There will not be a "Return to Normalcy" anytime soon

I wrote these thoughts on Facebook in response to a post endorsing Yascha Mounk's Atlantic article advocating voting for Joe Biden as a means of reigning in the "Illiberal Left".

I think the original poster's analysis was correct. People can be defined by, motivated by, and empowered by what or who they hate, and a Trump reelection would further motivate the illiberal left. However, remember the abhorrent 1998 add that said a vote for the GOP meant another church would burn? People like Mounk appear to be saying, in part, a vote for Trump means another federal building will burn. This is like "giving in" to hostage taking and threats of terrorism.

Furthermore, the only way a vote for Biden avoids increasing the power of the illiberal left is if part of the plan is to vote to create a divided government. In other words, if the goal is to avoiding an emboldened Illiberal Left by voting for an arguably centrist Democrat president, the best way to ensure the Democrat president does not stray from the reservation is to preserve Republican control of the Senate, perhaps also the House, and state and municipal offices. Therefore, those who propose Biden as a firewall or bulwark against the illiberal left should not only endorse Biden, but also endorse voting exclusively GOP down-ticket. If those promoting Biden as a bulwark did that, they would add far more credibility to their argument.

With respect to Biden, the idea he is a centrist firewall against illiberalism does not hold up if you read his campaign web page, consider his planned policies (reinstate the Title IX "Dear Colleague" letter, rescind Trump's anti-CRT EO, pass the Equality Act), or consider many of his comments, such as ones around youth transgenderism. 2020 Biden is not the Biden from the 1980s and 1990s. In some ways he was to the left of Obama during that administration.

Many are voting for Biden because they believe Biden will usher in a "Return to Normalcy". By that, most are thinking the Obama-Biden era of 2015 (the year before Trump declared his candidacy). Others think it will be a return to February 2020 (before the pandemic hit the U.S.). This is naive thinking.

Regardless of who wins, the Successor Ideology (Wesley Yang's term) marches on. Either more peacefully with Biden, or more violently with Trump.

Human nature suggests a critical mass of people will need to feel impacted by something before they push back. The Successor Ideology eventually will impact enough people that there will be a backlash. That will be the inflection point—not the 2020 election. Somebody is going to lose a job. Somebody is going to be conflicted enough to quit a job. Somebody is not going to get a job. Some divorced mom is going to see her aspiring teenage athlete daughter lose an athletic scholarship, and see her hopes and dreams for her daughter crushed. Someone is going to be called a racist one too many times. Someone is going to have to declare themselves a racist one too many times. Eventually a pushback begins. Eventually people organize to pushback.

Rod Dreher writes about the possibility of China's "social credit" system coming to the U.S. Some have written that the Internet Archive has been pressured to remove items from its Wayback Machine web site. What happens when not even your social media posts can get you fired or prevent you from being hired, but even long deleted social media posts are available, because of archiving sites? What happens when others (those who belong to the right group) are able to scrub their pasts including any archives? What happens when the general public has access to some people's social media, but others social media is restricted from public view? We have seen prospective and current college students held to task for social media posts made when they were 14 or 15 years old. We has seen other people held to task for who they choose to follow on social media, with motive assigned to the reason for following. It is reasonable to assume social media follows have been used against someone in an employment situation. We are not far from the ability to gather someone's Twitter follows and assign an ideological and personality profile to the person based on it.

I think we are in what we might call a "Long War". One measured in decades. I believe the start of this global populist/anti-globalist left+right movement goes back to the 1999 WTO protests (perhaps further back to Ross Perot's anti-NAFTA independent/Reform Party run in 1992). I think we have another decade to run. Wokeness and a claimed "democratic socialism" is the endgame of this "New Left". The "Great Reset" is the endgame of the new neoliberal centrists. A "New Right" has not yet fully defined itself. It may be socially reactionary against wokeness. It might be a further evolution of the anti-globalist somewhat socially conservative populism of Ross Perot and Donald Trump.

Another way to look at this is through the lens of the Strauss–Howe generational theory, or "Fourth Turning". In this model, the entire cycle is about 80-years, divided into four roughly 20-year "Turnings". The Third Turning is an "Unraveling." The Fourth Turning is a "Crisis." Per Strauss and Howe, the Third Turning started in the early to mid 1980s, which puts is in a Fourth Turning now. The problem is, I am not so sure. In some ways things still feel like an unraveling., and it is hard to believe we are approaching the end of a Crisis turning. However, that depends on when the Crisis started. Did it start in 1999 (WTO protests), 2000 (contested election), 2001 (9/11 attacks), or did it start in 2008 (financial crisis)? 2008 makes more sense, and fits with my theory the current Fourth Turning will not see resolution until the second half of the decade of the 2020s at the soonest, but probably more towards the end of this decade.

