Will The Airline Logistics Problem Cause A Havoc In The Airline Industry?

 

The coronavirus has devastated the airline industry. U.S. air travel has dropped 95% compared to last year, and the number of flights scheduled globally is down by 63 %. The insides of airports are empty, but outside is another story. While some airlines have started transporting cargo on passenger planes, more than two-thirds of the world's commercial aircraft are grounded.

 

 It's somewhere between 14-15,000 aircraft that are parked, or almost 60 % of the fleet. Never before in history have airlines had to ground so many planes so quickly.

 

 

Delta and United reported their first quarterly losses in more than five years. American Airlines told CNBC its revenue is down 90 % from a year ago. Parking hundreds of aircraft is also adding to their losses. These planes can't just sit idle. They need routine maintenance and a place to be stored. And when you suddenly have thousands of planes with nowhere to go, it becomes a logistical nightmare.

 

Before the coronavirus hit, airplanes were where they were meant to be- in the air. At certain times of the year, there could be as many as 20,000 planes in flight at the same time around the world. At the end of 2019, the global air fleet was nearly 24,000 and now more than 16,000 of those massive machines need a place to park. And that number can continue to go up as airlines cut their networks.

 

 

 Aircraft storage facilities have been around for decades, but never in history has the aviation industry had to park so many planes at once. Airlines are having to get creative about finding space for planes. A recent flyover of a storage facility in Victorville, California, shows planes fit together like puzzle pieces on unused runways.

 

Victorville is well known as one of the world's biggest airplane boneyards, a storage location for out of service or old planes. It was already storing Southwest's fleet of Boeing 737 max eight, but it's now storing hundreds of other aircraft due to the lack of demand and air travel.

 

Victorville, along with boneyards in Roswell, New Mexico, and Tucson, Arizona, are currently the top three locations for parked aircraft. Routine parking happens from time to time. Very, very small volumes of aircraft. But this is completely unprecedented, so widespread that aircraft are being parked at airports, all over major airports now have many parked aircraft on the ground and they're gonna be there for a while.

 

 

Aircraft range in size. For scale, a standard football field is 160 ft. wide. A narrow body jet like Boeing 737 has a wingspan of 117 ft. But wide body airliners can be twice that. The world's largest plane, Airbus's A380, has a wingspan of 261 ft. Even aircraft manufacturer Airbus is being asked to help out.

 

The client services team in Victorville created an app that helps these airlines to work out exactly how much maintenance is needed and even logistically where the aircraft are. And that enables them to very quickly optimize how to block the aircraft, which park them and also to prepare them when they come out of service when this is through.

 

 

 Airbus, along with Boeing, dominate the commercial aircraft industry and together make up 91% of the market share. Airbus has over 11,000 planes in operation.

 

Skywise is a digital platform the manufacturer offers its customers to keep up the health of an aircraft. It collects data from systems and sensors to help predict maintenance, as well as help with logistics of daily operations.

 

Airbus has added a new feature to help airlines find parking. Parking an airplane isn't as easy as just finding a spot. Factors like how long the plane will be out of service and what type of maintenance needs to be done, play a role in finding a location.

 

Now, parking is typically relatively short term. It's a bit like putting something in the fridge compared to longer term storage, which would be where you put it in the freezer. So certain pieces of maintenance must be done before you can pick up an aircraft, even if it's just for a couple of days.

 

These aircraft cost hundreds of millions of dollars and maintaining them is not cheap. Even when parked, they need to run the engines, cycle fluids and move the tires, among many other checklist items. This is why some airlines are flying with just a few passengers aboard just to keep them running.

When airlines know the plane is going to sit for months at a time, they're sent to the desert because the dry climate helps prevent corrosion. If it sits on the ground for one or two months and has been operated that whole time, it requires a lot more maintenance to bring it back in the service than, let's say, if it has been started up every 10 days or so.

 

Many of the maintenance officers are keeping twice as many airlines active than needed and they're rotating them in and out. So that way for those other aircraft, they won't have to worry about the more extensive maintenance bringing them back in the service.

 

In April there was about 80% of the fleet in the parking mode. Eithad Airways, for example, returned over 100 planes to its main base in Abu Dhabi, where it sealed up engines and sensors to prevent things like sand from getting into critical areas.

 

The outlook for coronavirus is still unclear. Boeing told its shareholders that air travel could take two to three years to return to normal. Airlines have had to consolidate fleets to cut back on costs.

 

 International travel has been hurt the most and with good reason. And it's very difficult now to travel between countries. A hundred percent of the aircrafts were grounded in April and May. The larger it is and the older it is, the more it suffers.

So when you're down gauge, you're going to go to the smaller aircraft, the most economical aircraft.

 

 Airlines before coronavirus were doing great. They had the highest employment levels in the United States, at least in 17 years. They were hiring, Pilots, flight attendants, expecting this big rush in travel to continue. And after seeing a decade of profitability now they're posting the first losses in years. Airlines have seen incredible losses. And analysts don't expect that to stop anytime soon.

 

Like many businesses, large and small, they're in survival mode and looking for ways to conserve cash. Lack of demand could lead to cancelling or deferring future orders from manufacturers.

 

 Airbus and Boeing have already cut back on production. And both companies are planning to slash jobs. As for the thousands of aircraft parked around the world, retirement could come much earlier than expected.

 

The thing to understand is that before this crisis hit, airlines couldn't get these planes fast enough with one of their biggest complaints was that aircraft were delayed. So the market for aircraft was very high. Airbus and Boeing, which dominate aircraft production, have been sold out of some of their best sellers through pretty much the middle of the decade.

 

Some airlines, because fuel is such a big cost, they do want the more fuel efficient aircraft going forward. But the timing of when they get those planes, that's going to change. It will all depend on when demand comes back. 6,000 of these are 15 years or older. 4000 of these are 20 years or more. They're already approaching retirement age and we're in a situation now where we have thousands of excess aircraft.

 

So an airline deciding what aircraft they’re going to keep around, would not want to spend millions of dollars on maintenance to keep your older aircraft around for them to fly into next year. So the impact here is dramatic. There is no timeline for when the world will return back to normal. So for now, much of these aircraft will sit waiting for the return to normalcy like the rest of us.