Forbes’ expert aviation contributors see the change in the air in 2020. From how the 737 MAX crisis will resolve to the weighty potential impacts of a Chinese economic slowdown, here are their predictions for the coming year.
Michael Boyd, head of the aviation consultancy Boyd Group International
THE BOLD PREDICTION: The formerly expected boom in China-U.S. air travel is going to deflate in 2020, big time. Traffic between China and the U.S. will fall in 2019 by at least 8%, and in 2020, plan on at least another 20% — or more.
The trade war is part of the reason, but in the larger picture, its effects are like putting a bad dent in a car that has just been T-boned at a railroad crossing. It’s the Chinese economy, ben dan. (That’s roughly “stupid” in Mandarin.).
Banks are starting to fail. Other financial systems need government bailouts. The real-estate bubble and related building of vapor cities on speculation make the Florida swamp land scandals of the 1920s look like an innocent game of children’s Monopoly. The discretionary spending that fueled leisure visitation is evaporating.
Travel will remain stable for the next three years because of the $140 billion in prior Chinese investment here. But the busloads of Chinese visitors eager to see the Grand Canyon, the Thousand Islands and Tucson, and to shop until they drop at big malls along the way, will get very rare.
THE BIG TREND: Internationalization. By the end of 2020, at least five more airports in the interior of the United States will have new nonstop transatlantic flights via one of the global alliance network systems: Star Alliance, SkyTeam or oneworld.
This is very different from the type of leisure service we’ve seen from carriers such as Norwegian and WOW, which were only aimed at shifting travelers’ discretionary dollars from a new kitchen into the decision to make a vacation to some alternative point in Europe. It was a strategy that largely fell flat on its economic face.
This new dynamic is fundamentally different and based on sound strategy. Carriers such as Lufthansa, British Airways, Iberia and Turkish Airlines have big connecting hub operations that need feed traffic, and they will be looking at key U.S. commercial centers to get it.
Here’s some forecast heresy: by 2025, transatlantic flights from midsize airports will be as routine as getting to Phoenix or Houston. New aircraft such as the Airbus A321XLR will make nonstop flights economically possible from points such as Albany, Grand Rapids, Louisville and Columbus. But the market criteria will be based on economic, not population, factors. These carrier systems are looking for business traffic, not vacationers.
WHAT TO WATCH: The ultra-low-cost airline model – “ULCCs” – will materially evolve. Where much of the focus has been on low-fare vacation service from smaller airports to points like Florida and Las Vegas, the new trend will be tossing aircraft between major metro areas. Sun Country and Spirit are apparently looking in the same direction.
THE UNCONVENTIONAL WISDOM: Over-the-road trucking companies reportedly had a disappointing 2019. But it’s fixing to get worse in 2020 and beyond.
One word, Benjamin: drones.
When 2020 comes to a close, we will be seeing companies in North America looking at drone-based, long-haul logistics. It is entirely possible that with some advances in powerplant technology, rural logistics use of drones will even start to eclipse over-the-road trucking in the foreseeable future.
For a more detailed version of Boyd’s outlook, click here.
Richard Aboulafia, vice president of analysis at the consultancy Teal Group
THE MISPLACED ASSUMPTION: that Chimerica — the long-running trading and dollar-recycling relationship between China and the U.S. that has benefited commercial aviation so well — can be repaired. I had thought it was just Trump administration trade policies, but it is now clear that both sides are at fault. I don’t think a “skinny” trade deal will accomplish much, and I don’t think either side is ready to renew trade ties in a deeper way. Meanwhile, the Chinese economy might be weaker than we think. None of this augurs well for jetliner market growth, which has come to heavily depend on both the Chinese market and Chinese financing.
THE BOLD PREDICTION: This time next year, the 737 MAX will not be an issue. It will be successfully flying in commercial service all over, and the general public will have moved on.
WHO TO WATCH: Boeing CEO David Calhoun. If he stays through the 737 MAX’s return to service, declares victory, then hands over to someone with aerospace and/or engineering experience, he’ll be remembered as a hero. If he stays on, I suspect he’ll be the second coming of Jim McNerney. That would not be a good thing.
