An Update on the Aviation Industry, with Michael Wells and Bob Brents

Bob Brents, Cameron Boozarjomehri, and Michael Wells

Welcome to the latest installment of the Knowledge-Driven Podcast. In this series, Software Systems Engineer Cameron Boozarjomehri interviews technical leaders at MITRE who have made knowledge sharing and collaboration an integral part of their practice.

Air travel has become commonplace to the point where many of us never even think about the wonder of flying on an aircraft or being able to send things around the world overnight. And yet every day, countless agencies and individuals around the world move in a coordinated ballet, even in the face of a global pandemic. Listen in as MITRE’s own Michael Wells and Bob Brents pull back the curtain on the latest news from the aviation industry.

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Podcast Transcript
Cameron:	00:00	Hello everyone, and welcome to MITRE’s Knowledge-Driven Enterprise. For today, we’re actually doing something a little different. We have an aviation industry update for you. Bob, Michael, would you like to first start off by introducing yourselves and telling us a little about what you do at MITRE? Bob you can go first.
Bob:	00:15	Thanks, Cameron. Yeah, my name is Bob Brents. I’m a systems and aerospace engineer here at MITRE. I work in the Performance-Based Navigation Standards and tools group, and we do a lot of instruments flight procedure analysis, but another part of my job is working in the UAS or the Unmanned Aircraft Systems, field, which is becoming a much more prevalent thing here these days. I have degrees in aerospace and ocean engineering, and I’m working on a PhD in aviation right now. That’s the short and quick one.
Michael:	00:49	And thanks, Cameron and Bob. My name is Michael Wells. I am an economist and a transportation analyst, also working at MITRE. And most of our work is in support of the FAA, but we also support a number of other sponsors in that same field. And if you know, I’ve got 10 years history at the FAA doing similar type of work. This is kind of a fun thing for us to do, maybe not now with the current situation, it’s a little bit more serious, but these aviation updates are kind of a nice opportunity for us to deep dive into some interesting things and share it with the community.
Cameron:	01:25	Well, welcome to both of you. And thanks for being here to share this aviation industry update. Maybe you could start by telling us a bit about the background of what these updates are.
Michael:	01:33	Yeah, sure. I’ll go ahead and jump in. These are reports that we present three times a year to MITRE’s Aviation Advisory Committee, affiliated with the MITRE board, and it’s basically just what it sounds like. It’s a group of aviation industry leaders that come together on a regular basis to hear what MITRE is doing in the air, in the field, and then also to provide their inputs to MITRE and to the MITRE board as far as what’s important to them and what priorities they think are worth looking into more.
Michael:	02:04	So, these aviation updates are, typically, because there are industry leaders that are in the room…our intention is more to share information, but also get discussion going with the members of the advisory committee. They always know more than we do, and it’s usually a very educational experience for us to stimulate these discussions and hear what the industry leaders have to say.
Michael:	02:28	Now, as far as that goes, I guess I need to point out that this is a… We can talk about what we presented to them last week, but things that are said in the meeting by the members of the committee typically are treated as confidential. So it’s freedom to speak. No attribution.
Bob:	02:41	Let me piggyback on something you said, Michael. It’s always a little bit trepidatious to brief the state of the aviation industry to executives in the aviation industry. So, as Michael said at the beginning, we like to think that this is really more of a conversation between MITRE and the aviation industry. It’s difficult to provide information that at least some of them don’t already know, but we try to put an in-depth analytical view to it, sort MITRE’s spin on it.
Michael:	03:12	Thanks. I really appreciate that piece of context. I think it’s pretty important because most of us don’t even know that this is really a thing that MITRE, let alone that the entire industry does. And as I understand it, the latest industry update was a little different from what you might expect, especially given everything that’s going on.
Bob:	03:28	Yes, absolutely. Normally industry changes a little more gradually. New aircraft might be built or regulations might change, things evolve. We share general statistics about the economy, passenger traffic, cargo traffic, what’s going on with general aviation. And we also usually add a deep dive into some kind of topic of interest that’s becoming more noteworthy.
Bob:	04:00	Over the past, we’ve looked at things like 3D printing and how that’s evolved into making actual aircraft parts, flying aircraft parts. We’ve looked at the evolution of unmanned aircraft systems, which we call UAS, a lot of people call them drones, or how the intensity of a sonic booms can be reduced, which might allow someday supersonic flights over populated areas in the US and/or even the use of angle-of-attack indicators in cockpits, which can help prevent accidents. Then that’s what we normally do.
