The Future of Commercial Aviation, Travel and Tourism

[GRG55]

A thread to see how this important sector fares in the aftermath of COVID-19.

Today, news from Airbus. Nobody flyin' planes, therefore nobody buyin' planes.
I had to include the quote about "...industrial vandalism...". There seems a great deal of fantasy thinking in the world today.

https://www.bbc.com/news/business-53242272

Coronavirus: Plane-maker Airbus to cut 15,000 jobs

June 30, 2020

Aerospace giant Airbus says it plans to cut 15,000 jobs as it deals with the effects of the coronavirus crisis.

It will cut 1,700 jobs in the UK, along with thousands more in Germany, Spain and elsewhere.

The move is subject to talks with unions which have opposed compulsory redundancies.

The Unite union said the Airbus announcement was "another act of industrial vandalism" against the UK aerospace sector.

Some 134,000 people work for Airbus worldwide, with around a tenth of them in the UK...

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

When I was growing up in the late 1950s and through the 1960s, everyone drove. Most families, including my parents, had only one car. It was used for the family trips to see relatives, camping excursions in the summer, going to the beach on the summer weekends, and everything else. I had friends in grade school who went with their families all the way from Vancouver, B.C. Canada to Disneyland in California over the Christmas holidays. They drove the ubiquitous Ford or Chev station wagon that was the suburban car of choice. Nobody ever flew anywhere - that was for wealthy people only.

Until the early 1970s, when all of a sudden a "gap year" backpacking in Europe became all the rage with the graduates from my high school. That was probably the first time most of them had ever been on a commercial air flight. It wasn't called a "gap year" back then either.

Looks like we may be reverting back to some of those old patterns of living?

https://www.marketwatch.com/story/tr...ays-2020-06-28

‘Travel will never, ever go back to the way it was,’ Airbnb CEO says

Published: June 28, 2020 at 6:43 p.m. ET

That’s the grim view of Airbnb Inc. co-founder and Chief Executive Brian Chesky, in an interview published Sunday by Axios.

“I will go on the record to say that travel will never, ever go back to the way it was pre-COVID. It just won’t,” Chesky told Axios. “There are sometimes months when decades of transformation happen.”

Chesky predicted that vacationers will stay closer to home in the future, largely limiting their travel to places within driving distance, with national parks becoming even more popular destinations.

“I think you’re going to start to see travel becoming more intimate, more local, to smaller communities,” he said, citing Airbnb data that shows travel within countries is recovering to normal levels. But its international business is still being hit hard. “People are not getting on airplanes, they’re not crossing borders, they’re not meaningfully traveling to cities, they’re not traveling for business.”

“People will, one day, get back on planes,” Chesky told Axios. “But one of the things that I do think is a fairly permanent shift is ... a redistribution of where travelers go.”...

[Mega]

Re: The Future of Commercial Aviation, Travel and Tourism

https://www.bbc.co.uk/news/business-53239256

Some years ago I had to visit Manchester airport on business........this ment I had to go "Air-side".
The metal detector went off & I was sent on, full pat down even though they knew who I was & why I was there.

It was not very professional .......& I said so.

Once I cleared in the guy I come to meet appeared & told me they little choice who does the frisking, full employment/ busy airport...low pay...you get the picture.
"In the old days before the cheap crappy flights "cattle class" we had better people"

Looks like its back to the future

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

That's sad about EasyJet. When I had the flat in London I used to fly from Stansted or Luton to the continent on their £49 one-way flights for a weekend. It often cost me more to get from my flat to the airport than the air fare.

Nice/Cannes was a favourite destination. Although I did get caught there once when the idiot France air traffic controllers went on strike to show support for some student strike of some sort. Priority for Air France flights, everybody else limited capacity. I complained very loudly and publicly about it in the line up. Figured I'd either get arrested (free bed and meals) or get deported (and therefore make it home).

[lakedaemonian]

Re: The Future of Commercial Aviation, Travel and Tourism

Surely we will see increasingly non-linear quadratic growth in airline layoffs and losses?

The loss of each high paying manufacturing job will echo, probably akin to every new hire at my old outfit Amazon(1 new hire roughly equates to 3 permanently lost old economy jobs).

If a human suffers oxygen deprivation(hypoxia) it can be as minor as hangover like symptoms or as serious as tissue death or patient fatality.

