so much uncertainty surrounding the near- airlines by operating lessors has also suffered term delivery outlook, it will be interesting to see a significant decline, according to Cirium data. how these trends extend into 2021. The 737 Max’s Just 115 transactions involving single- and twin- return will come into play, as will the ongoing aisle aircraft were recorded during the first nine cashflow crisis among the airline community. months of 2020, compared with almost 420 The leasing sector will undoubtedly continue its during the whole of 2019. In addition, the overall crucial role of oiling the flow of capital around the transaction picture in the regional jet sector industry amid the ongoing crisis. n
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China’s lessors spread their wings
Michael Allen explains how the coronavirus crisis changed the leasing sector’s structure and transactional fabric
During those buoyant years before COVID-19, to other external funds, the Singapore-based executives from aircraft leasing companies lessor was able to add dozens of aircraft to would gather at industry conferences around its leased fleet. Other major lessors which can Asia-Pacific and marvel at the unstoppable command similarly strong parental and investor growth trajectory of aircraft deliveries in the support are also in a relatively favorable position region. during this downturn. Michael Allen Cirium Dashboard’s Demand for aircraft seemed insatiable, based However, many industry observers warn not Asia finance editor on OEM forecasts. Airlines’ appetite was plain to all lessors will survive the pandemic, although see, with ambitious budget carriers like AirAsia they are coy about naming names publicly. The and Lion Air putting in orders for hundreds of strong and weak alike have for months been jets, offering significant sale-and-leaseback battling rental deferral requests from customers. opportunities for lessors. Moreover, as many Whether airlines can actually pay back the airlines were struggling to source enough deferred rent in full, or whether lessors will have aircraft from Boeing and Airbus to meet their to take that as a hit to their balance sheets, expansion plans, lessors could step in to fill the remains to be seen. gap through operating leases. The shock of seeing so many airlines that These and other trends in the leasing market would have been considered good credits pre- pushed lessors’ share of the global leased fleet COVID-19 going under, or being sustained by towards 50%, an impressive feat for an industry government life support, may result in a flight to that just four decades prior was regarded as quality among lessors and investors. more of a niche product than the indispensable component of the aircraft finance sector it now is. To take one example: before COVID-19, investors in Japanese operating lease with call option Even though OEMs have now revised down (JOLCO) structures—a type of lease that helps their delivery forecasts amid this unprecedented Japanese investors defer their tax bill, while global aircraft demand slump, lessors’ share of providing cheap financing to airlines—became the pie has still grown 1.1 percentage points to more open to riskier airline credits. Due to 48.9% in 2020 amid the pandemic, says Ascend surplus investor demand, equity arrangers sold by Cirium. Japanese investors deals with riskier carriers, pointing to the robustness of global airline Many lessors have spied opportunistic purchase- growth as reassurance. Such arrangers will and-leaseback deals with airlines desperate now certainly be dealing with angry investors, to raise cash to ensure their survival. As ORIX as even airlines considered sound credits like Aviation’s chief executive James Meyler pointed Colombia’s Avianca have rejected JOLCO out at a recent virtual industry conference, aircraft as part of their restructurings. airlines such as German flag carrier Lufthansa that before COVID-19 were not big lessees have Separately, Chinese lessors, which in their early been forced to sell their unencumbered assets. years focused on leasing aircraft in the domestic market, have been spreading their wings. Quick-on-the-draw lessors like BOC Aviation Many, such as CDB Aviation, ICBC Leasing and were early on able to capitalize on the downturn Bocomm Leasing, are now truly global lessors via such leasebacks. With Chinese state-owned in terms of their portfolio compositions. That lender Bank of China’s backing and good access expansion comes with a price, however, as they
The Cirium Airline Insights Review 2020 60 | cirium.com INDUSTRY VOICES
