The planned CCP-COVID-19 economic aid package has not yet been signed, and there is no guarantee that there won’t be more shenanigans when it goes to the House. But the betting is that it will be in place next week.
The package will not provide the one thing that airlines need – business. Airlines are flying empty airplanes – load factors in the teens or lower - and this relief program is only going to extend the amount of time before the industry has to ground itself. A total or nearly-total temporary shutdown is in the cards, regardless of what congress wants. Soon.
The fact is that the nation has already been shut down. Pay airline employees through December, but that won’t change the fact that people aren’t allowed in many cities to leave their homes. Regardless of quarantines, the CCP-COVID-19 pandemic is winning in regard to destroying the nation.
America has to reopen, not continue to dive into caves. In the meantime, we would suggest airport contingency plans addressing a potential air service shutdown that could manifest in a number of days. How long it would last is unknown.
At least the congressional aid bill funded millions to some high-brow orchestra in New York.
The Titanic had one of those, too.
Schedule Reductions To Be Filed Next Week – What To Expect
We will be monitoring revised schedule filings expected from U.S. carriers this weekend, and we intend to have an update to our clients on Monday.
Reducing a national network is not easy. in the hub-and-spoke system, everything is interconnected, and yanking one flight can change the revenue flows on several others.
Here’s what we might see over the next two weeks:
- Reduction In Long-Haul Nonstops. It would make sense that the four main network carriers – AA, DL, UA and WN – will pull down on longer-haul nonstop flights in city pairs that can be alternatively served by connecting flights.
- Bare-Bones Feed Markets. It is likely that with material reductions in the size and scope of the network carriers’ connecting hub operations, the number of flights from some smaller feed markets will get slashed down to one a day. Or less.
- Regional Consolidation. While the congressional aid package may affect this, carriers will be actively looking to consolidate service into fewer airports in a given region. We’ve already covered the example of the Lower Peninsula of Michigan, but there is likely to also be some triage in other regions.
- Air Service Development. One of the outcomes of the CCP-COVID pandemic will be a smaller airline industry. The new name of the game will be demonstrating superior revenue contribution at airports already served. That brings in the whole menu of demonstrating superior traffic generation and the cost-efficiency of the airport v others. When airlines are scraping to keep their current systems from collapsing, that massive leakage study from a small community is likely to be immediately filed in the local landfill.
- International Service – Maybe A Silver Lining For US Airports. Carriers in the UK and EU have been hammered... many have shut down on a (hopefully) pro tem basis. When things start to recover, the #1 objective will be to spike revenues through their connecting hub and focus city operations. Assuming a “V-shaped” U.S. recovery, by early 2021, airports such as Columbus, Cincinnati/Northern Kentucky, Grand Rapids, Albany, Norfolk and others east of the Mississippi may look like low-hanging fruit for foreign carriers.
Start The Blaze. Then Sell A Leaky Fire Hose To The Victim
Finally, in their ongoing efforts to raise the concept of “chutzpah” to an art form, the Chinese government, whose dishonesty and criminal actions started this pandemic, is nothing if not innovative.
Touting that they’ve conquered the coronavirus they themselves created, the CCP is now selling emergency supplies to EU countries. Seems a big part of the half-billion sale to Spain arrived defective, too.
By the way, somewhat off topic, plan on another outburst of the disease in China in the next 90 days. Anybody that believes China has had no new cases in the past two weeks is the definition of gullible. It could again regenerate across the world. All the factors that created this pandemic are still in play.
Insight & Perspectives
BGI will now be updating www.AviationPlanning.com during the week, in addition to Monday Updates. In addition, we’ll be doing the same with the Insights tab at www.BoydgroupChina.com. And, for our clients and friends, don’t hesitate to give us a call to explore & chat about unfolding events.
