Reported by: Chris Sloan

LAS VEGAS — We have arrived in Las Vegas, where we’re covering this year’s 24th Boyd Group International Aviation Forecast Summit.

It’s one of the world’s largest “who’s who” gatherings of commercial aviation, where airlines like United, American, Delta, and even foreigners like Turkish Airlines, Aer Lingus, and Air China are present keynote speakers.

Overall, more than 300 airlines, airport, and aviation industry executives from around the world have returned to Las Vegas for the 24th Boyd Annual International Aviation Forecast Summit. 

This year, more than 30 top aviation executives are slated to present their insights on the industry in an off-script, unfiltered format. It’s purely coincidental that this who’s who of commercial aviation have converged on Las Vegas – a city where the stakes are high and good or bad luck and a roll of the dice conspire to turn winners into losers and vice versa.

This year, all bets are off with roulette rather than poker being the game of the day.

The Boeing 737 MAX grounding, the global economic downturn, the labor strife, an overheated competitive landscape, airlines teetering on the edge, escalating costs, falling margins, labor discord, trade wars, air traffic control meltdowns, environmental backlash, geopolitical tensions, serious supply chain snafus, and last but not least Brexit signal we are at a tipping point. #BoydLAS promises to be a fascinating conference.

Airways is live blogging both days of the conference in real-time through our website and on our Twitter feeds.

The conference runs from 7:45 am -5:30 pm PDT Monday and Tuesday, August 26th and 27th.

Our posts are organized by executives’ panels and discussions, so refresh often. Please excuse typos and syntax error. We’re real-timing it, remember!

Here’s the schedule in PDT which, of course, is subject to change:

The schedule is below:

Tuesday, August 27

We’re back for Day 2 in what promises to be another jam-packed day: Delta, United, and OEMs like Boeing, Airbus, Embraer take center stage along with some side-scrums from American’s Vasu Raja (Vice President of Network and Schedule Planning) and Joe Mohan (Vice President of Alliances and Partnerships) and Kerry Philipovitch (Senior Vice President of Customer Experience)

8:00      Boyd Group International, Michael Boyd, President, Global Fleet Forecast

Off to hear about fleet from where the elite meet…

The issues: Growth vs Re-fleeting (retiring old aircraft). Re-fleeting drives most orders but post-2025, it will be about growth. Slowing fleet growth after that. The current backlog of current orders will have been delivered by then.

Boyd: “The A321XLR will change things dramatically as it will fly places people haven’t been able to fly before.” Same thing for A220.

Boyd on China: “Main global driver of several new trends.”

Boyd says ULCC will be 12% of seat capacity and then they will grow from there. They’re not driving down the traffic of major airlines.

New emerging dynamics: Sector cost, not seat costs is a decision driver. Go for the up-gauged aircraft, even if load factors are lower as it allows for growth.

Capacity bands are contracting: <70 seat jet airliners have almost no demand. Wide-body share dropping. Capacity is the key, not how many aisles the plane has.

Weakening alliance relationships may open up more opportunities for airframers and suppliers.

Believes there will be a huge demand for larger turboprops (outside the US).

China is a huge opportunity for turboprops, owing to the opening of smaller airports. Going forward China will account for 28% of aircraft sales going forward.

Fleet Forecast: 28% growth over the next 10 years. 1/3rd will be the replacement. 2/3rd will be growth. 19,000 new aircraft over the next 10 years.

Airline fleets in the US will remain static over the next 5 years as its most replacement than overall fleet will grow as fleet story shifts to growth.

The sweet spot for growth is 126-80 seat aircraft.

Boyd has not a lot of faith in China and Russian built aircraft like Comac and UAC. Planes like MC-21 won’t be a game changer.

Unlike Bombardier approach in “swinging for the fences with a new clean-sheet aircraft like CSeries did.”

Problem with China and Russia aircraft is that they are “Me Too” airplanes. Not innovative. They may be half the cost, but they will have half the capability.

Now on to Boom SST prediction: “If it comes out as advertised (in terms of costs), the plane will sell over 2,000 units (as a now 70 passenger plane). Front cabin traffic will move off 777s on to Boom.”

Now on to the airframers…

8:30      Embraer, Victor Vieira, Head of Market Strategy

This will likely be the last we hear the Embraer brand in the lead at Boyd and other commercial venues, as Boeing Brasil take hold… Embraer then is taking advantage of their time to nostalgically tell their 50th Year Anniversary Story.

Vieira: “The peak is behind us: traffic, load factor, profitability are down (from the peak in 2015-16. There’s no easy money to be made. Over 50% of profits will be made by North American Carriers.” (thank you consolidation!)

Vieira: “Apart from the US, pricing power has been lost.” Revenue and passengers flying are increasing but cost increases are outpacing this.

Embraer predicts 10,500 new aircraft (between turboprops and jets) deliveries up to 150 seats over the next 20 years.

Embraer doesn’t believe US regional airliners operating more than 76 seats due to scope clause. This doesn’t bode well for the E2 which in smallest E175 configuration is still overweight for scope clause.

Embraer has 1,900 jets in service in 70 countries with 120+ operators. Last year, they added 5 new customers. Embraer has a 29% market share of up to 150 seat aircraft.

Unlike neos and MAXs, Embraer went “beyond new engine exercise” with the E2 (new wing, fuselage, etc).

E2 is based on E1. E2 has 7 aircraft in service (slow delivery since first delivery in March 2018), 99.5% schedule reliability and completion factor (high rate for a new aircraft). Azul launches E2-195 in a few months.

Vieira: “The 50th Anniversary of Embraer is very emotional for us as Brazilians. The US has been tied to us since our first sale to the US here in the 1970s. In 1985, the Brasilia was launched by Delta ASA. In 1995, Continental’s 200 aircraft order of the ERJ really gave wings to that program.”

8:50 – 9:10     Boeing, Jim Freitas, Managing Director

The elephant in the room is the 737 MAX and Freitas says he won’t be discussing its return to service in this venue.

Reiterates more than half of global airline profits are generated by North American operators, though it’s leveling off. Freitas works the room and asks for a round of applause for North American operators.

Headwinds: Declining economic growth and 0% cargo growth though this isn’t so bad considering circumstances.

2019: Global load factor average = 82%. US load factor average = 86%. Foresees $6.8 Trillion worth of airliner sales (44,000 new airplanes) over the next 20 years and $9.1 Trillion over the next 20 years.

Based on 20-year world forecast of 4.6% annual increase in RPKs, 4.2% in FTKs outpacing 2.7% annual average GDP increase.

74% of new aircraft will be single-aisle. 32,420 new single-aisle aircraft valued at $3.8T over the next 20 years. I’d expect the MAX and A320 NSA successors will be significant players beginning in the 2030s.

Twin-aisle: Airlines will need 8,340 widebodies valued at $2.6T over the next 20 years. 10% will go to North America. 18% to Europe. 46% to Asia/Pacific.

Widebody anemic market will be jump-started over the next few years as the replacement cycle kicks in.

787 has 99.4% schedule reliability, 8 years after entry-into-service.

777 has 99.5% schedule reliability, 24 years after EIS.