Marisa Garcia, a freelance aviation journalist who spent 16 years working at a manufacturer of aircraft interiors and cabin safety equipment.
WHAT TO WATCH: U.S. flight attendants keep getting sick from their uniforms (Alaska Airlines, then American, now Delta) and there hasn’t been adequate research into what is poisoning them. This is a labor scandal in the making.
THE UNCONVENTIONAL WISDOM: Airlines will grow to regret a reliance on a single aircraft type and especially on midsized narrow-body aircraft. I think Airbus was right in its argument for the A380: There may be greater efficiencies in consolidating passengers on larger aircraft for major hub operations and long-haul flights. Smaller regional aircraft are more efficient for quick-turn shuttle service on short-haul and mid-haul routes.
THE MISPLACED ASSUMPTION: That the 737 MAX MCAS fix is a fix. Boeing may still be required by regulators to re-approve the plane as a separate aircraft type from the 737 family. We may still be discussing the fallout from this aircraft grounding next summer, if not next Christmas.
THE BIG TREND: Airlines and airports will introduce more biometric boarding at terminal kiosks and gates, along with other technology to speed the security process. Adoption of OneID will grow and by 2030 paper passports may start to go the way of the paper ticket.
THE BOLD PREDICTION: Boeing’s NMA is dead. There is no real appetite for it now and Boeing has other priorities.
Project Sunrise goes nowhere. There aren’t enough travelers who want to fly ultra-long haul. It’s been a fun marketing and PR exercise for Qantas, though.
Southwest Airlines could follow JetBlue’s lead and buy the Airbus A220, introducing a second aircraft type for the first time in its history. It is an efficient, reliable aircraft that is well-suited for further expansion, bringing connectivity to underserved city pairs in the U.S.
Faced with ongoing difficulties with the 737 MAX return to service, Boeing could put a lot of energy into its venture with Embraer and possibly introduce a new joint-production version of the E-jet. The question is whether Boeing and Embraer can do this before Southwest goes for the A220.
OFFICE POOL BET: WHEN WILL FAA LET THE 737 MAX FLY AGAIN? Not before July. The FAA won’t act unilaterally. The MAX might only return to service after a redesign and new type certification at the end of 2020, or even the first quarter of 2021.
Dan Reed, freelance journalist who’s written for the Fort Worth Star-Telegram and USA TODAY.
THE UNCONVENTIONAL WISDOM: Those expecting Boeing to collapse in 2020 as a result of its dramatic failure to get the 737 MAX back in the air after its horrible 2019 disruption will be disappointed. Boeing’s going nowhere, but up. The world needs lots of airplanes and Boeing is one of only two manufacturers in the world capable of producing high-quality planes in very large numbers. It makes no sense for Airbus to invest in more manufacturing capacity in a vain effort to steal market share from Boeing during its short-term disruption. That also means that Boeing’s shares, which have lost about 26% of their value since the MAX was grounded last spring, are likely to come roaring back, if not during the first half of 2020, then likely some time in the latter half of the year or in 2021.
WHAT TO WATCH: Airlines labor relations. Delta and American are in negotiations with their pilots, and American, with its long history of nasty relations with its unions, is making little progress toward a deal with its flight attendants. Then there’s the American mechanics, who earlier this year inflicted lots of harm on the airline and its customers by conducting a very thinly-veiled work slowdown that earned them a federal court injunction. Don’t expect either set of negotiations with the attendants and mechanics to be short or easy.
It could get rocky at United, whose contract with its 15,000 pilots has been up for renegotiation for nearly a year while its flight attendants’ deal opens in August. So far it’s been relatively civil between labor leaders and outgoing CEO Oscar Munoz, whose warmth and charm helped ease a historically fractious relationship. But Scott Kirby, who’s taking over as CEO in the spring, has a reputation as an impatient, action-oriented aggressor, not a touchy-feely hand-holder.
THE BOLD PREDICTION: With Delta increasing yield and unit revenues by making the flying experience a little better in order to attract more business travelers, and even some leisure travelers willing to pay a bit extra for more comfort and a better flight experience, expect other carriers to begin adopting some of Delta’s most successful changes.