Maybe carbon monoxide poisoning may be a more relevant analogy?

It’s my understanding that carbon monoxide poisoning victims can remain ambulatory for some time despite having already received aN irreversibly fatal dose.

Survivable versus fatal doses don’t necessarily follow a nice linear curve.

I suspect the same here.

i suspect the difference between long term casualty recovery and fatality is a narrow band.

Humans are really really bad at non linear thinking/predictions/planning.

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

The Provincial and Federal governments in my country, Canada, have a long history of throwing money at dying industries and companies to "save jobs". Often those mills, mines and manufacturing plants are closing due, in part, to those same government's other policies.

Those were mere ripples in the economic pond. This is a tsunami. And I believe you are correct; the non-linearity of the amplitude increase is going to shortly engulf virtually everyone - governments, private investment, households - and further undermine confidence in our public institutions ability to respond.

The aviation sector is just one example of a network of related industries with aggregate capacity far above a level of demand that may not return to pre-Covid levels for many, many years, if ever. Jet engines, avionics, airframe manufacturers, airport infrastructure, air traffic control systems, terminal and proximate hotels, restaurants & other vendors, government safety inspectors, IATA officials, pilot training capacity, mechanics, flight attendants, baggage handlers...all geared to service a global volume greater than they may ever see again. Canada, for example, may not be able to support more than one of the multiple of existing carriers.

How many times is that replicated in other economic sectors? Particularly China's propensity for too much capacity to produce "everything". Are we on the verge of a public debt binge to create the global equivalent of Japan's "bridges to nowhere", because nobody has a better idea?

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

Thor Industries, the world's largest maker of recreational travel vehicles and trailers, has seen its stock price double since mid-March.

[Mega]

Re: The Future of Commercial Aviation, Travel and Tourism

Want a laugh?
https://insideevs.com/news/431709/te...ertakes-exxon/

[shiny!]

Re: The Future of Commercial Aviation, Travel and Tourism

The Provincial and Federal governments in my country, Canada, have a long history of throwing money at dying industries and companies to "save jobs". Often those mills, mines and manufacturing plants are closing due, in part, to those same government's other policies.

Those were mere ripples in the economic pond. This is a tsunami. And I believe you are correct; the non-linearity of the amplitude increase is going to shortly engulf virtually everyone - governments, private investment, households - and further undermine confidence in our public institutions ability to respond.

The aviation sector is just one example of a network of related industries with aggregate capacity far above a level of demand that may not return to pre-Covid levels for many, many years, if ever. Jet engines, avionics, airframe manufacturers, airport infrastructure, air traffic control systems, terminal and proximate hotels, restaurants & other vendors, government safety inspectors, IATA officials, pilot training capacity, mechanics, flight attendants, baggage handlers...all geared to service a global volume greater than they may ever see again. Canada, for example, may not be able to support more than one of the multiple of existing carriers.

How many times is that replicated in other economic sectors? Particularly China's propensity for too much capacity to produce "everything". Are we on the verge of a public debt binge to create the global equivalent of Japan's "bridges to nowhere", because nobody has a better idea?

As someone who struggles with brainy concepts like 4th grade math I'm finding this hard to follow, but I think I get the gist of what you and Lake are saying. Lake's metaphor of carbon monoxide poisoning feels spot on. What would your better idea be? I think we're beyond the point of thinking outside the box because the box seems to have exploded.

[thriftyandboringinohio]

Re: The Future of Commercial Aviation, Travel and Tourism

Thor Industries, the world's largest maker of recreational travel vehicles and trailers, has seen its stock price double since mid-March.

COVID has been a gift to the RV industry. I just bought a small travel trailer , picking it up next week, and they are swamped with buyers.
It's a small industry in a big country. Total RV sales last year were about 500,000 units. The US has 130 million households.
If 1/10th of one percent additional US households suddenly want an RV, that's an additional demand of 130,000 units, a 26 percent jump in sales for RVs. It appears that's exactly what's happened.
One local dealer had his entire inventory and allotments for the year sold in March. If you order a custom unit you'll pay full MSRP (instead of the usual 30% off) and they are promising 12 week delivery but it'll turn out to be 20 weeks

The RV industry is dominated by two companies. Thor industries and Forest River together sell more than 80% of RVs, and Winnebago gets most of the rest.
Warren Buffett owns Forest River. My new camper puts a few bucks into Warren's pocket.