On 777X: Points out the 10 abreast economy class seats will have 18″ wide seats (up from 17″ in current 777) due to new cabin sculpting. Will also have improved ride and lower altitude cabin technology from 787.

9:10 – 9:30     Airbus Americas, Daniel Lazzari, Vice President Sales

Three topics: Commercial Review of 2018, Global Market Forecast, and Product Updates

2018 deliveries Airbus and Boeing virtually tied in deliveries. Airbus delivered 800 aircraft in 2018.

7,198 aircraft backlog equivalent to 7 years of production.

Airbus 2018 Data: 6.5% RPM growth against 3.7% GDP growth. Average load factor of 81.9%.

2019: Expect 10th year of global airline profitability at $30 billion. Protectionism is the biggest downside risk.

Forecast: 70% of total aircraft will be for growth, 30% for replacement. World fleet will increase by 125% over next 20 years. 37,400 new aircraft over 20 years.

A220 product update: Forecast demand for 7,000 A220s over next 20 years. 511 orders from 21 customers.

A320neo: 900+ in service. Very few ceos left in a production cue. 5,724 neo backlog.

A321: 4,500 A321s sold to over 100 customers. 2,500 still in backlog. Nearly a third of A321s are sold in North American market, where it has now outsold the A320.

A321XLR netted a little over 250 commitments in 3 days when introduced at 2019 Paris Air Show.

A330neo: 248 orders, 20 in service with seven operators. Airbus is banking on a replacement cycle to boost anemic sales.

Slide indicates A321neo and A330neo cover middle of market.

A350: 913 orders, 295 in service, and 618 backlog. They view it as ultimate 777-300ER replacement. 88,000 lbs lighter equaling $70m savings over 15 years.

Pitches A350 10 abroad configuration against 777X to lower seat cost per mile, but no mention of uncomfortable narrow seats. There goes the idea of the XWB comfort advantage. At 10 abreast, the seats are below 17″ width. Airbus won’t comment on my question if this negates their seat width advantage they had over Boeing in this densified configuration.

9:30-10:00 American Airlines, Vasu Raja (Vice President of Network and Schedule Planning) and Joe Mohan (Vice President of Alliances and Partnerships)

Side scrum….

Raja: “In Tokyo, we can create what we have with BA in London for creating connections.”

Raja: “Miami growth opportunities. The gateway to Latin America. A lot of demand is counter-cyclical. Growth inhibitions are not market or demand. It’s wide-body availability. As we take on 787s (replacing 767s) into Miami then there will be more growth. Asia and Africa remain to be seen. “

American Airlines A321 Picture: Airbus

Raja: “We’re looking at Hong Kong closely. Hard to see if this is longstanding.”

I asked Raja about adding long-haul out DC Dulles to consolidate its market position in DC area. This is a unique AA hub in that it has no long-haul which isn’t possible at Reagan.

“We are the largest carrier in D.C. but we’re not an international carrier. Loyal customer base and highest yield passengers there. We’ve looked at (adding long-haul) at D.C. Dulles but it’s a long time out. How do we serve the O&D customers there.”

Raja on the return of MAX: They’re excited for it to return. But what has happened is they’ve had to exit lower yield markets so we’ve looked closer at the network with MAX not in the picture for now. They’ve learned other things they can do.

Raja on DFW 900 with all the headwinds of 737MAX, weather, and operations: “DFW today pushes fewer departures than it did in 2004. It’s an unconstrained hub.

As ambitious as it was, it wasn’t that ambitious for DFW footprint. We’ve been encouraged by the growth. On 7.5% capacity growth, margins are still up 2.5% (with that growth). Trying to utilize the assets of the airport throughout the day (like adding International frequencies to Europe).”

JV Metal: (deciding on who’s metal to use between BA and AA?): AA has larger economy cabin capacity while BA has larger aircraft with more premium capacity, and aircraft have different scheduling and connectivity so flexibility is good for them. We think of both of them as one airline.

9:50 – 10:10    Boom Supersonic, Blake Scholl, CEO & Founder

We arrived to this late from AA scrum…

Update on Baby Boom XB-1: 110 engineers focused on it, 180 suppliers 4,000 parts on an airplane, 300 custom tools made.

Flight test program: “All pieces are coming together. We’ll take to the skies in 2020”

Scholl: “Why this matters. Speed isn’t about going fast. It’s about creating closeness. Overture is the start for us. Our goal is to make the fastest flights at cheapest prices. So many global conflicts can melt away. Humanity will move closer together.”

10:10    Rolls Royce, Richard Goodhead, Senior Vice President Marketing:

ElectRRification: an Overview of Exciting Projects Being Pursued by Rolls-Royce Civil Aerospace

Product strategy: Continue to involve gas turbine, increase integration between airframe and engine, and develop alternatives such as electrification and bio-fuels.

On to electrification: This isn’t new to Rolls Royce group who uses on trains, ships, though aviation presents its own significant challenges.

RR is championing electrification as it’s potential game-changer for society and the industry. RR is confident in its ability to adapt.

RR operating on dual fronts: Evolutionary from adding more electric systems to aircraft to revolutionary disruptive: Fully electric and hybrid.

In 2020, they fly Accel a small single-seat all-electric demo aircraft to break speed record up to 200nmi.

Next application: Concept E-VTOL (vertical take-off and landing) hybrid aircraft could be ready for first flight in the early 2020s. Up to 5 passengers, could travel up to 500nmi at 250mph.

And this one’s real now: E-Fan X: Flying Electric Propulsion Demo based on Avro RJ1000 platform with 3 conventional engines and the hybrid powered system. 2 megawatt power coupled with RR gas turbine – most powerful flying generator in the world which began running last week. Hybrid technology. First flight of demonstrator on-track for 2021.

11:00    United Airlines, Linda Jojo, EVP Technology & Chief Digital Officer

UA’s been making waves for its IT updates and its App, particularly with its leading edged missed connections functionality.

UA has rolled out 60,000 mobile devices to its FAs, ground crews, CSAs, mechanics, etc.

New UA mobile app is contextual: they know where you are in your flight journey. They pull all information together with the flight tracking data to possibly hold aircraft for misconnecting passengers. Connection Saver tech saved 35,000 connections this Summer with no impact on flight arrival time. Not disclosing financial impact, but certainly has positive brand impact.

Functionality of the APP: United offers options to passengers to chose which flights to take or remain on their current flight without having to interact with gate agents. App discloses reasons for delay from weather to technical. It even calculates the length of time it takes to walk from gate to gate to make connection.

United’s very enthusiastic with its partnership and ownership stake in CLEAR. Thinking about ways to use CLEAR for its employees, with customs, and now CLEAR applications can be made through the UA App.

Boyd asks about bottom-line impact: Jojo says “Great customer service is good for business.” …and it empowers employees as well.

Not all of this newly developed UA App functionality such as Connection Saver or CLEAR enrollment is on Star Alliance carriers apps.

11:25    American Airlines, Kerry Philipovitch, SVP Customer Experience

Presentation is called “Delivering a world-class customer experience”. Is Oasis world-class? This Summer’s Ops have not been world-class. Hmmm.

On AA metal alone: 365 destinations, 1100 nonstops, build 35,000 connections.

500,000 daily customers. Only 13% of customers fly more than once a year. 87% fly once a year.

