Industry speakers discuss opportunities and challenges
US AIRLINES FACE SUPPLY SHORTFALLS, LIMITING GROWTH
US airlines are navigating through a host of supply constraints—from delayed engine and aircraft deliveries to a shortage of pilots and air traffic control inefficiencies—as they attempt to develop networks to meet robust passenger demand.
“Right now, there are all these impediments—whether regulatory, whether supply chain—but the demand growth has never been stronger,” Allegiant Air VP corporate development John Pepper said during a March 21 panel discussion at the Routes Americas conference in Chicago. “Demand in the US this past summer far, far exceeded supply, and the fuel cost environment really drove inflation of airline ticket prices. You are going to see that same thing again this summer. … Frankly, this is a long-term structural [situation]. It's going to take years to get the network back to the way it was in 2019 from an operational standpoint. I think demand growth outstrips capacity growth for quite a while in the US.”
He predicted the pilot shortage in the US will not be solved until the 2030s.
While Allegiant is a ULCC, major Delta Air Lines is reporting similar supply constraints.
“On the mainline side, we have aircraft delivery delays and we're working through that,” Delta general manager network strategy Colin Scott said. “So to mitigate that, we are working closely with [Airbus and Boeing], but also with our colleagues in tech ops to see if we can extend time on any aircraft that is due for retirement a little bit longer and ensure that we're delivering capacity for our customers.”
He added that regional flying “still continues to be a challenging space where we've got more aircraft than pilots.”
Spirit Airlines senior director network planning Matthew Glover said the ULCC would like to be adding more capacity, but is constratined.
“In all of our markets, we would be growing faster if it was feasible for us to do so both sustainability and with the resources that we have today,” he said.
– Aaron Karp
IATA’S CERDA: GOVERNMENTS TOO OFTEN SEE AIRLINES AS ADVERSARIES
While there is “a lot of optimism” around the air travel recovery in the Americas, governments in the region continue to hinder airlines by imposing high taxes and fees and failing to develop aviation infrastructure, IATA VP-Americas Peter Cerda said.
Speaking March 21 during a fireside chat at the Routes Americas conference in Chicago, Cerda said there has been a “shift in mindset” in North and South America toward strictly regulating airlines, particularly regarding customer service options.
“Politicians love to hate on us,” he said. “We’re seeing governments trying to impose themselves on [the airline] industry more than any other industry in the world.”
Cerda said regulators are hyper focused on “looking at what’s not going right” with airlines by emphasizing “isolated incidents” that get a lot of traction on social media.
But governments too often ignore the humanitarian role airlines played in moving medical supplies and vaccines during the COVID-19 pandemic, particularly to smaller, more remote areas, Cerda said. He added that air service facilitates economic stability for a city by bringing in tourists and valuable cargo.
Certa noted the airline industry is “still recovering—we’re still taking aircraft out of the desert.” It is not the time to disrupt the momentum of the air transport recovery by imposing fees, taxes and regulations based not on safety or security, but on politicians’ ideas about what type of product airlines should offer customers, he said.
Let the “consumer dictate” what service is wanted, rather than governments dictating to airlines and consumers, Cerda said.
He said a flight ticket tax could keep a passenger from traveling to a city, depriving that city of the passenger’s tourism spending. “Easy money turns out to be not so easy” when ticket taxes undercut a city’s ability to bring in tourists and cargo.
“We need to be much more open minded” about how airlines are regulated, Cerda said, adding governments should be thinking: “How do we stimulate the industry so it brings much more wealth to our economies?”
Particularly frustrating, Cerda said, is that governments’ lack of investment in aviation infrastructure modernization affects customer service negatively and makes the airline industry less efficient than it could be. He pointed to the long-delayed efforts to upgrade air traffic control in both Europe and the US: “A city can build as many runways as it can, but then the passenger is sitting in a terminal for five hours in Chicago because of a ground delay in New York.”
The passenger does not understand why a delay in the US northeast causes a Chicago-Los Angeles flight to be delayed or canceled and blames the airline even though it is the FAA-managed ATC system that is the cause, Cerda said.
“We have to fix our house before we want to fix other people’s houses,” he said, adding governments wanting to improve airline customer service could do so by providing more modern, more efficient ATC.
Cerda said IATA would like to see governments interact with airlines as “a strategic partner instead of a strategic adversary.”
He added the industry itself must do a better job communicating airlines’ positive impact to counteract negative portrayals found on social media and voiced by politicians.
“We’re very good at defending against attacks, but not very good at telling our story,” Cerda said. “We should take it upon ourselves to communicate how we are bringing social and economic wealth to communities."
MEXICAN CARRIERS HOPEFUL OF SPEEDY FAA RESOLUTION
Aeromexico and Volaris are optimistic that Mexico’s Category 1 safety rating will be restored by the fourth quarter of the year at the latest, which will enable Mexican carriers to resume their growth plans in the valuable transborder market.
