Airlines Revamping Fleets With Little Insight On Future
The demand shock caused by the novel coronavirus pandemic and the industry’s long-projected recovery timeline are hastening the pace of change already underway in the global air transport fleet. This is pushing out less efficient, hard-to-fill widebodies and speeding up the replacement of older narrowbodies still flying as carriers scramble to meet a steady uptick in annual passenger demand.
- COVID-19 accelerates fleet renewal plans and curtails growth
- Fleet sizes creep back, but utilization lags
- Widebody-heavy operators face particular challenges
In the near term, there will be far fewer passenger aircraft flying. The International Air Transport Association’s (IATA) latest outlook sees revenue passenger kilometers falling 66% in 2020 compared with 2019—and last year saw demand constrained by several issues, notably the Boeing 737 MAX fleet’s grounding. Total flights were down 51% in September.
All of it adds up to airlines needing fewer, and in many cases smaller, aircraft in their network. At the beginning of the pandemic, the world’s airlines were operating 23,900 passenger jets with at least 50 seats. That figure fell sharply as airlines filled runways and aprons around the world, but it has been rising in recent months as traffic slowly recovers in some regions. At the end of September, however, the figure was still just 19,500, and nearly 10% of those aircraft were operating in a parked/reserve status only one or two times per week, Aviation Week Network Fleet Discovery data show.
Having more than 1,500 typically busy aircraft flying only a few times per week is one clear sign that demand is both sharply down and a day-to-day challenge to predict. This phenomenon reflects finicky travelers, more liberal airline cancellation policies and shifting levels of risk as the pandemic runs its course. It also is part of a larger trend that has aircraft flying much less than before the pandemic.
An Aviation Week analysis of proprietary fleet and aircraft operational data illustrates the precipitous fall in activity for many workhorses. Some, including the Airbus A330-300 and A350-900 fleets, saw their average daily flight-hour utilization per aircraft fall more than 40% in September compared with January, before the pandemic began to take hold outside of China (see Per-Aircraft Average Flight Hours Per Day graph below). The long-haul sector is suffering disproportionately, but the issue is hitting large narrowbody fleets as well. Among 737-800s, daily utilization in September was 5.9 hr., down 30% from January’s 8.4 hr.
How airlines are using their fleets varies by myriad factors, including region, strategy and available aircraft mix. In a few cases, however, the pandemic has accelerated the retirement of aircraft types that simply no longer work in any network. Some types have become popular for carrying the relatively few passengers traveling at the moment, and as a result are expected to be important tools in the rebuilding of networks once the industry eventually emerges from the crisis. Airlines that have chosen to err on the side of caution in the past and opted to operate smaller capacity aircraft instead of larger jets appear to be in a better position, whereas all large-capacity widebody and all long-haul operators such as Emirates are now seeing the downside of a strategy that worked well when demand was still growing.
The fact that there was no market for continued production of the Airbus A380 and the Boeing 747-8 was clear before the pandemic. In early 2019, when a planned follow-up deal with Emirates had finally fallen through after more than a year of negotiations, Airbus made the difficult move to announce the termination of the A380 program by 2022. Demand for the passenger version of Boeing’s 747-8 has been nonexistent for years, but demand for freighter versions has kept the program going.
The more interesting angle is the future of A380 and 747-8 in-service fleets, which appear to be taking different paths. With the exception of Emirates Airline, essentially all A380 operators have decided to either go ahead with early retirement of their fleets or have the aircraft put in long-term storage—acknowledging they are unlikely to return. The 747-8, with just three operators and 37 aircraft active in passenger service prior to the outbreak of COVID-19, appears to be on more solid ground, albeit as a much smaller fleet.
Lufthansa flies both models and its view is telling. The airline made clear that it will only return to the A380 in the case of a sudden, unexpected hike in demand, whereas the 747-8 will be its new flagship.
The youngest of its 19 747-8s are only five years old. In its network, the aircraft are operated at similar unit costs, but the revenue risk is much higher on the A380—around 100 extra seats have to be filled on every flight, which has been depressing average yields. Taking that risk out, even on trunk routes and after long-haul traffic has recovered at some point, is a welcomed effect. And while all of the A380s have been grounded since nearly the start of the pandemic, some of the 747-8s continued to fly, essentially because of their much greater capability to carry cargo.
Air France has parked its A380s for good as part of a series of moves by Air France-KLM CEO Ben Smith initiated before the pandemic to improve financial performance. British Airways (BA), however, has planned to return part of its 12-strong A380 fleet back to service at the end of October. Several of BA’s A380 aircraft will be dispatched on North Atlantic routes, and two will share the operation of a daily Johannesburg return flight.
In the Middle East, Qatar Airways has said that it will leave the A380s on the ground at least until November 2021 and Etihad Airways has raised doubts that it will ever return them to service. Emirates is not in a position to make a similar move, given it operates 115 of the aircraft type.
