Wednesday, July 8, 2020

Fall Travel Is Flashing Red

There's plenty to be worried about as an airline employee these days. As the coronavirus is spiking across much of the south, United just announced their bookings are off, and WARN will start heading to Delta and United employees in the next couple of weeks. This is not exactly the environment that I hoped to restart weekly posts. 

Unfortunately, this post will not bring the rays of hope that many might have wished for with this post. In fact, I, unfortunately, believe in the next few weeks, we will see additional bookings headwinds which should have been predictable and independent from the regionally impacted booking headwinds associated with coronavirus travel restrictions. The wishful thinking forecasts by some in the industry of V-shaped recoveries or 90% recovered by the end of the year will likely falter over the next few weeks.

I do want to be transparent in my research below. There are a some generalities discussed below. These generalities included business/leisure mix and travel trends. Typically, I stay away from these data points as they are impossible to prove at a market level with public data. However, I believe for my analysis, the value of these generalities significantly outweigh the risks. 

On Monday, CMT Engineering's Air Service group published an interestinganalysis digging into the TSA's daily screening data. Their conclusion, ULCC and LCC checkpoints, have higher year-over-year recovery rates compared to other security checkpoints. Thus, it is likely Allegiant and other ULCCs/LCCs are leading the travel recovery. 

I thought the whitepaper was quite interesting and wanted to dig deeper into their analysis and expand on it. Following the same methodology, if we segment cities into predominately Allegiant cities (90%+ of departing seats) and other cities, Allegiant cities took longer to experience the rapid decline in passenger demand and recovered quicker. 

The gaps in the lines are associated with weeks the TSA has not published data for airports. 

The above chart also validates with Allegiant's May traffic figures. According to the investor update, May traffic was down roughly 70%. The chart above estimates Allegiant’s May traffic would be down 69%. This indicates CMT's white paper methodology is reliable. 

In the last week of available TSA data (June 20th), Allegiant cities had recovered to be *only* 30-40% down in passengers year-over-year. This is not some fluke where the year-over-year compares were easier in the summer with these cities. As the cities move through the summer travel season, we see a steady rise in passengers at Allegiant dominate airports. 

So if Allegiant is outpacing other airlines with passenger recovery, why is there a concern? This is where the generalizations come in. First, it is essential to remember who Allegiant's core customer is: leisure customers. Allegiant makes this exact point in their 2020 Investor Day presentation

It appears the recovery in its current phase is entirely leisure-focused. Other carriers are reporting this as well. In Spirit's May 19th Investor Presentation, Spirit explicitly calls out leisure as being their most resilient customer segment. 

The lack of traditional business travel makes sense right now. Anecdotally, we have heard of travel freezes across a broad cross-section of the US economy. Businesses do not want to the liability if an employee were to get sick, nor do company finances support much discretionary spending. If you need further evidence that loyal business travelers are not hitting the road, ask yourself why every major airline extended loyalty statuses through 2021.  

So if the recovery is entirely leisurely focused, let's turn back to the Allegiant focused airports in an annual view. After the first week of August, demand across the Allegiant network significantly drops off and bottoms out around the first to the second week of September. At the Allegiant airports' lowest point, passenger demands are 40% off summer peaks. Let's also not forget after July 4th, passenger demand starts to wane across the network. 

When we take a look at onboard passenger trends by carrier segmentation, we can see ULCCs over-index summer travel in with their passenger demands compared to traditional legacy carriers and the industry as a whole. This is due to summer travel being focused much more heavily on leisure-oriented passenger demand. 

This, again, supports the notion that if we are in a leisure-based recovery, we will see better recovery rates in the summer, when leisure demand is typically the greatest. Following the same logic, when the business travel supports the industry in the fall, our recovery rates will likely flatten or decline. 

When we compare the prior Allegiant airports trends to legacy hubs, we see Allegiant airports significantly outperform large legacy hubs in terms of their recovery. For once, it is nice to be a small airport. It is also important to note, the three airports I selected to represent Delta, American, and United are in the South, which did not see the same virus-related travel restrictions as other parts of the country.

