According to FlightRadar24.com, in 2019, between 100,000 and 125,000 commercial flights were in the sky on a seven-day basis . The global pandemic of 2020 caused disruptions in many sectors; aviation, in particular, was brought to a literal standstill. Images of planes parked next to each other drawing parallels to used-car lots in America surfaced on the internet with Phil Latzman from KJZZ 91.5 Arizona, a National Public Radio Member, narrating and speaking to images at Pinal Air Park in The Planedemic: Why Hundreds Of Airplanes Are Still Grounded In The Arizona Desert.
A successful breakthrough and adoption of the mRNA vaccine grants a positive outlook on air travel. It can be argued that niche markets within the broader tourism sector are feasible solely through the miracle of air travel, for example, Hawaii. For an industry that derives much of its profit from transporting people, it would be easy to assume that a growing labor force would be supporting such growth. In fact, since the start of the 21st century, the opposite is true.
The following chart shows the Total Number of Domestic Passengers in All Carriers and Average Scheduled Passenger Airline Full-time Equivalent Employees since 2002.
Between 2002 and 2019, the Total Number of US Scheduled Passenger Carriers – All Airports increased 127.78%, with a yearly average increase of 5.05% per year. Juxtapose the increase in the Number of US Scheduled Passengers to the annual average decrease of 0.17% in Scheduled Passenger Airline Full-Time Employees and a 3.65% decrease in FTE’s since 2002. As of April 2021, the five largest Passenger Airline employers were three Network Airlines- American (93,552), United (63,734), and Delta (62,504), and Two Low-Cost Airlines- Southwest (55,721) and JetBlue (16,989) . Together they employ approximately 70% of the total Passenger Airline Industry FTE’s.
On May 3, 2021, the Bureau of Transportation Statistics shared the U.S. Airlines 2020 Net Profit release. The 23 U.S. Scheduled Passenger Airlines collectively reported a net loss of $35.0 billion after registering an average of $13.95 billion in Net Profits between 2016 and 2019. 2020 was heavily impacted due to the global pandemic and travel restrictions. I mentioned Hawaii before because it provides an interesting case study on how vital air travel can be to a particular economy.
The collection of islands out in the Pacific Ocean looks at tourism as an integral component of its overall economy. Consider this, between June-August 2019 (peak summer season), of the 1.08 million average visitors that arrived in Hawaii, 77.20% of passengers reached by air on domestic flights . According to the 2nd Quarter 2021 Report published by the State of Hawaii Department of Business, Economic Development & Tourism, Visitor Arrivals&Expenditures fell 73.85% & 71.36% between 2019 and 2020. In addition, the Unemployment Rate in Hawaii went from 2.0% in Q1 20 to 19.4% in Q2 20, with Accommodation and Food Services & Drinking Places accounting for 42.2 percent of the Total Job Losses .
The impact of a decline in visitors is fiscally visible when measured using the Gross Domestic Product. According to the Bureau of Economic Analysis, the Current-Dollar Gross Domestic Product fell 2.3% in 2019-2020, with Hawaii falling 6.1%. The last time a negative measurement was recorded was in 2008-2009 where the Current-Dollar GDP for the United States and Hawaii was -1.8% and -1.7%.
Restrictions imposed to counter the spread of a contagious virus negatively impacted Hawaii. However, with 51% of the native population now fully vaccinated, a broader reopening of the economy as a whole should provide the catalyst for recovery from a disastrous 2020. Like the 2008 Financial Crisis when the U.S. government stepped in and supported vital infrastructure, 2020 saw the U.S. government intervene with multiple relief packages directed to the airline industry. From the $25 billion package in September 2020 to the $12 billion in January 2021, it can be argued that the U.S. government has nursed the industry through the pandemic. Even with so much relief, the industry experienced labor shrinkages resulting in current industry inefficiencies. Inefficiencies, particularly on the operations side, are negatively affecting rising demand.
