Small jet demand likely to stay depressed after COVID

Subscription Required By Judson Rollins
Introduction 
January 25, 2020, © Leeham News: As passenger travel trickles back to life, one trend that’s already apparent is a long-term diminution of airline yields in most regions. This is largely driven by a reduction in business travel, some of which is likely to never return. Regional jets and small single-aisles like the Airbus A220 and Embraer’s E2 family have higher unit cost, or cost per available seat-mile (CASM), than larger aircraft like the Boeing 737 or Airbus A320. Achieving an operating profit with smaller jets requires high unit revenue, or revenue per available seat-mile (RASM). This will be difficult to achieve in a world where business travel is still down 70%-80% this year, even with a vaccine – and may be down 30% or more permanently. What role will these smaller jets have after the pandemic? And will production match this new reality? A closer look is required. Summary
  • Regional jets and smaller single-aisles have higher unit costs.
  • High costs require higher unit revenue to be profitable.
  • Business travel likely slow to return, with some permanently impaired.
  • Smaller jets previously used for routes now in danger of demand fragmentation.

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