Yesterday, United held a town hall meeting with their employees. While I was not on the call, employees listening in reported the town hall as "sobering." On the call, United reported bookings across the network have started to slow once again. EWR, which has been hit with the hardest by local travel restrictions, has seen the most significant decline in net bookings in a short period of time. The rest of the network has also seen a noticeable decline as well. 

For the non-EWR bookings, we do not have enough information here to determine precisely the nature of the decline. It could be that we are starting to work our way into the August and September booking curve, which I would expect to see leisure travel weakness or the decline could be related to recent spikes in COVID cases. 

But what is certain, states that were driving the passenger recovery are now the states that are many of the states seeing spikes in cases. Exactly how the growth in COVID cases will impact passenger trends is still to be determined. Local travel restrictions clearly will have a negative impact; however, not all states are implementing restrictions. Further, it is difficult to measure the customer behavior change associated with a rise in cases. What we do know is any increase in COVID related activity won't help with passenger recoveries. 

While we won't know exactly how fall travel will shake out until after flights operate, we do know there are far more headwinds than tailwinds with the passenger recovery.... and we did not touch on what is happening on the revenue front. 

I do expect passenger growth trends to plateau or decline around late July and early August. If you are fed an overly rosy passenger trend forecast, take it with a large grain of salt. It appears we are in this recovery for the long haul. 

Tuesday, June 30, 2020

Restarting Weekly Posts

Mark the calendars! We are returning on July 8! With new OTP, ticketing, and daily TSA data, we have plenty to research. 

We are planning to return weekly, but if the industry becomes extremely dynamic again, posts may become bi-weekly or ad-hoc. 

Monday, May 4, 2020

Delta's Push to Drop Small Cities

Few things chap my hide as individuals or companies going back on a deal. In the middle of April, airlines announced the agreements with the federal government as part of the CARES act funding. At the time of the agreement, airlines submitted their requests for minimum service exemptions required as part of their CARES funding. If you have been paying attention, most of these service exemptions were rejected by the DOT.

It appears the DOT will only approval exemptions to minimum service levels if an airline can demonstrate a local travel ban (Hawaii and Puerto Rico), show they will offer a unique service pattern, or travelers can be recovered by co-term airports. United most recently tried the latter to expand the number of cities to be temporarily dropped from their network. The DOT flat rejected all requests that were not supported by the local government. 

This rejection did not prevent Delta from attempting to drop nine domestic cities due to their proximity to other Delta cities. The entire premise of Delta’s filing is these nine cities are generally within 60 miles of the nearest Delta city, but no other meaningful data was provided. 

The level of analysis provided by Delta should warrant a giant red rejection from the DOT. Delta’s “evidence” that these airports were in co-terms with other cities was the airport name:

“Similarly, Savannah, GA (SAV) is an adequate substitute for Hilton Head, SC (HHH), and Orlando, FL (MCO) is an adequate substitute for Melbourne, FL (MLB), as evidenced by the fact that SAV is actually called the Savannah/Hilton Head International Airport and MLB is called the Orlando Melbourne International Airport.” (DOT-OST-2020-0037)

The practice of airports naming themselves after a large, semi-near attraction has always bothered me. Melbourne’s and Orlando’s airports took their airport naming fight to federal courtOrlando felt so threatened by an airport 1% their size, they filed a federal lawsuit to force Melbourne to stop calling themselves “Orlando.” I guess they forgot about Orlando/Sanford up the street... 

When it comes to airport naming, I have always taken the position an airport should feel free to call themselves whatever name they would like. Why? It is quite simple. Unless the airport can convince ticket distribution channels to update their name, it really does not matter. Airline and distribution channels co-term airports by their definitions. If an airline or distribution channel feels like airports are indeed in the same area, they often present both airports as travel options. In fact, Delta does this with its website as well. When we type in Los Angeles, both Burbank and LAX are presented as options. However, if I search for Orlando, only MCO appears. Melbourne is nowhere to be found.

In my opinion, airports should stop this practice. Renaming an airport has real costs to it (signage, documents, time, etc.) with no real benefit. I have yet to see an airport rename itself, without the support of a distribution channel name change as well, and see positive results. 

