ISTAT Jetrader - Autumn 2020 - 36

Every time we've been on the downward side of
a cycle, people have said "This time is going to be
worse than what we've seen in the past, and the future
is not as good as what we've seen historically," and the
demand has recovered.
predictable. Every time we've been on
the downward side of a cycle, people
have said "This time is going to be
worse than what we've seen in the
past, and the future is not as good as
what we've seen historically," and the
demand has recovered. The key to
all this conversation that you always
need to come back to is the underlying
demand and how you measure it.
Since probably 2010 or 2011, we
went through an extraordinary run in
the industry where the demand for air
travel was growing meaningfully above
trend, but we started to decouple from
the long-term trend lines of growth.
And while people started talking about
predictable long-term growth, we were
reminded the cycle hadn't gone away.
There are always different causes
for the cycle - this one being the
pandemic - and we'll dissect that to
see how it will play out in terms of the
recovery and the implications it will
have on the industry in the longer term.
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* T H E O F F I C I A L P U B L I C AT I O N O F I S TAT

The losses the airlines have incurred
during this downturn are unprecedented,
but it is also worth noting that we had
above-trend growth over the last almost
decade that generated profitability that
also was unprecedented. Airlines were
going into this downturn in some of their
healthiest financial position that we've

And the recovery took quite some time.
You saw a fairly strong rebound but
very weak airline performance. We had
quite a few bankruptcies a number of
years after 9/11, primarily concentrated
in the U.S., but it was a slow road to
recovery, complicated a bit by what we
also saw on the tail end of 9/11. We had
SARS just as the world was starting
to get its footing. SARS had a material
impact in Asia; globally, it was well
under 3-4%, but Asia saw a declining
demand of 18%.
The financial crisis, while significant
in the macro, had a relatively modest
impact on new aircraft, but it had a
significant impact on used aircraft. New
aircraft weathered the storm quite well
because the financial crisis coincided
with very high fuel prices. Thus, there
was an accelerated need to replace
airplanes with more new, fuel-efficient
airplanes. When we go back and look
at implications of the current crisis, the
best relative downturn would probably
be 9/11. In order to analyze and
contrast the implications of the current
downturn, it's important to agree what
the measurement is, which is supply and
demand. The demand are people buying
tickets, and supply are new seats, new
airplanes being delivered into the market
minus the retirements or the scrapping
of the older airplanes. Post-9/11, you
had a significant recovery; it took

When we go back and look at implications of
the current crisis, the best relative downturn would
probably be 9/11.
ever seen historically. So, let's look a
little further to get a perspective on
the current downturn relative to what
we've seen in the past. The closest
thing that we can come to is 9/11.
Post-9/11, the global aircraft traffic
decline was about 8%, but the U.S.
had a little over 15% decline in traffic.

about three years to get to a really tight
market, and then a fairly stable back and
forth, but fairly tight markets for about
14-15 years. But when one looks at the
demand and the degree by which the
demand declines, it is very important to
understand the timeline over which you
have a demand decline or acceleration,
ISTAT Jetrader - Autumn 2020

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