Weekly Roundup, Friday 1 May 2020

Over the next few days, more than 31 US states will start to re-open. Do you see the support for that in these two charts showing the continued steady high levels of new cases and deaths reported every day.

 

Good morning

And happy birthday this week to the Apple Watch, now turning five.  We were slow to warm to the Watch ourselves, and it did take Apple a few iterations until they got the product right and identified actual/useful reasons for owning one.  After an astonishingly generous reader sent us one as a gift, we’ve come to love our Watch.  You can read our series of articles about the Apple Watch and other smart watches here.

I’ve been happily busy working on a new part of the website that I’ll be releasing in the next week, an interesting new extension of things at a time when travel isn’t entirely in the forefront of everyone’s thinking.

Plus there have been another seven daily Covid-19 diary entries published too.  I’ll attach the most recent one to this morning’s newsletter plus feature links to the others.  If you’d like to get these every day simply add yourself to the Express or Daily Full Text emails on this page.

Thursday 30 April (attached)

Wednesday 29 April

Tuesday 28 April

Monday 27 April

Sunday 26 April

Saturday 25 April

Friday 24 April

(earlier entries from this page)

Reader Survey – Your First Post-Virus Trip?

Thinking ahead, as best anyone can at present, do you have a place you most want to visit once it becomes prudent and convenient to start traveling again?

I’ve suggested some possible destinations, and also offer a “write in” opportunity too.  And if you’re planning on going to several places, either all at the same time or quickly in succession, feel free to send in multiple votes.

Simply click the answer(s) that match your thinking, and that will generate emails to me with your answer coded into the subject line.  If you’re “writing in” a destination, please leave the subject line unchanged and add the destination in the body of the email.

As is the usual case for such surveys, I’ll tabulate the results and share them with you next week.  Many thanks for participating, it is always interesting for everyone to see the results.

A Bad Week for Boeing

Does anyone remember the 737 MAX and Boeing’s repeated stumbles as it tried to get the plane back into service last year?  We’ve not heard so much of it recently.  So, as an update, now that it is May of 2020, the plane is still grounded, and its recertification remains stubbornly and elusively somewhere in the future.

To be sure, the virus hasn’t helped, but that is not the only reason the plane is still grounded.  Continued computer problems seem to be more of an issue than virus related matters and there are still new software issues surfacing, as recently as last week.  This article suggests the plane is now expected to stay grounded through the end of August, and that’s a “best case” date that could slip further.  Seems we’ve heard that before – same story, different year.

Southwest said on Tuesday it was now removing the MAX from its timetabling through the end of October.

The big news for the week was Boeing’s decision to call off its buy-out of Brazilian airplane manufacturer, Embraer.  This seems like a good and also essential deal. After Boeing maladroitly forced Bombardier into Airbus’ arms, with the result that a weak/failing non-competitor became a much stronger and more directly competitive force, it seemed appropriate for Boeing to align itself with the other small-jet manufacturer, and after lengthy talks, a deal had been agreed upon, with all regulatory bodies – except the EU which seemed to be deliberately dragging its feet to signal its displeasure with Boeing – approving.

Boeing surprised most observers by suddenly announcing this week it was calling the deal off.  Boeing claims this is all Embraer’s fault, and by making such claims, hopes to avoid any liability for leaving its jilted bride at the altar.

It seems more likely to some commentators that the terrible financial crisis Boeing is currently struggling within – a combination of the virus and the 737 MAX – made the deal no longer desirable and better dropped, nothing to do with Embraer’s side of the deal at all.  There is a $100 million penalty clause in the agreement already, and conceivably Embraer could seek very much more than that in actual damages incurred because much of its business was placed on hold pending the new Boeing ownership.

We will be interested to see the outcome of Embraer’s outraged response.  One thing is for sure, though.  It is unlikely Boeing will be selling any planes to Brazilian companies in the foreseeable future.

Air Travel Bottomed Out

As you can see in this chart, it seems we’ve gone as low as we’re going when it comes to US air travel and might be starting to slowly climb again.  I’m not sure that is a good thing.

