8/3/2019 Air Travel Market Report
1/33
The Global Airline IndustryChallenges & Opportunities
For US Airports
Keep On Doing What Might Have Worked In The Past And Thats Exactly Where Itll Leave You
16th Annual Boyd Group
International Aviation Forecast Summitwww.AviationForecastSummit.com
All Contents 2011 Boyd Group International, Inc. All Rights Reserved
http://www.aviationforecastsummit.com/http://www.aviationforecastsummit.com/8/3/2019 Air Travel Market Report
2/33
Small Airports In The Economic Cross Hairs:
Airports with under 150,000 passengers are generally going to be
challenged by the new economics. But even some larger ones can be
threatened
Airlines want profitability, not flying to marginal markets, or markets
that dont fit their long term strategies
The number ofairline systems has shrunk materially in the last 20
years, and the fleets under their brand have changed, too
Tumble to it: Survival in the global economy means access from the
rest of the worldnot necessarily local air service to get toOrlando
Its not a matter of a route being profitableits a matter ofbeing
profitable and compatible with the airlines strategy
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
3/33
Key Airline & Air Service Trends
Ignore The Hype Retaining Air Service Access - Not Necessarily Local Air Service - Will
Be The Future Challenge For Many Communities
Traffic Demand: Dont get misled by 2011 airline financials. Theywere strong because the industry adjusted to the economy, not becauseof a booming business environment.
Revenues: Driven by ancillary fees and tight control of capacity thiswill continue. Capacity monitoring reduces the potential for at-risk flyingto small & mid-size communities
Expansion: Airlines are capitalizing on their strengths, but are addingstrong, targeted markets that fit specific strategies
Low Fare Carriers: The revenue hurdles are going up by the dayand the WN/FL merger does not change that situation
The Future: Air Service Access May No Longer Be At The Local Airport.
8/3/2019 Air Travel Market Report
4/33
Key Trends
Fleets:The industry is awash in excess 50-seat regional jets and that isnot an opportunity
Operator Conundrum: lose less flying em than parking them?
Conundrum: maintenance costs going up like a moon launch. At @40,000 hours they start to turn into financial pumpkins
Solution at least for now: high-yield feed markets. AAs foundmilitary points & EAS markets for Eaglebut theyre limited innumber, and not necessarily all-up profitable
Get pre-emptive: monitor RJ hub-feed performancedistance/local yield/flow contribution. Then make hard decisions
8/3/2019 Air Travel Market Report
5/33
Key Trends
Air Access Is Via Network Carriers, At The Carriers Hubsites
Small communities need access to connecting hubs to aggregate enough traffic tosupport air service
Therefore, air access is by definition via a comprehensive network carrier system
These CNCs are less able to attain an adequate ROI at smaller airports
Independent airlines? Not a chance. No hub to aggregate traffic, then no chance ofsurvival.
Point: long term, local air service EAS or not that is not connective to a networkbrands hub connectivity, isnt air service. Its a waste of fuel.
The Only Alternative: Assuring global access at a regionalized airport that canaggregate sufficient traffic to support service that consumers particularly inboundconsumers will use. Can your airport fill this role?
8/3/2019 Air Travel Market Report
6/33
There Are No Airline Alternatives
Travel Company Operators
Allegiant, Vision, & semi-charter operators are great to pursue
They generate lots of mostly net-new travel volumes
But they arent in business to fill a communitys air service needs
They focus on taking discretionary dollars from other sources
This type of operator is excellent for small airport revenue
streams, but dont do much to retain/recapture leakage to otherairports
Point: Keep on recruiting efforts. But dont get mislead into
believing this is access from the rest of the globe
8/3/2019 Air Travel Market Report
7/33
Todays Cargo Cult Air Service Distractions
Like: Another leakage study to find out - yet again - that 70% of thetraffic is using another much larger airport 40 minutes away in some
cases, its not going to change
How bout: An internet survey to find where people want to fly
usually data that are a non sequitur the airline & hub access options
are clear before the first unscientific result is posted on the net.
E Pluribus Dumb: A Chamber of Commerce coalition to let an airline
know how much the community needs the airline, and how they need
lower fares
Goin Hollywood: A YouTube video, showing civic leaders imploring
the target airline to fly to the community these have all the impact
of a hostage video
Tumble to hard reality: its a matter of airlines no longer having
airplanes that can serve many smaller markets - period.
