An Open Letter to Young Aviationists

Dear Young Aviationist,

If you are new or attempting to enter the aviation industry in the current environment, welcome to your first aviation crisis. It won't be your first and, if you've studied the past twenty years of aviation history, you know it won't be the last.

Nearly twelve years ago, a self-described hotshot pilot completed his pilot degree at Oklahoma State and was finishing his unpaid internship at Mesaba Airlines. He entered his pilot interview set to be the best pilot since Maverick jumped into an F-14. But he had as much crew resource management skills as Maverick himself and was rightfully rejected for a pilot slot. Of the five interns, two were selected for training. None made it to the first day of class.

That hotshot pilot that needed and received a humbling experience, that was me. The ink of my multiengine certificate had not even dried yet as the economy shifted, or more like exploded, around us. In 2008, the entire industry was in a rout.

I bring this up to all young aviationists, pilots, future airport managers, mechanics, or whatever you decided to be in the industry, your future is not set based on the events of today. You are not banned from ever entering the industry we all love. You are not the first, nor will you be the last to have their aviation career interrupted by uncontrollable economic shocks.

But while your career might be interrupted, sitting on your can at home accomplishes nothing. Since we all have much more time at home then any of us expected, learn a new skill. Learn to code. Study another branch of the industry.

But whatever you do, do not just sit at home waiting for the industry to be given to you. It won't be. When the industry returns, as it always does, you will need something to differentiate yourself as the applications once again flood our great industry.

Sincerely,


One data dork speaking from experience

Upcoming Suspension of Weekly Posts

All,

When I started this blog back in October, I had one goal in mind: use my airline network planning experience to explain to industry employees, fans, and advocates why airlines were making changes to their networks. I often felt airline economics and associated network decisions were not well understood.

Over the past three weeks, the Coronavirus has continued to spread grounding entire airlines and economies. If you are reading this blog, the virus impact is likely personal for you. In a matter of weeks, airlines went from their golden years to requesting government bailouts. The velocity of the downturn has taken everyone by surprise.

As the airlines have moved from growth mode to survival mode, I have taken the time to self-reflect. Would I be able to continue to provide relevant content to everyone besides which airline appendage was severed in the latest schedules? Without being directly plugged into airlines' booking systems and their immediate performance data, the answer is clearly "no." The industry we knew in January is not the same industry we will know in April.

As such, I, unfortunately, will be suspending my weekly posts until the industry stabilizes or more public data becomes available. My posts will become ad-hoc as new performance data becomes available, and we can analyze the ongoing storm.

In the meantime, like many others in the industry, I will be taking the time to invest in myself. I am hoping to increase my skills by learning Python and maybe R to help improve my data dorky-ness. As investing in myself is the most significant hedge I provide in the event my current position becomes unstable as well.

This week, I will analyze what is left of the airlines as they have continued to cut to survive. After that, I will continue with a more ad-hoc approach to posts.

I want to thank everyone who has read, learned, and even challenge me as I wrote about airline networks.

If you would like to reach out, please do. I have a contact form that sends directly to my personal email. I try to respond to all emails as they come in.

Thank you all! I appreciate the support.

Levi Anstine

LinkedIn

Bracing on Capacity Cuts; Waiting on a Recovery

The last week has been absolute hell on the aviation industry. There's no sugar-coating it. In the United States, we have had our first (accelerated) airline failure with Trans States announcing they were accelerating their shutdown from the end-of-the-year to April 1st. This at a time when employees thought they had eight to nine months to find a new job. Now, as others have halted their hiring to defer costs, these crews have found themselves in a difficult position. (Note to pilots: ExpressJet has stated they are still hiring)

Nearly every major carrier in the United States has issued guidance to expect massive capacity reductions starting in April. If you follow me on Twitter, I have started turbine side chats as we get through this together. As capacity breaks, I try to provide a more immediate, high-level update there then provider deeper analysis here.

Monday night, I noted how both Frontier and Allegiant have not announced capacity cuts to date. While Frontier A is not required to disclose their plans as a private company, I do wonder given how Frontier operates its fleet and its commercial strategy to focus on mostly less-than-daily service really puts them in a bind.

