I caught a story the other day about an odd beluga whale-shaped plane developed to carry air cargo, a couple of which will be utilized in the fleet of a U.S. air cargo carrier. Besides the plane looking- I’ll say homely– it got me thinking about the current state of the aviation industry. This industry is one of the most important sectors of the U.S. economy and an area for which the U.S. has been a worldwide leader since the Wright Brothers invented the concept of manned flight!
Here’s an update…
The BelugaXL’s maiden flight – which began and concluded at Toulouse-Blagnac Airport on July 19, 2018- Photo from Airbus
In the Race Between Boeing and Airbus
The longtime rivals compete tenaciously for every available order and work to fulfill the delivery of jets to their airline customers.
For 2022, Boeing delivered a total of 480 aircraft, a 40%+ increase from the 340 delivered in 2021. Boeing is still in the process of ramping production from groundings and the pandemic. Boeing delivered 89 planes in December, an annual rate of more than 1,000 planes and marking their busiest month in four years. Boeing also secured 774 orders in 2022, bringing their total backlog to 4,578 planes.
In comparison, Airbus delivered a total of 661 planes in 2022, an increase of 8% from 2021, but missing a 700 plane target. Airbus gathered over 1,000 new orders, bringing their backlog to 7,239 planes. Both Airbus and Boeing forecast demand of about 40,000 new passenger and freight aircraft over the next twenty years.
One more element to consider, China has fostered the development of an aerospace firm that hopes to deliver 150 aircraft annually by 2028. Boeing and Airbus have essentially been a duopoly for large commercial jets for decades; the Chinese hope to make the market a triopoly.
Wages and Regional Airport Service
Travel demand- still pent up from the pandemic- has bounced back faster than forecast. With the increased number of people traveling, airlines have generally become more profitable. These margins will get squeezed with the wage gains won by pilots. Last month, Delta offered a 34% pay increase to their pilots, which may drive incremental costs up 2%, and even higher for other airlines, as they are forced to keep up with the wage gains. It doesn’t help that some forecasts predict a difference between supply and demand in North America will be about 17,000 pilots by 2032; some predict a shortage as high as 26,000 for North America and a shortage as high as 68,000 globally. Flight attendants have also recently won wage hikes.
No need to play the violin for the airlines. Rest assured, the industry will still operate profitably, but the increased costs coupled with personnel shortages are having effects on service to regional airports.
Of the 430 airports in the continental United States and Hawaii that offered commercial passenger service before the pandemic, 76 percent had fewer flights scheduled in 2022 than in 2019, according to the Regional Airline Association. Smaller airports took the brunt of the cuts in service, losing an average of 34% flight traffic, while larger airport schedules were reduced by about 15%. This trend is partly caused by the cost to operate the plane, spread over a smaller number of seats. Smaller airports are generally serviced by smaller planes. Some regional airports have lost service entirely.
The loss of service to smaller airports would be even greater, if airlines weren’t being paid to keep routes there. On the bright side, new airlines with modern jets and operating models are starting to fill the void left in regional airports. Entrepreneurs recognizing a market and filling the need- this is a hallmark of capitalism!
I’ll end it here and leave you with a great piece from the National Air and Space Museum on how the Wright Brothers brought the concept of flight to the world. Enjoy- and reach out with your thoughts and airline experiences!
~ Brian Kasal- The Leadership Matrix
P.S.- Did you see my last Leadership Matrix post? Winter Holiday Bills