Building connections: Example: On DFW-LAX, 49% of daily passengers are O&D while the other half use the connecting complex.

DFW is American’s #1 and most profitable hub. 2nd largest hub in the US behind Delta’s Atlanta fortress.

The group shot with the “Keep Flighting Angie” banner, now signed by all aboard, will be presented to their loved ill colleague. (Crediits: Author)

So here’s a voluminous dump of Wow Facts! Expanded to 900 daily flights(adding 100) this Summer. Opened Flagship Lounge and Dining in May. Added 16 gates in Terminal B and re-opened E satellite to support mainline flights. Opening 5th Admirals Club at DFW. AA occupies 135 gates operating out of all 5 terminals. 11 check-in locations, 66 baggage carousels, 1.7M gallons of fuel per day and 105,000 customers per day.

Philipovitch offers contrition after an abysmal Summer operationally: “We had a great plan but we didn’t fully deliver in 2019”. Contributing factors: MAX grounding and illegal job action led by the union representing mechanics, weather. “But we’re not making excuses.”

Creating a world-class experience using tools such as iSolve (allows employees to resolve issues and issue compensation on the spot and customer notifications through the App such as bag tracking, delayed flights, etc.

AA admits “August results have improved but we’re not at full operations and capacity so another court action was filed against the union.”

2:45        Delta Air Lines, Tim Mapes, SVP & Chief Marketing and Communications Officer

                        Building Delta Into a Trusted Consumer Brand

Mapes: “There’s a difference between the name of airline and a consumer brand. Consumers are more emotionally connected to brands and willing to pay a price premium. They accomplish this, by listening…”

Mapes reminds the audience that Delta was in a very different (bad) place not long ago, and though the status quo is positive they say “we have a lot more work to be done.”

Mapes on the Delta difference of responding to what customers tell them: “There’s a big difference between listening to customers and actually acting on what they tell you.”

Brand history: “Keep Climbing” positioning introduced in 2010, was based on Japanese concept which translates as “Keep Improving”. Delta’s culture defines the brand. Delta doesn’t talk about and to road warriors, but its campaign was designed to talk to and inspire its own people. Delta asks now 10 years later: “How do we keep climbing and turn flying into an experience that people look forward to?”

Delta sets restaurants and hotels as examples for competing on hospitality – something airlines aren’t typically known for. Basic thesis here is fact that US doesn’t have an airline world-renowned for service on a global perspective is ludicrous.

How does Delta plan do this? It seems obvious but it’s “Place consumer at the center of everything.”

Delta wants to be “loved”: loyalty beyond reason. They’re talking about generating price premium like Starbucks charges for coffee. Delta wants a “badge value” like Mercedes or Apple iPhone, for instance.

This is the essence of becoming a consumer brand. Delta has to find a way to upgrade customer experience all across the experience, especially the airport experience: speaking directly to TSA / security which is a painful experience no matter what class one is flying.

Delta Premium Select – PHOTO: Delta Airlines

Delta counterintuitively views complaint letters “as a gift”. The ultimate source for real feedback and catalyst for action. It’s not about responding with apologies but fixing what caused the issue and learning from it.

Delta has tracked people’s heart rates as they call “Moments of Truth” to use data to track key waypoints in the travel experience. Checkin, security, boarding, disembarking, baggage collection, etc to create processes to make travel approach as seamless as possible in the air and on the ground.

What’s Delta one-word brand attribute? Disney = Magic, Volvo = Safety, Coca-Cola = Refreshment, but Delta doesn’t know yet what theirs is yet. But they do know it’s human. “What is, and has always been true about Delta as a brand?”

Delta HVP State: 5% of passengers take care of 25% of traffic.

Delta’s all for nepotism. They love generations of families and people are employed by the airline as they understand the company’s core values.

Trend: We’ve all heard this but people of today’s generations like Millenials and Gen Zs covet experiences and services rather than goods. That is today’s social currency so Delta wishes to create something people actually want to buy.

Delta, over the last 10 years: Cancel-free days 251 in 2018, 0 in 2008. NPS was 15% in 2008, 46% in 2019.

3:30       Airlines for America, John Heimlich, Vice President & Chief Economist

                       A4A Expectations for the Coming Decade

Heimlich: 2018 was the first year in history of this business that passengers traveled 1 trillion miles on US carriers. We see this to be sustained over the next decade even with the economic downturn.

At the peak in 2015-16, for first time in business since deregulation, the US airline industry got close to average US corporate margins.

In 2018-19, air travel between the US and foreign countries reached all-time high, this growth has surpassed domestic.

Biggest U.S. growth rates from foreign country visitors: India, Ireland, and Colombia are top 3.

The projected growth of US carriers is projected to be 2X growth rate of US GDP.

Up-gauging: In 2005, 45% of US domestic departures were >50 seat aircraft. Now its 21%. Regionals now just 43% of domestic departures and over half are larger RJs.

In 2000, 3 out of 4 airline passengers flew on US global network carriers, In 2018, its 53%. The growth has been in the “other category”: ULCCs and hybrids

In 2018, the average load factor is 83.7% and stable in low 80% area since 2011. Heimlich doesn’t expect this to grow markedly.

Looking ahead to 2020s and our first recession of the decade, Heimlich believes the new model will be tested but the airline will be much better prepared to weather the storm: “In the old days recessions could mean a threat to existence but now it will be a threat to earnings.”

The 2020s forecast trends: Forsees additional multiple attempts at TATL ULCC, late wide body-freighters still dominate that sector, return of SSTs to selected markets.

Environmental sustainability importance will reach critical mass with carbon-neutral growth of aviation.

….And with that, we’re departing and I’m blocking out of the gate. To parody an old song “I’m leaving on a jet plane, hope to be back at Boyd again.” We tried to do something a bit different in covering this conference in a Live Blog format, so please let us know any thoughts or comments on this format and coverage.

Thanks for following along. Now, off to the airport. I hope my upgrade clears!

Monday, August 26

And we’re off! Good Monday Morning, We’re here on location at the Encore. Mary Boyd, COO & IAFS Chairman greets a full house at the Las Vegas Encore. We’ll be live blogging all day from the event – good WiFi permitting!

8:05      Las Vegas Convention & Visitors Authority, Steve Hill, President & CEO

Las Vegas has 157 different markets directly serviced from LAS. 36 airlines, 13 countries with direct service into LAS. Half visitors come by air.

Hill mentions Allegiant Stadium, Hometown carrier Allegiant Airlines has secured naming rights. 46 annual events in first year, including home to University of Las Vegas and The former Oakland Raiders, relocating to Las Vegas. Maury Gallagher, CEO of Allegiant speaks later. Perhaps he’ll have more on this $25 million annual sponsorship – Allegiant’s first.

8:25 – 9:05     Boyd Group International – Forecast Mapping 2025, Michael Boyd, President

We’re running right on time as Mike Boyd takes the stage with the agenda.

The theme of the next 2 years is “Forecast Mapping”. “Going forward we haven’t seen aviation business in this stable condition for 30 years.”

Boyd riffs on a wide-range of themes and topics.

Overall theme is looking forward, not staying behind.

Boyd throws Shade on crazy airlines like Skybus.

“The future is bright but the future is disrupted. We’ve got Boom coming and others.”