This becomes especially problematic when you layer in F9’s LTD patterns. 

It would possible that if F9 were to reduce, they would operate less-than-daily service from a city, but the return flight might not be on the same route. Hugely problematic when you’re a P2P carrier.

— FlyDataGuy (@FlyDataGuy) March 17, 2020

Allegiant is also likely in a tight spot with their less-than-daily service as will, but operationally it would be easier for Allegiant to cut flights. But until they publish or flight the routes, I would not consider either of their schedules final. (This morning Allegiant issued new guidance)

What I will promise all my followers is as airlines begin to publish their reductions, we will take a look at what skeletons remain. My data provider (https://www.airlinedata.com/) updates schedules nightly. As airline schedules hit their system, I will have the latest the following morning. If you check my feeds in the morning, I will usually post high-level changes. By the evening or the following day, I will try to have a deeper analysis completed.

But while these capacity changes will negatively impact us all, a recovery will come. What and when it comes, we will all find out together and have the scars to show our grandchildren as well. But there are a few interesting opinions out there. Edward Shelswell-White had an interesting take on what we could see in terms of recovery. His thoughts? Given the physiological damage we all are about to go through, expect the recovery to begin in secondary markets, point-to-point networks, and with carriers such as JSX and Breeze (if they are operating by then).

While I debated for a while after reading this if this could be the case. When I examined the historical passenger trends, following 9/11 the traffic in the 50-100 largest O&D airports suffered less and grew faster than the 50 largest domestic airports until 2006.

When we take a look at nonstop passenger totals, we do see those flying nonstop dropped significantly following 9/11, however, this segment of passengers grew significantly from 2004 through 2006. Both of these data points could be used as support for the hypothesis that smaller cities may see growth with nonstop service.

Another supporting data point came from Jeff Sigmon with Intervistas. Jeff was able to pull together a graphic showing future GDS booking data by airport hub size. In his graphic, Jeff shows GDS large hub bookings are down nearly 20-25% across all future months. However, the medium and small hub airports see less of a drop off and quicker recovery in the fall.

When passengers and flights return, and they will return, it would be reasonable to expect small and medium-sized airports to see demand return much quicker than some of the larger airline hubs.

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Please continue to expect irregular posts going forward as schedules continue to change. I am planning on continuing a shorter, more frequent schedule as changes publish. Please follow my Twitter account more high-level discussion and quicker schedule updates.

Quick Personal Take: Capacity Reductions

On Friday, Delta upped its capacity reduction forecast from 15% to 40%. If you touch airlines at all, we have moved from concerned territory to outright (likely) fear. If Delta is cutting this much capacity, we have to assume others are considering the same. This evening when I have a chance, I'll post on Twitter how much of this reduction might be directly contributed to Asia and Europe prohibitions.

While I am still in the aerospace industry and very concerned about the viability of my job in today’s environment, I am sure most airline employees are rightfully scared.

When our industry leaders are comparing the demand to 9/11 and Delta report net negative bookings for the next four months, there are a lot of old and negative memories that are brought up. Please, if you are booking, canceling, or flying in the next few days, please be as respectful as possible. Many of these employees are worried if they can put food on the table next month. Someone screaming at them regarding policies they don't control isn't helpful.

If you are hiring, please consider prioritizing an airline employee. They are (rightfully) nervous and taking actions to protect their families.

While my family is not directly in the airline industry anymore, we are nervous like may others. My wife works in treasury for a major hotel chain, and I'm still in aerospace. Not the best combination in today’s environment.

The next few weeks will be challenging for the entire industry. I'll be reporting the reductions as factually, efficiently, and professionally as possible. If you are an airport heavily impacted, I will try to reach out ahead of time. I do not want you to find out about your reductions on a dorky blog if the airlines did not have time to call you.

As I've stated before, I am here for anyone needing assistance to understand their changes. At this time, I'm referring all requests to outside groups. However, given many groups are likely task saturated with capacity changes and reporting for their clients, we can discuss me running your analysis. I have a couple of approvals that will need to be put in place first; however, please know we will be working as quickly as possible. If you’re a consulting group overwhelmed and needing help, again, please reach out.