The FAA downgraded Mexico’s safety rating in May 2021, meaning Mexican airlines cannot add new routes and frequencies to the US. The decision also prevents equipment changes, such as swapping in larger aircraft.
Speaking at Routes Americas 2023, Aeromexico SVP institutional relations, government, airports and industry affairs Cuitlahuac Gutierrez said he is hopeful that Category 1 will be in place by peak summer, while Volaris director of strategy and network planning Wei Jin believes the end of quarter three is a realistic target.
“As an industry, we’re investing a lot in new aircraft, but we’re unable to invest those resources in the US, which was our most important international market,” Gutierrez said.
He explained that Aeromexico, Volaris and Viva Aerobus have about 80 next-generation aircraft between them, which they are currently unable to operate to the US. This is forcing them to use the aircraft elsewhere—and the carriers are losing market share to their US counterparts as a result.
OAG shows that Aeromexico is operating about 350,000 two-way seats on Mexico-US routes in March 2023, equivalent to about 93% of 2019 levels, while Volaris’ capacity this month is higher at about 530,000 seats. However, the ULCC has also been able to deploy additional seats to the US from its subsidiaries in Costa Rica and El Salvador.
“Having the additional AOCs has helped to diversify the business and played into our hands when Mexico was downgraded to Category 2,” Jin said.
“We were able to ship more capacity to our other airlines Central America. Costa Rica and El Salvador are similar markets to the US as Mexico given that VFR traffic is strong, so it has been a natural transition.”
– David Casey
SUSTAINABLE AVIATION IS KEY TO MEETING DEMAND
Continued and growing demand for commercial air travel is the key driver of the aviation sustainability discussion and the COVID crisis only emphasized the importance of ensuring that demand can be addressed sustainably.
In a panel discussion on sustainable aviation at the 2023 Routes Americas conference, an aircraft manufacturer, airport manager and a specialist in new sustainable engine technologies shared their views on the best pathways to achieving the global airlines’ commitment of being carbon net-zero by 2050.
“Net zero by 2050 requires a lot from the airframer side,” Boeing director sustainability & emerging technology product marketing Thomas Sanderson said.
“The value of air transportation is not in dispute. … What’s driving this is that more people want to fly. COVID emphasized the importance of that, and the majority of the world’s population has yet to fly. The demand is there, and the question is how to serve that in a responsible way.”
Rama Myers, head of business development at ZeroAvia, a British/American hydrogen-electric aircraft developer founded in 2017, said the company was focused on propulsion technologies, specifically how to power airliners by batteries or hydrogen.
“Hydro-electric is the main path forward because it’s true zero emissions,” he said. The startup is initially working with a small Cessna Caravan as its development platform, then plans to scale up to turboprops, regional jets and ultimately narrowbodies that can be hydrogen-electric powered.
“Towards the end of the next decade, hydrogen-electric powered flight will be feasible,” he said.
Battery-powered airliners, the panelists agreed, are a much less likely prospect. The weight of batteries and scale of energy needed for an aircraft mean the physics don’t equate except perhaps for very small aircraft.
“People see electric automotive and say, ‘If I can have an electric Tesla, why can’t I have an electric airplane?’” Myers said. “But the scale of energy you need for an airplane is enormously larger than for autos. … Barring multiple Nobel prize-winning technologies, you cannot run an all battery-powered aircraft.”
Juan Camilo Hoyos, chief of legal and institutional affairs at OPAIN, which oversees the management, modernization, operations and maintenance at Bogota International Airport in Colombia, said sustainability was a cornerstone of the airport’s activity. The airport has been able to effectively operate on 100% green energy via solar panels, hydro-electric and other green sources. It recycles 77% of waste generated and has a waste water treatment plant. OPAIN also works closely with its local communities to educate them on the importance of sustainability and make them aware of sustainable practices. For example, it has helped build playgrounds from recycled plastic products.
“As a point of entry into Colombia, which has all-year weather, nice people, nice food, a great airport experience, we want visitors to see that what we are doing in terms of sustainability,” he said.
– Karen Walker
RECORD BREAKERS
Chicago has set the record for the biggest-ever Routes Americas, with more than 1,100 delegates in attendance and over 3,000 meetings taking place.
Speaking during the opening of the conference program, Routes director Steven Small said the discussions taking place over the course of the three days would help to further accelerate the recovery and stimulate new air service across the region.
“Having hosted Routes World in 2014, Chicago understands the impact that hosting a Routes event can have on increasing air connectivity—and they have an amazing story to tell,” Small said. “This region has been at the forefront of the recovery and Routes is proud to serve such an important community and provide a platform to help fuel the expected growth over the years to come.”
Jamie Rhee, commissioner at the Chicago Department of Aviation, highlighted some of ambitious infrastructure projects taking place at Chicago O’Hare (ORD) and Midway (MDW), including a $1.3 billion investment to expand Terminal 5 at ORD. Matt O’Shea, chairman of Chicago City Council Committee on Aviation, also said that work is underway to improve access to Chicago’s airports.