COVID-19’s ramifications mean it is now rare to see any A380s operating in the Asia-Pacific region. Carriers such as Asiana Airlines, All Nippon Airways, Korean Air, Malaysia Airlines, Thai Airways, Qantas and Singapore Airlines have stored all their A380s.
One exception is China Southern Airlines, which still has its five A380s in service, according to Aviation Week’s Fleet Discovery database. This reflects the fact that, unlike the rest of the region, mainland Chinese carriers have generally parked or stored few of their aircraft. Air China is one of the few operators in the region with 747s in service. Freighter fleets are still flying as much as possible due to strong cargo demand. For many airlines, such as Korean Air, only freighter versions of the 747 are operating; all of the passenger versions for South Korea’s flagship carrier are parked or stored.
When business was still good, many airlines could afford to keep less efficient aircraft in service longer. The Boeing 747-400 and the Airbus A340 are perhaps the best examples of that tactic. In some cases, their utilization was driven by delivery delays of aircraft replacements such as the Boeing 777X or the A350. Issues with Rolls-Royce Trent 1000 engines on Boeing 787s created another wave of unanticipated capacity needs that gave some older widebodies a few unexpected flight hours.
However, long-haul capacity supply now far outstrips demand. As a result, it is not only the 747-400s and A340s that are heading into storage but also older 777s and many Boeing 767s as well.
The end of the 747-400, a process that had started long before the novel coronavirus crisis hit the industry, has become particularly visible due to the decisions of BA and Qantas to not return the aircraft to service. BA had begun replacing the 747-400s mostly with A350-1000s, but the airline still maintained one of the largest 747-400 fleets before COVID-19. Qantas, once an all-747 operator, was far more advanced in the aircraft’s retirement cycle, so the decision to pull the 747 from service does not have nearly as much of an effect on the carrier’s network.
KLM Royal Dutch Airlines, another iconic 747-400 operator, flew its last passenger services in March and temporarily reactivated three -400s for cargo-only use in April. These flights are slated to end by November.
Like the 747, the A340 has been in decline for some time, with A350s and 787s taking its place. At the end of September, 123 A340-200/300s and 105 A340-500/600s were in service or stored only temporarily, according to Airbus. But the numbers are changing fast. Lufthansa decided to put its 17 remaining A340-600s into long-term storage and will only return some to service in the highly unlikely event that demand comes back much faster than foreseen.
While efficiency is driving much of the shuffling among midsize widebodies, the same demand trends putting pressure on the A380-class aircraft are reshaping strategies at the lower end of the long-haul route scale. For many Asia-Pacific airlines, more efficient and newer narrowbodies are being operated more than older, larger aircraft. This has led carriers such as Cathay Pacific and Singapore Airlines to park 777s while keeping A350s or 787s in service. The 777s are often too big for the lower demand on international routes. Where 777s are being flown, it is often the -300ERs, with older ones like -200s/-200ERs more likely to be stored; Korean Air has been a prime example. Somewhat surprisingly, many A330s are parked or stored.
Singapore’s strategy illustrates a reliance on newer, more efficient widebodies rather than its larger twin-aisles. The carrier has 32 of its A350s in service, eight parked or in reserve and another eight in storage. The eight in storage include all of its ultra-long-range (ULR) models, which are of little use in the current demand environment. It is also operating almost all of its 16 787-10s.
In contrast, the airline only has one 777 in service, with seven parked or in reserve and the remaining 27 aircraft stored, according to Fleet Discovery data. All of its A330-300s and A380s, totaling eight and 19, respectively, are stored.
Singapore in May said that its 777-200s and remaining A330s would not return to service with the airline. The carrier indicated it would effectively retire its 777-200s early and return its remaining A330s to lessors without renewing their leases. All but one of its cargo division’s 747 freighters are in service.
Like Singapore, Cathay is relying more heavily on its newer widebodies. It has a combined 20 A350-900s and -1000s in service, versus about the same number parked or in reserve. In comparison, it has just seven 777-300ERs in service, nine parked or in reserve and 52 stored. About a third of the stored 777s are older -300s, along with the other -300ERs. Two A330-300s are in service, with 15 parked or in reserve and eight stored. All 20 of its 747 freighters are operating.
South Korea’s flagship airline has 37 of its 54 777s in service, including freighters. It is generally operating its 777-300ER passenger aircraft, while almost all of its 777-200ERs are stored.
Korean Air has a relatively large freighter fleet and all are in service—the carrier’s strong cargo operation was one of the main reasons it achieved a profit in its second quarter. So while all 10 of its passenger 747-8s and 10 A380s are stored, all 11 of its 747 freighters are flying.