Courtney Cole of WBTV North Carolina, on June 20, reported on fragmented American Airlines flight cancellations and delays from Charlotte Douglass International Airport due to “issues with the crew.” Teresa Woodard of WFAA Texas on June 28 reported on canceled Southwest Airlines flights and citing weather and staffing issues as reasons. It is fair to say that the airline industry was not prepared for the eventual reopening of the economy, as evidenced through such reports. Moreover, the Transportation Security Agency was not equipped as well. On June 10, ABC News reported that “the Transportation Security Administration (TSA) is projecting that 131 of the nation’s airports will experience staffing shortages,” with Mr. Darby LaJoye, Acting TSA Administrator, “asking office employees to volunteer at airports for up to 45 days” . Long lines are not ideal, so there needs to be better solutions to deliver efficiencies. Much like the pandemic accelerated underlying trends such as video calling, e-commerce, and others, the pandemic must force airlines to evaluate operations differently and expedite the adoption of existing technologies.
Installed in 2019 at the John F. Kennedy International Airport was SelfPass™ — a biometric facial scanning process system manufactured by Collins Aerospace, a unit of Raytheon Technologies Corp (NYSE: RTX). Fast-forward to September 2020, and Collins Aerospace announced adding a QR code feature to their ARINC SelfPass™ system. This system allows air travelers to step up for a facial match against the biometrics database and proceed. Quicker adoption of biometrics-based infrastructure shall benefit the current infrastructure, as reflected in a September 2018 publication by the TSA titled- TSA Biometrics Roadmap. The agency said, “TSA will work with stakeholders to examine options to leverage biometric matching services, such IDENT/HART, for matching voluntarily-provided domestic passenger facial biometric data consistent with applicable policy and authorities” . Biometrics provides a unique solution to streamline airport foot traffic. The SelfPass system is manufactured by a company that is part of a more significant corporation.
Consider the New York-based company, Clear Secure Inc (NYSE: YOU), that started trading on June 30. If you have ever been through Hartsfield–Jackson Atlanta International Airport, Los Angeles International Airport, Chicago O’Hare International Airport, Denver International Airport, or John F. Kennedy International Airport, you would have run across one of their biometrics enable kiosks that allow for passengers to check-in seamlessly. In their S-1 statement, the company mentioned that their infrastructure could be found in 38 airports, supporting 5.6 million members, with Denver as “one of our more developed markets” . The company offers limited historical financial data such as $230.8 million in Revenues for FY 2020, an increase of 20.02% compared to FY 2019, and Net Loss of $9.3 million for FY 20 compared to Net Loss of $54.2 million in FY 19. Operating Loss in FY 20 was $18.9 million compared to Operating Loss of $56.1 million in FY 19. The technology is also installed in stadiums such as Coors Field in Colorado, PayPal Stadium in California, and Target Field in Minnesota. A question worth reflecting on before engagement would be its feasibility. The service provided by the company might expedite the check-in process, from entry into the airport to getting closer to the gate, but would it get to the point of adoption where it can allow for an expedited TSA pass-through. Furthermore, synergies between private and public enterprises need to be built on a cyber-secure platform.
At the CES 2020 Keynote and State of Industry Address, Ed Bastian, CEO of Delta Air Lines Inc (NYSE: DAL), discussed his company’s baggage tracking service and how the company is using the FlyDelta app to reengineer the travelers’ experience. Two technologies that attracted my attention were Parallel Reality and Exoskeleton. Parallel Reality is a new visual technology created by a Misapplied Sciences out of Redmond, Washington. In contrast, Exoskeleton is a Guardian XO machine powered by Sarcos Robotics based out of Salt Lake City, Utah.
Both technologies provide a glimpse of the technologies that can potentially support an airport and an industry experiencing a sporadic and unsustainable recovery to expedite operations. The airline industry entered the recovery with a depleted labor force, and the adoption of such technologies can provide avenues to support the rising demand properly.
The airline industry will need to use as many advanced technologies to help it gain profitability. Reliance on technology to increase productivity will be important as team sizes decrease. Yes, there is an approach to addressing the challenge through more efficient aviation fuel. But, more importantly, it is high time that the modern miracles of technology and data processing be applied to the core infrastructure of the airport and airlines. Much like the Delta infomercial with Sloane that Mr. Bastian presented at CES, traveling through an airport can and should be as seamless as possible.