The First 100 Days:

It was just over 100 days ago that Rob Adams was elevated to be L&B’s new president. Rob is only the fourth individual to lead L&B since it was founded in 1949. He brings to his new role an extensive knowledge of aviation, L&B’s institutional history, and strong industry relationships fostered over a career spanning more than 30 years. We are excited to work with Rob and to see where he takes L&B in the future. To that end, this LAB is different from our past posts. It will look back at the LAB’s inception and our industry’s recent past, provide an assessment of the current state of the industry and discuss where we believe the aviation industry and LAB might be going next. It will also include some insights and thoughts from Rob interspersed throughout the post.

“Creating the LAB was a first for L&B. We didn’t have a public newsletter or blog. The pandemic was an unprecedented event, and the vision for this LAB was our best means to engage the broader industry and our clients. We wanted to share our knowledge and do what we could do to help.”

Rob Adams, President

The L&B LAB was launched a month before the Pandemic was in-full-force and affected most of the United States (U.S.) in March of 2020. The impact on our industry was nothing but catastrophic. Not since 9/11¹ had we seen the demand for air travel decline so rapidly. However, unlike 9/11, this decline persisted through much of the following 12 months with gradual recovering occurring in 2021. The LAB (formerly called the Weekly) was launched at the beginning of this decline. Many of the articles during this time focused on the impact of COVID-19 on travel and when demand for flying might return. We examined this topic several times that year, as well as in 2021. The LAB team also explored various ways our clients might adapt to the pandemic, including recommended actions to adapt their facilities to support health screenings and provide more space for passengers to socially distance. As it became clear that we were entering a new phase of the pandemic (an endemic), the LAB’s focus became broader than this one crisis. The LAB started to explore areas of thought-leadership such as resiliency planning, advanced air mobility(AAM), customer demographics and terminal design, among others.

Source: Transportation Security Administration and L&B analysis  

“It was clear as the pandemic endured the L&B LAB had more to say. As our industry has emerged from the pandemic, it is now facing a new series of challenges that will test its ability to adapt and be nimble.”

Rob Adams, President

COVID-19 pandemic is hopefully growing distant in the rear-view mirror as more and more countries shift their public health strategies from controlling a pandemic towards managing an endemic disease. Endemic disease management acknowledges that a disease is still around and may even be widespread. However, rather than focused monitoring of infection rates and testing, public health agencies now focus on evaluating hospital admissions rates and percent of staffed hospital beds occupied by COVID-19 patients. The U.S. CDC uses these as primary metrics to determine whether an area’s risk level is judged low, medium, or high². So long as vaccines, treatments, and natural immunity continue to largely prevent serious disease that requires extended hospitalization, public health agencies will continue using an endemic management strategy that places few restrictions on travel and commerce.

Source: https://www.hospitalitynet.org/opinion/4103074.html

Source: Oxford COVID-19 Government Response Tracker, Blavatnik School of Government, University of Oxford

Most countries have eased border restrictions for COVID-19. As shown on the left, 61 countries have no travel restrictions based on COVID-19 status. Many of these countries are in Eastern Europe plus the United Kingdom, Italy, and Portugal, with the rest scattered around the globe. The largest travel markets among these countries are Mexico and Australia.

Many other countries have eased their restrictions, especially for their own citizens and permanent residents. As shown on the map, only two very large travel markets, China and Japan, have maintained their highly restrictive entry policies. Four others, Germany, India, Saudi Arabia, and New Zealand, still maintain many restrictions while eliminating some others.

“Eliminating or easing border restrictions for COVID-19 is an essential first step towards restoring our air travel industry.

Rob Adams, President

Outside of China the graph at right shows that domestic travel in large markets has nearly recovered to 2019 levels. Worldwide domestic travel in May increased to almost 77% of 2019. However, U.S. and India domestic travel recoveries appear to have peaked in April and travel recovery fell a bit in May. In the U.S., travel volumes had a seasonal increase, but the 2022 seasonal increases were less than the seasonal increase in 2019. In India, more restrictive travel policies and public perceptions of travel safety led to a sharp decline in May travel compared to April.

Source: IATA Economics, IATA Monthly Statistics

“I am encouraged to see international travel is returning. Over the course of the coming year, we hope the industry labor shortages start to resolve in line with traffic growth and that China will open its borders; both developments would help lock in a robust return to pre-pandemic travel.”

Rob Adams, President

IATA statistics depict outside of Asia, major international travel markets have also recovered to their 2019 volumes. Chinese lockdowns are still dragging down international travel within Asia and across the Pacific. Travel volumes will continue their low volumes so as long as China pursues its “Zero COVID” pandemic management policy through massive testing programs followed by extended domestic and international travel lockdowns. The latest COVID variants are among the most transmissible viruses known. China will have a major challenge in succeeding to eliminate COVID-19 within their borders. Even if they succeed, opening borders to international travel remains unlikely in the foreseeable future under the Zero COVID policy when the rest of the world acknowledges COVID-19’s endemic status.

Source: IATA Monthly route area Statistics

U.S. airlines are focusing on two areas of concern that will limit their growth for the remainder of 2022 and into 2023. First, they have a shortage of pilots and other staff. The shortage of pilots was an issue prior to the pandemic. However, the pandemic induced a wave of early retirements and layoffs that has now exacerbated the previous shortage. Fixing the pilot shortage will take time.³ The major airlines are heavily tapping the large pool of qualified pilots that exists in their commuter airline partners. These commuter airlines, in turn, are turning to colleges and universities, in addition to traditional flight schools to create career pathways.⁴

Entry level pay has more than doubled. Major airlines have renegotiated their commuter airline partnership agreements to enable higher pay levels for their pilots. In addition to pilot shortages, the airlines and their partners, such as ground handlers, are also short staffed. They should be able to remedy these shortages more quickly than the pilot shortages. However, labor costs have increased due to the overall shrinkage of the U.S. labor supply. This issue is evident in most developed aviation markets globally, and it is hampering consumer confidence on flying.

Next, fuel prices in May peaked at near record levels for two reasons. First is the embargo on Russian oil imposed as a result of the Ukraine war. Second, worldwide demand has increased in the economic recovery that has resulted from the easing of initial pandemic induced lockdowns in most of the world. Meanwhile, fuel prices have eased a bit in June and July as a result of changes in oil supply chains. The U.S. Energy Information Administration (EIA) estimates that oil prices will remain around $90 per barrel through 2023. Oil prices were about $60 per barrel prior to the pandemic.

¹  The attacks in the United States on September 11, 2001.
² https://www.ama-assn.org/delivering-care/public-health/how-we-will-know-when-covid-19-has-become-endemic
³ The FAA requires pilots to have 1,500 hours of flight time to even be eligible for an airline transport license. A certain portion of this flight time must include night flying and instrument flying, which means navigating by use of instruments during periods of low visibility. Pilots work up to the required flight experience through training programs, military experience and by flying on their own or for jobs that require less experience.
⁴ https://www.skywest.com/skywest-airline-jobs/career-guides/pilot-pathway-program
⁵ https://www.cnn.com/2022/06/27/asia/china-zero-covid-policy-intl/index.html
⁶ https://www.icgam.com/wp-content/uploads/2022/05/ICG-Economic-View-Jun-2022.pdf