In India, low-cost carrier IndiGo has been an exception amid an industry trying to defer as many deliveries as possible. Since March, Indigo took delivery of 19 Airbus A320neos and 12 A321neos, more than any other airline. IndiGo is at the same time aggressively retiring its A320ceos to manage capacity.
While the pandemic’s sudden emergence and forecasted effects on demand for the next several years will challenge most airlines, the big three Gulf carriers may face the highest hurdles. Even before the crisis, Emirates Airline, Etihad Airways and Qatar Airways were facing a flattening wave of the globalization trend that helped foster their emergence. Their international networks have a heavy focus on long-haul flying and hub connectivity, while none of the carriers has any domestic network free of travel restrictions or low-cost subsidiaries that would support some level of revenues.
Emirates has driven the model to the extreme by exclusively operating widebodies—259 at the end of March 2020, including 115 A380s. According to Fleet Discovery data, Emirates currently flies only 14 A380s, but 135 of its 151 777s are in service, although at much lower utilization. It has orders for smaller 787s and A350s, but the aircraft will not begin arriving until 2023 and 2024, respectively.
Funded by the government and ultimately the emirate’s ruling family, Qatar Airways has been more aggressive in rebuilding its network, primarily relying on smaller long-haul aircraft such as the A350 and the 787. The A380s will be grounded for at least another year. According to the Fleet Discovery database, 48 of the 57 777s, 47 of 52 A350s, 27 of 39 787s and 22 of 34 A320-family aircraft are in service or in parked/reserve status—meaning they have flown at least once in the past seven days.
Etihad had been pulling back its former ambition to be a global force in aviation well before the pandemic and has cut back on future orders. Where it had to take delivery of aircraft, even new A350s were put straight into long-term storage. While Etihad is flying most of its 777-300ERs and 787s, it has put most A320s and all A330s on the ground.
Before the pandemic, newer narrowbodies were staking claim to some work historically done by smaller widebodies. That trend will not change, but travel restrictions have put a premium on cargo capacity, giving some widebodies what will likely be a short-lived advantage. This applies to both Singapore, Cathay and their respective narrowbody affiliates.
In the long-term future, models including the A321LR give airlines the option to either add frequencies to large-volume, long-haul markets or introduce nonstop flying on thinner routes that would not be viable for even the smallest widebodies like the 787-8 or the A330-200. There was also a significant replacement cycle nearing, as the mostly North America-based Boeing 757 fleet was coming up for retirement over the next few years, a part of which had been flying transatlantic routes ever since Continental Airlines drove the concept to serve secondary European cities mainly from Newark Liberty International Airport.
In the absence of almost all long-haul flying and with entry points to many countries limited to only a few airports, the concept remains on hold for now, forcing carriers to rely on domestic or regional routes to the extent restrictions allow. When air travel was essentially on hold during Europe’s lockdown, some airlines chose to uphold a skeleton network to avoid the hassle of trying to start operations from zero. They tried to minimize operating costs at the same time, with just a few passengers willing to travel. Only the smallest and most efficient aircraft were used.
Lufthansa is a good example. In April and May, the carrier’s Munich-Hamburg domestic trunk route, usually the domain of A320s or A321s, was served by a Bombardier CRJ900. When some demand for narrowbody flying reemerged, the airline chose to keep essentially all of its A320neos flying while the older classics remained on the ground.
As Europe braced for the second COVID-19 wave this fall, Lufthansa affiliate Swiss International Air Lines went one step further. The airline decided to park its entire A320 family fleet for the winter and exclusively operate the smaller Airbus A220 on its European network. Austrian Airlines has parked its A320s and A321s as well while flying all 17 Embraer 195s, eight de Havilland Canada Dash 8-400s and a few Airbus A319s.
Norwegian Air Shuttle has focused on a limited number of short-haul services for now, with long-haul operations set to resume to some “key” destinations in April 2021. As of mid-October, the airline was operating just 20 737-800s on domestic routes in Norway and to short-haul destinations including London’s Gatwick Airport and Edinburgh, Scotland.
“Long-haul for us is clearly U.S.-led. Due to the prolonged crisis that is affecting the global aviation industry, especially on transatlantic routes, the decision was taken to cease all long-haul operations from the end of March,” the carrier says. “Like all airlines, we have been amending our future flight schedules to adjust to changes in demand and the latest global travel advice.’
Norwegian does not expect to operate the 737 MAX until midway through 2021 due to the current restricted short-haul network that it operates. The airline has been saying since the beginning of the pandemic that its future fleet size would be reduced compared with pre-COVID-19 levels.
Norwegian had abandoned services from Ireland to the U.S. even before the pandemic. Airlines such as Aer Lingus that would have liked to expand their reach based on narrowbodies like the A321LR/XLR have to wait for travel restrictions between the U.S. and Europe to disappear. JetBlue pushed out its planned London A321LR service to late 2021.
