Ashes, Ashes, We All Fall Down

IATA released its international traffic results a couple of weeks back and after a very positive rebound in international passenger traffic over the last nine months, April's results showed a considerable decline thanks in large part to Volcanic Ash that affected traffic across the North Atlantic.  Overall, passenger traffic was down by 2.4% for April vs. April of a year ago.  More importantly, the results were down from the 10% increase recorded in March.

European traffic suffered the most, declining by almost 12% while North American traffic declined by 2%, Asia-Pacific showed a 3.5% increase, Middle East airlines recorded a 13% increase, and Latin American carriers showed a 1% increase.

The 'ash' was one of those unexpected external elements that tend to damage traffic trends.  Moreover, other external events can damage the rebound as strikes at British Airways and currency instability may further impact traffic returns putting into jeopardy a nice upturn.

Separately, IATA is now forecasting that the world's airlines will post a profit of $2.5Billion in 2010.  It was only March where the same organization said that the airlines would lose $2.8Billion.  This apparent 'miss' (hey...what's a $5.3Billion error between friends) reminds of the expression: "...people shouldn't forecast, especially about the future...."

The Parking Lot is Full

Stored aircraft is a key metric when assessing the health of the commercial airline industry.  The number of aircraft that are parked (I use parked and stored interchangeably) are related to seat capacity changes, aircraft values, and airline aircraft fleet plans.  The nearby time series graph shows the peaks and troughs of parked aircraft between 1990 and June 2010 and are divided by aircraft class groupings--RJ (regional jets, both modern and older RJ types), NB (single aisle aircraft), and WB (twin aisle aircraft).  The data is from Ascend's aircraft database.  Note that Ascend's definition of stored aircraft is for aircraft that have been reported as parked for at least 30-days.  Consequently, aircraft that are down for heavy maintenance checks may be included in the data but are likely to be a small sub-set of the totals.  Also, these are absolute unit numbers and don't show the relative nature of the parked inventory, i.e., number of parked aircraft vs. the number of aircraft in the total inventory.  I will get into that in another post.  Finally, there are numerous elements that come into play that affect parked airplanes.  This analysis is basically a high level assessment.

In the graph, I highlighted the large events that have created turmoil in the stored aircraft market and you can obviously see the rather steep effects that these events have had on the parked inventory.  The single aisle aircraft class shows the most volatility, growing by more than 100% in the Gulf War of 1991 with another two-fold increase as a result of 9/11. Parked single aisle aircraft during the current recession rose from about 800 in 2007 to more than 1200 by 2009.  From the trend line data, it is also apparent that while the parked inventory can increase quickly (almost overnight it seems) it takes years to reconcile itself during better economic times.

Twin aisle aircraft and regional jets show a different dynamic with parked wide-body aircraft rising consistently between 1990 and 2003, but then falling for for about four years before rising slightly during the current recession. Parked RJs have been increasing for most of the decade and are now near 500 units--although many of those are older RJs (like BAe 146s and Avros).  Of the modern RJs (like the Embraer 145 and CRJ 100/200), about 250 are parked (the Ascend data indicates that 44% of the ERJ135s in the total inventory are parked---that clearly is a function of today's fuel prices).  From the data, it is clear that narrow-body aircraft are more susceptible to economic downturns than either WBs or RJs at least on an absolute basis (of course, there are many more NBs in inventory than either WBs or RJs---which makes the case for looking at this data on a relative basis a necessity in order to analyze these trends fully).

A final observation.  Parked aircraft tend to follow physical age and technology age: 18% of 747 aircraft are currently stored, while less than 1% and less than 3% of 777 and A330 aircraft respectively are parked.  Less than 1% of 737NGs are parked while more than 50% of JT8D powered 737s are parked and are not likely to return to service.