Aviation Industry Update with Bob and Michael: June 2021

Aviation Industry Update - June 2021

[Airbus (Center) Cameron Boozarjomehri (Right)]
Photo by: Cameron Boozarjomehri

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. 

Another quarter, another aviation industry update. Join us as Bob and Michael walk us through an economic recovery spanning everything you ever spent money on. Even if you never plan to fly again, you’ll still learn some powerful insights about the invisible forces you interact with everyday!

Click below to listen to podcast:


Podcast Transcript
Cameron: 00:00 Hello everyone, and welcome to MITRE’s Knowledge Driven Podcast or more appropriately, welcome to another edition of the Aviation Industry Update. Today I’m joined once again by Michael Wells and Bob Brents. Would you guys like to introduce yourselves?
Michael: 00:12 Yeah thanks Cameron. I’m Michael Wells, I am an economist and I work in the transportation innovation center here at the MITRE corporation.
Bob: 00:20 And hello, I’m Bob Brents. I’m an aerospace systems engineer working in the operations streamlining department within the MITRE corporation center for advanced aviation system development.
Cameron 00:29 So when we talked back in February, one of the topics we discussed was the arrival of the new COVID vaccines and their expected impact on aviation. Now, several months later, it seems like many Americans have been vaccinated and are starting to go out again. So is air travel doing better now?
Michael 00:47 Yeah. Well, I think the short answer is yes it is. I mean, kind of anecdotally you’ve probably seen news reports about more people flying and maybe even that some airlines have had actually problems accommodating the recent surge in passengers, because they just literally hadn’t called back enough of their employees to work, to handle somewhat unexpected passenger numbers, more, more passengers than that expected to see.
Michael 01:09 And so of course, we’re a very data-driven organization. So if you look at the data, it does confirm these kinds of news reports. But it tells kind of a more nuanced story that we have a little ways to go as well. So I guess specifically I’m thinking of data I looked at, we looked at for the month of May. It shows that US flights and passengers were about 70% of their pre-COVID levels.
Michael 01:32 That’s kind of the way we’ve been tracking it, kind of as a percentage of what it would have been a couple of years ago. Now 70% is by far the best we’ve seen since 2019, when this whole thing right before this whole thing started. But of course 70% still 30% below where it was before. So yeah, there’s a little ways to go. I think some of this remaining slack is attributable to international travel still being very low, but there’s room for domestic demand to recover as well.
Cameron 02:01 And this might seem like a wild connection to make, but does it seem like the economy overall is bouncing back in that same vein?
Bob 02:08 Well Cameron basically, yes. The most recent gross domestic product data certainly seems to suggest that the economy is recovering, real GDP grew by 6.4% during the first quarter of this year. So in a normal year, 6% growth would be considered really phenomenal. However, it’s important to remember that the economy is also coming back from a big drop in activity a year ago. So we would certainly hope to see some kind of big growth numbers until we get back to those pre-pandemic levels.
Cameron 02:43 Yeah, I guess that distinction about the drop-off because of the pandemic versus where we’re trying to go back to is, it’s pretty important to keep in mind. So maybe in that same way, is the GDP getting close to, or back to pre-pandemic levels?
Michael 02:57 It’s close Cameron, but not quite there yet. So again, as of the first quarter of this year, which is the latest date available kind of the level of GDP, which is not something that usually gets the top line news, but it’s certainly part of the press release was still a little bit below what it was in 2019. But it was really, really close I forget the exact numbers. But a good bet might be I think that by the time the second quarter data are in which should be available shortly, they’re probably going to show that the total value of US goods and services, which is GDP has slightly surpassed their value at the end of 2019. But to be clear that’s just kind of a guess on my part. So don’t take that to the bank.
Cameron 03:34 So I have to ask about, well, inflation. I hear on the news that prices have increased by more than usual over the past year for like I mentioned, there’s just not as much stuff being made or can be made. And I’ve heard economist saying that it’s only temporary, can maybe you guys can elaborate on that.
Bob 03:52 Well Cameron, we can try to explain it, but it’s not clear how well anyone completely understands what’s going on and we’re certainly not the experts, but what we can say is that if you look at the detailed data, two things are going on which may suggest that this is a temporary phenomenon. One of those things is that prices actually fell on average during the pandemic, really due to a lack of demand for some things, right. Prices for hotels, rental cars, airfares, they all fell.
Bob 04:25 So some of what we’re seeing now are those prices simply bouncing back. And if you look at the details, you see that the biggest price increases currently are for either, A, products or services whose prices fell last year like airfares, et cetera, or B, products or services where the whiplash of the pandemic caused unpredictable shortages. I mean a classic example of these shortages is microchips. Everyone was buying so much home electronics during the lockdown, but now there’s a shortage of microchips and this is causing the price of some things that use microchips to rise.
