Resources

Aviation Industry Updates: July 13, 2021

Written by James Onieal | Jul 12, 2021 10:12:41 PM

 

United vs. Delta | Completely Different Fleet Strategies

  • Delta Air Lines has significantly increased the average number of seats on its aircraft over the past 10 years, helping to limit costs and boost earnings.
    Despite its upgauging program, Delta has a wide range of aircraft sizes in its fleet, including many large regional jets and small narrow-bodies.
  • United Airlines will attempt a much more aggressive form of upgauging, dramatically shifting its fleet towards large narrow-bodies, which could severely pressure average fares.
  • Last month, United revealed its own plan to become less dependent on single-class 50-seat jets. However, it's taking a much different approach than Delta, which could spark another big change in industry dynamics.
  • Delta's 2012 pilot deal was part of a broader strategy of "upgauging" -- shifting the fleet to larger jets (especially in domestic markets). Typically, larger aircraft are cheaper to operate on a per-seat basis.
  • This boosted Delta's average number of seats per aircraft by 30% in the decade after 2009, helping the full-service airline keep its costs in check and post strong profit growth.
  • Meanwhile, United expects to retire over 200 50-seat jets by 2026, although single-class regional jets will still account for 10% of its departures in North America at that time. This will increase United's average seats per departure in North America from 104 in 2019 to 134 by 2026. Essentially, United plans to upgauge even faster over the next five years than Delta did over the past decade.
  • Essentially, United's management is betting that rapid upgauging will allow it to reduce unit costs faster than unit revenue declines, bolstering its profitability. Perhaps it's right. But with more 76-seat jets at its disposal and a substantial fleet of small narrow-body jets, Delta will be better able to match capacity to demand on a market-by-market basis. That's a much more reliable strategy for generating strong earnings than United's even more aggressive upgauging plan.

Motley Fool

Avelo Already Dropping 2 Cities | Is Trouble Brewing For Start-Ups?

KEY POINTS:

  • On Wednesday, Avelo extended its booking window from Sept. 16 through Jan. 11, 2022. As part of the schedule extension, the carrier also made some quiet adjustments to its route map, first flagged by Brett Snyder on Twitter and later confirmed to TPG by the airline.
  • Perhaps the biggest news is that Avelo will exit two of its 12 cities beginning later this summer.
  • The carrier isn’t necessarily throwing in the towel in the long run. In a statement shared with TPG, spokesperson Jim Olson said that “we will reevaluate returning to [the] markets for the summer of 2022.”
  • Avelo isn’t just dropping cities; the carrier’s also fine-tuning its schedule. The airline’s online booking schedule no longer lists any flights to any destination on Wednesdays or Saturdays from Sept. 16 through Jan. 11, 2022.
  • Many of the carrier’s existing routes that survive the cuts will see reduced frequencies as well. For instance, flights from Burbank (BUR) to Ogden, Utah (OGD), were originally planned for six weekly services, but that’ll now get cut to four times weekly.

The Points Guy

NetJets Stops Light Jet Sales | Flight Demand Booms

KEY POINTS:

  • NetJets has “temporarily paused” sales of fractional shares, leases, and jet cards for the Cessna Citation XLS and Embraer Phenom 300 due to “unprecedented demand within the private travel industry,” a company spokeswoman told AIN.
  • According to NetJets, record contract utilization by existing fractional owners has resulted in flight demand currently exceeding all other highs in the company’s 57-year history.
  • To meet continued demand, NetJets said it is hiring hundreds of pilots and service employees through year-end and investing nearly $2.5 billion for 100 new aircraft to be delivered between now and the end of 2022.

AIN Online

United’s Big Aircraft Order | Huge Upsides And Risks

KEY POINTS:

  • The airline has been actively marketing the benefits of this order since its announcement, with CEO Scott Kirby touting that the main idea behind the order is for an improved customer experience
  • There are a lot of upsides to this new order for United, including a relatively quick refresh of a fleet that has gotten quite old. The two new plane models, the Boeing 737MAX and the Airbus A321NEO, are both highly efficient, fuel-saving airplanes that will be better for the environment than United’s current fleet.
  • But this order has some significant risks, also, and has implications for domestic U.S. capacity, affects on competition, airline labor markets, and the regional airline industry.
  • According to United’s press release, many of these planes will replace 50-seat regional jets (RJs). This has plenty of interesting implications. These replacements will mean a step function increase in size per departure compared with the RJs, meaning that the schedule may need to change in terms of frequency or otherwise a lot more people will be needed for each flight.
  • Not long ago, CEO Scott Kirby spoke positively about United keeping more wide-body planes than his primary competitors, and he saw this as a strength for when long-haul business travel returns. Not sure if he still believes this, as both the 737MAX-10 and the A321NEOs just ordered can replace the carriers’ Boeing 767 fleet if not more.
  • In the last few years, United has been steadily building up its hubs in a strategy that is working well for them. For example, from their hub in Denver, they fly to Los Angeles — but so do lower-cost carriers Southwest and Frontier. United is forced to match the low prices set by these more efficient carriers on this route. By adding service from Denver to more mid-size and small cities, like Kalispell, MT, for example, they can be less dependent on the low-price local traffic from Denver to L.A. and carry a connection from Kalispell to L.A. instead.
  • In some ways, this order helps to lower United’s unit cost of production by bringing in more efficient aircraft that will burn less fuel and, for a time at least, need less maintenance. However, they are also putting pressure on their own labor rates as they will need many more pilots, flight attendants, and mechanics paid at United’s rates to support the new aircraft, and this is a big increase in cost compared to the regional feed that will be replaced.
  • The most interesting thing about United’s announcement is how they have positioned the new order. Rather than say it make them more green (which it will), or burn less fuel (which it will), or be more reliable (which it will), or even be more profitable (uncertain), CEO Kirby has highlighted that this fleet upgrade will make for a better customer experience, even focusing on the individual screens at each seat being great for families.

Forbes

Weekly TSA Numbers

[image_with_animation image_url="2731" alignment="center" animation="None" hover_animation="none" border_radius="none" box_shadow="none" image_loading="default" max_width="100%" max_width_mobile="default"]