“And The Winner Is….”

Talk about tough times for our industry!?The last two years have given new meaning to that statement.

During the last 22 years, aviation has faced “9/11” in September, 2001 and “The Great Recession” in 2007-2008.?But the Covid19 virus and the actions required by airlines to protect travelers have wreaked such financial and operational havoc that comparison to both of the previous crises is certainly appropriate.

This time around, we think that the problems faced are going to bring about changes to our industry.?The changes we expect are already beginning to be obvious and, frankly, were on the horizon prior to Covid19.?However, instead of a reasonable evolutionary process that might have occurred over a decade or so, the process has been increased from a time standpoint to occurrence in just a few years.

One primary change that has occurred is in regard to the passenger airline industry.?We don’t doubt that travel will return to “pre-Covid19” levels and that it will certainly surpass previous levels.?We believe that ALL TRAVEL including domestic travel, foreign travel, leisure travel AND business travel will eventually return to or surpass “pre-Covid19” levels.

Even though video conferencing is widely used for interaction “in person” these days, we don’t believe that it will replace actual “in person” meetings.?We believe that, just as a phone call augments communication, the video conference will augment “in person” communication for the time being.?Accordingly, business will continue to be done “face to face” and air travel will be the main mode of transportation.

However, we believe that there will be a change regarding which airlines and which TYPES of airlines will be providing that transportation.?

During Covid19, we began to see a rise in usage of private jet charter airlines as a mode of air transportation due to time savings, reduced personal contact and scheduling flexibility.?We believe that the private jet charter airline usage will continue to increase hereafter which will impact the viability of regional airlines and major airlines as well.?When you consider the amount of time that can be saved, the reduction of human interaction and the improved security and scheduling opportunities that charter airlines offer relative to major and regional scheduled carriers, it’s easy to see why business travelers and also leisure travelers will “switch”.

If this evolutionary process occurs as expected, then it stands to reason that other changes will occur including a reduction of the major airlines from four to three and possibly two.?We aren’t speculating as to which airlines are most likely to survive but one can expect that the non-survivors will be merged into the surviving operations.?Given the financial issues of the last two years, one might expect such mergers to occur in the next two to five years...and before the end of this decade at the latest.

Regional airlines will face the same issues as the major airlines while ultra low cost carriers might be better off than the major carriers and the regional carriers based on their “low fares” approach to transporting “leisure” customers.

But, it certainly looks like charter airlines are going to pick up a larger share of passengers going forward…to the point of impacting the bottom line of major and regional carriers and eventually reducing the number of those carriers that are in business.?

Change can be healthy for any industry.?In this case, diversification will…in our opinion…strengthen the aviation industry and will continue to help it grow.