Cameron 05:05 Oh, you don’t have to tell me I was in desperate need of a computer or a new personal computer over the pandemic. And this certainly made prices go a little higher than I wanted them to. I guess in that same vein, does that mean that these prices are a one-off thing? Or is this going to continue?
Michael 05:18 I mean we can’t say for sure honestly. There’s a lot of factors at work, there are things that could lead it to continue, but I guess our takeaway or certainly my takeaway on, is on the face of it. I’d just say it’s too soon to worry yet, right because as Bob explained most of these recent price increases can be explained as things you would expect due to the pandemic recovery. So, I’m not worried about inflation yet. It doesn’t mean we won’t have it, but I would say that I’m personally, I can explain these data. And so I’m not panicking it.
Cameron 05:54 Our listeners may be surprised to know this, but this is an Aviation Industry Update. And I feel like I’ve taken us on a wild tangent. So if I can bring us back to aviation, I think you said before data shows passengers in flight seem to be on their way back to normal kind of going along with that one-off prices and getting back to pre-pandemic levels. Is there anything else related to the recovery that we should know about?
Bob 06:16 Oh yes, definitely. In our previous Aviation Industry Updates, we talked about how COVID-19 posts severe challenges to the airlines and the rest of the industry. Suddenly there was a surplus of available airplanes, pilots and crew were being laid off and many gates were not being used at airports across the country. Now, now it seems that this has offered an opportunity to some of those Hardy entrepreneurs who were looking to start on their own airlines. According to aviation week, there are over 30 new airlines beginning operations this year, and that’s a worldwide number. It’s now keep in mind, this is taking place as the industry overall is still in recovery mode. Some small air carriers even went out of business last year, but yet some see opportunity in that situation.
Cameron 07:05 I think you just said 30 airlines worldwide, right?
Bob 07:08 Correct, yep.
Cameron 07:08 So can I assume some of those might be in the US as well?
Michael 07:11 Oh yeah, that’s a good assumption Cameron. Yeah currently two of these startups are, and actually both of the ones, at least that I’m aware of began service a couple of months ago. One is a startup called with Avelo. it’s has its initial schedule, it’s kind of focused out of the Hollywood Burbank airport in Southern California. And it’s mainly serving smaller leisure destinations. It’s a really pretty small operation right now, but again, kind of maybe the novelty is just that it is Bob said that it started up during the pandemic or at least the pandemic recovery, I guess.
Michael 07:47 And the second startup is one called Breeze. It’s just starting with a slightly larger, but still modest network of again, smaller cities destinations in the south and east of the US. And both of these airlines are kind of somewhat in the model of the so-called low-cost carriers or LCCs, they’re offering point to point service at reduced prices to these kinds of smaller and often secondary airports. But in a sense, Breeze and Avelo are not so much competing directly with the larger network carriers, but maybe rather seem to be trying to capture a niche in the market by serving some of these smaller cities as well.
Cameron 08:25 Yeah I’d be curious to know. I mean, they may be smaller carriers, but that’s still trips that other airlines might not be getting. Do major airlines see them as competitors.
Bob 08:34 Now that’s a good question. We haven’t heard one way or the other, but I think the bigger question is whether or not they will make it over the long run. They seem to be getting a lot of kudos for seizing the opportunity to obtain aircraft pilots and gates at good prices, but they still have to fill their seats with passengers. Now that’s something that we’ll be watching over the next year or so to see if they’ve actually found that winning formula or not.
Cameron 09:00 All right. I mean that, I always appreciate how fast and yet brief we can always be. Is there anything else we should keep in mind or you think we’re good until our next update?
Michael 09:07 We got so much to talk about. I think we can’t fit it all in, so I think we’ll have to save it for the next update.
Bob 09:14 Yeah. There’s always things that… But that’s it for now.
Cameron 09:20 Cool. So it sounds like we’re going to have a lot of follow-up questions for you in the months to come. As always thanks to MITRE and the Nostrum enterprise for making this podcast possible. And a huge thanks to you guys for taking the time to share all these fun and Aviation Industry Updates with us.
Michael 09:35 Thank you Cameron, for taking the time to interview us. It’s always our pleasure and yes, thank you to the listeners as well.
Bob 09:41 Yeah thanks Cameron. It’s always a pleasure to talk with you about the aviation industry.
Cameron 09:46 Also I guess I don’t do this enough, but anyone who’s enjoying this podcast, please thank you so much for listening.


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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Jul 21, 2021


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