Bob:	04:30	This time, there’s sort of this overarching issue that’s affected the aviation industry and some incredible changes have been brought about by the coronavirus. Collectively, as a group, we realized there’s really not that much else worth talking about that is more important than the impact of the coronavirus. We decided that’s the way we’re going to go this time.
Cameron:	04:51	Yeah, I think that’s something that we definitely are going to want to talk about. I guess you’ll think of it as the 50,000-foot overview of the COVID impact on the air transportation industry. Michael, maybe you want to take this one?
Michael:	05:02	Thanks, Cameron. Yeah, I mean, I think, sort of the basics, maybe a lot of people are probably already familiar with, particularly the passenger segment across the board was really pretty hard hit. And it’s to the point where in the US, passenger numbers drop over 90% of what they would have been typically in spring travel. Worldwide, it was similar, if not even greater in some countries, because more travel is international.
Michael:	05:26	And I think the reasons for this is maybe the first thing that comes to our mind is like, “Well, people don’t want to get in planes.” But I think even more than that, people are advised to minimize social interaction, stay indoors or stay away from other people. So even if you were okay, getting on a plane and wearing a mask, and taking that flight, for over a couple of months, there was really no place to go. I mean, there was, countries where we’re banning international flights to their countries to try to minimize the spread of the virus. Hotels, restaurants, vacation destinations were all closed down. Nobody was going to Disney World because Disney World was closed.
Michael:	05:58	So I think it’s kind of explicable that, that passenger number fell so steeply. I mean, we experienced in the US something similar after September 11th, and that was a drop of 30% in air traffic and passengers flying. Now, we’re talking over a 90% drop and worldwide. So I think that’s really the big picture. And in fact, it’s rippled through all aspects of the industry.
Cameron:	06:20	Does that also mean that airlines are only flying 10% of the flights they used to?
Michael:	06:24	So, no. In the US, it’s about one out of every three flights are flying that… partly this is because the airlines are trying to maintain some network connectivity. The assistance package that was passed back in March—there was some requirement to maintain a minimum level of service.
Cameron:	06:40	Yeah. I want to know more about how this aid package was supposed to be used by the airline industry to help, as I understand, maintain service.
Bob:	06:48	Well, yes, to a degree. As part of the Cares Act, about $25 billion in grants were made available to the US passenger-carrying airlines. And an equal amount of loan guarantees. So if the airlines accepted this money, they were required not to lay off any of their employees through September. And they also had to maintain service to all of the cities that they were serving in February.
Bob:	07:12	But maintaining “service”—that’s sort of been defined as having at least one daily or weekly departure. And the airlines were not required to keep all of the same city pairs. To give you an example, if an airline had daily flights to Orlando from, let’s say, a dozen cities around the country, they were only required to maintain one daily flight from there to Orlando from at least one city. So this was usually a flight from one of their busier hubs, so that they could try to maintain some connectivity.
Cameron:	07:41	Yeah. I think I’d like to know a little more about [how] the money from the Cares Act actually helped the airlines. Did it make up for any of that loss in revenue?
Michael:	07:49	25 billion dollars in grants. It seems like a lot. I mean, of course it is a lot. But actually that’s, if you look at the airlines operating revenue for a typical year, last year, that’s about 10% of what their total operating revenue was. Now, of course, they don’t have the same costs that they did because they are flying less, but they do have this requirement not to lay off people before the end of September. And, of course, to maintain that kind of this minimum level of service that Bob talked about. And, so, I think the airlines costs haven’t fallen as much as they would probably like to.
Cameron:	08:22	So what are they doing to help reduce their costs?
Bob:	08:25	I’ll take this one. Yeah. They’ve been offering voluntary separation packages to their employees that are willing to accept them. The motivation there is that you get to leave the company with some kind of a severance package. The risk there is that you might be potentially laid off later with little or no severance.
