As long-term storage sites for aircraft become increasingly full, airlines’ responsiveness to an increase in demand is seriously hampered. Parking aircraft is an alarming trend and shows the industry is not expecting a quick recovery.
When the COVID-19 crisis took hold, airlines were quick to alter their schedules and streamline operations in an effort to conserve cash. With airlines like Emirates returning their A380 fleet into service, others have taken a more conservative approach, such as Qantas and Singapore Airlines, and have sent some of their aircraft into long-term storage. This strategy is understandable, given IATA does not expect demand to fully return until 2024, but limits responsiveness to any potential increase in demand.
Airlines restricting their ability to respond quickly to a sudden uptick in demand could hinder their recovery. They could face a situation in which there is rising demand and limited aircraft readily available to deploy. This could further damage the finances of airlines taking this calculated risk and impede the recovery of the industry as a whole. On the other hand, airlines that are returning more of their fleet to service may be playing an even riskier game, having to take on additional operational costs for flights that may not even be half-full.
Long-term aircraft parking sites are becoming sparse
Aircraft parking sites are becoming increasingly full around the globe. The popular long-term storage site in Alice Springs Australia reportedly has no available space left. Even though airlines have slowly increased their schedules across the summer months, there is clearly a rising demand for long-term aircraft storage. With the industry now entering the quieter winter period, demand for this type of aircraft storage could increase significantly.
If long-term storage options were to deplete, airlines will be left with few options to store their aircraft. Parking at commercial airports, which was popular at the height of the COVID-19 crisis, will be the only option, but it is extremely costly.
IATA traffic forecast downgraded, signaling a tough winter ahead
IATA now forecasts air passenger traffic in 2020 to decline by 66% YOY, as opposed to an earlier forecast of 63%. With airlines now entering the colder months in many parts of the world, revenue generated in the summer may not be enough for some and further casualties could emerge.
A surge in demand for flight bookings was experienced in Europe when travel corridors were announced between nations a few months ago. Many airlines were not in a position to capture this returning demand due to having a high number of aircraft in storage and the length of time it takes to get these airworthy again.
Even though sending aircraft for long-term storage now might be the best strategy for airlines to conserve cash flow, a middle ground needs to be established in order to allow a quick return to service and capitalization on any increase in demand.
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