We’ll be talking about small towns and how they do receive good air service. Boyd says: “The past isn’t coming back”. Small towns like Topeka may not have airlines any more but close-by Kansas City provides that. “Not having schedule flights at a local airport is not a sentence to becoming a thirdly-world backwater.”

Boyd’s thesis is the FAA is living somewhat in the past.

Stop using obsolete metrics. Prescriptive data is where we need to go: “Whats’ the right thing to do?”

The terms “Small, medium, and large hubs is a throwback. It’s a misnomer.”

“Going forward, what do we have to do to optimize to the changes in consumer patterns. Moving goods and people by air have all changed.” Makes a funny reference to Shorts 360 plane that was a commuter mainstay: “Even FedEx packages don’t want to fly those.”

Argues ULCC’s like Allegiant, Frontier, and Spirit compliment, but don’t really compete, with legacies by attracting passengers to the air who have never flown.

Boyd is a proponent of drones for specialized uses like UAS’ delivering packages to rural packages. He feels UAS will be part of airport masterplans going forward. But cautions, the great future exists as long as there isn’t a major security issue. “If you can drop ordnances, you can drop cargo.”

On fleet: We have incremental breakthroughs like A220, A321XLR, and 787 but we have major breakthroughs like the Boom SST (who Boyd is consulting with): “This isn’t a pipe dream. It’s real. The sonic boom is less noisy than the garbage truck in your neighborhood.”

“Hybrid and electric for small aircraft are possible but it’s tough for large aircraft.” Boyd prognosticates that we won’t see an all electric A320 sized aircraft soon but it will happen one day.

50 seat jets will be gone by 2025. “They should’ve been Budweiser cans by now”. But with limited exceptions the smallest airplanes in US major branded airlines will be 70+ seats. The argument that smaller communities will lose air service as 50 seat aircraft are finally phased out is not valid. Suggests there’s more of a need for modern turboprops like Q400 in markets like Northeast US but American customers don’t want to get on them.

On China: By end of 2021, number of passengers flying around in planes will exceed U.S. Points out China doesn’t have hubs, most traffic is O&D.

Projects 7,500 planes (but upgagued) will be in service by 2029.

PHOTO: Tomas Del Coro

Growth of air traffic in next 10 years: more or less 33%. Equivalent to the O&D of the top ten airports in the US. Air Traffic Control continues to be a challenge. “There’s no such things as on time travel” but “on schedule travel” as airlines have to add minutes in schedule to deal with this.

Theme: Disruption is the norm. “Change will be wrenching in some cases, but there’s a huge future out there.”

Turkish Airlines had to be cancelled. Frontier’s Barry Biffle will be up instead.

9:00 – Hawaiian Airlines, Peter Ingram, President & CEO

The theme is how Hawaiian Airlines is adapting to competitive changes in Hawaii (like ANA A380, Southwest entry into the market, and additional capacity from legacies like United. “No one is better equipped to serve Hawaii than Hawaiian.”

“We make fleet decisions because we don’t have an average flight in our system. 900 miles is the average length in our system, but that would mean landing on an aircraft carrier”. 30-40 minutes in the island. 5-6 hours to US or 9-10 hours to East Coast. Their fleet must fit that. Speaking of new fleet: 787-9, A321neo, and A330s.

“The space we are is a premium leisure carrier: an authentic representation of Hawaiian culture as all of our flights connect to Hawaii… We want to deliver genuine hospitality.”

“This model is successful. Over the last decade, we have a 15% revenue premium off of the West Coast.” Many know this will be a challenge to sustain with all the the competitors coming into the market.

Evolution in the industry is the diversity of products on the same aircraft. Not all guests value the same thing so Hawaiian wants to offer a variety of options to different passengers. Elaborates on Premium Cabin and how adding fully flat seats would have been “crazy” for a leisure-based airline in the past. Extra Comfort is a product that has incredible value for its guests.

Main Cabin remains the core of the airline product suite. Main Cabin Basic “reflects that some people value the lowest cost fare that we can provide but all products delivered with the same authentic hospitality.”

Network: Las Vegas is the top destination for Hawaiians. Point of sales is heavier on the Hawaii side. Las Vegas is sometimes called the 9th Island of Hawaii.

Maui has really become a second hub for Hawaiian with 9 direct nonstop destinations to the US, up from 3. A321neo is giving the airline all sorts of new direct opportunities to West Coast.

PHOTO: Airbus.

HI has had a major growth spurt in Japan since they began in 2010. Hawaiian is now second-largest airline in the markets in terms of seats offered. Pending JV with JAL will only accelerate this. Ingram says his airline will provide the best of both worlds. The premier airline of Japan with all their connectivity in Japan and Hawaiian within the islands.

A lot of emphasis on effortless travel: Checkin area investments, apps, etc. They admit they need to improve.

Hawaiian hasn’t pitched themselves as an LCC but they need to watch costs to provide the product at a price that’s a good value. Going for $100M annual run-rate savings rate by 2021.

Ingram on Southwest encroaching into the market (particularly Inter-Island near-monopoly): “We don’t need to focus on what our competition is doing, but focus on what we’re doing. On neighbor islands, we have aircraft like 717 ideally suited for inter-island flights which are 25% of our revenue. We have an incredible depth and breadth of our schedule.” The advantage of connecting flights as well as positions them to be competitive.

Ingram talks about keeping pricing competitive through Hawaiian’s inter-island fares are under significant pressure from Southwest, even though Southwest has nowhere near the frequency and network in the islands (for now).

Who knew: Inter-island traffic of 6,000,000 passengers per year grown only about 1% per year. With more direct flights to the mainland, connecting traffic is lessened. And as infrastructure builds on neighborhood islands, there are not as many reasons to go to Honolulu.

9:30 – 9:55     Spirit Airlines, Ted Christie, President & CEO

Boyd and Christie are on-stage in an interview.

Spirit has 145 aircraft right now but growing to 300 total aircraft by 2025… Doubling fleet! That’s growth!

Boyd asks for some new markets. Christie’s not giving up trade secrets but says “we look for de-stimulating high fare markets. Leisure markets like South Florida and Las Vegas, International, and low-frequency point-to-point.” Spirit has 600+ daily flight ts to 76 destinations. They serve 23 of the top 25 U.S. metros.

Christie: “Next evolution is doing all that (low price) with high quality. We were #4 in on-time performance last year. “Biggest investment to improve “starts with communication, design of the network, schedule of a network, and how we interact with it. It’s tedious and granular. We have a lot of push/pull in these discussions (such as with buffer).”

Spirit’s investing to make “guest interaction more seamless”: Wi-Fi install, Cabin refresh with more comfort, loyalty program revamp coming, self-bag drop, and live person guest service (social media, chat, etc).

Spirit’s complaints are down 80% over the last 3 years. Boyd points out that this is about generating brand loyalty, not just “price, price, price.” Christie says “loyalty in space is different than a large network carrier but we do have loyalty.”

Boyd asks how consumers are responding to kindler, gentler Spirit. Christie responds they have surveys after every flight. Spirit’s guests actively engage in these and they have shown improvement.

Christie thinks “we under punch loyalty” but that’s going to change with the introduction with a new loyalty program.