are now lumped with large numbers of lessees online, but especially in Asian markets such as that cannot pay rent. Had they kept things local, Japan, China and South Korea, face time is still they would probably have overcome most of deemed essential to form a long-term business their payment issues by now, since Chinese relationship. carriers are among the few globally that are able to pay rent on time—troubled HNA Group’s Despite these significant challenges that have airlines notwithstanding. We may therefore see hit the sector due to COVID-19, leasing will a preference for Chinese lessees in the early continue to be an indispensable component stages of the market recovery. A recent request of the aircraft financing industry. Some lessors for proposals from China’s Kunming Airlines was may not survive, but those which do, and which said to have garnered interest from some 20 position themselves strategically, could reap the lessors who put forward about 100 aircraft for benefits if and when COVID-19 vaccines roll out consideration. successfully and airlines are able to start flying passengers in droves again. The transactional fabric of the industry has also changed. Leasing aircraft has always been Ascend by Cirium does not expect long-haul to a people business—replete with client visits, recover to 2019 levels until 2024-25, but the rich coffee catch-ups, and trading industry gossip at experience of senior leasing executives—many the hotel bar—but many executives have now of whom have been decades in the market and had nearly a year of mostly virtual meetings and ridden out cycle after cycle—will ensure many of little or no travel. the bigger lessors have a steady hand to guide them over the next half-decade. The sheer brute While some executives are relieved at having a force shock of this archetypal black-swan event, break from the relentless travel schedule, others however, will never be forgotten, and the lessons are itching to get back on the road. Zoom and lessors learn from this pandemic will shape the Teams have proven that deals can be done industry for many years to come. n
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The return of the Boeing 737 Max
Max Kingsley-Jones talks to the vital role of the Boeing 737 Max aircraft and the plans needed to achieve return and acceptance
The departure of a Gol Boeing 737 Max 8 on make around 550 Max deliveries during 2019, December 9, 2020 from Sao Paulo to Porto with the smaller Max 7 due to come on stream Alegre marked a long-awaited resurrection that and another stretch, the 10, poised to begin followed extensive investigations, evaluations flight testing. and a testing program that kept the twinjet grounded for 20 months. Now Boeing and the Then came the March 2019 grounding order, By Max Kingsley-Jones, authorities have tackled the many challenges which was implemented over safety concerns Senior consultant at that the road to ungrounding created, the following two 737 Max accidents that cost Ascend by Cirium OEM, regulators and the wider industry are the lives of 346 passengers and crew. The confronting a set of new ones. grounding, which saw the 385 delivered Max aircraft immediately consigned to storage, has In the half century between the 737’s 1967 debut lasted far longer than anyone had expected, not and the Max’s introduction in 2017, Boeing least Boeing. delivered over 9,500 737s to more than 450 operators worldwide, according to Cirium fleets Confident the situation would be shortlived, data. Its arrival heralded the fourth distinct Boeing sustained Max production throughout iterations of 737, and by the time the initial 737 2019 before finally relenting at the beginning Max 8 variant had been joined in production of 2020. As a result, Cirium estimates there by the larger Max 9 during 2018, Boeing had are around 450 Max airframes built and stored powered past 10,000 737 deliveries. awaiting delivery.
Output had been rapidly rising as the Max Now, after a thorough investigation and supplanted the NG series on the Renton reappraisal by the US Federal Aviation assembly line. Boeing had been on course to Administration (FAA) and a wider group of
Boeing 737 cumulative annual deliveries
11,000 10,000 9,000 8,000 e r i s 7,000 6,000 5,000 4,000 3,000
N u m b e r o f d l i v 2,000 1,000 0
0 2 4 6 8 2 2 7 7 7 7 7 10 12 14 16 18 20 19 19 19 19 1982 199 1968 19 1980 1984 1986 1988 1990 1994 1996 1998 2000 200 2004 2006 2008 20 20 20 20 20 20
737-100/200 737-300/400/500 737NG 737 Max
Source: Cirium Core, fleets data, data for all operator types, date filed December 1 2020
The Cirium Airline Insights Review 2020 62 | cirium.com INDUSTRY VOICES
certification authorities, the ungrounding of Boeing 737 airline fleet the Max is being progressively approved by jurisdictions, which has permitted the twinjet In service Storage Total to begin returning to the skies. This follows 737-200 36 24 60 the implementation of changes to the aircraft and training processes to address concerns 737-300/400/500 553 261 814 identified during the investigation. 737NG 5,301 1,092 6,393 737 Max 385 385 This marks a new chapter for the Max program in which there are myriad issues in play—some Grand total 5,890 1,762 7,652 linked to the current airline trading conditions Source Cirium Core, fleets data, data for airline-operated aircraft, caused by COVID-19. date filed December 1 2020
