We’ve seen several airlines make major changes to their fleet plans in recent months, and I can’t help but pose the question of whether airlines are acting a bit irrationally, and oscillating between extremes.
The shifting attitude among airline leadership
Up until the start of the pandemic, all too many airline executives acted as if the only way was up. I couldn’t make sense of it at the time, and I can’t make sense of it now. Just to give a few examples that span different parts of the industry:
- American Airlines CEO Doug Parker famously stated that the airline would never lose money again
- Etihad Airways ordered new planes as if there was no tomorrow, even though the airline was losing billions of dollars; even pre-pandemic, the airline was already trying to cancel many of these orders
- The major US airlines kept devaluing their frequent flyer programs, expecting more from their customers while offering less
Etihad had ordered hundreds of new planes, including the 777X
Suffice to say that in general these attitudes have changed, and the pandemic has been a great reset for the industry. Most airline executives expect it will take years for a full recovery, and just this week Lufthansa CEO Carsten Spohr questioned whether business travel would ever recover to pre-pandemic levels.
Are airlines now short-sighted with fleet planning?
I can’t help but step back for a moment and look at how attitudes in the industry have shifted:
- Remember the mid-2000s, before the A380 entered service, when most people assumed that this would be the future of aviation, given how global demand for air travel keeps growing?
- Fast forward just over a decade, and we’re seeing A380 production end, we’re seeing airlines retire the A380, and we’re even seeing airlines cancel their 777X orders, claiming that the plane offers way too much capacity
Air France became the first airline to retire all of its A380s
Heck, this is even the case at Emirates, which is by far the world’s biggest A380 customer, and the biggest fan of the plane. The airline plans to fly A380s through the mid-2030s, and eventually plans to replace them with 777Xs. However, the airline keeps trying to reduce its 777X order, claiming the plane is too big.
I understand the thinking of airlines in general:
- Aircraft technology has improved significantly, as we’re now seeing smaller, longer range, and more fuel efficient aircraft than ever before, ranging from the A321XLR to the 787 & A350
- This allows airlines to operate point-to-point routes that simply wouldn’t have previously been economical, and in general allows airlines to maximize yields, by not having to dump too much capacity in markets
The A321XLR will enter service in 2023, and is an incredible plane
At the same time:
- Pandemic aside, the demand for global air travel keeps growing, and that’s a trend that will continue over the coming decades
- Airports keep getting more congested, and in general we’re not seeing much airport growth in many parts of the world, largely over environmental concerns
- While the A321XLR is an incredible plane, it’s not great for cargo, which can also be extremely profitable for airlines
- While not all routes need a lot of capacity, most major airlines have some markets where there’s a lot of demand, be it New York to Frankfurt (for Lufthansa), London to Doha (for Qatar Airways), New York to Tokyo (for All Nippon Airways)
- While point-to-point routes are great, the reality is that the major network airlines aren’t fundamentally adjusting their long-term business models, which is to say that the hub-and-spoke model is still very much alive, and that plays into having big planes operating prime routes
- Is there a point at which consumers simply prefer bigger planes, whether it’s avoiding narrow body planes for long haul routes, wanting to fly planes that have first class, etc.?
Could the A350 be Lufthansa’s largest aircraft in the future?
My comments here aren’t really targeted at any one particular airline. However, if I had to give a few examples, I suppose I have the following questions, especially looking forward about a decade:
- Does Lufthansa really not think it will need 20 777Xs as flagship aircraft, once 747-8s are retired?
- Does Emirates really not plan to at least have a 1:1 replacement of 777Xs for A380s? Pre-pandemic the airline operated 10 daily A380 flights to London-area airports, so what’s next, 20 daily 787s?
I suppose airlines might be thinking “well, we can always order 777Xs in the future if we need to,” but this also gets at the extreme oscillation I’m referring to, between planning for the future as if nothing can go wrong, and then taking a doom-and-gloom strategy and acting as if nothing can go right.
What will Emirates look like in a post-A380 era?
It’s fascinating to see the shift in thinking among airline executives when it comes to future aircraft orders. Pandemic aside, the global demand for air travel keeps growing, while long haul planes keep getting smaller.
While I can appreciate that this largely comes down to the emergence of smaller, more efficient, and longer range aircraft, I still can’t help but feel like this might all be a bit short-sighted, as we see airlines essentially suggesting that a 777 is simply way too big nowadays.
Call me optimistic, but I think the airline industry will recover fully, and I also think we’ll get to the point where we see the 777X become a popular plane. Yes, both the 787 and A350 are amazing aircraft, but at a minimum I think there’s a market for the 777X being a flagship aircraft for a lot more airlines.
What do you make of the huge change in direction among airlines with future fleet plans? Is this a knee-jerk reaction to the pandemic, or is there simply no market (even a decade down the road) for anything bigger than a 787 or A350?