Spirit averages 1X frequency on its city-pairs. This does prevent challenges for IROPs recovery. Spirit’s all about re-accommodation on their metal and “buying tickets”. As most know, Spirit had to do that this Summer certainly with the challenging schedule and disruptions. This impacted costs and the stock price.

Christie reveals SMS and WhatsApp interaction in English and Spanish with “Live Person” partnership.

10:00   Frontier Airlines, Barry Biffle, CEO

Change in the schedule. Barry’s moved up a bit earlier with his presentation as Turkish had to bow out.

He’s announcing a new class of service with the A321XLRs coming for the long-haul: Seating, inflight entertainment, amenity kits, and food. More to come on this… Spoiler alert: It’s not as it appears.

Frontier placing emphasis on being “Green”. With their fleet, they claim to be the greenest airline in America. Points out that by charging for bags, Frontier cuts down on weight and therefore fuel burn. Frontier saved 102 million gallons of fuel in 2018. “Flying Frontier is like eliminating 359 million straws.”

With A321neos, Frontier is getting more and more green as fleet triples.

The new class of service is called: Green Class. The audience was kind of punked in that passenger provides their own IFE (your PED), home-to-airline food (your own food), and personal meditation space (no WiFi), and your own onboard power (it’s more environmentally friendly they say to charge your own). So airline is going to adhere to its LCC #PaxEx roots. Clever switcharoo that got everyone excited until the rug pull.

Boyd asks about A321XLR missions for Frontier, Biffle: “We don’t know what’s going to happen yet. It will be changing international flying all over the world. Less fuel burned with more direct flying.”

Biffle acknowledges 6-7 hours of long-haul flying is a tipping point for narrow-body, comfort on a ULCC. They are “studying options” but already offer extra legroom seats. Looking at catering and even lavatories.

Boyd points out “A321XLR can access markets other planes can’t”. Biffle jokes it will give customs heartburn.

Biffle burnishes Frontier’s green cred with all things such as seat pitch is 100% related to fuel burn. His logic is, the more seat pitch, the worse it is for the environment. This is some very unique sustainability spin.

Next up is Air Lingus.

10:40    Aer Lingus, Bill Byrne, VP Global Sales

Byrne’s style is pretty off the cuff and free-wheeling to bring everyone back from the break. Reminds us all of his Irish roots. Maybe they’d sponsor a Guinness Happy Hour!

Byrne: Strategy is to be leading value carrier across North Atlantic. Reducing costs 4-5% has allowed the airline to renew fleet, lower fares, and improve margins – the leading in IAG. Reminds the audience that cost control is key – with rival Ryan Air right across the campus. O’Leary, are you listening?

Byrne: Building out Dublin Hub is key. Westernmost Hub in Europe gives Are Lingus significant advantages that others can’t do for connectivity. US customs pre-clearance is another. Eight new destinations to the NATL hub since 2014. The A321LR (1 now on the property with 6 on order) and future A321XLRs are powering the growth. They will open up new markets and flexibility such as adding frequency.

Byrne: The A321XLR / A321 LR can add product consistently all the way across NATL and flow into Europe with premium cabins’ with lie-flat seating. They can’t provide an all premium service with A330/narrow body connections at present.

Byrne: AI product decisions are based around NPS which are running 46% with our guests. IFE, WiFi, and free drinks return in all classes on NATL routes. Praises the Thompson seat and farm-to-table cuisine “invented by the Irish”.

Sidenote — today I’ve noticed: There aren’t airline passengers anymore. Every passenger is now a guest.

Brand refresh: Byrne says “Ireland’s a different place than it was 20 years ago”. He notes the economy is good, highly educated workforce and growing demand for air travel.

The brand needed to be refreshed. “Smart flies Aer Lingus” which is the positioning in Ireland, to set it apart from its LCC competition. The shamrock is shaped like a heart. I imagine to give off the impression of love for its guests. This is intentional against the more iron-knuckled LCCs like a certain O’Leary led airline.

Interesting to still hear a lot of emphasis on Irish customers in the US and on NATL has given airline’s trend to position themselves as a value-based carrier for connecting into Europe.

Reminds all the airport market development people that AI is open to new markets but Byrne amusingly says “I’m just the sales guy.”

11:005  Allegiant Air, Maury Gallagher, Chairman & CEO

Hometown airline CEO is up on stage to reflect on his 40 years in the business and the industry at large – not just Allegiant. Best charts and data f the presentation so far.

Shows interesting chart revealing that over the last 40 years since deregulation, RPMs have grown 7.4X relative to population.

Photo: Allegiant

A bit of history lesson is deregulation drivers were intra-state airlines like Southwest in Texas, PSA in California, and Air Florida in Florida that weren’t regulated. A slide show history of consolidation. Of 10 current US airlines, only Hawaiian, Allegiant, Spirit, and Frontier haven’t had a history of consolidation. Since 1978 in the US, 170 cases of Chapter 11 bankruptcies and 21 cases of Chapter 7 bankruptcies.

Gallagher: “Our competition is the couch. US ULCC airlines will carry 50 million people this year that wouldn’t be in the transport system. 30% of our customers just fly from A to B and don’t buy anything (beyond ticket).” Should he be bragging about fewer ancillary revenue?

Gallagher: “The airline industry needs to be successful as it’s the underpinning of the economy.” The industry has made money on $110/barrel of oil. The industry has much better management now. And consolidation has helped. This is not your father’s airline.”

To prove his point on business sustainability, Gallagher shows EBITDAR (Net Debt) is 1.3 in 2018 versus 47.2 in 2002. “The airline business can deal with a downturn.”

ULCC’s are 10% of the market in the US now with average fares falling from $120 in 2001 to $55 in 2018. But ancillary revenues have been a key contributor to making this happen “as much as people may not like them.”

Maury decides to talk about that the US airline industry has never been safer. In light of the Allegiant critical 60 Minutes story a few years back, this strikes me as a bold talking point.

Gallagher says #1 cause of accidents is pilots, not maintenance. Maintenance procedures precede the accidents often. Says data tells the time in the cockpit isn’t the determinant for quality of pilots, with simulators being capable of what they are today.

This naturally leads to a discussion of pilot shortages and retirements. Gallagher: “The 1,500 rule is a real problem. Imagine a 20-year-old needing to spend $200,000 to get his ticket.”

Gallagher continuing in his airline industry statesman/advocate role today: “Airlines are the most taxed industry, more than alcohol.” Reveal slide that displays taxes as a percentage of the ticket has grown from 10% to 30% since 2002. 34% of Allegiant ticket price goes to taxes and fees.

Departures in America have declined substantially since 2000 with airline up gauging, and dismantling of hubs like Memphis, Cincinnati, and Cleveland.

Believes the airport should collect their fees directly from passengers versus airlines. Airports are in great financial shape – even better than airlines. Gallagher: “There’s got to be a better way for airports to get their fees than to come through us”. Airports have strong credits and outperforming other bonds. He believes they should be able to take care of their own infrastructure funding.

Using Mesa Airport as an example: “The consumer doesn’t care about the inside of your airports or the cabin of my airplane”.

On Allegiant brand building (such as from Allegiant Stadium, Entertainment Centers, and the new SunSeeker Resort): “It’s a long-term effort for customers to not only fly us from A-to-B but think of us (holistically) when they travel.”

