In our latest webinar, a panel of Cirium experts discussed the complex business of navigating the flight plan for the air travel industry recovery.
Drawing on the latest Cirium data and insights from a joint survey with Yocova, Ascend by Cirium’s Rob Morris, Global Head of Consultancy and Richard Evans, Senior Consultant, and Andrew Doyle, Cirium’s Director of Market Development, presented an update on the most likely recovery scenarios as well as an expert view of the market.
For those unable to join the live webinar, we’ve rounded up the five key takeaways from the session. Access the full webinar and the supporting slides here.
1. Recovery remains dynamic – The latest Cirium data shows that global airline capacity remains down by between 65% to 80% compared with 2019, with a view to recovering to around -50% by the end of August 2020. Domestic markets appear to be recovering most quickly, with China’s domestic airline capacity on track for year-on-year growth by August 2020.
However, these projections are subject to change as airlines continue to adjust their schedules at short notice, in line with changing travel restrictions and quarantine requirements, as well as fragile consumer demand.
2. Three possible roads to recovery – There are currently three potential scenarios for air travel industry recovery according to analysis by Ascend by Cirium.
Scenario 1: A two-year recovery period, with 2019 traffic levels being reached by August 2021. Decline of around 50% in revenue passenger kilometres (RPKs) in 2020 compared with 2019.
Scenario 2: A more rapid V-shaped recovery, with 2019 traffic levels being reached by February 2021.
Scenario 3: A slower recovery, with 2019 traffic levels reached by Q2 2023. A four-year loss of traffic with 2020 traffic down by over 60% compared with 2019.
The current consensus within the industry is leaning toward scenario 3, as Cirium analysis of RPK data suggests a slower recovery is currently more likely. However, Cirium fleet data shows that there are currently more passenger jets in service than projected in scenarios 1 and 3, although these aircraft are operating fewer flight hours than anticipated.
3. Current conditions favor the low-cost market – Low-cost carriers appear to be navigating the flight plan to recovery more quickly than their mainline counterparts – a trend which tracks globally across North America, Europe and Asia Pacific. In the US, for example, low-cost carrier Southwest Airlines projects capacity will be down by just 2% on pre-COVID-19 levels by December 2020. In contrast, Asia-based network carrier Singapore Airlines plans to operate no more than half of its 2019 capacity by March 2021.
This divide can largely be attributed to a lack of long haul flights and a depressed corporate travel market, which is making it difficult for network carriers to operate full schedules. Meanwhile, the recovery of leisure travel favors low-cost carriers, which are well positioned to serve this demand through their short-haul networks.
4. Newer, next generation aircraft returning to service – As of July 2020, the number of in-storage aircraft has fallen below 7,600 – just over a third of the global passenger fleet – with more than 14,000 jets now in service. But those aircraft that remain parked have not been static. Airlines have been moving a number of their jets into long-term storage locations, a sign that carriers are deciding which aircraft have a future in their fleets and those which don’t.
On the whole, new generation and fuel-efficient aircraft types are being brought back into service more quickly than older jets. This can be seen in both the single-aisle and widebody markets, as carriers favor aircraft with longer life cycles and proven sustainability credentials.
5. Growing maintenance challenge looms – According to a recent joint survey by Cirium and Yocova, the growing volume of outstanding aircraft maintenance tasks remains the biggest worry for airlines globally. Chief concerns include whether MROs will have the capacity to service increased demand for aircraft maintenance, the availability of spare parts and the time and financing needed to meet regulatory requirements.
Many carriers also cited the ability to phase out older, less eco-efficient aircraft types as the biggest opportunity to arise from the wider operational recovery of the air travel industry. This will likely result in further retirement of pre-2000 build jets as well as passenger-to-freight conversions.
For more Cirium insights, you can download our latest e-book on the keys to successful airline recovery, featuring expert analysis by Andrew Doyle.