10 shattered aviation and aerospace truths
I am so in love with aviation that it pains me to write anything negative about the most wonderful industry and technology in the world. The coronavirus is a terrible thing, impacting families, industries and entire economies. Aviation, aerospace and its employees have been some of the hardest hit folks. I feel like so many core “truths” of aviation have been turned on their head. The industry will certainly come back, but what and how is unknown. Below are some shattered truisms (in no particular order), but we should also ask what change and innovation can this crisis bring? Feel free to add additional shattered truths or potential changes/innovations in the comments:
Airlines, especially in the US, couldn’t possibly consolidate further. There is 90%+ load factor. FALSE: though they may recover, many regions, like Europe are simply oversupplied. More so, in the US, we could see reduced frequency, elimination of some LCC/ULCCs, etc
Passenger traffic volume, even in a recession or 9/11 only drops 5% maybe 10% or 15% max. FALSE: Traffic is dropping between 50% and 100% depending on the airline / country / route.
Business jet and general aviation traffic will always be more susceptible to cyclical trends than commercial aviation. FALSE: Biz jets seem a lot more safe (for those who can afford it). While they are still cyclical, they are more protected from pandemics than a big airline with hundreds of people on them.
Boeing’s tremendous backlog of aircraft, even in the wake of the MAX disasters, is massive. So massive in fact that a recession-induced draw down of orders does not impact their production or cash flow. FALSE: When airlines ground 50%+ of their fleet, there are hundreds of aircraft waiting to be un-mothballed before airlines are willing to pay for 1 new aircraft, let alone the hundreds that Boeing and Airbus deliver annually
Parts suppliers to Boeing, of which there are thousands, benefit from the annuity that is Boeing. Their orders and cash flows are assured. FALSE: See above
MRO activity, the not-as-sexy but just-as-important cousin to the OEMs and airlines are able to constantly manage a dynamic aviation — (1) low oil prices = airlines fly old planes longer = more MRO, (2) high oil prices = airlines buy new planes = old planes are parted out or converted via MROs to freighters, (3) recession = MROs can reduce temp seasonal staff and preserve profitability. False: Global pandemic = no flying = no MRO needed
Pilot shortage. False: Not any more with all airlines now pushing furloughs and early retirements. This problem has been solved for some time
TSA and airport security’s main mission is anti-terrorism / prevent a bomb or hijaking. MAYBE FALSE: Has their mission changed to include health screener / preventer of disease spread?
Airports are like public infrastructure annuities (think toll road, electric utilities), and private buyers (P3s) and local cities are happy to underwrite huge capital programs based on assured revenues and relatively low IRRs. FALSE: No flying = no airport revenues.
Commercial aviation is the safest form of transport in the world. FALSE: Not if it spreads around a deadly disease to the entire world.