Thor stock is a great play right now, but it wont be a buy for long - it's a short term trade, buy it then dump it
The industry is notorious for crap quality and awful service, horror stories abound of people spending $400,000 on a big diesel pusher motorhome and having it stuck at the dealer for repairs for 6 months at a time. The experienced RV customer knows this and buys anyway (that's me). The new customers are in for a rude shock.
Here's the famous RV death spiral articles. https://fifthwheelst.com/documents/R...ompilation.pdf

I expect next summer new RV sales will plummet and the used RV market will be flooded with year old units for sale cheap.
But today Thor is a BUY.

[shiny!]

Re: The Future of Commercial Aviation, Travel and Tourism

COVID has been a gift to the RV industry. I just bought a small travel trailer , picking it up next week, and they are swamped with buyers.
It's a small industry in a big country. Total RV sales last year were about 500,000 units. The US has 130 million households.
If 1/10th of one percent additional US households suddenly want an RV, that's an additional demand of 130,000 units, a 26 percent jump in sales for RVs. It appears that's exactly what's happened.
One local dealer had his entire inventory and allotments for the year sold in March. If you order a custom unit you'll pay full MSRP (instead of the usual 30% off) and they are promising 12 week delivery but it'll turn out to be 20 weeks

The RV industry is dominated by two companies. Thor industries and Forest River together sell more than 80% of RVs, and Winnebago gets most of the rest.
Warren Buffett owns Forest River. My new camper puts a few bucks into Warren's pocket.

Thor stock is a great play right now, but it wont be a buy for long - it's a short term trade, buy it then dump it
The industry is notorious for crap quality and awful service, horror stories abound of people spending $400,000 on a big diesel pusher motorhome and having it stuck at the dealer for repairs for 6 months at a time. The experienced RV customer knows this and buys anyway (that's me). The new customers are in for a rude shock.
Here's the famous RV death spiral articles. https://fifthwheelst.com/documents/R...ompilation.pdf

I expect next summer new RV sales will plummet and the used RV market will be flooded with year old units for sale cheap.
But today Thor is a BUY.

That's my take on it, too. It will be a buyer's market.

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

As someone who struggles with brainy concepts like 4th grade math I'm finding this hard to follow, but I think I get the gist of what you and Lake are saying. Lake's metaphor of carbon monoxide poisoning feels spot on. What would your better idea be? I think we're beyond the point of thinking outside the box because the box seems to have exploded.

Too much production capacity worldwide for almost everything - that's what happens when there's a decade+ of abundant, cheap capital - lots of misallocation.
Followed by dramatic demand destruction as a result of COVID recession.
Resulting in governments borrowing more money to provide public works stimulus funds to use up some of the idle capacity and create employment - commonly called "infrastructure investment".
Which can be a useful exercise when done intelligently and with some moderation.
Alternatively, can be a waste of money when pork barrel politics and political corruption enter the equation - the "bridges to nowhere" reference is from Japan's experience after its economy busted in 1989.

The danger today is we have the confluence of record amounts of overcapacity and record levels of rapid demand destruction. What does the world (and the Chinese) do with all that cement making capacity for example? Pave over Hong Kong? New Silk Road (belt & road)? More domestic ghost cities?

No I don't have any good ideas.
I'm just thankful that I am not a worker in the aviation, hospitality, travel or tourism business. Despite the blood-in-the-streets situation in the energy sector, at least there's comfort in knowing people still need it by the millions of barrels full every day.

[lakedaemonian]

Re: The Future of Commercial Aviation, Travel and Tourism

Too much production capacity worldwide for almost everything - that's what happens when there's a decade+ of abundant, cheap capital - lots of misallocation.
Followed by dramatic demand destruction as a result of COVID recession.
Resulting in governments borrowing more money to provide public works stimulus funds to use up some of the idle capacity and create employment - commonly called "infrastructure investment".
Which can be a useful exercise when done intelligently and with some moderation.
Alternatively, can be a waste of money when pork barrel politics and political corruption enter the equation - the "bridges to nowhere" reference is from Japan's experience after its economy busted in 1989.

The danger today is we have the confluence of record amounts of overcapacity and record levels of rapid demand destruction. What does the world (and the Chinese) do with all that cement making capacity for example? Pave over Hong Kong? New Silk Road (belt & road)? More domestic ghost cities?

