Another Update on the Aviation Industry with Michael Wells and Bob Brents

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Airbus photo provided by Nicole Elliott

Interviewer: Cameron Boozarjomehri

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 over night. 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 and what they’re doing to help keep our economy flying high.

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Podcast Transcript
Cameron: 00:00 Hello everyone. And welcome to another aviation industry update from MITRE’s Knowledge-Driven Podcast. Today, I’d like to welcome Bob and Michael again.
Bob: 00:08 Thanks, Cameron. My name’s Bob Brents. I’m a systems and aerospace engineer here at MITRE.
Michael: 00:16 Thanks, Cameron and Bob. My name’s Michael Wells. I am an economist and a transportation analyst working at MITRE. I work in transportation transformation. That’s a bit of a mouthful.
Cameron: 00:26 Thank you for being here to share the aviation industry update with us. The last time we sat down was back in June and the topic of the day was COVID’s impact on air travel. Can we assume that’s going to be a big part of the discussion this time?
Michael: 00:39 Yeah, Cameron. That’s is definitely the case. We can certainly share some other new and exciting things that are happening, but it’s really hard to escape the overall impact that the pandemic is having on aviation right now.
Cameron: 00:49 Well, let’s start with that then. What is the current impact of the pandemic on air traffic? I thought I was hearing that passenger flights were coming back, but then they weren’t. Is that right?
Michael: 01:00 Yeah. Actually, Cameron, both of those statements are kind of true to some degree. So to recap a little, April was a really bad month for US airlines, in fact, airlines worldwide really, with passenger boardings in the US dropping below 5% of what they were last year. But passengers slowly started returning during May and June as summer approached, got up to about 25% of last year’s levels, and then they plateaued in July. Passenger numbers today are still only about one third of what we would normally see.
Michael: 01:32 But what may be misleading, what I think you were referring to, however, is that in the early summer and then into the fall is when airlines saw passengers starting to return. They announced increases in their schedules, right? There’s like, “Great, passengers are coming back. We’re going to increase our schedules.” But when those bookings didn’t materialize, the airlines would then cut back those same schedules a few weeks before departure. Frankly, we’ve seen this pattern of cautious optimism on the part of the airlines, followed by reducing their published schedules at the last minute, continuing through the summer and the fall.
Cameron: 02:01 Yes. I’d also heard there were layoffs a couple of months ago. Did that have anything to do with there being no additional stimulus money from the government?
Bob: 02:09 Great question. Again, yes and no. Most passenger airlines applied for and received grants under the CARES Act back in the spring. I think all of these airlines would likely say that these funds have helped keep them going during a period of extremely low demand, but accepting funds from the CARES Act came with a couple of requirements.
Bob: 02:30 One of those strings was that airlines accepting CARES assistance could not involuntarily lay off or furlough their employees. However, this requirement only went through the end of September. The airlines knew that they were likely to have to downsize before then and they tried to do this in the best way possible. What most of the passenger airlines did was start offering early retirements and voluntary buyouts to their employees in order to reduce their payrolls before October, and hopefully, avoid layoffs.
Bob: 03:05 For the most part, the airlines were successful. It appears that somewhere around 50,000 airline employees accepted those buyouts over the summer. Unfortunately for a few airlines, it wasn’t enough and they were forced to lay off or furlough about another 30,000 staff at the beginning of October.
Cameron: 03:23 Yeah. Please correct me if I get this wrong. I heard that it was maybe something like a reduction of 80,000 employees. Does that sound right?
Michael: 03:33 Yeah. That’s correct. Yeah, it’s about 50,000 over the summer and about 30,000 that happened in October. That is a pretty big number. Just to put it in context, we looked at the airline filings with the US Department of Transportation. For US major passenger airlines, that translates to about 20% of their workforce compared to before the pandemic hit. So yeah, that’s a pretty significant number.
Cameron: 04:03 That reduction sounds a little odd because I think you mentioned there were a couple of requirements for accepting federal support, and then also some other requirements around maintaining service level. Am I right?
Michael: 04:12 Yeah, that was the other requirement from the CARES Act, that with some exceptions, scheduled airlines that accepted CARES money were required to continue service to the airports they were serving before the pandemic hit. And so, looking at the data, we in fact did see that the number of airports served actually remained fairly steady, both pre and post pandemic. There was a slight drop, but again, there was some exceptions allowed under the CARES Act. So, that’s understandable. What we weren’t sure about, though, is whether we would then see a big drop in the number of airports served after September when those service requirements also expired with the CARES Act.
Cameron: 04:46 I‘ve got to ask: did we see that?
Bob: 04:48 Actually, no. The number of airports served by carriers remained about the same, even after September 30th. This was surprising considering we’ve been hearing talk about how airlines might want to drop a number of their so-called thin markets starting in October, but that doesn’t mean there haven’t been changes in routes and destinations. We have seen a number of airlines trying out different non-stop service in an attempt to capture more leisure passengers. In particular, airlines that specialize in point-to-point service like Southwest and JetBlue have been adding service to airports they might’ve previously avoided as too crowded.