There remains uncertainty around the pace the way for the resumption of deliveries to US of the Max fleet restoration (both among the airlines and the gradual restoration of their grounded fleet and the stockpile of undelivered grounded fleets. airframes); operators’ appetite to add Max aircraft and crew-training capacity; the potential Gol became the first airline to reintroduce displacement effect on other fleets; and the the Max on revenue services, with flight from cascade of regulatory approvals globally. Sao Paulo to Porto Alegre on December 9. A day earlier, United Airlines became the first But one crucial aspect is a parameter beyond recipient of a post-grounding delivery with the industry’s control: the acceptance by the acceptance of a 737 Max 9. This aircraft the traveling public to fly on the aircraft. (registration N27519) made its first flight in June While the narrative around the Max’s safety last year, highlighting how far back the surplus failings has perhaps been overtaken by the of undelivered aircraft extends. COVID-19 pandemic, media attention around the reintroduction could quickly revive painful Ungrounding approvals are following by memories. authorities participating alongside the FAA in the 737 Max Joint Operations Evaluation Recertification by the FAA on November 18 Board, which comprises Canada, Brazil, and the along with an airworthiness directive cleared European Union.
Boeing 737 Max annual deliveries 550 500 450 400
e r i s 350 300 250 200 150 N u m b e r o f d l i v 100 50 0 2017 2018 2019 2020F 2021F 2022F 2023F
Deliveries
Source Cirium Core, fleets data, date filed December 2020, Ascend by Cirium analysis
The Cirium Airline Insights Review 2020 63 | cirium.com INDUSTRY VOICES
The approval status in key 737 Max market China Over the last 20 months, while Boeing’s Max is less clear but might be expected to follow shipments were at a standstill Airbus has within months of the FAA. delivered over 800 more A320neo family aircraft. As Boeing works to clear the backlog of built aircraft along with integrating deliveries from the Ryanair gave Boeing an important vote of Renton assembly line, Ascend by Cirium projects confidence shortly after the ungrounding annual shipments reaching 360 in 2021 and 530 approval, declaring the Max was a in 2022. “Gamechanger” aircraft when it signed a much-touted follow-on order for 75 of the Boeing is aiming to ship around half of its high-density Max 8-200 variant on December surplus of undelivered aircraft during 2021 and 3. Until this deal, Boeing had secured very most of the remainder through 2022, with the few incremental Max firm orders since the pre-built backlog fully cleared during 2023. grounding. Airbus meanwhile Airbus continued We project the delivery rate will decline as to enjoy healthy sales fortunes, increasing production stabilizes at a monthly rate of 31 the A320neo family order book by over 950 aircraft, depending on the level of demand in the aircraft. The Neo program received an extra industry’s recovery phase. boost in 2019 with the launch of the extended range XLR variant of the A321neo. The resurrection of the mothballed, undelivered aircraft is being complicated by some airframes Ascend by Cirium estimates that Boeing has now being unallocated due to order cancelations already shed over 1,300 Max orders in the wake or rescheduling. Customers have been of the March 2019 grounding, including 749 potentially able to cancel penalty free if delivery orders that are subject to ASC 606 accounting is not achieved within 12 months of the original adjustments (i.e. contracts with substantial contractual date. uncertainty of fulfilment). During 2020 so far, Boeing has recorded 533 Max firm order There are potentially up to 210 unallocated cancelations. Some of these changes may affect “whitetails” among the stockpile of already-built aircraft. approximately 450 undelivered aircraft, Ascend by Cirium estimates. Reallocated airframes At November 30, 2020 (prior to the Ryanair would require some cabin reconfiguration for announcement), the Max’s firm backlog stood at their new operators. 4,039 aircraft, which reduced to 3,290 after ASC 606 adjustments. By comparison, the A320neo Describing the situation “as fluid as anything family backlog exceeded 5,900 aircraft, meaning you can imagine”, Boeing has confirmed that Airbus held almost a two-thirds share of future it will have to “remarket some of these aircraft, orders. and potentially reconfigure them”, which would “extend the delivery timeframe”. Turning to the 385 Max aircraft that were in service at the time of grounding, there will be A pre- and post-grounding comparison of several drivers determining the pace of their the 737 Max fleet metrics with its Airbus rival return. After approval within each operator highlights the ground Boeing has lost in the jurisdiction, every aircraft must undergo post- 20-month interval. In March 2019, Cirium data storage checks and testing. From a demand side, shows that Boeing had delivered 387 Max airlines are looking at their fleet planning strategy aircraft, against around 700 A320neo family amid the current downturn and the availability of aircraft. the training required for flightcrews.