You sure thisll work better
than a travel bank?
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
8/33
Lets Review Some of The Snake Oil
These flim-flam, go-nowhere schemes really happened:
A small, unserved airport, 40 minutes away from two low fare carriers, being told
they have local service potential for a hundred thousand passengers or more
A mid-size airport told that it can be a regional hub, fed by 9-seat airplanes, even
though no carriers bank flights there whatsoever
The Jet America fiasco: Communities persuaded to spend thousands marketing a non-
existent airline promising three flights a week to the East Coast
Communities advised that just getting more direct (read: nonstop) flights will
instantly spike demand by 40%....
Airports with barely 150,000 enplanements, being told they can lure a low costcarrier with a couple $K in incentives
These sorts of scams might make communities feel better, but they are just re-arranging
the deck chairs, not planning for the future
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
9/33
Air Service: Its Subject To The Laws of Physics, Too
It went down strictly due to hard, physical realities
Conditions outside of its control changed factors that no
longer permitted it to float
No amount of consulting schemes or Black Magic could have
changed these realities
Hey, Captain Smith,
lets do a study and find the solution!!!
Scheduled air service is no differentthere are economic realities that cant
be reversed with another study or
survey the situation is clear, so
deal with it. Or go down with the ship.
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
10/33
The Current State of Rural Air Service
The physical economic realities of air service have changed
The cost of flying airplanes across the sky has eclipsed the ability to
support it at many communities
The same economics are causing major airline systems to re-structure
Air service is no longer a matter of flights at the local airport.
It is whether whole regions have access to and from the rest of the world
Access & Regionalization are the trends of the future
For many communities, its time to get off that air service Titanic
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
11/33
Its Not A Matter of Finding The Right Airline
Not a complete list.
Consumers couldbook & buy on at
least 21 large jetoperator brands,plus over twodozen independentregional airlinebrands.
Majors Regionals
AIR CAL AIR ILLINIOIS
ALASKA AIR MIDWEST
AMERICA WEST AIR NEW ORLEANS
AMERICAN AIR OREGON
CONTINENTAL AR WISCONSIN
DELTA ASA
EASTERN ASPEN
FRONTIER ATLANTIS
MIDWAY BAR HARBOR
NEW YORK AIR BRITT
NORTHWEST CASCADE
OZARK CHAPARRAL
PAN AM COMAIR
PIEDMONT IMPERIAL
PSA MALL
REPUBLIC MESA
SOUTHWEST METRO
TWA MIDSTATE
UNITED NEW AIR
US AIRWAYS PBA
WESTERN PLIGRIM
PRECISION
RIO
ROCKY MOUNTAIN
jetBLUE ROYALE
SPIRIT SKYWEST
Today, airports canturn to just nine
large jet operators.
And none of theregionals who werearound in 1983 arein the retail airlinebusiness.
8/3/2019 Air Travel Market Report
12/33
The Fleet Bar Keeps Going Up
Entire Fleet Categories Have Disappeared
Not a complete list.
8/3/2019 Air Travel Market Report
13/33
These Are Shrinking
They are already being retired
Gone already Lots of them retired more are in line for the desert sun
As we speak, in North America, there are close to 200 of these airplanes sitting
inactive, retired. They are economically obsolete.
In the 2Q of 2011, some airlines were paying, all-up, almost $4 per gallon for jet fuel.Spreading this over 50 seats (or less) gets real expensive, real quick.
And, again, theres that maintenance cost issue. Its a matter of time.
http://www.aerospace-technology.com/projects/erj145/8/3/2019 Air Travel Market Report
14/33
That Fleet/Revenue Bar Is Going Up
And no amount of denial will change it:
All 50-seaters are out of production and are getting older
Fuel costs on a per-seat basis are getting tougher
At 35K 40K hours, they get maintenance-costly
And no replacements the next cost-hurdle will be 100-seaters (like the E-190) - maybe
A Gift From The
People:
Most of the
development costs
for CRJ and ERJ
were borne by the
taxpayers of
Canada and Brazil
when the
manufacturerswere privatized.
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
15/33
The Future Is Clear In One Key Area
Long before 2020, most 50-seaters will become cost-prohibitive
Between now and 2020, most of these will be in the desert
Turboprops? Only 60-70 seaters still in production high ticket airplanes
Going out.