If you're an airline employee, please know you are not forgotten. To me, all of you are family. I've shot the breeze and debated with all of you regarding capacity cuts or decisions I've made. Just like your favorite uncle Eddie, some of you thought I was full of it but listened anyway.

If your a crew overnighting in OKC and would like to get drinks, let me know. I'm always happy to share my thoughts or listen to your concerns.

We will make through this together.

Schedule Reductions: Spirit's Day-of-Week Approach and RDU Reductions

Yesterday at the JP Morgan Industrials conference, airlines did not have a lot of great news. As we all know, booking rates continue to be extremely dry as the Coronavirus continues to spread across the United States. United was extremely blunt in their assessment. Booking and revenues are terrible. But the employees of United should be incredibly proud of their new CEO. Scott Kirby did not sugarcoat the situation, and they appear to have a plan (or plans) in place to keep the airline operating in the most economical condition. Other airlines have capacity reductions and soft booking trends, but no one was as blunt in their assessment as Scott Kirby. 

But United is not the target of today's post. Instead, Spirit, along with multiple other carriers, announced capacity reductions effective in April as well. Spirit announced they were decreasing their capacity by ~5% in April. While this was not unexpected, I did not expect their capacity would be loaded while they were discussing these reductions. Thankfully my provider loads schedules nightly, so we have a sneak peek at Spirit's schedule. 

Spirit has kept its reductions almost entirely isolated to the April travel window. These reductions can be summed up in a few parts: Day-of-week reductions to/from leisure destinations and larger Spirit cities as well as Raleigh-Durham deferrals and exits.

Spirit's day-of-week cuts were the most substantial reductions in their network. In Spirit's 3/7 published schedule, there was minimal variation in day-of-week flights for Spirit's operation. This trend currently continues in the published May schedule. However, based on the guidance other carriers are providing, I think it is safe to say we will likely see Spirit extend these Tuesday, Wednesday, and Saturday reductions. This approach at least keeps the network somewhat whole on other higher demanding days. 

The vast majority of the Tuesday and Wednesday reductions were associated with Fort Lauderdale, Orlando, and Las Vegas. None of these targets should be a huge surprise since they are more significant in Spirit operation. Also, given these are more leisure-focused cities, demand tends to be softer during the middle of the week

Finally, Spirit took their ax to their Raleigh-Durham operation. Towards the end of April, RDU was scheduled to increase to 7 daily departures. In the last schedule, the city will drop to as low as once a day service to New Orleans. There's a lot of moving parts to get Raleigh-Durham to where they are at:

• Boston service is canceled effective 4/4 (re: American entrance)
• Baltimore service will be suspended from 4/4 through 4/22
• Fort Lauderdale and Orlando will be cut on Tuesdays and Wednesdays during the first half of April 
• Chicago service scheduled to begin 4/22 will be deferred until 5/4
• Detroit service scheduled to begin 4/22 will be deferred until 6/10

When Spirit only operates once daily service to New Orleans, it really feels out of place. During this period, Spirit drops all of their large focus/hub cities, but keeps New Orleans. This feels as if they had to keep something in RDU on these days or they have found a relative goldmine no one else is operating. I’m betting the former. The flight might have been just too difficult to remove from the schedule compared to FLL and MCO.

While all of these cuts are unfortunate, I think it is pretty clear cuts will be the new normal for the foreseeable future. I expect to see schedule reductions by JetBlue, Delta, and American to be filed over the next few days. As they come out, I will try to get a post out as soon as possible. 

As you will see at the end of all of these posts, please reach out if you need help. I am happy to refer you to a few great consulting groups. If you need data to run your analysis, please feel free to reach out to Airline Data, Inc. Their tool made it possible for me to capture Spirit's schedule load so early. 

For any referrals, I do not get any commissions. I just want you to have access to quality analysis and data as we all work through this together. While you will not stop capacity cuts from coming in this environment, do not lose your messaging to your board or your community if you wait until airport activity reports start coming in. 