Cameron: 05:30 That’s interesting. Does that mean that these low-cost… I guess, their point-to-point airlines might be better positioned to deal with the pandemic, or at least compared to big carriers have to deal with the network across the entire country?
Michael: 05:43 Yeah, Cameron. We’ve been hearing that. You hear people saying that, but I think we honestly need to see a bit more data to actually know for sure. One argument in favor of the low-cost airlines is that they’re better positioned to capture price-sensitive leisure travelers. These are people that may be going to visit relatives or just trying to get away to an isolated vacation spot for a few days off. We know travel’s still down, but business travel is down much more than leisure travel. And so, the argument is that low-cost airlines can capture more of this leisure market.
Michael: 06:15 But on the other hand, the beauty of actually having an airline network, which is based on this hub-and-spoke model, is that airlines can actually collect passengers together at the hub airport, and then basically get enough people on flights to make them somewhat economically viable. That’s really important now with demand so low. If you look at the data we saw early in the spring, we’ve definitely seen the major network carriers running more traffic through their hubs, and actually less point-to-point service over the last few months. So I think we still need to see more data on how this shakes out over the next few months.
Cameron: 07:50 Speaking of Amazon, I heard there might be… and again, I don’t follow the news too closely… but I heard there might be some noteworthy news about Amazon?
Michael: 07:57 Yeah. As many people are no doubt aware, Amazon’s actually been working for a number of years to make drone delivery a reality. Drone delivery meaning, delivering some of your Amazon packages to your door by using these small unmanned aircraft. But the news is that at the end of August, at the end of the summer, Amazon got one step closer to this goal when the FAA granted them what’s known as a Part 135, that refers to the part of the regulations, Air Carrier Certificate. This essentially means that they’ve met the requirements to operate as a small airline.
Michael: 08:30 What it doesn’t mean, though, is that they will immediately start delivering packages all over the country. First, they need to test their procedures, demonstrate in a real-world setting that they can perform specific types of operations safely, and, at some degree of scale, to convince the FAA that they can do this safely at scale.
Cameron: 08:47 Given that it sounds like there’s going to be a lot of testing, do we know where Amazon’s going to start these tests? And are they going to be delivering to my house anytime soon?
Michael: 08:55 Well, it depends on where you live. I can’t answer if they’re going to be delivering to your house or not, Cameron. We don’t really know the answer to either one of these questions. There’s some news reporting that suggests that in North America, Amazon might actually be planning to start their testing in Seattle, Washington, and Vancouver, British Columbia.
Michael: 09:11 And actually, it is worth clarifying a little bit or worth pointing out that actually Amazon was not the first company interested in drone delivery to receive a Part 135 certification. That honor actually goes to two other companies: Alphabet Wing, which is a subsidiary of Google, and then UPS, both just about a year ago.
Cameron: 09:28 Really interesting to hear. I get asked, do we know about any other retailers who are interested in doing drone delivery? I think a lot of people know that Amazon’s one of the largest online retailers, but are there any smaller retailers who are in the game?
Bob: 09:42 Yes, absolutely. The second largest player in e-commerce in the United States is actually Walmart, although their roughly 6% share of the online market seems small by comparison. And yes, Walmart is actually experimenting with drone delivery too. Unlike Amazon though, they’re not currently planning on running their own fleet of drones, but rather, they’re currently working with a number of partners who specialize in this already. Speaking for the two of us, we are definitely going to be keeping an eye on all of these companies to see how this progresses.
Cameron: 10:15 Well, I think you guys shared a lot of really interesting stuff. Is there anything else we should keep in mind going forward?
Michael: 10:21 Thanks, Cameron. I appreciate the opportunity to do this. I would just say if you people are interested in aviation, keep your eye on the news because there’s a lot of things changing with the pandemic, and with technology. As Bob said, we’re definitely going to be keeping an eye on these things and we look forward to maybe doing one of these podcasts with you in the near future.
Bob: 10:42 Yes, Cameron. Thanks for having us.
Cameron: 10:43 Yes. I’d like to say, obviously, thank you to MITRE and the Knowledge Driven Enterprise for giving us a place to share this incredible content. And as always, thank you Bob and Michael. It’s always a pleasure to learn more from you about the aviation industry and all the amazing things that they’re up to.
Michael: 10:58 Well, I’m glad I figured it out. I cracked the code of Yes, and. But I think something that is important to get into, this is definitely not something unique to MITRE. This isn’t even something unique to engineering. I mean, it’s a whole comedy bit, but maybe you can give a little more insights into how people who aren’t used to using improv comedy or improv in general in their work, how they can build on what you guys have learned and discussed here and maybe use some resources you can share with them.
Bob: 10:50 Yeah. Thanks very much, Cameron.

 

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.

© 2020 The MITRE Corporation. All rights reserved. Approved for public release.  Distribution unlimited. Case number 20-3369

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