Veteran aviation and airport analyst William Swelbar predicts U.S. airports and carriers should eventually recover from the disruption caused by COVID-19, but adds that even when healthy, commercial aviation will be a much smaller industry several years from now.
“There is no historical precedent for a demand shock that resulted in negative net bookings,” says Swelbar, chief industry strategist for Richmond, VA-based Delta Aviation Consultants. “Probably as close as the industry came to a V-shaped recovery was with the SARS outbreak. But that was primarily a China-centric event and an international issue for the airlines. This pandemic impacts all domestic and international flying. As much as we hope for a V-shaped recovery in a one-to-five-month window, I do not foresee that outcome.”
With the help of massive government assistance, Swelbar says he expects the larger U.S. carriers will get through this. But he adds, “I do not believe that all carriers and suppliers and vendors that serve the industry in some capacity will survive. And, I do not believe that the industry will be flying the same number of routes and planes any time soon.”
Swelbar say that American Airlines has already announced that it will park its 757 and 767 aircraft, adding he expects other carriers will follow suit and purge underperforming assets.
“I envision a return to the 2010 – 2014 period, when the carriers exhibited capacity discipline,” he says. “Despite government help, there is deep damage being done to balance sheets therefore a refocus on costs and cash. Routes will need to be profitable otherwise they will not be flown.”
Swelbar adds that when it comes to airports, the recovery from the pandemic will be uneven, with some airports bouncing back relatively quickly while others struggle.
“This will be a catalyst that leads to a smaller industry and as is typical that pain tends to be felt at the smallest commercial air service airports first,” he says. “However, there are many emerging commercial centers like Nashville, Raleigh-Durham, Austin and San Jose where expansion projects are being worked on today. That should not stop. Demand for infrastructure improvements at the nation’s large and medium hub airports has not suddenly ended, rather the filling of the terminals is only delayed. It is not ‘build and they will come’,–rather it is they are there and are certain to return.”
