Airlines are still recovering from the pandemic, and their flight ops are changing. Operating in a highly competitive industry, airlines constantly tweak and experiment.
The industry’s need to continually optimize is why it showed yearly fuel burn improvement long before being “green” was de rigueur. Indeed, one might ask why the airlines fell for the NetZero target.
For this exercise, we are using data from Skailark. The table below shows how fuel burn has improved since 2019. The red triangle on the sparkline is a high point. Regional flying has the highest fuel burn. The data has four types of airlines: ULCC, Value, Full Service Carrier (FSC), and Regional (REG). Skailark’s reporting airlines started at 71 in 2019 and is currently at 76.
Here are some charts to show how flight operations are evolving. The first chart focuses on regional flights. Notice how regional airlines have flown more ASM/flight over the period. There has also been an increase in the average stage, which suggests that regional airlines are upsizing aircraft. This move is necessary because regional flying is expensive – as fuel burn illustrates. This is also why we see regional airlines keenly eye hybrid-electric aircraft.
Next, we look at ULCCs. Here, the average stage is growing, with some ASM/Block hour growth. Growth in AMS/Block hour guides to upsizing, and we see ULCCs deploy A321neos as quickly as they can acquire them. These aircraft offer substantially more range, and we see that ULCCs exploit this.
As the chart shows, Value carriers watch ULCCs creep into their turf. Notice that Value carriers have seen the average stage switch back and forth. There has been little growth in ASM/flight. This segment might face some confusion – ULCCs are closing in and may already be operating larger aircraft. The Value segment might not be a happy place to operate.
Finally, a look at the FSC segment. Like the Value segment, these airlines have seen switching back and forth on average stage. Unlike Value carriers, FSCs are not threatened and tweak their operations as they seek optimization.
Summary
Airlines face unusual challenges now. Fuel costs are rising along with labor costs. Finding a new sweet spot is crucial because the previous one no longer exists. Fares can be bumped up because of demand, and as soon as demand starts to soften (like now), margins wither, and business risk rises.
To add to the pressure, new deliveries are running late, keeping fuel burn and MRO costs much higher than they might be. A 15%+ fuel burn cut from a state-of-the-art aircraft is irresistible, as is an MRO holiday with a new plane. Airlines that have to endure unexpected MRO costs because they need to keep older aircraft operational gnash their teeth in frustration. Because there’s nothing anyone can do.
As airlines consider softening demand, accountants warily watch the cash mountain melt away due to much higher salaries. Meanwhile, the airline industry seeks better fuel burn and every possible operational improvement. This is not a business for the faint hearted.