Thanks Maury for an excellent, truth-telling session IMHO.

11:35  Volaris, Holger Blankenstein, Executive Vice President Airline & Commercial Operations

Blankenstein rolls off some stats: One of fastest ULCCs in the US and Central America. 66 destinations: (23 direct destinations to the US, 40 in Mexico, and 3 in Central America. 78 aircraft, 24% are Neos. One of the lowest CASM in the world at 3.9 cents.

Photo: Tomas Del Coro

Volaris and family member Frontier operate first LCC code-shares in the world. I wonder if this is a sign of things to come from Indigo Partners other carriers especially as A321XLRs one day might allow for networks to connect.

Blankenstein: Volaris is striving to be the lowest cost airline in the world. They are now number three. Compares Volaris to US LCC’s costs: Volaris’ is lower. High fleet utilization, high density, and low unit costs allow the airline to raise demand for lower fares. The average fare is $50 per passenger on a plane. Market segments: VFR, price-sensitive leisure, and business passengers (small/medium family business and worked not the traditional business traveler.)

Volaris key commercial focus is not competing for airlines, but the bus. Blankenstein lays out the case:

Three billion bus trips per year. Air market is only 1.5% of the bus market. Volaris believes this is way under-utilized with huge potential. 40 million people of the population in Mexico have never flown an airplane. “When one flies they enter the Middle Class where people aspire to be.” Average bus fare is $55 per person per trip (versus Volaris $50). This is clearly an argument to those who say there’s overcapacity in the Mexican domestic market. 25% of Volaris flights have no air competition. The busses are the competition.

Cleverly, Volaris spends a lot of marketing dollars in bus stations (with a 99% flight discount), the Mercados, and of course social media (where the video of airline getting thrown out of bus station went viral).

Ancillary is 36% of revenues. Top 6 in the world. They want to reach Allegiant and Spirit levels who are around 50%.

“Volaris network is very defensible and diverse with low concentration in Mexico City” unlike its competitors. So he says all the issues surrounding the halted new Mexico City Airport don’t affect Volaris nearly as much.”

Growth of Mobile phones in Mexico (90% of Mexicans have smartphones) are revolutionizing Volaris sales channels: 90% of sales are made digitally with 25% made on mobile platforms. 90% of customers check in on the Mobile App.

Fleet goal: 100 aircraft by 2022. All new aircraft coming are Neos. Volaris has most numbers of Neos of any aircraft in North and South America.

Boyd asks how Volaris makes money. Blankenstein: “low cost always wins and stimulating the market (against the busses).”

11:55 – 12:20  Sun Country Airlines, Jude Bricker, President & CEO

Former Allegiant COO makes a homecoming to Las Vegas to talk about his 2 years at Sun Country.

Goal: Become cost competitive, find leisure markets where we can compete profitably, add ancillary revenues, expand out of Minneapolis/St. Paul.

Fleet: No plans to order MAX’s. Switch from leasing aircraft to owning aircraft (will own 18 aircraft). Operating 30 aircraft now, heating to 35 aircraft with all 737-800 fleet (removing 700 from fleet). Bricker: “A cheap big airplane is optimal for us.”

Progress on Product: upgrade cabin, 32″ pitch new seats (same as Southwest), power to all seats, free IFE streaming to PEDs, and free in-flight non alcoholic beverages. First Class reduced, Sun Country has relatively long stage lengths.

Bricker reminds audience of past CEO Thomas Joseph Petters who was convicted of fraud and numerous federal charges. Essentially using the airline as his own piggy back instead of investing in the airline. “He is in jail now”.

MSP, Charter, and longer haul franchises will be keys to success. “We are nimble to make changes to our network.” Challenge in Minnesota is in Summer, “we don’t travel as much so we can enjoy (our short Summers).”

Airline will focus on cheaper used aircraft since utilization can be low at 10 hours per day depending on season.

Throws some shade on former employer Allegiant for not embracing GDS, which Sun Country does.

Big emphasis on ancillaries, hotel, car rental to take fares down which allows us to increase capacity. To do this, we’ve reduced unit cost revenues by 30%. Levers to reduce CASM are: fleet utilization, seating densification, and solvency (the airline historically has been a financial cost basket case). They mean business: Airline is cutting costs by moving its headquarters to its hangar. Bricker feels this is a positive move for culture to bring operations and commercial side together.

Value proposition of Sun Country: “2 digit fare to the beach. We can never cancel. We had 185 days of non-cancellation in 2018-19 which ironically ended right here in a Las Vegas snowstorm when they ran out of de-icing fluid.”

It’s no secret that Sun Country operates in brutal winter weather conditions which are good for the airline as people want to fly away to warmer climes. But it ain’t easy. Bricker shows photos of himself (A Southerner) working on the ramp where this Southern boy was way out of his element. Really rough weather last year during Polar Vortex. First de-icing was in late September and last was in early May. He shows another slide from social media of FID screens where all other airlines were cancelling but Sun Country was just flying.

Excited airplane is capitalized and backed by private equity of one of world’s largest PE firms, Apollo. “Things are going well with our profits up 200%.” Doesn’t know how long Apollo will be part of picture as “they’re not long-term owners”.

Boyd asks about Sun Country’s conservative small, fleet number. Bricker says best solution is to be able to acquire and remove aircraft quickly to be nimble.

1:35    Southwest Airlines, Andrew Watterson, EVP & Chief Revenue Officer

Next up the EVP from America’s #1 domestic carrier by passengers carried. Emphasizing business focus as “Southwest began that way” – using Herb / Rolin King cocktail napkin analogy that the triangle DAL-HOU-SAN was business from the beginning.

Watterson: California Intrastate is 5X larger than Northeast shuttle business market. “We’re California’s #1 business airline”. At LGA with EWR soon to be out of the picture, “we’re not trying to be New York’s hometown airline. We’re in the best terminal now, Terminal B and now we fly exclusively 737-800 adding capacity without adding slots.”

Southwest Business SWABIZ is a major growth area. 6X as many people in this department as in 2016. “Embracing a B2B strategy” with “industry standard GDS partnerships. Southwest is bringing its B2C experience to B2B “which frankly we weren’t easy to do business with in the past.”

Southwest now says they have full participation with GDS on Amadeus and Travel Port, so now whichever channel of choice business customers use, “Southwest will be there.” But it’s not on Sabre yet… came close to a deal which fell apart and hope to make a deal eventually.

On leisure side, Hawaii: 18 daily flights to West Coast and 34 inter-island daily flights now with much more to come. Added relevance in California markets. Watterson says not too much more inter-island Hawaii flying to come because we have “Pretty good utilization right now with aircraft coming in the morning, flying inter-island, and departing in late afternoon….It’s further along than mainland flights now.”

Additional flights including San Diego are dependent on 737 MAX return to service. Sacramento made sense before San Diego based on schedule.

Watterson tips his hat to Hawaiian CEO Peter Ingram for “staying calm with all these Southwest questions.” Admits Southwest isn’t Hawaiian’s hometown airline and they won’t try to be.

Asked when Southwest is returning to Mexico City, Watterson says they still have 2 slot pairs. Thought it was relevant to Houston, but they couldn’t make it successful. But they could return one day in the future.