United's April Cuts

At the Chamber of Commerce Aviation Summit, airline CEOs compared the demand environment to trends similar to those following 9/11. Airlines are now starting to react to the demand environment. As we discussed last week, airlines are trying everything they can to get bookings. Change and cancellation fees waivers continue to be spread for future travel periods. Heck, Alaska is even trying to bonus people into status runs with a 50% mileage bonus towards elite status. Alaska also announced an aggressive fare sale last week when other carriers were stating they could not even stimulate demand with fare cuts.

If you got a call from United late last week, you knew it was not going to be a fun conversation. You did not answer the call expecting a new route announcement or frequency increase, as many airports expect during these calls. In your mind, it was "how much capacity am I losing?"

On Wednesday, United announced they were decreasing April domestic capacity by 10% and international by 20% to offset demand reductions associated with the Coronavirus. Anecdotal data points throughout the industry show a massive drop off in bookings. Sabre reported a 15% drop in bookings in January and February. Remember, the booking trends accelerated recently, so this number is likely to understate the severity of recent trends. 

As we go through today's post, we will first discuss the reduction in terms of ASMs (available seat miles). ASMs is the capacity unit of measure that is communicated to Wall Street and drives a vast majority of airline's standard metrics. This was also the only way I could tie United's capacity guidance with what was filled. Later in the post, we will switch to trips and seats, which drives passenger demand much more than ASMs.

Over the weekend, United's April capacity reductions were loaded. In total, United's schedule currently shows the airline down 13% year-over-year in ASMs vs. 2019. This is significantly off their 2-3% ASM growth that we saw scheduled in winter, as well as what is currently filed over the summer. 

How substantial were these reductions, in terms of ASMs? Well, 1/3 of United's routes were decreased or exited. Additionally, United removed the equivalent of 92% of Spirit's or 138% of Frontier's April networks. Take your pick. Whatever measurement you use, this schedule change was massive.

 
These cuts were truly network-wide. The reductions hit each of United's hubs and fleet types. But that does not mean they were all hit equally. The middle of the country, which has fewer long haul international ASMs, saw a much more modest decrease in capacity compared to the coasts. 

As we might expect, two-thirds of United's ASM reductions came from the international side of the house. Much of the international cuts came from outright market exits. For the most part, the market exits were where we would expect them, heavily impacted areas in the world where the virus has hit hard; China and Italy. However, we also see Chicago to Zurich and Houston to Vancouver and Edmonton, Canada, also exited. ORD-ZRH and IAH-YVR appear to be temporary exits. However, IAH-YEG seems to be a permanent exit.

We also see another 48 international markets saw their capacity reduced as well. Again, long haul international frequency reductions drove the vast majority of these cuts. Most of these reductions targeted flight originating from the West Coast to Japan, South Korea, Singapore, and a slight reduction to Israel.  

With these reductions, widebody service took it on the chin, hence, why United is asking those pilots to take time off. In total, widebody capacity is scheduled to be down 13%, with the 777s taking the brunt of the impact. A month ago, United had nearly 130 average daily 777 expected departures in April. As of this weekend, the United is reducing the 777 to just under 100 daily departures (23% reduction). 

Long haul international is not the only international franchise that saw significant reductions. European service from both Dulles and Newark is scheduled to see capacity reduced. United had much more flexibility to reduce its European service. While FRA, GVA, and MXP saw frequency reductions, other European routes were cut by downgauging 777s and 787s to 767-400s or 767s to 757s. 

Turning towards the domestic front, United took multiple approaches to reduce domestic capacity. While the smallest amount of ASMs removed, United did exit eight planned markets in April. Most of these exits appear to be April seasonal exits; however, SFO-XNA, CAK-IAH, and JAN-ORD all seem to be permanent exits. 

Next, United cut 2 to 3 daily flights in long-haul, Florida, or higher-frequency markets. The only market here that sticks out like a sore thumb is PAE. PAE does not fit the mold here compared to the other higher frequency reductions. I've analyzed PAE in the past, and I am a little surprised why United kept the city at all. My only assumption is United's executives have decided on no city exits until they understand if the virus demand trough is temporary or a much longer recovery. 

