Leeham News and Analysis
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: Air Transport’s route to 2050. Part 21. May 9, 2025
- Does an A220-500 need a new wing and engines? Part 2. May 8, 2025
- Embraer downplays tariff impact on 2025 results May 6, 2025
- JetZero readies effort for private equity fund raising May 5, 2025
- Bjorn’s Corner: Air Transport’s route to 2050. Part 20. May 2, 2025
Pontifications: No, it’s not time to fly
Aug. 10, 2020, © Leeham News: Frontier Airlines’ CEO Barry Biffle says “it’s time to fly,” reports The Points Guy.
By Scott Hamilton
Well, good luck with that.
Air fares are ridiculously cheap. Some airlines in the US continue to block middle seats and now require passengers to wear masks throughout the flight. Extra efforts are made to clean the airplanes. (Southwest Airlines, in a truly bizarre move, ceased cleaning seat belts and arm rests between flights—two things passengers are guaranteed to touch.)
Travel count in in the US is now up to about 800,000 passengers a day. This compares with nearly 3m a day pre-COVID.
I wrote July 6 why I won’t be flying any time soon. I wasn’t concerned about the airplane experience (except for those passengers who refused to wear masks). I was concerned about the experience getting to, from and at the airports and at hotels.
Now, there’s another reason why it’s not time to fly.
US Regional Consolidation Began Before Covid
Second in a Series on the Future of Regionals
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Introduction
By Kathryn B. Creedy
Aug. 6, 2020, (c) Leeham News: Many might assume the recent loss of three regionals – Compass, Trans States and ExpressJet – is Covid related.
What is actually happening is the long-anticipated consolidation of the regional airline industry coupled with fleet restructuring and the most recent fallout of the pilot shortage crisis that began in 2013.
Reducing the number of regional partners also streamlines the inherent inefficiencies of the regional/major model.
Summary
- Regional airline industry is volatile.
- Mainline-regional model broken for many years.
- Rising costs eliminate some advantages.
HOTR: NOK Air, 3 more bite the dust in COVID fall-out
By the Leeham News Staff
July 31, 2020, © Leeham News: NOK Air of Thailand is the latest carrier to filed for bankruptcy.
LNA’s monthly tracking of failed carriers adds NOK, Jet Time, Level and Blue Air to the list of carriers in bankruptcy since COVID collapsed the global airline industry beginning in mid-March.
Aviation veteran journalist Creedy joins LNA
Kathryn Creedy
July 29, 2020, © Leeham News: Kathryn B. Creedy has joined Leeham News & Analysis as a regular contributor, it was announced today.
Creedy is an award-winning veteran aviation/travel journalist and author who has covered every facet of commercial and business aviation.
Pontifications: The light bulb goes on
By Scott Hamilton
July 27, 2020, © Leeham News: Airlines across the world are pledging aircraft, slots, airport facilities and real estate to raise money.
Some US airlines recently pledged frequent flyer programs to raise billions of dollars in debt to help carry them through the COVID-19 crisis.
Airfinance Journal last week had a podcast with United Airlines and Goldman Sachs to discuss UAL’s doing this and the larger picture.
The rush to pledge virtually everything to raise money is déjà vu all over again.
I’ve been in this business since 1979. I’ve been through the 1991 Persian Gulf War, SARS, downturns, 9/11 and the Great Recession. The impact to the airline and aerospace industry from the virus crisis is by far the worst.
As federal aid comes to end, small suppliers see “blood bath”
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By Scott Hamilton
Introduction
July 20, 2020, © Leeham News: As the Payroll Protection Plan of the US government nears expiration, a blood bath among small suppliers is all but certain unless an extension is approved by Congress.
This is the dire forecast by William Alderman of Alderman & Co. Alderman specializes in representing small suppliers and aftermarket companies wanting to exit the business. Small, in this case, is defined as revenues up to $100m.
Alderman told LNA that some of his clients don’t see business recovery for 10 years. This is a different metric than the one most often cited: air traffic returning to pre-COVID levels in 2023-24, by most accounts.
Summary
- Small companies need PPP extension.
- Small companies need working capital, fast.
- If neither is forthcoming, exiting the business in the other alternative.
Pontifications: Turbulence is not just something in the air
By Scott Hamilton
July 20, 2020, © Leeham News: The timing is coincidental. If you think the airline industry is in a wind shear now, don’t be fooled.
The industry has been in perpetual turbulence for 50 years.
At least that’s the theme of an airline executive’s new book, Turbulence.
David Banmiller began his career as a ticket agent, when hand-writing the coupons at the airport as common practice.
He retired three years ago after a career that saw him in executive positions at AirCal, American Airlines and other carriers.
He became a bankruptcy reorganization specialist as well.