However, most experts agree that smaller widebodies and long-haul capable narrowbodies are going to benefit much more quickly than other aircraft types when aviation eventually recovers. They offer the least amount of risk in terms of trip costs and are also competitive in terms of unit costs. Airbus’ A321XLR, offering 4,700 nm of range, is slated to enter service in 2023. Airlines have placed more than 400 firm orders for the aircraft, according to the manufacturer.
U.S. network carriers are well positioned to use A321XLRs for travel from East Coast cities to Europe, similar to what JetBlue is planning between London and both Boston and New York. However, midsize narrowbodies will continue to feature prominently in the U.S., in networks that in many cases rely on traffic flowing through major hubs and connecting to faraway international gateways as well as smaller outposts in the region.
Among the major U.S. carriers, the general trend is accelerating retirement of older, less efficient models while continuing to keep newer models mostly active. Delta Air Lines is flying nearly all of its A220s, while American Airlines is flying its entire fleet of A321neos. Older 737s and A320s are gradually falling out of favor, with large numbers entering storage at the three major carriers. United Airline’s fleet is the least active among the legacy U.S. carriers, reflecting that it has operated the lowest level of scheduled capacity during the pandemic. Surprisingly, the 757-300 is the most active narrowbody jet in the Chicago-based airline’s fleet, with just over 70% of the type in active status, followed by the 737-800 and 737-900ER, both between 60% and 65%.
Southwest Airlines cut three 737-700s from its fleet in the third quarter, returning two to lessors and retiring one, bringing its total fleet size down to 734 aircraft. About 100 aircraft from Southwest’s all-737 fleet are in long-term storage, including 34 737-8s grounded since March 2019. It also has 50-150 aircraft in various stages of short-term parking as it manages demand. The company’s fourth-quarter plans include removing three more 737-700s. And it will take a maximum of 48 737 MAXs through December 2021, though it continues to work with Boeing “to restructure its orderbook,” the carrier says. Southwest has 217 737 MAXs on firm order.
Delta has officially retired more than 100 mainline aircraft this year, including all of its MD-88, MD-90, 737-700 and 777-200ER/LR fleets, in addition to portions of its A320ceo and 767-300ER fleets. The Atlanta-based carrier has also decided to accelerate retirement of its entire Boeing 717-200 fleet and the remainder of its 767-300ERs by December 2025. On the regional side, Delta will phase out all of its Bombardier CRJ-200 jets by December 2023.
American has parked numerous jets, including several fleet types. Among its widebody jets, the carrier has retired its entire A330-300 and 767-300ER fleets and placed its 15 A330-200s in long-term storage through at least 2022.
On the narrowbody side, the airline has retired all its Embraer E190s and 757-200s. Company executives have publicly floated the prospect of additional A320 and 737-800 retirements, although nothing formal so far has been announced.
Among its regional fleet, American has officially removed all its CRJ-200s, as well as 22 of its 46 Embraer 140s (12 additional aircraft have been placed in storage). Its remaining regional fleet consists of CRJ-700/900s, Embraer ERJ-140/145s and Embraer 175s.
However, American revenue chief Vasu Raja has expressed doubts about the future prospects of the ERJ-140 fleet, telling pilots in a memo over the summer that the 50-seaters “may become uneconomical” at high-cost airports like New York LaGuardia.
Canadian carriers remain particularly challenged by travel restrictions that continue to strain domestic as well as international demand. Provinces within the vast country have seen various levels of COVID-19 risks, which have triggered local lockdowns. Air Canada took quick action, announcing in the second quarter that it would accelerate retirement of its Embraer 190, Boeing 767 and Airbus A319 fleets—a total of 79 aircraft, including 50 immediately. Over time, about half are slated to be replaced with newer aircraft, but the reduction in aircraft types will leave the Canadian flag carrier with a slightly simpler fleet. Air Canada operates two versions of the 777, 787 and A320ceo families as well as A330-300s, 737-8s and A220-300s.
While the total number of idled aircraft has fallen since the pandemic’s April-May air travel demand nadir, the 6,500 passenger jets in storage at the end of September was 66% higher than at the end of January. The recovery’s pace will dictate how many aircraft never return to revenue passenger service. While many airlines have confirmed some early retirements, other aircraft that will probably be phased out are still being stored with no firm decision on their future. Airlines are keeping options open because the outlook is very fluid, but if the estimates prove true, many of these aircraft will be retired early. The used market has seen values fall, which creates more incentive to wait for trends to firm.
United is a prime example. As of Sept. 30, its fleet included 432 in-service aircraft, 395 in short- or long-term storage, and 22 in a low-utilization parked/reserve status. All remain part of the carrier’s fleet plan—for now.
“We have a lot of parked aircraft,” says United Chief Financial Officer Gerry Laderman. “Those are, in our view, right now, temporarily parked. And until we see what’s needed to run the operation, we’re not going to make any firm decisions.”