Bob:	08:45	Another way to reduce costs is that planes that are not flying have been parked and put into storage, which reduces some of their costs, but not as much as you would think. Any aircraft that is parked takes time and money to prep for storage. And then even once that’s done, and it has to be maintained on a regular and sometimes almost daily basis while it’s parked. And finally, it really, it takes time and money to get it ready to fly again, once they decide to drop back into service. In ways, airplanes are just like cars, that they thrive when you drive, let’s just put it that way. Now, additionally airlines have tended to park their less efficient airframes, which is a good thing because they get a modicum of benefit at least flying more efficient aircraft. So, they’re certainly more fuel efficient, so those costs go down a little bit.
Cameron:	09:36	What about private flights like charters, that’s a big chunk of the sector. Were those also affected?
Michael:	09:42	It’s a different shock. I mean, it’s certainly not quite as large as in terms of passenger movements, nothing nearly as large as the schedule operators, but yeah. Yeah, we had that kind of, that same thought that maybe that’s what the data would show, but actually if you look at the numbers for April and May, they were basically down really just as much. And again, I think this kind of goes back to the fact that there was really no place to go. So, even if you did feel more comfortable flying on a charter, there was this, you really…[there] wasn’t as much reason for people to travel during April and May. Now, there is preliminary data that suggests general aviation, it’s flights by private pilots or corporate pilots. Private jet charters actually have been recovering a little bit faster than the commercial scheduled flights. So we’re going to kind of watch that trend.
Cameron:	10:29	Yeah. Actually, so we’ve covered passenger flights and we’ve covered private flights now, but I feel like especially considering how much people are still ordering things online, there might be a different story with cargo flights.
Bob:	10:40	Interestingly, cargo traffic has dropped quite a bit, when you’re speaking about international cargo. For April, the international cargo traffic was down about 30%, compared to the same time last year. Now, but this is compared with a drop of over 90% in international passenger traffic. It’s down, not quite as bad as the international passenger traffic.
Bob:	11:01	It’s not too surprising really. People have been restricted from traveling because they didn’t want to spread COVID-19 or they don’t even want to travel at all. Cargo, on the other hand, is down partly because of the drop in economic activity associated with the pandemic and partly because of the temporary disruptions in the various supply chains. Regardless, some cargo is still clearly needed, and it’s ready to be shipped. But there’s an interesting story here, right? About half of international cargo is typically flown in the cargo holds of passenger aircraft. And the industry calls that belly cargo. With so many fewer passenger flights, a lot of that belly cargo capacity has temporarily really gone away.
Bob:	11:46	So in the aggregate, international cargo capacities has actually fallen more than the demand has, and by about 30% or so. This explains why we’ve seen some moves by many of the large passenger carriers to temporarily modify some of their aircraft, or passenger aircraft, to carry cargo in the passenger area. So, there are no passengers, just carrying cargo.
Bob:	12:13	These changes have required special exemptions from the FAA and other countries’ safety agencies, since cargo holds… Yhey’re typically required to have things like specialized fire suppression systems, specialized ways to lock down the cargo. And these things are just not found in passenger cabins.
Cameron:	12:35	I think you bring up actually a pretty good point. How is all this affecting the FAA?
Michael:	12:40	When direct impact, I mean, I guess there’s a number of ways it’s kind of affected the FAA. So, in terms of kind of the disease itself, if the FAA has had to temporarily close some of its air traffic control facilities, if one or more of the employees have tested positive for coronavirus. The first one to be affected was the air traffic control tower at Midway Airport in Chicago, till mid-March, an employee tested positive and the tower was actually closed down for a week while it was cleaned. And, of course, the personnel were monitored.
Michael:	13:08	Now, traffic there is, so you might be wondering how did they shut down the airport? Well, traffic was obviously pretty low for all the reasons that we just talked about. And so the traffic that was going in and out could easily or fairly easily be handled by the Chicago radar approach control. But it’s kind of interesting. I guess you could call it almost a good news story, is that, after going through a handful of these closures, the FAA and Air Traffic Controllers union, actually kind of got the routine down, and they figured out how to streamline the cleaning process, institute other staffing mitigations, like not mixing workers among different shifts so that if a shift needed to be quarantined, that other people had been exposed in that same operating facility had been exposed to those same people. And so the result is now having seen infections pop up among the staff at 50 air traffic control facilities around the country. Since then, most of those had been cleaned and reopened in less than 24 hours.
Cameron:	14:04	Actually, something I want to understand about the FAA, and please keep me honest here, because I’m a total novice compared to you guys. Isn’t the FAA partly funded by aviation taxes? Is this financial impact… is all this stuff going on in the diminished traffic affecting their ability to operate in the amount of money they have?
