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 demand by Will Livsey Airlines go big on early retirements by Michael Gubisch Asia-Pacific lights aviation’s path to recovery by 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 s 60,000 Number of flight 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.