That doesn’t mean flying will suddenly become the airborne equivalent of crossing the Atlantic in a first class suite on a pre-World War II ocean liner. But it might just get marginally better, at least for some air travelers.
OFFICE POOL BET: WHEN WILL FAA LET THE 737 MAX FLY AGAIN? Feb. 13. That’s about enough time to get done what still needs to be done, and there’s great motivation for lawyers and consultants attached to that date so they can get home and go out with their significant others on Valentine’s Day.
Brian Foley, founder of the business aviation-focused consultancy Brian Foley Associates
THE BIG TREND: Flight shaming will gain further traction in business aviation. New business aircraft sales, which have been flat for the past decade, will further struggle as corporations, tycoons and celebrities move to modes of flight where their movements can’t be tracked, such as charter, fractional ownership and other such non-ownership models. They don’t want to become the next Prince Harry in the headlines, who flew off in a cloud of suffocating private jet emissions, according to activists.
We’ll also see a parade of PR stunts from business aviation companies to demonstrate their stewardship of the environment. This could range from a single, publicized flight using sustainable aviation fuel to offering third-party programs for flyers to voluntarily pay extra towards a carbon offset program. The effects will be most felt in Europe where the trend originated, followed by North America which is the largest market for business aviation.
WHAT TO WATCH: After years of relative inactivity, emerging markets could once again begin shopping for business jets as investors look outside the maturing U.S. market and worldwide trade relations become more normalized. In addition, a Brexit deal could add more certainty to the European market which could translate to an uptick in activity.
THE UNCONVENTIONAL WISDOM: The sharing economy is not profoundly affecting the industry as widely thought. The general belief is that younger, affluent flyers don’t want to own an aircraft, but rather just have access to it through charter, jet card, membership and other non-ownership models. However the flight activity data and my own discussions with industry leaders suggest that millennials are barely moving the needle in these programs.
THE MISPLACED ASSUMPTION: At one time corporate profits directly correlated to the health of the business jet market and new sales. Today that theorem has been upended as sales have remained flat despite record U.S. profits. Instead, companies are deploying capital to areas of higher return instead of a depreciating asset like a business jet.
THE BOLD PREDICTION: Today there are 41 models of business jets produced by seven manufacturers delivering a combined total of only around 700 units per year. The market simply isn’t deep enough to support everyone forever, as evidenced by the layoffs in late 2019 at Textron’s Cessna unit and General Dynamic’s Gulfstream division.
Bombardier, which has relentlessly been shedding business units to remain viable, may closely evaluate its Learjet division, which only delivered nine planes through the third quarter of 2019.
OFFICE POOL BET: WHEN WILL FAA LET THE 737 MAX FLY AGAIN? April 1: the FAA’s ultimate subliminal payback.
Dean Donovan, managing director of the investment firm DiamondStream Partners
THE BIG TREND: Social pressure on carbon emissions depresses the trajectory of the European aviation market while other global markets steam ahead.
WHAT TO WATCH: The impact of the 737 MAX’s return on fares in the commercial aviation business. There is a lot of capacity sitting on the sidelines at the moment. Mind those fares!
How Uber’s experiment with seamless, multi-modal helicopter service works in New York. Bedrock value or sizzle with limited ability to motivate new types of behavior from consumers?
THE UNCONVENTIONAL WISDOM: Freight will emerge as the investment darling of the electric aviation industry.
THE MISPLACED ASSUMPTION: That urban air mobility will scale sometime in the first half of the decade.
THE BOLD PREDICTION: Battery energy density demonstrates that regional electric aviation will work in practice in the various tests in the PNW and elsewhere. The Eviation Alice won’t fly per its aspirational spec, but will demonstrate it can catalyze a renaissance for regional aviation. Successful conversions, especially of the Cessna Caravan, will show that the renaissance is just around the corner.
OFFICE POOL BET: WHEN WILL FAA LET THE 737 MAX FLY AGAIN? April 15, with certain other governments holding off on immediate (within one month) approval.