No I don't have any good ideas.
I'm just thankful that I am not a worker in the aviation, hospitality, travel or tourism business. Despite the blood-in-the-streets situation in the energy sector, at least there's comfort in knowing people still need it by the millions of barrels full every day.

Couldn’t agree more.

The only thing I would add to a long term energy focus(such as XOM discussions from a few months ago), besides perhaps food....is technology enabled automation, optimisation, and virtualisation.

This CV19 has really been like hitting the fast forward button.

Big Tech is interesting.

Facebook, Apple, Amazon, Microsoft, Google = $5+ trillion market cap and 3-4 billion users.

They are the new Army, Navy, Air Force, and Marines in a commercial Cold War with China.

They may not be the ones we want, but they are the ones we got.

[GRG55]

Re: The Future of Commercial Aviation, Travel and Tourism

Couldn’t agree more.

The only thing I would add to a long term energy focus(such as XOM discussions from a few months ago), besides perhaps food....is technology enabled automation, optimisation, and virtualisation.

This CV19 has really been like hitting the fast forward button.

Big Tech is interesting.

Facebook, Apple, Amazon, Microsoft, Google = $5+ trillion market cap and 3-4 billion users.

They are the new Army, Navy, Air Force, and Marines in a commercial Cold War with China.

They may not be the ones we want, but they are the ones we got.

In a de-globalizing, increasingly fractious world, those nations fortunate enough to have endowments of energy resources and farmland combined with an educated workforce and sound, functioning public institutions would appear best positioned to recover from the devastation of the virus. Provided they haven't already sold it all out to the Chinese.

In the tech world the block chain may prove the gravest threat to the dominance of Google and Facebook, as it transfers power back into the hands of individual consumers. Cryptocurrencies perhaps the greatest future threat to the conventional banking industry?

China mystifies. After a long period of acting the Dragon internally and the Panda externally, it seems to have chosen an odd time to become belligerent on so many fronts? Military excursions in the South China Sea and at the high altitude border with India. Hong Kong. Intimidating Australia and Canada. Threats against the UK and others over Huwai. For an economy so dependent on exports it seems to be assuming the rest of the world can't live without China. Assuming the upcoming election and the pulling down of the remaining statues (are there any left?) will keep the USA distracted indefinitely is a risky gambit.

[thriftyandboringinohio]

Re: The Future of Commercial Aviation, Travel and Tourism

..China mystifies. ..it seems to have chosen..to become belligerent on so many fronts......it seems to be assuming the rest of the world can't live without China. Assuming the upcoming election and the pulling down of the remaining statues (are there any left?) will keep the USA distracted indefinitely is a risky gambit.

China does indeed mystify. But it seems to act rationally and logically - the more important the issue, the more well considered it's actions seem to be.

For the border squabbles, those seem less important to the Chinese state overall, and therefore more likely to be the actions of local authorities or commanders acting impulsively. For the big economic contest with the U.S., China seems to understand that there is no national policy. American companies act individually. In fact, the U.S. openly advocates leaving business policy up to businesses. Therefore China can pick off companies one-by-one, offering attractive deals to bring them into China to build plants and reveal technology. It has worked like a charm and is still underway.

I don't see how China needs the U.S to be distracted to achieve it's goals. No doubt China likes the distractions of US political turmoil to make its work easier, but I don't think it's a gambit that China is executing, and I don't think China would care much if it ceased. They've hollowed out US manufacturing and commerce well enough for twenty or thirty years regardless.

Imagine if China unilaterally stopped shipping anything to the US, a sudden Chinese embargo. US store shelves (including Amazon) would go half bare in two weeks for retail goods and electronics, and the industrial supply chains would halt in two months for lack of critical piece-part components for automobiles, aircraft, and heavy machinery. Such a move would certainly hurt the US more than China. The Chinese goods would eventually re-route to come to the US indirectly through other countries, so China would not lose the sales and income, but the US would pay higher prices and suffer painful disruptions.

Like it or not we've allowed China to become indispensable. Sure, the US has abundant farm land and oil fields, but we'd soon not have farm tractors, food packaging, or replacement parts to keep the oil refineries operating. We'd run out of bread and gasoline just the same, with the crops rotting in the fields and the oil stuck in the ground.
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