Michael:	14:21	I mean, let me jump in with this one actually, too, just to continue on the last one. Yeah, a significant portion of the FAA’s operations and capital investments are paid for out of what’s known as the Airport and Airways Trust Fund. And that trust fund is supported almost entirely by set of aviation excise taxes. For instance, there’s a ticket tax, there’s a fuel tax, there’s a number of these.
Michael:	14:43	And so, of course, tax collections are down anyway. It would have been down anyway because traffic is down, so there’s nobody really paying these taxes. But also, as you may have heard, Cameron, part of the Cares Act, Congress granted a tax holiday on these through the end of December. So through the end of calendar year 2020. So basically what that means is that all those taxes have been suspended for the next nine months, eight, nine months. Tax collections would have been pretty low certainly now, anyway, even without this tax holiday, but that just kind of sets them to zero. So I think it’s a benefit to the airlines and the small operators. But of course, for the FAA, it means that they’re not getting that income coming in.
Michael:	15:30	Now, I think it’s worth stating, of course, that the trust fund is just that, it’s a trust fund. And so there was a significant amount of money in it already when all this started, an amount which had around $14 billion, which is typically, which is equal to the FAA’s budget roughly. And so the FAA is able to currently draw on that money with no problem, and they’re able to maintain their operations, they’re maintaining air traffic control, all the safety inspections that they need, etc.
Michael:	15:58	So it hasn’t directly impacted the FAS operations. But at some point, that trust fund will get depleted and low enough, perhaps that the FAA actually could start to run into cashflow issues. And so there’s been estimates out there that they might run into these cashflow issues even before the end of this calendar year. And so the solution most people believe is for Congress to give the FAA some money from the general fund, paid from out of just general taxes and maybe even government borrowing as opposed to those aviation taxes.
Cameron:	16:31	Yeah. Is there a sense of how much the industry will or maybe will not have rebounded by the end of the calendar year?
Bob:	16:36	Well, that’s the $64,000 question, isn’t it? Well, I mean, actually that’s a multi-billion dollar question. So I mean, let’s say it’s almost impossible to forecast because it really depends really so heavily on what happens with the coronavirus. Will it be spreading quickly? Will there be a vaccine? Those things will determine both people’s willingness to travel as well as individual countries’ willingness to let visitors in.
Bob:	17:06	I mean, that doesn’t mean that there aren’t forecasts out there, of course. Most seem to show a checkmark recovery. It’s checkmark-shaped recovery, where about half of the last traffic recovers by early next year, but a full recovery to sort of pre-pandemic levels, it doesn’t occur for another two to three years after that. Wow. We don’t really know what model those forecasts are based on. We can say that, that type of recovery is pretty much what we saw in the US after the attacks on September 11th.
Cameron:	17:40	So until then, are we seeing any signs of recovery right now?
Michael:	17:44	Yeah, actually there’s been some. There’s been some progress being made as the country has started to open up. I think we were at a pretty low point, as we said, kind of in mid-April. So, you may have seen the numbers of passengers… newspapers showing reports of passengers screened by the Transportation Security Administration, TSA. And that’s not a usual metric that people tend to watch in the aviation industry. There are reports that the airlines submit to the government about number of passengers, but TSA numbers have come to become the gold standard in this fast-moving crisis, just because their daily, almost, they’re the next-day reporting, which is much quicker than the usual reporting mechanisms for passengers on planes.
Michael:	18:33	And presumably it’d be pretty accurate, because if the number of people screened by the TSA at a US airport should pretty much equal the number of people getting on planes. And so the low point back in mid-April was 5%, traffic was 5% of what it would have been the previous year. Now that was kind of the low point. It was kind of down around 10% for most of that period. But basically during May and end of May and June, it’s now up to about 20% of the passenger counts again, compared with the year before.
Michael:	19:14	So, while 20% is exceptionally, low unprecedented really, if you think about it, it’s actually quadrupled since that low point back in mid-April. But of course, it would really have to at least quadruple again, to be back up to the levels that we would have expected based on last year’s traffic.
