The Tokyo Olympics didn’t happen in 2020 and now the question is will they happen in 2021. Obviously, the primary concern for the organisers is the risk of spreading covid-19, but to what extent does the event also rely on the world of global aviation being at least partially recovered.
Fifty-two weeks ago, we wrote a short blog highlighting some of the regional capacity changes in Asia as a result of a small, localised outbreak of a new virus. At the time we thought that there could be some impact on global aviation, perhaps like a SARS or Ebola time impact. We were so wrong! A year later and we are reporting on what has become the single most destructive event in aviation history; it has to end soon, surely?
The flattest seasonal holiday season has been reflected in the latest global capacity which has broadly remained around sixty million seats a week since the middle of December. The early Christmas present of breaking that sixty million, was just that, a present and this week’s 59.6 million is perhaps likely to be as good as we can expect in the next few weeks.
It’s hard to believe that Beijing’s newest airport has been open for a year already. And what a year it has been for the industry – certainly not one that any airport would have wished for in it’s inaugural year. We know however that China’s domestic air market has recovered from the COVID crisis, at least in terms of capacity – and in the month of November, domestic capacity was 10% above November 2019 levels.
Since the week commencing the 5th October the US market has reflected a very different trend pattern to the rest of the world as the chart below highlights. Whilst the rest of the world has seen a steady decline in capacity and is now 9 points lower than at the beginning of September, the United States has seen a thirteen-point improvement; a twenty-two-point swing to use pollster terminology.
If you have over 100 aircraft scheduled for delivery in 2020/21 and a further 106 that are currently inactive then you have plenty of capacity. But where do you operate those aircraft? Southwest seems to have found part of the solution with their recent announcement of entering the Chicago O’Hare (ORD) and Houston Intercontinental (IAH) markets from early next year.
Traditionally the next week is one of the most impressive displays of the success of the airline industry, the Big Three US carriers announce their third quarter earnings which cover the July to September period; the peak months of travel in many markets. Last year United Airlines reported net income of US$1.0 Billion, Delta Air Lines adjusted revenues of US$12.6 Billion and American Airlines paid some US$44 million in dividends in the quarter.
In the week that some 32,000 aviation professionals’ careers were placed at risk in the United States as the CARES Act expires, it feels like a really flat week for what is a great industry. It seems that this week’s capacity data reflects what is probably one of the most depressing weeks of the Covid-19 crisis; we knew those furloughs were coming but just hoped that they could be avoided, perhaps they still can.
The transatlantic for many airlines is a very lucrative source of revenue and with the IATA Winter Season now four weeks away we’ve looked at the typical revenue generated across the season. However, since Covid-19 was already bugging demand in January we’ve used Winter 2018/19 as a reference point.
Throughout 2020 scheduled airlines have been looking for glimmers of hope in a recovery, but it looks like the last hope of the year Thanksgiving will be memorable this year for all the wrong reasons. The summer season saw a small spike in demand and then a rapid settling back to the new normal demand levels; labour day showed a similar pattern and the end of year holiday currently looks like being worse than both of those events.
The first full week of September capacity follows the recent trend and we are now into the fifth consecutive week of capacity declines from what looks like the peak capacity week of the 3rd August. Project the current trend forward to the year end and global capacity will fall below 40 million in the last week of December; that will not be a happy Christmas for the airline industry. The last full week of December 2019 saw some 106.8 million scheduled seats, so we appear to be heading for less than half of global capacity by year end.
While the past four or five months have been tough times for airlines and airports, the same has been true for suppliers to the industry. An example of this is the fuel suppliers which are on standby, ready to refuel aircraft in their often-short turnaround time. Early on in the pandemic, as OAG frequently reported, airlines struggled to plan schedules around travel restrictions imposed at short notice and plummeting demand.
This week’s latest scheduled capacity data shows a further reduction with the loss of some 700,000 fewer seats reported this week. That’s a reduction of just one percent and exactly the same percentage of capacity at 50.6% of last year’s level as we reported for week thirty-one. This is now the third consecutive week of global capacity falling back; that seems like the beginning of a trend to me.
We may not have realised it at the time and it certainly didn’t feel that great, but last week’s global capacity may have represented the peak week for 2020 in the new world of Covid-19. Last week we broke through the 60 million mark; this week we are just below that point and although there are pockets of capacity growth around the globe there are also a number of new travel and rumoured travel restrictions dragging capacity down.
The past 30 weeks have seen the number of cancelled flights go through the roof as a result of the global pandemic, causing disruption to passengers, airlines and airports. Last week we looked at how airlines managed schedules during Covid. This week take a look the cancellation disruption and management at country level and how they got it under control.
With one of the world’s largest airlines making nearly 800 schedule changes in one day and at the same time having to release over 17,000 dedicated employees, the challenges of running a scheduled airline are not getting easier. Global capacity has crept up to 60 million seats this week; some 4% up on last week and breaking through the halfway point to recovery; well at 50.4% of last year’s capacity it’s a positive statement!
“Unprecedented” is a word we’ve heard a lot over the past 5 months. It’s a term which very much applies to the airline industry. Never before have airlines had to adjust so rapidly and at such scale to a changing external environment.
Last week we were very close, this week we have broken through the 50 million weekly seats mark which is great news, however, at 53.8 million we remain at just 45% of the capacity available in the same week last year. And just to give you some historic context in 1996, the earliest online year for OAG data there were some 52.6million seats; we have come a long way in those years!