Our latest webinar hosted by Rob Morris, Global Head of Consultancy, explored the challenges that lie ahead for the aviation industry, drawing on Cirium’s historical, real-time and forward-looking insights. You can access the recording and data presentations here.
In this article we round up the need-to-know takeaways from the session to help the market plan and prepare for the most likely COVID-19 recovery scenarios. Morris provides insights on airlines’ aircraft return to service, aging passenger fleet freighter / cargo aircraft, challenges for airports and much more.
Is recovery certain and predictable?
The impact of the COVID-19 pandemic on aviation is the worst market shock in the history of the industry. The need for a networked community response is greater than it’s ever been as attention now turns to the recovery effort – specifically, is a recovery certain and predictable?
Looking at current forward-looking schedule data, Morris shared data that presented a global capacity increase from -80% at its peak drop earlier this year to around -20% by the end of June. Airlines could however make further adjustments to these flight schedules depending on the changing environment surrounding coronavirus.
Green shoots in the Chinese domestic market, which has seen over 30% of its capacity return in the last two months, is a positive sign for short-haul travel recovery.
However, the dramatic drop in capacity globally compared with 2019 remains in stark contrast to the forecast from the International Air Transport Association (IATA) in December last year, which projected capacity growth of +4.7% in 2020.
It’s clear that, as some travel restrictions ease it will be the domestic market which will start to return first. And while flight schedules are indicative of supply, they do not reflect the changes that airlines are making to their network on a daily basis.
Cirium’s flight status data shows that around one fifth of the adjusted flight schedules globally are being canceled on a near-term basis. So there is still significant uncertainty at a time when airlines need hard facts.
Could the cancelations be due to the lack of demand as consumer confidence drops? While China’s domestic capacity started to recover, could the plateau that is now seen indicate that while capacity started to return, the consumer confidence isn’t there yet?
Modest uptick in tracked passenger flights
The positive side is aircraft are starting to return to service and we are seeing the uptick in domestic capacity in certain regions. Morris indicated that a ‘bottom point’ has now been reached for aircraft being grounded, the hibernation phase has begun and passenger jet tracking data for May 4, 2020 shows a positive trend emerging.
Cirium’s ‘seven-day prior metric’ shows active aircraft have increased by 6%, flight cycles by 14% and hours flown by 13%, compared with a week before on April 27 2020.
However, year-on-year, active aircraft are down by 72%, flight cycles by 82% and hours flown by 84%, compared with May 6, 2019 (364 days prior).
And aircraft utilization also remains dramatically lower than pre-COVID 19 levels for in-service jets, with single-aisle aircraft usage down 43% on average since the start of year.
So, the uptick in passenger jet flights is modest but it’s encouraging to see aircraft returning to service. Twin-aisle aircraft are particularly returning to service, now down just 29% on the start of the year, and the analysis here suggests these aircraft are being used for freight – some with cargo transported in the belly hold – and in some cases – main passenger cabins.
Aircraft groundings have entered hibernation phase
With tracked aircraft hours down, Morris explained that planning the required post-lockdown fleet will be complicated, “it’s almost impossible to say when the bounce-back will start or end, and it would be unwise to speculate.”
“Ultimately, it is airlines that will be in the best position to track the recovery as they assess their forward booking data,” said Morris.
As the aircraft going in to storage has passed its peak, Cirium are classifying the current phase as the hibernation phase. Around 13,700 aircraft, 62% of the global passenger fleet, still remain parked around the world as of May 4, 2020.
For context, the in-service fleet of 8,320 aircraft per May 4, is approximately the same size as that operated in 1993.
However, more than 2,600 passenger jets have returned to service since March 1, 31% of which is in the China domestic market as travel restrictions have eased in the country.
Planning for returning aircraft to service
The airlines face a number of hurdles to getting planes back in the air, not least an ageing passenger fleet.
- Only 113 aircraft built between 2001 and 2016 have been stored for over a year, excluding Boeing’s 737 Max aircraft which were grounded before the pandemic
- There are more than 2,000 stored aircraft built in or before the year 2000. These jets may never return to service or could get a second lease of life, albeit as converted freighter aircraft
- The current demand scenario will likely result in premature retirements, particularly for stored widebody aircraft built between 2001 and 2005, such as Airbus A340s and Boeing 777s
- Some owners will choose to monetize their assets and ‘part-out’ jets that they no longer deem profitable as in-service aircraft
The challenge of returning aircraft to service is also magnified by the geographical diversity and number of unique locations in which aircraft are currently parked around the world, Morris added.
- A total of 719 different locations globally are home to one or more single-aisle or twin-aisle passenger jets
- More than a fifth of the global in-storage fleet is parked at the top 20 locations, 23% by aircraft units and 27% by aircraft value
- Top locations include Roswell International Air Center, Victorville Southern California Logistics Airport, Delhi Indira Gandhi International Airport, Istanbul Airport and Hong Kong International Airport.
- Only three of the top twenty locations globally are ‘typical’ storage facilities
- With many aircraft stored at commercial airports rather than storage locations, if storage is prolonged, many will need ferrying to more suitable locations to mitigate risk of corrosion
- This is further compounded by passenger to freighter conversions. As some jets have had cabin furniture removed during the pandemic – with airlines operating all-cargo flights to shore up revenue – many will require restoration to passenger configuration
So what does this mean for the recovery of the market?
Morris concluded that supply will inevitably outstrip demand for the foreseeable future, with aircraft being retired earlier than planned or subject to a part-out process as owners try to recoup costs.
Airlines face a long haul to return to profitable operations. It will take time to get aircraft flying again as demand lags behind capacity – and even longer to return to 2019 levels.
The sector is set to shrink in the short term but the current outlook helps to identify the route to a planned and predictable recovery for the aviation industry, with the need for a networked community response greater than it’s ever been.
Participate in a joint survey between Cirium and Yocova on the challenges associated with airline recovery
For more Cirium insights on the impact of coronavirus on the aviation industry, visit our COVID-19 impact and analyses page here.