With the remaining flight reductions, you have to get really into the weeds to understand why United cut them. First, United reduced its later-night arrivals. These flights typically were associated with end-of-day flights out of United's hubs into smaller spoke cities. This approach also drove a 17% reduction in the number of flights departing in the 6am hour. 

If you survived all other cuts, you there's still a pretty good chance you saw a downgauge in your aircraft. Of the markets which did not see a capacity reduction, 59 markets saw some level of gauge decrease. Gauge changes ranged wildly, from a couple of seat gauge adjustments across the entire month to FAT-ORD, which saw a gauge swap of a mainline narrowbody to an E-175. 

If you are traveling in April, I suspect you will have the highest quality United schedule in quite some time. They likely are operating with spares than they have had in quite some time. However, this does come with a cost. 

If these cuts impacted you,  you are not alone. This type of capacity reduction is unprecedented in the modern airline industry and it appears globally more carriers are reducing their capacity as well. Please remember this if you are working with any of the airline commercial groups. They are under intense pressure to right the ship in an environment they mostly do not control. If your crew member is a little on edge on your next flight, remember that many of them are worried about job security. 

I'd say hug an airline employee. But given many of us dorks are huge introverts, and we aren't even supposed to be shaking hands, just give them a gentle nod and a bottle of Purell--- if you can find one. 

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If you are an airport or visitors bureau and are in need of support, please reach out. I am happy to refer you to a few great consulting groups. If you need data to run your own analysis, please feel free to reach out to Airline Data, Inc. I do not get any commissions for any referrals. I just want you to have access to quality analysis and data as we all work through this together. 

Managing the Network During A Crisis

In the past, most of my posts have been data-heavy. However, today's will be a break from those posts. If you follow me on Twitter (@FlyDataGuy), you likely saw a long-winded tweet providing guidance for airport professionals. I thought it would be appropriate to follow that tweetstorm with my thoughts regarding the coronavirus and how airlines are likely planning their networks with any demand changes.

You all are likely well aware of airlines liberalizing their change and cancel fees while reducing capacity to Asia and Italy as the coronavirus continues to spread. Clearly, airlines are feeling a squeeze in demand as the public reacts to the virus's spread.

Today's post will focus on what I believe is going on behind the scenes and what is weighing on professionals within the commercial groups (network planning, revenue management, marketing, and finance) as well as some considerations these groups have for operational groups. I will reference some of the internal data they may be reviewing, however, since it is... um, internal, I do not have access to it.

I do want to be entirely clear here. While I continue to have connections with professionals across a variety of airlines, you will not find any inside information here. In the unlikely event someone would actually discuss their decisions making process with me (they can't re: NDAs), I feel these types of conversations are privileged and should not be discussed openly. They would, however, help impacted professionals understand the operating conditions and constraints in which the commercial groups would be making decisions. Let's also not forget, the virus is still located in isolated regions throughout the US (we believe). As more cases are suspected and confirmed, it is likely the impact on the aviation industry will continue to grow.

So, where are we at right now? To date, outside targeted Asian and Italy flight reductions, March through August flight reductions have largely focused on domestic travel due to MAX aircraft availability. In total, domestic trips are down 1,776 trips vs 140 trips when comparing schedules published in January compared to current published schedules. MAX reductions to date have removed nearly 10x as many flights as any virus related reduction.

However, it is clear the aviation industry is under intense distress. United seems to be the most vocal regarding the impact. To date, United has reduced capacity to Asia, suspended 2020 earning guidance, canceled investor day, delayed future pilot classes, asked widebody pilots to take a reduced pay vacation, and warned future capacity reductions may be necessary.

How significant are these close in capacity reductions? Huge. Why? Costs. By the time airlines' operate their flights, a vast majority of their costs are largely locked in. Outside, of fuel, incremental maintenance, and some airport costs, cutting flights a couple of days out does not save that much money.

This is why we are not seeing widespread domestic cancellations in March. While I am sure demand is off for the month, cutting these close in flights would make a bad situation worse. As long as flights are covering their fuel and other truly incremental expenses, it is best for the airline to operate the flight rather than canceling it. Costs do not take into consideration the potential nightmare it would be to redevelop flight crew pairings and aircraft routings with near term capacity cuts.