But, I cannot fault completely Delta for attempting this maneuver, regardless of how much I disagree with it. When it came time for Melbourne to eat crow and demonstrate they are a different airport from Orlando, they mostly missed the opportunity. In fact, the airport helped support Delta’s request by stating:

“Lastly, Delta mentioned it can simply shift all operations to nearby Orlando International Airport (MCO) and that since we share the same market, out customers can simply use Delta’s existing capacity at MCO. We ardently disagree with this approach as MLB has worked extremely hard to provide distinctive service amenities for our customers and we would regret losing even more of our market share because of this decision” (DOT-OST-2020-0037-0113). 

Notice in the response, the airport worries about its market share with Orlando. Pretty much arguing they are the same catchment area, even when this is not the case. While the airport might compete with some Florida visitors, Orlando and Melbourne are entirely different markets in how they function. Orlando is the king of inbound traffic; however, MLB relies on the local economy to drive outbound traffic. When we look at all Florida airports, only Tallahassee and Gainesville airports generate a higher percentage of their traffic from the local demand.

Melbourne’s response is mostly silent on this fact. They touched on their local businesses, but the airport’s response was primarily emotional-based with a few links to news articles. I fault the airport here as they could have been much more data-driven in their response. Delta’s original request to suspend service and their response were equally lacking in data to warrant a grant for suspension. 

In Delta’s follow up response, Delta claims, “the actual demand has fallen to almost zero at the airports at issue in the request.” Again, this is extremely misleading as Delta has said this is the case across their entire network: “This has led to an unprecedented situation where demand for near-term air travel dropped to almost zero in a matter of weeks.” With the information alone, Delta has failed to show how the financial results of these markets are any different than the rest of their network.

Instead, I suspect Delta’s request to drop MLB comes entirely down to its decision to accelerate the retirements of its aging fleet. On Thursday, Delta announced they would retire the MD-88s and MD-90s. Even with a large amount of their fleet grounded, these Mad Dogs are still active in the May schedule (Source: The Hub by Airline Data Inc). Delta will be under pressure to backfill at least some of the MD-88/90 flights with a smaller gauge aircraft. While regional jets might look like a preferred option, grounding mainline aircraft in place for regional backfill would likely break Delta’s scope clause. 

Melbourne has a unique asset compared to other cities. Currently, Delta operates once daily 717 service. Since the 717 operates with only 110 seats, Delta can use this aircraft to replace much larger mainline aircraft without running into possible scope clause issues. The other cities requested that Delta has requested to be discontinued are operated by 50 seat CRJ-20, excluding HHH, which has E75 service. (Source: The Hub by Airline Data Inc) But Delta uses load factors as an attempt to show equality between the cities. 

This is disingenuous at best. Delta has access to fleet-level load factor comparisons, which could actually make the case to drop MLB, but the carrier failed to provide detailed level analysis. Additionally, if Delta truly wanted to show MLB and MCO were the same market, Delta has zip code level customer data, which they could map out purchasing patterns between the two markets. But again, they failed to provide this information. The airline provided, at best, the good ol’ college try with Google Maps. 

If Delta wants the 717 out of MLB and reduce costs, they have other options than discontinuing the Melbourne. Regional service would keep MLB on the network for now. 

Generally, I believe airlines should have the choice to enter and exit cities as they please. However, most major carriers made a deal with the federal government for grants and loans in exchange for minimum service guarantees. The DOT had predefined catchment areas, which the airlines had to agree to upfront. If the DOT allows more a more liberal definition of which cities can be discontinued, expect a bloodbath at the small city level. If Delta were granted the ability to drop any of these cities, expect American and United to submit a carbon copy to drop these cities as well within a week. 

At least with MLB, Delta has failed to present a reasonable case to drop MLB. The DOT should quickly deny this request, but I fear with many airports focusing on emotional rather than data-driven responses to these requests, the major carriers will get approval to start hacking cities off their network. And once a city comes off a carrier’s network, don’t expect it to return anytime soon. But hey, airlines, if you want approval to drop cities, you can have blanket approval on October 1, 2020.  

Wednesday, March 25, 2020

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.


One data dork speaking from experience

Saturday, March 21, 2020

Upcoming Suspension of Weekly Posts


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


Wednesday, March 18, 2020

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.

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 ( 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.

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.

Friday, March 13, 2020

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.