To put the percentage figures into absolute numbers, passenger numbers dropped as low as 87,500 on 14 April, and spent most of the middle of April under 100,000 each day.  But for the last week, numbers have always been over 110,000 and have gone as high as 129,000 on 26 April – that’s almost 50% more than on 14 April.

AA Accelerates its Boeing 757 and 767 Retirements

The 757 is one of our least favorite airplanes (one long aisle – often blocked by carts, and slow to load/unload), but the 767 has always been one of our preferred planes.  Lots of aisle seats (four) and only one middle seat.

So it is with mixed feelings we read that the coronavirus slowdown means that AA will retire the balance of its 757s and 767s.

What Will Airlines Do When Traffic Returns to Normal?

What will AA – and all other airlines – do when traffic numbers return to normal?  Well, that’s a huge question in two parts, the bigger part of which is probably obscured.  The bigger part is the “when”.  Some commentators predict a fast return back to the projected levels for this year/next year.  Others are saying “a year or two”.  One company (Leeham Co) is projecting four to eight years until traffic returns to 2019 levels.  Our own sense is that a year or two might be optimistic, and four years might be pessimistic, so put us down for three, depending on how quickly life returns to normal, everywhere in the world.

With airlines going bankrupt at present, there’s a growing inventory of returned lease airplanes, or just parked airplanes for sale, sometimes at bargain prices.  And because jet fuel prices are low, it is harder to justify the cost of a new plane in terms of fuel saving.  Add to that the financial harm the surviving airlines are experiencing, and we think they’d probably much prefer to save tens/hundreds of millions of dollars per plane by buying old/used planes rather than new planes for the next few years.

As a result, we expect there’ll be a major drop-off in new airplane orders, and probably plenty more order cancellations too.

Boeing announced its first quarter results earlier this week, but while it gave specifics of planes delivered during the quarter (50, compared to 149 last year), it went very vague when it came to net new orders received, talking only of “capturing” an order for 12 787s from ANA, and preferring instead to refer to having over 5000 airplane orders on its books at present.

It seems certain that Boeing actually had a net negative quarter with way more cancellations than orders, and this is following an entire year with a negative net of 87 cancelled orders in 2019.

We think Airbus may have had a positive quarter with more orders than cancellations.

5000 orders looks like a great number – it is six years of full rate production for Boeing.  But the problem is that airlines often have a staggered delivery schedule, and so while there might theoretically be six years of orders, the airline timings might mean a month or two, here or there, where no planes are wanted.

This is even more likely at present – not only are airlines cancelling orders, but they are deferring their delivery schedules for the ones remaining on order.  The 5,000 orders is also the smallest number of forward orders Boeing has had in seven years according to my notes here.

British Airways Pilots Live in a Different World

British Airways plans to lay off approximately a quarter of their 4,300 pilots, and in total, 12,000 of their 42,000 employees. There’s no surprise about that, the airline has been as seriously affected as all other airlines.

But try explaining this to their pilots.  Their union clearly lives in a different world, and has said it will fight each and every job cut.

No-one likes job cuts, but when your employer has idled most of its planes, and is only flying perhaps 10% of its normal passenger loads, surely no-one also expects to continue to receive a paycheck every week as if nothing has happened.  It is commendable that BA is only laying off a quarter of its pilots.

In other BA news, after having closed their Gatwick hub down entirely, they are now wondering if they’ll ever re-open it.  A second “overflow” hub made sense when Heathrow slots and terminal space were at such a premium, but now that BA has its own lovely new terminal at Heathrow, and clearly expects to pick up plenty more slots at bargain prices should it want them, it seems perfectly sensible to consolidate their London area traffic all at the one hub.

Details here.

A Reminder About Cancelling Travel Arrangements

Here’s an interesting article that says half of all Americans are canceling their summer vacations.

But it is only mildly accurate when it talks about your entitlement to a cash refund.  My article on how to best cancel your travels is more definitive and helpful.

CBP’s Inconsistent Approach to Office Opening

On September 9 last year I submitted a renewal application for my Nexus (Global Entry) membership.  The government quickly took my money, then did nothing until yesterday, almost 8 months later.

