It is a subject we hear about all the time.  is fracturing so airlines need to focus on frequency rather than up-size.  Or have gone up, so airlines need to up-size gauge.  It can be rather confusing.  The debate between the 787 and A380 is an obvious one.

The 787 vs. A380 debate has always been about what the market needs more – frequency (787) or capacity (A380).   In truth both arguments are correct.  But both arguments are limited and therefore neither is a panacea.

Starting with the big picture, we can see that air traffic growth is in a faster curve than stage length.

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The number of people taking to the skies is growing fast. The typical metric is that traffic doubles every 15 years.  What is equally interesting is to see that stage lengths of flights, on average, are also growing, but much more slowly.  Between 2005 and 2015, stage lengths grew 8.2% to 1,100 miles.

A 1,100-mile stage length is one that virtually any commercial jet can handle.  So on a average basis, and all things being equal, it would seem airlines need to focus on number of flights using small aircraft.  This is the reason we see the A320 and 737 being so popular – they can easily handle this stage length and carry a useful load to make money.

In 2013 Amadeus reported that 1,000 routes accounted for 40% of global traffic.  They go on to point out that: “35% of air travel in Europe and North America is made on smaller routes with fewer than 100 thousand annual passengers. This contrasts sharply with other regions such as Asia where 85% of air travel is concentrated on routes that carry over 100 thousand passengers each year.”

Another item from Amadeus notes: “in Asia, the larger routes with over 100 thousand annual passengers have a 4%-9% growth range, but the smaller and medium sized routes in the region are growing at approximately 19%-21% per annum.”

It would appear from the Amadeus information that Boeing’s theory of traffic splintering is occurring.  This does support the case for smaller aircraft.  There is an additional item that bears consideration – Amadeus notes “The percentage of air traffic served by just one or two airlines has fallen by 2% each year from 39% in 2010 to 35% in 2012. Concurrently, the percentage of air traffic with four or more competing airlines has also risen consistently from 35% in 2010 to 38% in 2012.”

This last item is important because it the amount of competition introduces both risk and further supports the move to smaller aircraft.  Airlines want to reduce risk by using smaller aircraft that are cheaper to buy and operate, they are also easier to fill.

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