Careers
Banmiller weaved through American, TWA, AirCal, the second Pan Am, Aloha and Air Jamaica. He was CEO of AirCal when it was sold to American, where he became an executive under legendary CEO Bob Crandall. Banmiller went on to become CEO of Aloha, Pan Am and Air Jamaica. He took the first two through bankruptcy reorganization and restructured Air Jamaica outside of the courts. He also served as CEO of Sun Country Airlines.
Throughout his careers, Banmiller experienced many of the downturns of the airline industry: oil price wars, 9/11, the SARS pandemic and now, from his retirement, COVID-19.
An economic crisis on top of a medical one: Why airline traffic won’t fully recover until the mid-late 2020s
Open To All Readers
By Judson Rollins
Introduction
July 13, 2020, © Leeham News: As the world waits for the COVID-19 storm to abate, questions are growing over the duration of a demand downturn for airlines.
Many journalists and industry observers have been obsessively searching for “green shoots” indicating the beginning of a recovery, but much of this commentary misses the mark. For instance, much attention has been focused on capacity restoration in the US and China. However, little is known about the percentage of seats filled by Chinese carriers – and last week United Airlines told employees in an internal presentation that while US carrier capacity in July is back to 47% of 2019’s level, it believes industry traffic has only reached 28% and revenue just 19%.
Last month, investment research firm Bernstein published an analysis calling for narrowbody traffic to recover by 2023 and widebody traffic by 2025. This is consistent with most public forecasts from airlines, banks, and industry observers. The firm’s analysts said that single-aisle concentration in short-haul and domestic routes should see them returned to 2019 utilization sooner than twin-aisles due to reduced long-haul demand and lower demand in short-haul markets previously served by widebodies (e.g., in most of Asia).
LNA believes that 2024 is the earliest possible date for a return to 2019 global passenger traffic – and it could conceivably take until 2028. Many obstacles lie between the present situation and a full recovery: deployment of a successful vaccine (or vaccines), rollback of border restrictions, passenger confidence in the medical safety of air travel, and most importantly, restored willingness to pay by business and leisure travelers. Specific countries or regions – especially those with local vaccine production – may recover sooner, but a global recovery to pre-COVID traffic levels requires all these to happen at a global scale.
To be clear, LNA’s definition of “herd immunity” is that of the global medical community: population-level resistance to virus transmission that occurs because a large majority have been vaccinated or previously infected. This differs from an increasingly popular usage of the term in reference to the passive infection-oriented virus management approach taken by Sweden and other countries.
Summary
- Widespread uncertainty means downturn likely to outstrip previous ones in duration, magnitude
- Vaccine development may be expedited; global distribution will take longer
- Herd immunity to COVID-19 is a prerequisite to confidence in travel safety, reopening of borders
- Open borders, restored economic activity are keys to any rebound in business travel
- Consumer travel requires confidence in personal income, availability of lower fares
Bjorn’s Corner: Do I get COVID in airline cabins? Part 10. Trans-Atlantic trip.
By Vincent Valery
July 10th, 2020, © Leeham News: In our Corner series about flying during the COVID-19 pandemic, we look at a trip undertaken last week by a member of the LNA team, Vincent Valery. Vincent, who flew from New York to visit family in France close to Geneva, writes this post.
On the flight over the Atlantic in Economy. Source: All photos LNA.
Looking ahead for 2020 and 2030 decades: Embraer
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Fourth in a series.
By Bjorn Fehrm
Introduction
July 8, 2020, © Leeham News: All airliner OEMs have a disastrous 2020, but for Embraer, the year has been even worse. After spending a year and over $200m to carve out the Commercial Aviation division to merge it into Boeing, the Joint Venture Agreement (JV) was stopped by Boeing at the last moment.
The Executive Jets and Defense side were not affected, but now Embraer was organized as two companies instead of one. The company must now re-merge the organizations to save costs in a COVID-19 environment where limiting cash outflow, and lowering costs are necessary for survival. At the same time, it’s arch-rival on the world market, Airbus A220 has gone from strength to strength through basket selling with the popular A320.
How does Embraer come back from the Boeing pass up and regroup in a regional market that is no longer a fight of equals? Embraer competes with Airbus that in 2019 was 11 times larger in airliner deliveries and 29 times in airliner revenue.
Only in the below 100 seat market is it saved from the giant, who doesn’t have a model in the segment. And it seems the below 100 seat competitor, Mitsubishi, might fold its entry.
Summary
- The botched JV with Boeing came at the worst possible moment for Embraer, just when the COVID-19 pandemic stopped airliner deliveries.
- The planned JV had held back sales and deliveries, waiting for the JV to complete.
- In addition, it cost Embraer $200m, pushing it into the red for 2019.
- Embraer must now find another fix to the Airbus problem while wrestling with a worldwide COVID crisis.