On Canada: “We can fly there one day. Hawaii was super relevant to California. Canada isn’t a huge missing part of the network right now.”

With MAX grounding, Southwest is 10% short of projected fleet (already delivered plus future ingesting aircraft) by November when effect will begin to be more acute. They say their financial strength allows them to “weather this storm”.

Southwest GDS and IT work has been focus, but then they may begin to look at over-night flying.

195 departures a day out of DAL so “those departures must earn their keep”. In DAL, it’s all about O&D so they want to send connecting traffic elsewhere such as HOU.

Snarky joke complete with a cat scream responding to litigation with Delta over gates Southwest leased from United at DAL. Watterson says “Delta is on Southwest gates”. If Southwest wins litigation, it’s a modest increase in flights.

On growth in day of week service: “For most part, we’re an everyday service airline in larger markets.”

Somehow, we’re running on schedule. This one felt like a lightning round!

2:05      Air China, Dr. Zhihang Chi, VP & General Manager North America

Michael Boyd and Chi have taken the stage for an informal talk, much less of a presentation than what we’ve seen so far. Given fractious state of US/China relations and declining economic growth in China, this should be interesting but…

Chi makes sarcastic joke that “not alot of excitement is going on so that’s why people are leaving.” Of course, China is the news right now.

Chi: “Domestic is saving the day for us. Internationally to Europe, US, and Canada are challenging right now.”

Chi: “International (long-haul) travel is still price sensitive (for Chinese residents) leisure. Things are slowing down a little bit. People are traveling internationally but to closer-in destinations (in Asia).”

Chi: “We’d like to have a JV relationship with United. But given the back (China / US relations are this is on back burner.”

Chi: “Service to Beijing has been on decline.” No secret there…. US airlines have invaded the turf over-flying hubs to secondary cities. Those airlines lack connectivity in China though. So why are they doing this? Chinese airports are offering huge incentives for this, even if flights aren’t altogether profitable.

Chi’s interview is quite pessimistic so far: “This year is a little muted, more subdued.”

Boyd asks “Where do we go from here?” On a positive note, Chi says Air China is returning to Gatwick and New York continues to perform well. Boyd puts for

Hawaii (Honolulu-Beijing) didn’t work for Air China because it’s a leisure market to one-place where Chinese want to see different parts of the US, which they can do flying to mainland US destinations. It didn’t work for Hawaiian either.

Chi maintains the VISA requirements requiring Chinese to obtain visas to travel to the US is hurting both sides. Boyd says “there’s an affinity between China and America”. Chi agrees: “In 2005, Chinese visitors to America numbered 250,000. In 2017, it was nearly 3 million when relations (between the 2 governments) were still good.”

Chi: “We see a dichotomy. US airports and cities all want Chinese visitors. In Washington, it’s a different mentality.”

Chi: “We see softness in Beijing but Shanghai is growing a bit because it’s almost all business.”

No one has mention the “T words”: Trump or Tariffs but it hangs heavy in the room.

2:30    Aeromar, Fabricio Cojuc, Executive Director, Network Strategy & Alliances

Who is Aeromar? Mexico’s most experience regional airline. I’ve never heard of them, either. Only turboprop airline flying out of Mexico City. 18 domestic cities and 1 in the US. “We’re anti-LCC. 100% private owned… Conservative….We fly where other airlines won’t fly due to thin market or equipment…We fly ATR 600 series aircraft.”

Who knew? Aeromar is world’s #3 largest ATR operator in terms of cycles and hours in the world.

Now on to 2018 US/Mexico air services agreements…

Facts: Mexico is # trade partner with US. USA is Mexico’s largest air market. US-Mexico is US #1 international cargo market.

3 main changes for 2017 new US-Mexico Air Services Agreement: Paved the way for first JVs between Mexico and US like Delta/AeroMexico. Eliminated restrictions to Mexico City traffic access, slots not withstanding (no slots at current airport. No slot limits at new stillborn airport). Amplified cargo traffic rights.

Mexico City to LAX is ranked 6th in US international city-pairs.

If Air China presentation was pessimistic but realistic, Mexico isn’t much better. Given Mexico / US trade ties, this is even more significant if under-reported IMO.

US-Mexico emplacements which had been steadily increasing, are now decreasing so far -2% in first 2 quarters of 2019. Growth of scheduled flights is nil. Nonstop routes are -3% YOY and have returned to 2016 levels, before the 2018 agreement.

Fares between Mexico and US are decreasing significantly at 11% owing to the increased competition and capacity. Only Mexico City to New York is holding its value. Cojuc says “LAX-Mexico City has tanked”. He expects fare erosion to continue.

Cojuc: Market share is stable with US carriers at 70% and Mexican carriers at 30%. Combined AeroMexico/Delta JV is at 32% market-share.

Cojuc: Cancelled new MEX airport means no end in sight to MEX slot congestion. The status quo will favor the Mexican carriers who control 80% of the slots at MEX. US carriers control 6% of the slots. They will be maxed out. “To grow they’d have to up-gague to twin aisles but they’re not going to do that.”

Cojuc on what he says is basically an Open Skies agreement: “The results (of the 2018 agreement have been disappointing so far. ” Market value has actually decreased with all the additional capacity.

How do things improve as new US/Mexico agreement is negotiated? Cojuc lists: USA customs and immigration pre-clearance, additional JVs, further benefits from DL/AM integration, improves slot management at MEX, successful implementation of Mexico City’s proposed Metropolitan Airport System, and improvements of bilateral relations.

What will stand in the way of progress? Cojuc postulates demand growth insufficient to offset yield erosion – capacity is then pulled down. MEX Airport capacity remaining maxed out, fallout from US elections, and a new NAFTRA agreement no signed.

2:50 – 3:15       Oil Price Information Service, Ben Brockwell, Director

It’s time for some prognostication: What’s going to happen to oil prices over next year-and-a-half into 2020? We hear from an oil guru who has been right more often than he has been wrong….

Brockwell: “The prices could go down to the ’40s or up to the 80s’. At this point, chances favor them going down. It’s a bi-focal market.” Geopolitical factors would be most significant factor.

Jet Fuel demand increasing faster than oil for other uses such as transportation. “Gasoline demand has peaked and is in a recessionary mode.” Gas, diesel and jet fuel prices will separate.

Brockwell predicts stronger prices for first-half year and weaker prices for second-half year. Push/pull geopolitical factors and economic slowdown could impact this. But doesn’t see anything taking us near $100/barrel where we were back in 2008.

Declining oil prices are of course, good news for the airline industry – an industry that needs some good news against all the emerging headwinds. I am reminded what David Neeleman told me recently in an interview that he’d rather have an economic downturn with low oil prices than vice versa. It looks like he might get his wish.

3:35 – 4:00       Korean Air, John Jackson, Vice President

Korean Air has had a turbulent year with declining margins, geopolitical issues with Japan, China, and North Korea all conspiring to reduce revenue in key markets, a shakeup at the CEO level, etc. On a positive note, Delta/Korean JV is bearing fruit. This should be an interesting panel for sure…

Jackson: “We’re the largest transpacific carrier. 50% of our passengers from North America connect to 80 cities past Incheon.” Largest non Chinese carrier operating in China.

