ISTAT Jetrader - Autumn 2020 - 37

and who absorbs the demand collapse
and at what point.
I'll give you a little thought
experiment. If air travel was turned
off on Jan. 1, nobody flew until July
1, and on July 1 everybody got back
on the airplane, then the number of
airplanes they needed on July 1 is
exactly the same as what you had on
Jan. 1 because it's the same number
of flights/same number of people. But
you had a year-on-year demand decline
of 50%, which is much more than what
we've seen in past downturns. So, all
of that short-term demand decline was
absorbed by the airlines, in a sense.
That's what we're seeing in the early
stages, that the airlines usually are
the ones that absorb the bulk of the
pain in the demand decline in the short
term. As the lower demand persists
in the system, it then starts to shift
into aircraft owners or investors and
aircraft manufacturers.
We were going into a fairly strong
market position with very good demand
growth over the past decade. Over
the last decade and a half to two
decades, airlines have extraordinarily
transformed their businesses. The
current analysis of airline cost structure
shows that roughly half of airlines'
global costs are fixed, and roughly
half of them are varied, and that is a
significant shift from where airlines
were 15-17 years ago when roughly
three quarters of airlines' costs were
fixed. As they shifted more to variablecost operations, the airlines started
to behave differently; they started to
take out a lot of the capacity. As we've
seen over the last decade, whenever
there were various pockets of market
softness, we saw very proactive actions
by the airlines to reduce capacity and
thus not operate airplanes that are
relatively empty and burning up a lot of
the cost associated with that.
The other important thing
worth noting are the productivity
improvements the airlines achieved
over the past decade. Not only have
the airlines seen massive growth

in demand above trend, but the
airlines were very good in improving
productivity of their fleet and in
improving productivity of their yield
management, meaning the load factors,
the densification of the airplanes. To
provide perspective, over the same
period, Boeing and Airbus delivered
a little bit under 7,000 airplanes. If
airlines continued to operate the same
way they did 10 years ago, they would

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have needed another 7,000 airplanes to
meet the capacity requirements. So, the
airlines have done an extraordinary job
of becoming more efficient. That gives
them a bit more flexibility, along with
their strong balance sheets, to absorb
the short-term demand disruption.
We also have seen unprecedented
government engagement in providing
aid to help airlines weather the
turbulence that the pandemic has

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ISTAT Jetrader - Autumn 2020

Table of Contents for the Digital Edition of ISTAT Jetrader - Autumn 2020

ISTAT Jetrader - Autumn 2020 - Intro
ISTAT Jetrader - Autumn 2020 - Cover1
ISTAT Jetrader - Autumn 2020 - Cover2
ISTAT Jetrader - Autumn 2020 - 1
ISTAT Jetrader - Autumn 2020 - 2
ISTAT Jetrader - Autumn 2020 - 3
ISTAT Jetrader - Autumn 2020 - 4
ISTAT Jetrader - Autumn 2020 - 5
ISTAT Jetrader - Autumn 2020 - 6
ISTAT Jetrader - Autumn 2020 - 7
ISTAT Jetrader - Autumn 2020 - 8
ISTAT Jetrader - Autumn 2020 - 9
ISTAT Jetrader - Autumn 2020 - 10
ISTAT Jetrader - Autumn 2020 - 11
ISTAT Jetrader - Autumn 2020 - 12
ISTAT Jetrader - Autumn 2020 - 13
ISTAT Jetrader - Autumn 2020 - 14
ISTAT Jetrader - Autumn 2020 - 15
ISTAT Jetrader - Autumn 2020 - 16
ISTAT Jetrader - Autumn 2020 - 17
ISTAT Jetrader - Autumn 2020 - 18
ISTAT Jetrader - Autumn 2020 - 19
ISTAT Jetrader - Autumn 2020 - 20
ISTAT Jetrader - Autumn 2020 - 21
ISTAT Jetrader - Autumn 2020 - 22
ISTAT Jetrader - Autumn 2020 - 23
ISTAT Jetrader - Autumn 2020 - 24
ISTAT Jetrader - Autumn 2020 - 25
ISTAT Jetrader - Autumn 2020 - 26
ISTAT Jetrader - Autumn 2020 - 27
ISTAT Jetrader - Autumn 2020 - 28
ISTAT Jetrader - Autumn 2020 - 29
ISTAT Jetrader - Autumn 2020 - 30
ISTAT Jetrader - Autumn 2020 - 31
ISTAT Jetrader - Autumn 2020 - 32
ISTAT Jetrader - Autumn 2020 - 33
ISTAT Jetrader - Autumn 2020 - 34
ISTAT Jetrader - Autumn 2020 - 35
ISTAT Jetrader - Autumn 2020 - 36
ISTAT Jetrader - Autumn 2020 - 37
ISTAT Jetrader - Autumn 2020 - 38
ISTAT Jetrader - Autumn 2020 - 39
ISTAT Jetrader - Autumn 2020 - 40
ISTAT Jetrader - Autumn 2020 - 41
ISTAT Jetrader - Autumn 2020 - 42
ISTAT Jetrader - Autumn 2020 - 43
ISTAT Jetrader - Autumn 2020 - 44
ISTAT Jetrader - Autumn 2020 - 45
ISTAT Jetrader - Autumn 2020 - 46
ISTAT Jetrader - Autumn 2020 - 47
ISTAT Jetrader - Autumn 2020 - 48
ISTAT Jetrader - Autumn 2020 - 49
ISTAT Jetrader - Autumn 2020 - 50
ISTAT Jetrader - Autumn 2020 - 51
ISTAT Jetrader - Autumn 2020 - 52
ISTAT Jetrader - Autumn 2020 - Cover3
ISTAT Jetrader - Autumn 2020 - Cover4
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