The good news – my renewal has been conditionally approved.  The bad news – I have to go for a renewal interview.  The really bad news?  These days there is only one interview center in Washington State, and it is indefinitely closed – due to the virus and, as per the information on the CBP website, “out of an abundance of caution”.

Now you might think that their abundance of caution is country-wide, and that was what their advice note implied.  But, I checked.  Curiously, while they’ve closed their WA location, at one of the largest and busiest US-Canada border crossing points, there is still one open at a border crossing in MT, with fewer than one tenth as many people crossing in a normal year.

But do I want to drive 694 miles, each way?  Why not just waive the interview requirement entirely.  They interviewed me the first time I qualified for the Nexus program, and that was a perfunctory “did you tell the truth/will you obey the laws” set of questions/answers that lasted all of a minute or two.  Couldn’t the interview, if necessary, be done over the phone, or if they wanted to stare me down, via video conference?

Illegal Cruise Lines

What happens if you work on a cruise ship if the cruise line cancels its sailings and idles its ships?  By law, the cruise lines are obligated to repatriate their crews, rather than leave them stranded wherever in the world they have moored their ships.

But what has law got to do with anything when it comes to cruise lines?  They are surely the slipperiest of all the travel company “fish” when it comes to avoiding legal obligations (and taxes) due to how they register their ships in countries they seldom/never visit and largely operate in international waters with no clear jurisdiction applying.

The cruise lines are pretending they don’t have to observe this repatriation obligation.  The net result is there are more than 100,000 cruise ship employees stranded around the world.

We have to wonder why the cruise lines don’t just fill up a couple of their ships with crew members and sail them to the Philippines or wherever it is most of their crews comes from.  Offload their people in Manila or Cebu, then wait until they can start cruising again, and pick them up again.  That might be cheaper than buying air tickets by the tens of thousands.

Talking about when cruises will start again, that raises another interesting point.  The cruise lines are also refusing to acknowledge the CDC’s ban on cruising, currently set to expire on 24 July.

Details here.

Does Anyone Remember When Electric Cars Were a Big Thing?

The virus has pushed just about everything else off the front page, hasn’t it.  It is a long time since we’ve seen much to do with Tesla, or its new Model Y – we’re not even sure if it has started shipping.

But apparently Tesla has just announced their first ever truly-profitable first quarter, so clearly some things are going well for them.

I think these days it is fair to describe Tesla as a success story.  That’s not to say I agree it is worth its still very-high valuation, but no-one can deny the company has somehow confounded its critics and succeeded in marketing a series of successful electric cars, something no other car manufacturer has come close to emulating.

Which makes the continued apathy by the major manufacturers ever more surprising.  This last week saw news from Ford that it is discontinuing a planned alliance with an electric vehicle manufacturer to jointly make an electric-powered Lincoln.

Sure, there were vague mentions of this being due to the coronavirus, and it is true that new car sales are definitely down at present.  But strategically, thinking beyond the immediacy of the current virus crisis (and shockingly low gas prices), the business case for electric vehicles remains essentially unchanged and positive.  How is it Ford is yet again taking one small step forward then a giant leap backwards?

While much in the world has changed, some things never change, including the regular appearance of stories (glorified press releases, usually) of amazing new battery technologies that promise to transform the entire electric vehicle paradigm.

Lower costs, smaller sizes, lighter weights, faster recharging and more recharging cycles, these claims are the stock-in-trade of such articles.  The other thing that, sadly, all the articles invariably contain is a small mention that the batteries are not yet ready to go into full commercial production, but it is expected to happen in the next year or two.

Here’s the most recent example of this genre.

And Lastly This Week….

Here’s a visualization you definitely don’t want to see immediately before your next flight.  On the other hand, while these “uniforms” might perhaps make sense (after seeing the visualization) we’re not sure it is a look many airlines which to promote.

Here’s an interesting story about an organization you may have heard of, but probably don’t belong to.

And truly lastly this week, here’s an innovative approach to ensuring that social distancing laws are observed.

Until next week, please enjoy your continued time at home

 

David.

 

 

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