[FONT=Tahoma, Verdana, Lucida]Part 1: The Boyd Group Advantage[/FONT]
Aviation Perspectives & Insights
Available Nowhere Else
[FONT=Tahoma, Verdan, Lucida]Hot Flash[/FONT][FONT=Tahoma, Verdan, Lucida] - October 3, 2005[/FONT]
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[FONT=Tahoma, Verdan, Lucida]New Airports:USA Forecast Flash:[/FONT][FONT=Tahoma, Verdan, Lucida] More I-Air Traffic Issues[/FONT][FONT=Tahoma, Verdan, Lucida]
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[FONT=Tahoma, Verdana, Lucida]The RJ Glut... [/FONT][FONT=Tahoma, Verdana, Lucida]
Shaky Revenue Streams At Regional Airlines...
Now That It's Obvious, It's Safe To Forecast It
The "consensus." What "everybody knows." Myths not to be questioned. [/FONT]
[FONT=Tahoma, Verdana, Lucida]Among these: the glorious future of RJs and the entities that operate them. Passengers love them. They make bundles of cash for their operators. Airports need to snap to and build lots of expensive, RJ-specific infrastructure. The RJ is the future. RJ operators are the model for the future airline industry.[/FONT]
[FONT=Tahoma, Verdana, Lucida]Think again, all. The future just arrived. And it's got some ugly baggage. Note to airports: re-think those RJ-related expenditures.[/FONT]
[FONT=Tahoma, Verdana, Lucida]Sacred Mysteries Not To Be Questioned. Two of the core tenets of today's ambient thinking in aviation have been a) that "regional" jets are the wave of the future, and b) the entities that operate them, which are generally still referred to by the misnomer "regional airlines," are the future profit stars of the airline business.[/FONT]
http://www.aviationplanning.com/images/forecast1032.JPG[FONT=Tahoma, Verdana, Lucida]It's been chanted over and over from all sides of the aviation cognoscenti. RJs are the growth aircraft, and regional airlines can make a profit where legacies can't. To disagree with this (which, as we'll note, our forecasts have done consistently, based on facts, not consensus) is grounds for snickering from the lightweights and perhaps a burning at the stake for heresy. [/FONT][FONT=Tahoma, Verdana, Lucida]Oops! A couple things just happened that already has these veneer analysts doing a pirouette that would make a ballerina blush. [/FONT]
[FONT=Tahoma, Verdana, Lucida]The Glut Is Now Obvious. Plan On The Herd Reacting Accordingly[/FONT][FONT=Tahoma, Verdana, Lucida]. First, it seems that a sizable number of RJs - "tomorrow's airplane" - are heading for today's desert. Plan on seeing a change in tune from the same consultants who have been chanting what they just read about RJs in some aviation periodical, not to mention some that have touted (or, worse, were paid to tout) the glories of the regional jet. [/FONT]
http://www.aviationplanning.com/images/forecast103.JPG[FONT=Tahoma, Verdana, Lucida]Second, the parrot cognoscenti have just discovered that the supposed ironclad profitability of "regional airlines" is based not on consumer and marketplace factors, but on the rates that the airlines to which they lease airplanes are willing to pay. [/FONT]
[FONT=Tahoma, Verdana, Lucida]And that revenue stream is starting to dry up, not to mention becoming vulnerable. The Northwest bankruptcy, for example, precluded significant pre-petition payments to Mesaba and Pinnacle, putting both in some financial jeopardy. Surprise! Gee, what a discovery. These "regional airlines" really are neither "regional" nor are they "airlines." They're vendors of a product that has a declining demand curve.[/FONT]
[FONT=Tahoma, Verdana, Lucida]But, according to some financial stock peddlers, these "regionals" are examples of how airlines should operate. One analyst not too long ago put out a glowing recommendation on Pinnacle, noting that it had a great growth future because it could easily partner with other major airlines. [/FONT][FONT=Tahoma, Verdana, Lucida]Clueless and ignorant information. Yet there are people who probably invested based on this nitwit advice.[/FONT]
[FONT=Tahoma, Verdana, Lucida]News Flash: After It Happens, It's Too Late To Prepare For It. [/FONT][FONT=Tahoma, Verdan, Lucida]There's a difference between a forecast, on one hand, and a mere recognition of what's already taken place, on the other. The first gives people a view of the future, so they can make informed decisions on how to prepare. The second is a discussion of history.[/FONT]
[FONT=Tahoma, Verdan, Lucida]Too bad most consultants confuse the two. A forecast is an educated projection of something that isn't yet obvious. Once something's taken place, guys, it's a little late to "predict" it or the outcomes that may be expected. An in-depth insight into the obvious, however postured, is of little planning value.[/FONT]
[FONT=Tahoma, Verdan, Lucida]But it's always safer not to "forecast" anything until after it happens. That's why most other consultants don't. Of course not. To do otherwise could leave one open to being accused of arguing with the "consensus thinking." That would make one have to defend his position. [/FONT]
[FONT=Tahoma, Verdan, Lucida]So, here's generally what we'll be hearing from this point forward as a "forecast" by a lot of aviation analysts:[/FONT]
[FONT=Tahoma, Verdan, Lucida]"...One key thing to keep in mind is that the market cycle for small jets in the 32-50 seat categories... has peaked..."[/FONT]
[FONT=Tahoma, Verdan, Lucida]That'll be the general gist, now that new orders for CRJs and ERJs have gone south.[/FONT]
[FONT=Tahoma, Verdan, Lucida]But that statement isn't just going to be made. It was made - almost three an a half years ago - May 23, 2002, Hot Flash. it was based on The Boyd Group's annual fleet forecast at the time. It went on, [/FONT][FONT=Tahoma, Verdan, Lucida]"...Ignore forecasts that predict huge new numbers of these airliners. It will still take some time for most other analysts to notice it in the rearview mirror, but the day of big orders for commuter-cabin 50 seat jets is over. Done. Finished. There's a couple hundred more (maybe) coming on line in the US, and then that's it. Then the slow decline in their applications will begin. Airports might want to review any terminal planning that entails investments in jetways and other facilities for "regional jets" that cannot also easily accommodate larger aircraft."[/FONT]
[FONT=Tahoma, Verdan, Lucida]RJs Being Parked. Regional Airlines In Trouble. Our Clients Were Prepared. Naturally, this statement back in 2002 was heresy. Other consultants were busy providing sunshine forecasts predicting demand for RJs in the thousands. But our forecast clients - including those heavily invested in RJ production - heard it straight, whether it agreed with the "consensus" or not. Remember, "consensus thinking" is a contradiction in terms.[/FONT]
[FONT=Tahoma, Verdan, Lucida]Gee, guess what's happened since then. Our fleet forecasts - which are sought after by aircraft and powerplant manufacturers - clearly and accurately predicted the flattening of the demand curve for RJs.[/FONT]
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