ISTAT Jetrader - Winter 2021 - 40

Finishing the Long
Path to a Demand
Recovery
by Douglas Harned
A
fter the COVID-19 pandemic hit in
early 2020, aircraft demand came
to a halt, airline traffic plummeted
and aircraft delivery rates were
slashed. Even in summer 2020, we
saw glimmers of optimism that the
recovery would happen soon. Forward
airline schedules would show substantial improvement coming
in many markets. Analysts latched onto those outlooks and
predicted recovery. But every time this happened, we saw
that optimism crushed when actual schedules eventually
came through with limited improvement - and even less so
in passenger traffic (RPKs). None of this schedule data really
mattered. This was not a problem that airlines could solve or
even forecast. The problem was, and is, a medical problem.
Since late 2020, we have seen global progress against
COVID-19 as the key to recovery for aircraft demand. The
first big step was taken in November 2020 when Moderna
and Pfizer vaccines demonstrated high efficacy against
COVID-19. Those results held up and other vaccines followed
(e.g., Johnson & Johnson, AstraZeneca, Sinopharm, Sinovac,
Sputnik V), although others failed (e.g., CSL, Merck, GSK).
Aerospace stocks rallied in November 2020 into early
December on that news.
Regional signs of encouragement started to happen in
early 2021. China domestic traffic had already recovered to
2019 levels. Vaccinations were rolled out rapidly in the United
States, and U.S. domestic traffic moved in tight correlation
with that rollout even as the highly transmissible delta variant
of COVID-19 surged. European vaccination programs ramped
up with the United Kingdom leading. Soon intra-European
traffic followed the growth in vaccine penetration, just as
it had in the United States. The result of these regional
successes was to spur hope by industry observers, primarily
in Western countries. Basically, the thinking was, if I can now
40 * THE OF F I C I AL PUBL I CAT I ON OF ISTAT
go out to a restaurant, air travel is soon going to follow. Once
that happens, airlines will need more airplanes, and we will
move back to the positive demand outlook we knew before
the pandemic. But cash-strapped airlines around the world
cannot drive a recovery until traffic really starts to return.
Unfortunately, observers who looked through the lens of
regional improvements missed the breadth and complexity
of what was needed to drive commercial aircraft demand. A
healthy market cannot depend on aircraft being forced on them
by manufacturers, even if they can alleviate some of the pain
through government subsidies and sale-leaseback agreements.
The recovery needs to be global. As of early August 2020,
most major markets outside of North America, Europe and
China had negligible vaccine penetration. North America and
Europe were also benefiting from high levels of infection
(although clearly not a benefit for the more than 1 million
people who had died in those regions from COVID-19), which
added to immunity. Because Asia-Pacific represents more than
40% of aircraft demand, it is critical. Furthermore, the majority
of international travel globally involves Asia as an origin or
destination. Simply put, one cannot have recovery in global
aircraft demand without a strong recovery in Asia Pacific.
Figure 1 shows where countries were in early August
in terms of full vaccinations. The horizontal axis shows the
percentage of population fully vaccinated. The vertical axis
shows the number of COVID-19 cases per million population.
Circle sizes are proportional to the size of the narrowbody
passenger fleets in each region as of the beginning of 2020.
The red circles are the highest growth markets, where the
backlog exceeds fleet size. Outside of North America, Europe
and China, vaccinations were practically nonexistent. The
countries in the red-dashed circle represent major markets
for aircraft, and many also have low infection rates. This was
why we saw little reason for optimism on the recovery during
the past summer.

ISTAT Jetrader - Winter 2021

Table of Contents for the Digital Edition of ISTAT Jetrader - Winter 2021

ISTAT Jetrader - Winter 2021
From the President
ISTAT News & Events
Perspectives: Q&A With Mahoko Hara
Reconnecting in Edinburgh
Back to ‘Live’ in the City of Palaces
The Road to Recovery
Appraisal: Airbus A319neo and Boeing 777-300ER
ISTAT Foundation: Advancing Aviation Through Internships
Advertiser Index
ISTAT Jetrader - Winter 2021 - ISTAT Jetrader - Winter 2021
ISTAT Jetrader - Winter 2021 - Cover2
ISTAT Jetrader - Winter 2021 - 1
ISTAT Jetrader - Winter 2021 - From the President
ISTAT Jetrader - Winter 2021 - 3
ISTAT Jetrader - Winter 2021 - 4
ISTAT Jetrader - Winter 2021 - 5
ISTAT Jetrader - Winter 2021 - 6
ISTAT Jetrader - Winter 2021 - 7
ISTAT Jetrader - Winter 2021 - ISTAT News & Events
ISTAT Jetrader - Winter 2021 - 9
ISTAT Jetrader - Winter 2021 - Perspectives: Q&A With Mahoko Hara
ISTAT Jetrader - Winter 2021 - 11
ISTAT Jetrader - Winter 2021 - 12
ISTAT Jetrader - Winter 2021 - 13
ISTAT Jetrader - Winter 2021 - Reconnecting in Edinburgh
ISTAT Jetrader - Winter 2021 - 15
ISTAT Jetrader - Winter 2021 - 16
ISTAT Jetrader - Winter 2021 - 17
ISTAT Jetrader - Winter 2021 - 18
ISTAT Jetrader - Winter 2021 - 19
ISTAT Jetrader - Winter 2021 - 20
ISTAT Jetrader - Winter 2021 - 21
ISTAT Jetrader - Winter 2021 - 22
ISTAT Jetrader - Winter 2021 - 23
ISTAT Jetrader - Winter 2021 - 24
ISTAT Jetrader - Winter 2021 - 25
ISTAT Jetrader - Winter 2021 - Back to ‘Live’ in the City of Palaces
ISTAT Jetrader - Winter 2021 - 27
ISTAT Jetrader - Winter 2021 - 28
ISTAT Jetrader - Winter 2021 - 29
ISTAT Jetrader - Winter 2021 - 30
ISTAT Jetrader - Winter 2021 - 31
ISTAT Jetrader - Winter 2021 - The Road to Recovery
ISTAT Jetrader - Winter 2021 - 33
ISTAT Jetrader - Winter 2021 - 34
ISTAT Jetrader - Winter 2021 - 35
ISTAT Jetrader - Winter 2021 - 36
ISTAT Jetrader - Winter 2021 - 37
ISTAT Jetrader - Winter 2021 - 38
ISTAT Jetrader - Winter 2021 - 39
ISTAT Jetrader - Winter 2021 - 40
ISTAT Jetrader - Winter 2021 - 41
ISTAT Jetrader - Winter 2021 - 42
ISTAT Jetrader - Winter 2021 - 43
ISTAT Jetrader - Winter 2021 - Appraisal: Airbus A319neo and Boeing 777-300ER
ISTAT Jetrader - Winter 2021 - 45
ISTAT Jetrader - Winter 2021 - 46
ISTAT Jetrader - Winter 2021 - 47
ISTAT Jetrader - Winter 2021 - 48
ISTAT Jetrader - Winter 2021 - 49
ISTAT Jetrader - Winter 2021 - ISTAT Foundation: Advancing Aviation Through Internships
ISTAT Jetrader - Winter 2021 - 51
ISTAT Jetrader - Winter 2021 - Advertiser Index
ISTAT Jetrader - Winter 2021 - Cover3
ISTAT Jetrader - Winter 2021 - Cover4
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