Michael:	19:35	And for now, a number of, actually, US airlines have actually started adding flights back into their schedules for the late summer. American airlines, for example, recently announced that they were planning on to fly about 50% of their original planned summer schedule. We’re also seeing reports as, you’d expect, that those flights are also more full than they were back in the depths of this crisis in April and May. It depends of course, but some of them might be almost full. That’s a good sign, I guess, for in terms of at least things starting to recover.
Cameron:	20:08	So with all that said, I feel like my last real big question for both of you is, is there going to be a moment where passengers are going to feel comfortable flying again? And more importantly, what are airlines willing to do to accommodate whatever they think it will take for passengers to want to fly again?
Bob:	20:27	Interestingly, in a recent survey, IATA, which is the International Air Transport Association, found that at least roughly half the people that responded to that question, so they’re not yet really comfortable to getting on a plane. One of the ways that they’re accommodating this is, right now, accommodating passengers is to leave the middle seat empty. And everyone would love to have the middle seat empty next to them on every flight, but there seems to be a universal belief amongst the airlines that, that’s not sustainable in the long run.
Bob:	21:03	Some things are already being done, such as airlines and airports requiring passengers to wear masks, thoroughly sanitizing the aircraft between flights. And from what we’ve heard, all accounts, these activities are going to continue for a while. Now, airlines are also working with vendors to have them look into new ways to sterilize the cabins and laboratories in flight. They’re investigating things such as UV lights, improved air filtration systems. Unfortunately, these things take a while to roll out.
Bob:	21:36	Some airlines are also implementing a passenger self-reporting of feeling ill or having had COVID-19 contact before flying. One of the big wild cards is whether temperature checks will be mandatory before boarding. The US airline associations, called Airlines for America, I mean, they’re saying that if TSA will do the temperature screening, their members pledged to issue refunds or free rescheduling of the passenger that has the fever.
Michael:	22:06	Yeah. Bob, you’ve summed that up pretty well. One of the things we learned about recently, I personally have not had a chance to read it, that the ICAO, it’s the International Civil Aviation Organization, it’s part of the UN body that develops international consensus-based standards for sort of air traffic regulation, harmonization, just actually released guidelines for reopening air travel. And the idea is to kind of get all countries around the world on the same page, so that the requirements for safe travel in the US would be similar to the requirements for safe travel in Great Britain. And that would be something that would help facilitate this. Now, of course, I would imagine that it would not preclude countries from sort of issuing temporary travel bans, if they felt it was warranted by their internal situation.
Michael:	22:54	But again, it’s to make sure that sort of whatever the requirements are to safely fly would be very similar in all countries. And the FAA has, we’ve seen reports and heard from the FAA that they’ve contributed significantly to this ICAO guidance. And now of course, ICAO leaves the implementation of these up to International Nation States just as most UN things are done. It’s really just try to set the norms rather than impose rules. And so the FAA is, we’ve heard they’re planning to release their own kind of US version that would be largely reflective of these international guidelines, pretty shortly. So I’m actually trying to kind of looking forward to reading both those documents.
Cameron:	23:34	On that, I’d just like to say thanks to both of you. I’ve learned a lot. This has been a lot of very interesting information that I think a lot of just people don’t get to see. And it’s very interesting to see how the FAA and our country are reacting to this problem and more importantly being proactive about it. And I believe you mentioned at the top of the conversation, you guys do this three times a year?
Michael:	23:56	Yes, yeah. Three times a year. And so we will be continuing to try to keep up with the situation and watch what the data shows, see if there’s points to extract from the data or from the news, try to connect some of the dots.
Cameron:	24:12	Well, I must say thank you so much to both of you for taking the time to explain this. And I’m sure we’ll have many opportunities in the future to hear more from you guys as this unfolds and that you have more conversations. I’d like to give a quick thank you to MITRE and the Knowledge Driven Enterprise for making these conversations and this podcast possible. And, of course, again, a big thank you to you, Bob and Michael. I imagined having these conversations gives you a special glimpse into a world most of us don’t even know exists. And so I really appreciate you both sharing it with us.
Bob:	24:42	Well, thank you, Cameron. It was our pleasure.
Michael:	24:43	Yes, indeed, our pleasure and we want to thank you for taking your time to talk with us, to invite us here.

Cameron Boozarjomehri is a Software Engineer and a member of MITRE’s Privacy Capability. His passion is exploring the applications and implications of emerging technologies and finding new ways to make those technologies accessible to the public.

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