Our latest webinar hosted by Rob Morris, Global Head of Consultancy, and George Dimitroff, Head of Valuations, comprised in-depth review and analysis of the latest updates on the impact of the coronavirus on the aviation market, attracting more than 900 delegates from around the globe. (Access the recording and data presentations here).
Please note all references to ‘today’ are equal to accurate stats on the 22nd April. You can read our daily updates here.
What are the key takeaways? We’ve collated the key data, trends and analysis you need to know now…
When the walls came tumbling down
With IATA’s prediction for a 48% fall in traffic this year having sent shock waves across the industry, Rob Morris shared his expert view on the new outlook for the industry, including the prospect that at least seven years of passenger growth could be wiped out.
This seismic shift from IATA’s original forecast growth of 4.7% not only presents unprecedented challenges. We would require 100% compound growth to get back to 2019 levels of passenger traffic. Growth of 10-30% will only see us return to the traffic levels in 2014.
The global travel and tourism industry (US$10 Trillion business) has been ‘put on hold’ for at least three to six months, impacting the whole supply chain and booking cycle with revenue sources drying up
As yet, there are no clear navigation aids as GDP forecasts and customer confidence spiral down and travel regulations increase, along with massive government interventions. The situation will improve, but the timing and scale of recovery remains unclear.
Potential implications of IATA scenario
- The commercial passenger jet fleet in service at the end of 2019 was ~23,710 units (includes regional jets, single-aisle and twin-aisle)
- Assuming no changes in unit productivity, the equivalent fleet to operate the 2020 capacity base implied by the IATA scenario is ~16,360 units (note that in this scenario load factor reduces to 62%)
- Implication is that there are immediately >7,000 surplus aircraft in the system (in addition to aicraft stored at start of year)
- OEMs will deliver further aircraft in 2020, if we argue 800-1,000 then that increases the implied surplus by that same amount
- Reality is that most of these aircraft will be parked for the duration of 2020, awaiting 2021 recovery scenario
- What will traffic growth be in 2021 (assuming load factor recovers to 70%)?
- 20% (back to 2011-2012 traffic base) – 6,250 surplus jets + OEM deliveries in 2020/2021
- 40% (2014-2015) – 3,340 surplus jets + OEM deliveries in 2020/2021
- 60% (2015-2016) – 430 surplus jets + OEM deliveries in 2020/2021
- 80% (2016-2017) – no surplus
- Retirements in 2020/2021 will reduce the surplus (last two complete years saw 1,130 total retirements), but remember that we opened the year with 2,500 stored passenger jets already, including 380 737 Max.
The latest view – comparative analysis by region
Drawing from Cirium’s data points, Rob Morris highlighted the following key trends and regional differences:
- Global capacity down around 75% by end of April on a daily basis over 2019, recovering to around 45% by end May
- While it’s interesting to see airlines scheduling a higher percentage of flights in May, it’s likely that these will be revised.
Daily capacity changes YOY by region
- US domestic was at 2-3% and it began to reduce in March 2020 and is now at 65% reduction YOY
- Intra-European capacity down nearly 90%
- China domestic down 75% in middle of February recovered to 40% down in April and potentially will see 5% YOY growth in May
- The data suggests that what airlines are publishing in their schedule is not the reality of the situation.
Tracking the global fleet by single-aisle and twin-aisle aircraft
- Single-aisle aircraft: Start of the year, 14,000 tracked every day. Began to decline in February when China went into lockdown, then it started to bounce back before the rest of the world went into lockdown at the start of March – now 4,000 aircraft being tracked today.
- Wide-body aircraft: a change from around 4,000 aircraft on 3 January to 600 aircraft today (passenger aircraft only)
- Single-aisle aircraft that are in-storage are flying less than normal, averaging around 9 hours a day at the start of the year are down 44% to around 5 hours a day
- Twin-aisle aircraft a similar story with those aircraft operating flying fewer hours
- Fewer aircraft, less utilization
- Shutdown phase reached around 20th April 2020. Now we are in the hibernation phase.
Analyzing the global fleet and utilization figures by region and country
- The beacon of hope: 2,500 aircraft tracking at the start of the year reducing through February as the domestic network shut down in China and in-service domestic flights increasing in March.
- It’s important to know where that recovery has come from: while the future schedule is showing signs of potential recovery (5%YOY), we will only know for sure when we analyze the actual utilization figures for that respective time period.
- Utilization patterns in China are stabilizing, although this is still well below expected growth targets and figures from early January. 8.5 hours a day that the Chinese single-aisle fleet were flying at the start of the year is now down to 5.5 hours. Twin-aisle down even more fundamentally by 43%.
Asia Pacific (excluding China)
- Fleet decline was slow in comparison to China, but the decline came in late March and it was very sudden. To the same kind of levels as Europe.
- US single-aisle fleet stayed stable for a much longer period with 3,500 aircraft flying through March.
- If people read about airlines reducing 90% capacity, our evidence suggests at present they are not taking out 90% of their fleet.
- As of mid-April, 1,340 were being tracked in the US and only 91 of these aircraft were twin-aisle.
- The shutdown is almost complete. Only 300 aircraft tracked on 17 April, and we can predict that any wide-body aircraft that is flying internationally is operating for cargo purposes. Significant number of all cargo flights operating on all passenger aircraft are operating out of Europe to North America.
Monitoring the in-storage fleet from the shut-down to hibernation phase
- Parked fleet at the start of the year was at 1,800 aircraft that equated to around 6% of the global fleet.
- It’s the statistic we thought we’d never see – with 66% of the global fleet now parked, the shut-down phase has come to an end.
- On the 20th April 2020 there were 14,500 aircraft in-storage 2/3 of the global fleet, broken down by 10,844 single-aisle and 3,655 twin-aisle aircraft.
- In-service fleet of 7,577 is about same size as that operated in June 1991.
- More than 1,000 passenger jets have returned to service , almost 40% into fleets in China. We are starting to see some recovery of the Chinese market as domestic markets are the first to come back
- The number of single-aisle aircraft is a greater proportion of the global fleet so there will be a larger impact on these aircraft types, A320 family and 737 various types
- IATA scenario has a 48% traffic reduction YOY, taking us back to similar figures in 2009. Therefore, if this scenario is correct then it potentially wipes out 10 years of growth.
Please join us for our next webinar in the coronavirus series: The route to a planned and predictable recovery. Register here.