The Cirium Airline Insights Review 2020 64 | cirium.com INDUSTRY VOICES
But there will certainly be implications for fleet. There are 1,200 more NGs in storage incumbent single-aisle fleets, as amid the as operators keep their capacity constrained current crisis the Max’s absence has helped the amid the coronavirus crisis. With commercial supply and demand balance. Its reintroduction 737NG production having only just ended is creating a displacement effect at operators (although output continues for non-commercial where they will replace rather than supplement customers), the variant should remain in airline existing aircraft—predominantly 737NGs. service for some years to come and many will find their way to the cargo sector after The likelihood is that each Max returned to conversion to freighters. service or delivered from Boeing will replace a 737NG or A320 family aircraft on a one-for-one For the Max, the future is still not fully certain. basis. This will increase supply when capacity Firstly, the return to service must go to plan growth is off most airlines’ agenda, and so there and achieve a good level of acceptance by will be implications for values and lease rates—in the traveling public. This will be crucial to the 737NG community and across the wider determining whether the type can move on from single-aisle spectrum. the tragedies and grounding. But without doubt the Max has a vital role to play in the longer Cirium fleets data shows that in December term, post-COVID-19, in providing the world’s 2020 some 5,200 737NGs were in commercial airlines with sufficient single-aisle capacity. service, accounting for 90% of the active 737 Airbus cannot build enough aircraft on its own. n
The Cirium Airline Insights Review 2020 65 | cirium.com 2020 OVERVIEW
All the data that’s fit to print
Mike Arnot, a journalist-turned-PR who works with Cirium, highlights the role our data plays in informing, and even inspiring, editorial coverage of the industry
Journalists love their sources. These third-party, Nowadays, my firm is helping Cirium connect independent voices corroborate or counter what reporters in the Americas directly with the data. an interested party—or their PR spokespeople— Over this past year, Cirium has helped journalists might relay to a reporter to mold a story. at premier outlets uncover stories before anyone else. That’s a direct result of Cirium having built Mike Arnot, I’ve been on both sides of the fence. For tools to quickly access its data lake, which it Principal of reporters, a trusted source allows you to cut continues to deepen. Juliett Alpha, a through the chaff to get the story and tone just communications firm in right to inform your audience. I’ve shared a computer screen with reporters, New York perusing the extensive aviation data sets. While reporters are (mostly) immune to Frequently we’ve seen trends emerge in our eviscerating online comments from readers, browser window. A reduction in capacity not a single one enjoys a query from their between here and there. Fewer flights early in the editor resulting in a correction. Sources are an morning out of Miami. More flights to Caribbean insurance policy for a reporter seeking to first resort destinations from Seattle. Signs of understand, and then explain. recovery and green shoots. Even quick factoids that communicate just the right amount of detail What better source, then, than data? It’s factual, are available. Just how many Boeing 737 Max jets illustrative and impersonal. Indeed, sometimes have been produced, which airlines have them, a data point is the story. Unlike most other and where are they? And just how many ‘Queens industries, airlines have been forced to show of the Sky’—747s—are in the air these days? their hand as a matter of legacy public policy— particularly in the USA. Of course, Cirium’s credibility as a source extends much further than the data tools. When Airline schedule changes, average fares, it comes to aviation, the company benefits from employee counts and fleet details—down to the having a deep bench of industry expertise. The tail number—are available to journalists. You just consultancy group—Ascend by Cirium—provides can’t get anything near this level of competitive color and insight based on collective decades data in tech, manufacturing or retail. of expertise. Separately, Cirium team members have spent years at airlines such as Southwest There are so many compelling stories revealed Airlines and American or at airports building air in the data alone, be it from Air Canada or Air services between origins and destinations. These Koryo and every airline and aircraft between are experts that know obscure airport codes by them. memory.