Airline costs are often not well understood. This is often true by commercial professionals as well as the general outside world. When it comes to costs, airlines are capital intensive organizations with largely few variable costs. On the day of departure, nearly roughly 70% of an airline's costs are already locked in. Take United's 2019 cost structure, only ~30% of United's costs could be shed if they were to cancel flights across the network. Even this 30% is misleading. At most major airports, airlines are on the hook for airport expenses depending on the airline/airport operating agreement.

This 30% estimate could also range wildly at the route level. Different fleets and mission profiles may have different cost structures. The point, however, is for airlines to cancel flights due to lack of demand, demand has to really dry up. This appears what happened to United in Asia. According to the Wall Street Journal, US-based ticket sales to Asia are off a little over 50% year-over-year around the middle of February.

With softening demand, airlines have hinted there could be capacity reductions on the horizon. The commercial teams are likely actively working on these a variety of capacity reduction solutions if demand continues to soften. We are likely in the heart of spring and summer booking season. If the softness continues, airlines can start reducing flight schedules in a much more ordered manner which would allow some deferring or eliminating of costs.

When working within a dynamic environment, who do I believe is at the wheel driving decisions? I suspect most airlines have an active war room with commercial executives, revenue management, finance, and network planning. Revenue management is likely informing executives of the current booking trends and projected health.

Revenue management will be analyzing negative booking impact based on expectations of their booking curves. Revenue management would be looking at both near term and further out booking curves to understand the impact the virus is having on their operation.

With this information, executives are likely determining a few courses of action. They are likely guiding revenue management (manages ticket prices) inventory and pricing strategies. Executives from there are likely using the provided information to guide network planning on a general theme of what to cut if they believe cuts are necessary. Network planning will be taking this direction to start reducing capacity in impacted markets.

If you are an airport, your traditional network planning capacity planners are not likely the individuals actually making the decisions on which flights to cut. They might be informed and be able to weigh in on some options, but they are not the decision-maker here. Each airline has a team within network planning which manages the fleeting of schedules, as well as near term schedules decisions. These are the unsung heroes of network planning. They make the schedule operational. They also are at the front line when stuff absolutely hits the fan as well.

These teams are likely working hand-in-hand with finance to determine estimated variable costs by flight as well as revenue management of projected final booked revenue. The network planning team would then start weeding through the schedule to see which of these projected cash negative flights could be removed while keeping the schedule operations.

So here's the million-dollar question, where do I expect flights to be reduced? As always, it depends. If we continue businesses implementing travel bans, I would expect carriers to begin reducing their business networks. This would include large Northeast cities (New York/Washington), Chicago, Bay Area, Dallas, Houston, etc.  But some of these reductions would be dependent upon suspension of slot usage requirements (which IATA is requesting). Airlines are willing to operate empty flights in the short term rather than lose their slots to constrained airports.

Next, if the virus continues to cause long term demand concerns, airlines could take two approaches. First, expect to see long haul flights that overfly hubs to be targeted for reductions. Second, watch for the number of banks within hubs to be reduced. Reducing the number of hub banks would reduce the number of itineraries within a carrier's own network which competes with itself. Finally, as some outlets have started to report, entire fleets that are approaching retirement may see their retirement dates accelerated. This would help reduce some costs associated with unproductive aircraft.

As airlines continue to respond to the virus situation, it is incredibly important for those within the industry, especially airports, to understand how airlines are being impacted so you can plan ahead or you can address concerns as they arise. If you have access to GDS/MIDT data (I do not), you are at least four to seven months ahead of others in understanding the financial impact.

If you are new to analyzing airline revenue or you report entirely on load factors and passengers, please have an air service consultant help you. Trust and respect are the foundation to air service development. Actually understanding what airlines are looking at can help you build relationships with the decision-makers and lead to better results. Solely reporting on load factors and top O&Ds to airlines will not help, especially in dynamic times.

If you need help, please reach out to me. I am happy to get you in contact with some of my preferred air service development groups that can help you understand your airport's current performance and analyze the traffic results when the newest traffic data is released. I do not receive a commission, nor work for any consulting group. I'm offering so that others do not make the same mistakes I made in the past.