Avg Age Est Avg Hrs Age 2020Est Hrs
2020
CRJ-100/200 10.4 24,960 19.4 46,560
ERJ-135/145 8.8 21,120 17.8 42,720
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
16/33
Lets Summarize The Real Trends
Sheer costs are outrunning ability of markets to support air service locally,
so
The concentration of service IS gravitating to being regionalized
Airline resources = highest & best use only
Airline strategies: maximizing revenues v system costs shifting to
cooperative Alliance strategies
Key metric: revenue flows to/through the alliance is job #1
Going out.
Going up.
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
17/33
Its About Alliance Territory, Not Local Markets
Capturing and Defending Revenue Streams.
Based on each Alliances strategies, the goal is to capture revenues that buildand strengthen the system.
Globally, Growth By Adding Members, Not Expanding IncumbentsThe idea is to get regional strength through recruiting more regional players
Territorial
Alliances will stake out turf globally and ceded other turf
Concentration of Pooled Resources
Today independent fleets. By 2020 pooled fleets,
maintenance, purchasing, standards
Focus: Global Flows
Less ability to serve small & mid-size markets. Less interest, too.
Aggregation of traffic at fewer US airports is not just a trend it is
a certainty. Communities that ignore this put their economic
future at risk in a global economy
Don SkyTeam, the oneworld
family has given up SFO-
Australia to the Star family
should we make a move on
New ZealandLAX?...?
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
18/33
Yes, That Scraping Sound Is An Iceberg
Lets Recap Before We Head To The Lifeboats
The types of aircraft that are now serving many communities are
going away no question it is a mathematical certainty
There are no aircraft breakthroughs that will result in replacement for
regional jets. The 50-seat era is over. No manufacturer is taking therisk to develop a follow-on
There are no new airlines coming to the rescue and the LCC growth
era is over. Measured expansion, if any and not in rural areas
Deal with it: at least 100-125 non-EAS airports will lose
scheduled air service in the next 810 years
including many that today have over 150,000 O&D
Howling at the moon wont
change economic realities.
Neither will social media, best
practices, or another consumer
survey.
Communities must start making
contingency plans to assure air
service access and that may
mean regional cooperation.
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
19/33
Okay
Lets Move Into The FutureYear 2020
8/3/2019 Air Travel Market Report
20/33
Fast Forward To Year 2020. Lets Look:
Passenger growth slow up 12% from today - to 517.6 million
Enplanements: up @ 10% to 799.1 million
Fleets: Smallest jet airliner: @ 100 seats
No 50-seat jets are left they are all run out
Traffic is concentrating into fewer airports
Local air service not always at the local airport
Regionalization of access
Service determined by potential for revenue capture, not passenger volume
Airports:USA forecasts indicate
that air passenger demand will
grow much slower than in the
past, and much more slowly than
FAA forecasts.
Remember? In 1992, the FAA
predicted enplanements to exceed
1 billion by 2001.
Now, their forecasts predict that
number to be reached after 2021
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
21/33
These Are Your 2020 Local Airline Brands
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
22/33
Year 2020 The Competitive Landscape
Fleets big iron only
The costs of design and development of a new small-capacity airliner simply
are too risky
Point: the enplanement bar will be up big time.
Competition
Three network carriers Star, oneworld, SkyTeam. A couple of independents
Southwest, JetBlue, etc.
Face it competition will be minimal the airline business will no longer beone with easy entry or viable return on investment
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
23/33
By 2020, The Traffic Requirements Will Be Much Higher
These are rough numbers, but indications of a roughfuture for local air service Figure what a basic
schedule will demand in terms of passengers
annually
Remember, therewill be no small jets
take it to the
bank
And it will be global
alliances that will be
driving strategy
Where an airline
schedules a $30
million airplane is
much different than
a $15 million unit.
Flights
Per Day
Equivalent
DaysWeeks Seats/Flt L/F Pax Rq
6 6 52 100 85.0% 155,938
Assumes three RT flights - six daily
segments - & 98% completion factor
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
24/33
The New Global Alliance Market Definition ModelWhere Might Your Airport Fit For Each Alliance?
