24 January 2010

Crisis? What Crisis - Capacity Grows Again in 2009

In general we have seen a strong discipline in the deployment of capacity by the world's airlines.

The recent 2009 December study by OAG is pretty predictable. Despite some extensive cutting in certain markets - but the time the end of the year rolled around - the total number of seats once again grew topping the previous biggest year for seats which was 2007.

There are a number of trends we can point out - but I think you should go and download the report directly:

This represents both good and bad news.

it would seem that the airlines are not necessarily cutting the capacity that they need to in order to regain yields. It also indicates that (using other data from Ascend) that the new aircraft are still coming online pretty fast. Further this is being used for replacement services. HOWEVER there are a large number of viable aircraft heading to the desert. While I was at LHR this week about 5 white tail 757s were parked at the BA Facilities on the east side of the airport.

Delta interestingly came out and stated that dollar for dollar the MD88/90 family of aircraft represent greater value to the airline than the newer and more efficient B737NGs that Delta is taking from Boeing.

With equipment and operations numbers falling it indicates that there are a surplus of smaller size capacity aircraft. The number of 2000 early model and smaller RJs which have been pointed to as surplus with many leaving the fleets would be a confirmation of this fact - and of course the downsizing of Mesa is a further indicator.

At the top end of the scale the big twins - currently 777s and A330s are replacing 747s. We are also seeing the end of the A340 as a viable production aircraft. 4 for long haul slogan that Virgin advocated a few years back seems hollow as even VS is taking A330s - its first big twin.

So in general we are seeing a rationalization and a true shift. After the last short recession at the beginning of the Oughts we didn't see a big return of older model planes to inventory. The price of fuel put paid to that. However we are now seeing a significant number of middling aged aircraft heading to the desert and other storage facilities which do have viability. So MD80s and 737 CFM powered classics are readily available. For long haul a large number of 747s particularly -400s are available. This makes for an interesting dynamic. And lets not forget 767-300s (still scarce) and 757s are in pretty plentiful supply. The chance of a low entrant coming in and taking these and starting new businesses cannot be discounted.

Food for thought?


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