Jackson: “We’re at Version 3.0 – our JV with Delta. We’re only (Asian) airline with major passenger, cargo, and aerospace divisions.”

Jackson rattles off stats to prove his point of Asia’s emerging dominance: Asia is taking over from North America as center of aviation world. 8 of top 10 busiest air routes in world are in Asia: Seoul – Jeju. More than half of world’s population is in Asia. More than half of world’s GDP growth in Asia. 40% of new aircraft deliveries destined for Asia.

Fleet transformation as Korean, a traditionally wide-body dominated carrier is now rapidly adding narrow bodies to meet this demand – adding frequency and destinations.

Major Asian airport competitors for KE: Taipei, Beijing, Hong Kong, Tokyo (Narita and Haneda). More than half of traffic from North America is connecting traffic. Japan was the focal point of this transit at 60% in 2000, now that’s down to 31%. And more movement away from Tokyo to come. Korea is now second in terms of connections.

Korean is boosting traffic to win in connections to Southeast Asian markets that can’t be flown profitably from North America with nonstops.

Views Hong Kong and Taipei as Incheon’s biggest competitive threats for connectivity competition. Hong Kong because of Cathay’s aggressive growth and Taipei since its not as much of an O&D market so their airlines are hungry for connectivity at their hubs.

On LCC front: Asia was late in the game. Currently, only 20% of Asian passengers fly on LCC’s but it’s growing rapidly. Doesn’t view long-haul TransPac LCCs gaining alot of traction. Their cost advantage isn’t there, and fares are already low due to over-capacity in the market. Korean will be more focused more on business side, but has the opportunity to experiment with segmentation (like Basic Economy) with Delta JV.

Jackson on Korean’s A380: “If you can configure it right, it can very profitable. No plans to remove them from our fleet. LA and New York will likely be only US markets we bring them to.”

4:00 – 4:25      Hermeus, AJ Piplica, CEO & Founder

Our next talk reads like complete science fiction so strap yourself in for a 2g discussion.

Who is Hermeus? “Long-term vision is to build an aircraft that can carry people at Mach 5 (in Hyperspace)”. Mach 5 is New York to London in 90 minutes at Business Class prices. “The world becomes regional”.

This is beyond Boom, but is it vaporware? The CEO claims it isn’t as far fetched as it seems as many pieces of the technology already exist in defense, if not commercial aviation. Boyd jokes “I told you he was nuts”, but he doesn’t believe this idea is as crazy as far fetched as it might seem in the future.

Not much will be revealed here but here’s a few details: Carry 20 passengers (smaller platform than Boom), 4,000 miles at cruising speed of 2,900 knots. Titanium construction. RamJet and Turbine for propulsion or as he turns it “A can with a flame in it.” We can’t show photography of the slides, but suffice it to say the CGI visualization is striking but not unconventional looking for an SST.

Path to production. Stage 1: Demo miniature aircraft in 3-5 years. Stage 2: Drone. Stage 3: Transport. Stage 1 and 2 will be autonomous.

Target is to be able to match “today’s business price classes for the business case to close. Not quite as profitable as subsonic business class.”

Hermeus CEO PaxEx on Mach 5 travel: Acceleration will be 10-12 minutes for “push yourself back in the seat” sensation but in cruise, you won’t notice the difference between this and a regular flight.

Piplica tries to downplay difficulty of building this aircraft by leveraging off of existing technologies and solutions, but is being deliberately vague as “much will change as we learn so much (going forward).”

Question asked “Why develop a small 20 passenger aircraft, not 50?” Answer: We can get to market faster and more cost effectively with a smaller aircraft.

The aircraft will have a sonic boom, so this will be a fly over the water aircraft. Smaller aircraft means less of a boom signature.

4:50 – 5:30      Boyd Group International: Airports: USATM Traffic Trends & Enplanement Forecasts

OK, after a brief trip to the far future, we return to the nearer future with Boyd’s Traffic Trends Forecast to wrap things up for the day. This discussion is where Boyd reveals their legendary research, data, and forecasting chops. This is far too exhaustive to cover in real-time in this format, but here are some highlights. Scroll to his opening remarks for additional predictions and pontifications.

Three airport categories for forecast from 146 airports: Hubsites (connecting traffic driven by a hub carrier), large non hubsites (large airports but not a hub like Tampa), regional airports (under 2M passengers annually).

Forecasting challenges: new fleets have very different mission capabilities than 20 years ago, new technology airlines like A220 and A321XLR change everything, why people travel is different (such as disappearance of some short haul and inter-regional traffic), LCC traffic as he calls it “wildcatter carriers” that are seasonal are hard to forecast.

Boyd: “We believe airports that will suffer from lost airports have already been hit.” The system we have lined up is all for growth.

Boyd: Airlines were “the caboose to the GDP economic train”… not today. Aviation is decoupled from GPD growth. Forecasting changes every week so we don’t do annual forecasting. Forecasting more shorter increments in weeks and months.

Categories of airline systems: Network carriers, Next-Tier Carriers like JetBlue and Alaska, Wildcatter carriers ULCCs that look for new pools of discretionary markets, and subsidiary carriers like Silver, Boutique which purées subsidized markets that wouldn’t normally have service. Disavows use of term of “regional carriers” which are part of main airline system now.

Boyd critical of FAA forecasting. He puts up a slide that says The FAA aerospace forecast assumes an airline that no longer exists. It tracks US airline traffic – not total airport traffic. He calls it “Understaffed. Under-supported. Under-aware.”

He’s not a fan of BTS/DOT data either in terms of on-time data (it’s more about on schedule data as airlines buffer schedules), consumer complaints, fare data vs ticket spend data.

Forecast for next 10 years: 3.9% growth each year of passengers traveling, totaling 33.7% growth over 10 years by 2029. Expects 1 billion emplacement by 2021-22.

Trend from 2007 – 2018 is fewer flights (12% fewer) with large aircraft. Average airplane size grown from 103 to 121 seats. This isn’t just about up-gaguing but also densification. “Skies aren’t getting more crowded because of commercial aviation”.

And about the 737MAX grounding: There are still 3.5% more departures and 3.7% more seats than last year despite the MAX cancellations. Boyd: “We didn’t have the expansion we thought we were going to have.”

Metro-peripheral airport expansion is a trend. Sites Boston catchment area as an example where Providence and Manchester are essentially additional terminals for Boston. Portfolio approach with different cost structures.

New communication channels replacing short-haul: Boston to New York down 35.4% versus 20 years ago, Houston to Dallas down over 50%, Washington – NYC down 59%, and Chicago-Detroit down 60%. People are still traveling but there are better alternatives out there like rail.

Boyd predicts international and TATL service for opportunities for small markets like Jacksonville, Richmond, Manchester, and Albany due to new tech aircraft. They predicted this last year with Charleston and three weeks later, British Airways announced new service to London. No mention of Norwegian abandoning their second tier market TATL LCC flights.

….And with that fascinating, but head spinning data dump Day One of #BoydLAS is in the books. As a first time attendee, I am impressed with Boyd’s stamina, grasp of data, and forecasting. We’ll be back bright and early Tuesday morning for Day Two.