Commercial Aviation: What’s In and What’s Out

With some exceptions, short-haul traffic is expected to recover sooner from the coronavirus pandemic than long-haul. In the short-haul market, low-cost carriers are better-positioned than their legacy rivals because their traditional focus has been on leisure traffic, which could grow steeply once travel restrictions fall. Carriers such as Ryanair are also well-capitalized and have a much lower cost base, putting them in an ideal spot to benefit once demand returns.

Norwegian was the latest failed experiment in the long-haul low-cost market. The airline’s bet that operating Boeing 787s would transform the business model compared to earlier attempts has not worked out. The carrier grew too fast on North Atlantic routes, while at the same time it lacked the traffic rights in the Asia-Pacific region. Huge losses in the long-haul part of the business could not be compensated for by the relatively more profitable short-haul segment. Norwegian is pulling back from long-haul and will focus on the Nordic short-haul market, if it survives.

Even at the height of the pandemic, airlines have kept a relatively large portion of the A350 fleet flying, simply because it was the most economical way of keeping routes open. Its moderate size means trip costs remained relatively low, and turning trips cash-positive is easier to achieve than with larger jets such as the A380.

The model was on the way out in several fleets even before the pandemic. The COVID-19 crisis prompted most operators to put their A380 fleets in long-term storage, and only a few see it returning. Emirates remains the exception and hopes to bring back its large fleet in 2022.

That the 777-300ER has seen relatively high utilization compared to other widebodies during the crisis may seem counterintuitive, given its size. However, the aircraft is well-suited to meet the strong demand for air cargo due to the volume of its underfloor compartments. That capability has meant that some airlines pulled smaller, older-generation aircraft from service and kept many -300ERs in the air. However, when traffic normalizes over time, many carriers may fall back on the smaller models.

Boeing had to postpone entry into service of the 777X until the end of 2023 because of expected certification delays—but no airline is sorry about it. The 777X would saddle carriers with too much capacity for the little demand that cannot be met with existing fleets. In the longer term, the trend toward smaller aircraft will likely keep it from becoming a major commercial success, though it may benefit from the large number of big widebody retirements.

Like the Airbus 350, the 787 has been the backbone of long-haul fleets during the crisis. Its small capacity and relatively low trip costs are a good combination for current market conditions. However, quality issues have prevented Boeing from delivering a single 787 to customers since October 2020. Looking ahead, the aircraft will be better-positioned than others as long-haul demand picks up again, though that is unlikely to translate into many new orders, given the large available capacity at airlines and lessors.

Launched as a low-cost competitor to the Boeing 787, the A330neo has been a commercial disappointment for Airbus. Production is continuing so that Airbus can offer a competitor to the 787 where the A350 is too large. But the A330neo does not appear to have a bright long-term future, even as many older A330s are retired.

The A321XLR has enjoyed huge sales success since its launch, with more than 450 firm orders, and is slated to enter service in 2023. The aircraft is perceived as having the potential to transform long-haul networks with its capability to connect secondary destinations and therefore open up many more destinations than would be feasible with widebodies.

Seeing the success of the A321neo and its long-range variants, Boeing stretched the MAX family but has not seen nearly the success of its rival, mainly because its models fall short in range. The aircraft-maker is now considering launching a 250-275-seat aircraft with a range of about 5,000 nm that could attack the A321XLR market from above—but it may also cannibalize the 787 backlog.