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Aviation financiers and analysts can better monitor and forecast airline performance with Cirium data

March 1, 2021

Aircraft lessors and analysts closely monitor passenger demand and seat supply, together with the movement of aircraft assets and their utilization, to gain a complete picture of the market.

By Kanishka Chatterjee, Business Solutions Consultant, Cirium

Access to reliable, accurate and timely data not readily available in the public domain, is key for analyzing market trends and to keep pace with the dynamic world of aviation. COVID-19 has amplified this need, with sudden outbreaks, changing (often last-minute) regulations and flight cancellations resulting in fluid plans and operations.

Amongst the many variables at play across what has been a traditionally stable industry from a data perspective, the availability of up-to-date, accurate and credible data is proving to be the key differentiator in analyses in the new normal.

Cirium’s 360-degree view of the industry provides additional key fundamentals to analysts to make informed, data-driven decisions. Cirium’s leasing clients seek to keep a tab of aircraft utilization. Buy and sell side analysts want to gain an edge in tracking market recovery to pick the winners, losers, and understand volatility and pricing disparities by using historical demand trends.

Aircraft lessors and analysts closely monitor passenger demand and seats supply, together with movements of aircraft assets and their utilization, in order to gain a complete picture of the market. This enables them to pro-actively analyze, track, forecast and beat the market by studying data that is made available faster than airlines, governments and industry sources.

Cirium’s best-in-class aviation tools and solutions enable these stakeholders to stay ahead of the game.

Airline schedules and operated actuals combine to give aviation financiers a true picture

Airlines publish their forward-looking schedules with Cirium. The published flights, seats and derived Available Seat Kilometers (ASKs) are great indicators of an airline’s intended operations. Traditionally, this has given analysts a good view of an airline’s planned growth, key capacity trends and planned flights on specific equipment (sub)types, but this was because, in the pre-COVID-19 era, airlines operated 98-99% of their planned schedules, with the remainder being cancelled largely due to weather or unforeseen technical events.

For the majority of 2020, however, the delta between schedules and completed flights was much wider, ranging from 10% to as high as 60% in some markets. Therefore, a better way of deriving a completion factor (how many scheduled flights were actually flown), can be obtained by combining schedules data and flight status information, to provide a more accurate picture.

The below chart utilizes Cirium Schedules and Cirium Flight activity data to illustrate how the proportion of cancelled flights sky-rocketed globally in Mar-2020.

Cirium Schedules and Cirium Flight activity data

Combined with future planned capacity data, Cirium’s clients can utilize historical, or near real-time, completion factors by airline, routes or aircraft, to better calibrate their models and algorithms to better forecast expected completed flights. This will enable analysts to assess credit risk, and when combined with passenger demand data, forecast an airline’s expected revenues, and potentially operating costs and profitability.

Market demand data helps provide aviation financiers with a more complete view of an airline’s demand profile

Published schedules and actual flights offer a view of an airline’s supply (planned and operations, respectively). A better indicator is the demand data (i.e. passenger traffic) side of the equation, the availability of which is a different story altogether. Analyzing traffic trends, how many passengers flew on a flight segment, what fares were paid (and by cabin class), how did these fares compare to competitors by route over time – these provide key recovery indicators through analyzing passenger and revenue mix, market leaders and followers, to add depth to analysis.
The objective is to understand and monitor the competitiveness of an airline. Is an airline that is a market leader able to maintain its leadership and command a fare premium? Or is it doing so at the expense of yields, as new players enter the market? Is the airline maintaining its position or growing in key markets?

Combining Traffic and Fare data with Scheduled and Flown Seat Capacity can shed incredible insight into load factors and help with assessing the health of the airline in key markets.

Taking the available analysis one step further, when an airline announces a new route, exits a route, changes frequencies or capacity, or when competitors announce similar moves, being able to assess and quantify the impact of changes in a timely manner is fundamental to some analysts being more successful than their peers in forecasting stock price movements and credit risk.

An example below shows the key players in Australia’s domestic market and how the fares paid on each airline vary by month for the year 2019.

Airline revenue profile

Understanding an airline’s revenue profile is key. Understanding how much of its revenues come from each cabin class will offer a view of how an airline is exposed to an economic downturn, trade wars, sanctions and other events that affect corporate and leisure travel. Access to data demonstrating key source markets, by country and airport, to understand passengers’ trip origins, and the passenger mix on flight segments will highlight, for example, that some flights can comprise as high as 90% connecting traffic. Aviation financiers could use this data to highlight and analyze the dependency and exposure to traffic beyond just the flight segment in question, providing a more accurate view which adds to a more rounded view of an airline’s network.

Cirium’s comprehensive suite of aviation data offerings provide aviation financiers at lessors, banks and Non-Banking Financial Institutions with data to support airline insights and credit risk analysis not available elsewhere.

A combination of airline operations, schedules, fares and traffic data allows deeper insights which can be taken a step further to predict which airlines will likely continue to garner higher market shares.

The result is an analysis that can derive more insightful, smarter conclusions which will then drive more profitable decision-making or help mitigate risk exposure.

The ability to offer and combine a large variety of disparate aviation data-sets to derive deeper and more meaningful insights is what sets Cirium apart. Cirium’s existing clients in each of our finance segments utilize richer and deeper data to analyze investments, assets and risk in order to make better decisions.

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