Primary/Anchor Markets: Connecting Hub Portals: Star:
FRA/NRT/IAH, etc. In a very few cases, two alliances may have
the same Primary/Anchor market ORD & NRT are examples
Secondary Major Markets:Typically large metro airports,
including those where the Alliance needs presence at another
Alliances primary market. Example: Delta needs ATL-LHR as asecondary major market, even though oneworld is the
dominant alliance at Heathrow
Incremental: markets where strong feed is provided to the
Primary/Anchor airports, specific to each Alliance
Marginal:markets that provide Alliance presence, and/or feedthat is additive, but not critical to the Alliance strategy
Ceded Markets: Routings, and even regions where the Alliance
is not strong enough to maintain a brand presence.
Alliances have specificmarket systems that are
based on their individual
strategies & strengths.
One Alliances
Primary/Anchor marketcan be anothers secondary
or even incremental
market.
Point: Alliances are
splitting turf between
themselves and that turfincludes regions of the US
and Canada
It N t J t V S ll Ai t
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
25/33
Its Not Just Very Small Airports:
A Few Potential Examples Of Airports At Service-Risk
Airports With Over 50,000 Annual Passengers That AreLikely To Lose Scheduled Service By 2020
Abilene
Brownsville
Champaign
College Station
Fort Smith
Marquette
Redding
San Angelo
Springfield
Toledo
Tyler
Yakima
These do not include over 100 smaller airports whereretirement of small airliners will end service
Regionalization of Air Service The Traffic Is Still There
8/3/2019 Air Travel Market Report
26/33
Regionalization of Air Service The Traffic Is Still There
Except There Is At Another Airport
Regionalization Is In ProgressPassengers Aren't Lost - Just Using Other Airports
Since 1990 passenger traffic has shifted to centralized Bloomington/Normal -The region has grown by 10% in air traffic, but Bloomington/Normal has now
grown by over 350%, capturing over 40% of the 5-airport region traffic - upfrom 9% in 1990 - 120,000 passengers O&D in 1990 to over 560,000 in 2010
Reason: Central location allows carriers to "regionalize" traffic capture atone airport.
Same dynamic in other regions of the country
8/3/2019 Air Travel Market Report
27/33
Total traffic in the region is up 10%...
But regionalization has resulted in BMI
jumping 350%
Do All The Surveys Studies Best Practices And Other Voodoo You Want But:
8/3/2019 Air Travel Market Report
28/33
Do All The Surveys, Studies, Best Practices And Other Voodoo You Want, But:
Its A Mathematical Certainty By 2020 Dozens of Local Airports Will Lose Service
Small Jet Airliner
Retirements 2011 2020
Mergers Have Reduced
Competitive Choices
Fuel Costs Raise Revenue
Requirement Bar Low Cost Carriers
Not Low Cost, Anymore
Global Alliance Strategies
Increasingly Focus onMaximizing Revenue Flows
Not Flying More Places.
Regional Airlines
which today are just
leasing aircraft to majors,
shrink dramatically
The New Air
Transportation
System:
100+ Fewer Cities With Local
Air Service
Capacity Aimed At Bottom
Line, Not More Passengers
Trend: Less Competition
Airline Capacity Additions
Very Slow &
Anticipatory To Economy
Code-Share & Frequent Flyer
Program Sharing Between
Alliance Partners Control
Consumer Brand Choice
Market Dynamics:
8/3/2019 Air Travel Market Report
29/33
Yeahbutt New Airlines Will Pop Up
No, they wont
What will they fly? Retired RJs will be run-out anduneconomic at $3 - $4 a gallon for jet-A.
Economics make no sense for designers to try new-
generation small jets the R&D cost are prohibitive
There are no viable openings for new airlines trying
to fly to East Cupcake. Like inter-urban rail of the
early 20thcentury, its transportation mode that
cannot be supported any longer
Low Cost Carriers? Their cost is too high to take
advantage of the opportunities at Fort Smith or
Muskegon, or Champaign/Urbana
Passengers Are Not Being Lost -
There will be little opportunity
for new airlines to serve small
and mid-size airports the cost
of entry is high, the ROI is
abominable, and heres the
kicker
Those passengers lost at MKG
or CMI or PLN or PUB are still
flyingits just at other airports.
A new carrier to fill thesesupposed gaps in rural air
service would be taking on
incumbents, big time.
8/3/2019 Air Travel Market Report
30/33
Factors Defining Future Regional Gateways
Strong Industrial Base. Particularly an international-focusedbusiness base: Montgomery Charleston WV etc.