I know first-hand. When I wrote about airlines And, best of all, they give a great quote. and aviation for publications such as The New York Times, I called on Cirium and its in-house In 2021, hopefully the data will reveal an upward experts to explain the complexities of the trend in flights flown and passengers returning aviation world. Cirium is the gold standard for to the skies. Of course, it’s not our call. The data aviation data and expertise from high-level to will reveal. And reporters tell the story as they incredibly granular. see it. n
The Cirium Airline Insights Review 2020 66 | cirium.com APPENDIX
Usage and attribution
The information provided in this report has been compiled from various contributors and sources. The majority of data is from the Cirium Core—the number one source for aviation and air travel data and analytics, unless sourced otherwise. The data collected by Cirium is verified and corrected as it travels through our processing pipeline. This analysis is carried out by Cirium and exceptions apply to authored analyses by contributors.
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The Cirium Airline Insights Review 2020 67 | cirium.com APPENDIX
Glossary of terms
Completion Factor (CF)—is the percentage of tracked flights that were completed (e.g., not canceled).
Block times—the total time expected for a flight to get from gate-to-gate.
Revenue passenger kilometers (RPKs)—is a metric to show the number of kilometers traveled by paying passengers. It is the number of revenue passengers, times the total distance traveled.
Flight volume—flight volume reported in the Airline Insights 2020 section is referring to the total number of flights scheduled (see description below) and not scheduled passenger flights flown.
Flights scheduled/a scheduled flight—a planned regularly operated flight of an airline. Cirium’s schedules data is historical, current and forward-looking. Flight schedules do not mean the flights have flown.
Scheduled passenger flights tracked/completed—the Cirium baseline data which has extremely high global coverage of tracked passenger flights. Cirium’s Flights Flown section in this report presents this data. The data does not cover many charter (unscheduled) flights.
Available seat kilometres (ASKs)—the number of seats available multiplied by the number of kilometres flown (also referred to as load factors/capacity).
Purchase and leasebacks (PLBs)—transaction whereby an aircraft operating lessor agrees with a customer to purchase an aircraft and lease that aircraft back to the customer.
In service—Cirium’s reference to aircraft in-service means the aircraft are in operation. This does not indicate whether passengers are on board (the load factor).
In storage—Cirium’s reference to in-storage means the aircraft is grounded and being stored by the airline.
Single-aisle/twin-aisle—aircraft types, also known as narrowbody/widebody.
Japanese operating lease with call option (JOLCO)—an operating lease for the purpose of accounting or tax, which gives the lessee an option to purchase the aircraft at the end of the lease or during the lease period.
The Cirium Airline Insights Review 2020 68 | cirium.com 2019 About Cirium Launched new brand CIRIUM to take forward Cirium brings together powerful data and analytics the full portfolio of smart to keep the world moving. Delivering insight, built data and advanced from decades of experience in the sector, enabling analytics for the wider travel companies, aircraft manufacturers, airports, travel industry airlines and financial institutions, among others, to make logical and informed decisions which shape the future of travel, grow revenues and enhance customer experiences. Cirium is part of RELX PLC, a global provider of information-based analytics and decision tools for professional and business customers. 2020 Find out more at cirium.com Added live flight 2014 and navigational Added historical data to the Cirium airline schedules portfolio, bringing data to business in initiatives for with acquiring System Wide Innovata Information Management (SWIM) from acquisition of Snowflake Software
2016 2008 Enhanced portfolio with over 10 years Rebranded of airline and real- multi-product time flight status portfolio and comprehensive under brand trips data. Also FlightGlobal integrated analytical tools based on fares, traffic and schedules data with acquiring FlightStats and Diio
1997 Created online news and data 2011 service for Grew portfolio aerospace and with addition of airports aircraft finance services with historical fleet valuations data with acquiring Ascend
1909 First to launch 2004 aerospace Expanded in magazine— aeropsace Flight with the most comprehensive technical fleet database
1985 Launched airline specific insights to industry c-suite with title Airline Business
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