Anchor Business W/ Big Travel Budget:Alliances will salivate at
getting the travel budget of major employer State Farm at
BMI
Surrounded By Smaller Markets Nearby: This is business,nothing personal. If strong traffic currently, your airport has as
good a chance as any as long as its current service is already
strong. Examples: Grand Rapids. Midland TX
Yields:This is one area where you want to have strong airline
fares. The goal is access from the rest of the globe. No center
ofel cheapo fares, thats the deal. Shreveport: your high fares
dont make airlines unhappy. And happy airlines bring service
to town
The main decisions on
where an airline alliance
will place lift comes from
the front office and you
cant always count on
logical decisions from thatarea
But there are factors that
make one airport more
attractive than others
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
31/33
Regional v Metro Peripheral Markets
Not all traffic will automatically funnel into regional gateways
Some markets are stand-alone: Traverse City. Saginaw. Flagstaff.
There are markets that have local traffic sufficient to maintain strong local service
particularly where local industry is strong and focused Binghamton. Lincoln. L.A. Basin.
Watch population & business trends Flint got strong access to migration out of Detroit.Toledo did not. It just moved north, not south nor west, toward Lansing
The move toward regionalization is driven by a combination of consumer & airline strategies,
so
Pro-Active regional planning will facilitate the process the region can control it or, it can be
haphazard, or not at all
The airlines of 2020 will be heavily-dependent on road hubbing markets with strong 4-
lane feeder systems will have the advantage
http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:1http://www.google.com/imgres?imgurl=http://www.saabhistory.com/blog/wp-content/uploads/2007/01/340_saab_small.jpg&imgrefurl=http://www.saabhistory.com/category/340/&usg=___Ndawgubq5cjN6OAnRetyzyySlI=&h=424&w=600&sz=45&hl=en&start=1&zoom=1&itbs=1&tbnid=EcXlO-hQMS8sgM:&tbnh=95&tbnw=135&prev=/images?q=Saab+340&hl=en&gbv=2&tbs=isch:18/3/2019 Air Travel Market Report
32/33
So, How To Plan
First: all of the financial factors have changed for the airline industry the air service recruitment techniques of2010 are now like tryingto put a vacuum tube into an iPad. Meeting and schmoozing with airline planners is nice, but now you have to have more than a travel
bank, a leakage study, or a slide deck of size to rival War & Peace. What revenue streams do you offer to the airline/alliance system?
Identify which category of market you fit into or can work to fit into for each alliance. Assume that individual airline brands will evolve
into an alliance identity US & UA will represent one alliance strategy
What type of regional role does your airport face? A true regional gateway? A stand-alone with strong industries to support future
service? A Metro-peripheral access point? Or, worst case, one that needs to plan for assuring access that may be at another airport in the
region. Civic hubris to avoid reality can be very expensive in the future.
What is your regional airport competition? Competitively awake? Asleep? Side-tracked with dumb air service schemes? Whats your most
likely path try to dominate the region, or recognize other airports have the advantage? What emerging industries are in the region, and
what value do the represent to the alliance carriers serving your airport?
If regional jets got replaced tomorrow with 100 seaters, where would you stand, revenue v cost? Load factors? Hub access. Facilities.
What is the distance to the current connecting hubs where you have service. The more distant, the more vulnerable.
Hard analysis: What are the airport alternatives in the region? What are the airline strategies at each? Are you a potential GRR? Or a
candidate for regionalization to other airports? Just a glance at where EAS airports are headed increasingly to single-engine, non-
connecting service is a harbinger for larger airports in the
8/3/2019 Air Travel Market Report
33/33
More? Give Boyd Group International a callwell be up front about where we think we can help
crafting an aggressive air service plan that addresses these futurist issues. Well also be upfront regardingthe realities we see for your airport and your region.
Unlike other consultants, we turn down any assignments where the air service goals are inconsistent
with reality, and we let clients and potential clients know this right up front.
Air Service Success In The Global Economy Will Go To The CommunitiesThat Boldly Plan Within The Context of The Future Airline System.
For Straight Talk To Assist In Developing An Air Service Strategy That Fits The Future, Call
Us At (303) 674-2000. No Fluff. Well Give You The Facts As-Is & Where-Is
The 16th Annual International Aviation Forecast Summit
Albuquerque