The idea we have another decade of angst to live through is too much for many to accept. They want a return to normalcy as soon as possible. A different president. A vaccine for COVID-19.  A reliable, compounding increase in the S&P 500 index funds in their 401ks driven by continued cost optimization from the globalization of supply chains and labor markets. Their comforting property tax deduction returned, even if the tax cuts meant their total taxes went down. Readily available cheap, but questionably documented day laborers to handle repainting and landscaping. The costs of all of this put in a can and kicked down the road for future generations or Modern Monetary Theory to deal with. They want ideological and financial comfort food—tonight. This desire leads to a false hope that the resolution is near. It leads to a form of Magical Thinking: This just can't go on any longer. It is like the person who posted on Facebook in mid-March at the start of the lockdown: "We are only going have to do this for two or three weeks until we get a vaccine." Yeah, tell me how the SARS vaccine is going, now, eighteen years after that pandemic started.

I believe the 2020s are going to be another 1960s. People think the current chaos is wrapping up, or that this can be wrapped up, with a Biden win, as if changing the president changes our reality—a sort of quantum superposition. The truth is, it is just starting, regardless of who wins. There is no way out, there is only a way through, and with apologies to Robert Frost, both roads are rough, and neither will make any real difference.

Wake me up in 2030.

The Coming Airliner Consolidation

The COVID-19 pandemic severely impacted air travel. While air travel is starting to recover, it will take years to fully recover. Much of the recovery at this point is in leisure travel, not in business travel. Businesses have moved aggressively to work from home and video conferencing technology even for meetings across town. This technology will result in less demand for travel until travel for in-person meetings is viewed as a competitive advantage.

The pandemic occurred at a moment of a worldwide economic peak, and a major recapitalization effort on the part of the airlines. The pandemic offered the opportunity for airlines to accelerate the retirement of older aircraft ahead of schedule, while deferring the delivery of newer replacement aircraft.

But the broader and longer-term effects are different. In some cases, entire sub-fleets of aircraft are being retired, primarily due to the length of time expected for demand to recover, and because of accounting issues. An aircraft which is owned outright can be retired and sold on the secondary market. An aircraft over 20 years old is fully depreciated, and while this offers no operating cost reduction through expensing depreciation, these are cash-flow cows, operating at very low expense costs at least until their next major maintenance check ("D-check"). Instead, a new approach to accounting is taken. Older aircraft approaching D-checks are retired ahead of schedule to rationalize fleets. Newer, but fully owned aircraft, especially small sub-fleets are sold because they have some value on the secondary market. Leased aircraft are retained, because the lease payments must be made regardless of if they are flying or not.

The upstream impacts to the aircraft manufacturers are the next consideration, and where things will change considerably.

In good economic times, "thin" routes can justify their own dedicated investment in nonstop routes and equipment. In bad economic times, these cities are served via consolidation and connections. As a result, the pandemic sees less value in aircraft at the small end of a category. Aircraft like the 737-700, A319, etc. in the domestic space, and the 767-300ER, A330-200, and 787-8 in the international space. At the same time, lower passenger demand on the middle routes means these aircraft have ideal capacity points for routes formerly flown by larger aircraft. But often, these are smaller subfleets, so there is pressure to serve the thin markets using a different approach.

My expectation is we will see the manufacturers try to wrap up current production of the small capacity variants of their major product lines, and they will not introduce new small models. For example, there are only 14 orders for the Airbus A330-800neo, the upgraded version of the A300-200. The A330-800neo is designed to directly compete against the 787-8, however, the 787-8 has pretty much made its production run, and most new orders are for the 787-9 and 787-10 variants. The 787-9 is the "sweet spot" for the 787 series, with similar range to the 787-8, but greater passenger capacity, lower manufacturing costs, and with the 787-8’s bugs worked out. With the shift of 787 manufacturing exclusively to Charleston SC, there is the possibility of wrapping up production of the 787-8. Boeing can steer demand towards the 787-9 using pricing and financing. It can also fill 787-8 demand with used aircraft traded in, coming off of lease, or early lease return aircraft.

Regarding the Airbus A330-800, the same is true for Airbus. They can try to get open A330-800neo orders converted to A330-900neo orders, and they can leverage trade-ins and lease returns of A330-200s to fill A330-800neo demand. The main value proposition of the A330-800neo is extreme range at relatively low passenger load, and that market is a "good economy" market negatively impacted by the pandemic.

The same logic applies to the planned Boeing 777-8X. The 777-8X is seen as a follow-on to the "C-market" (ultra long-haul) 777-200LR. But the 777-200LR did not sell well. Boeing has already pushed back the 777-8X, and it is possible Boeing could cancel the project.

An obvious question is: "What about the dedicated freight airliner market?" Dedicated freighters operate on different economics than passenger aircraft, and as such do not demand the latest models with the best efficiency. The Boeing 747 has continued production as a freighter, but will wrap up over the next few years. The Boeing 777-200LR, which was not popular as a passenger airliner, but has sold well as a dedicated freighter. Similarly, the Boeing 767-300ER, being retired right now out of passenger service, continues in production as a dedicated freighter. 767 military variants (the KC-46A aerial refueling tanker) remain in production.

Airbus has not had the success with dedicated freighter variants Boeing has had. Airbus offers a dedicated freighter version of the A330-200, but there are only a few outstanding orders.  Airbus also offers an aerial refueling tanker version of the A330-200, with a number of outstanding orders. Airbus is offering passenger to freighter (P2F) conversions of its A320 narrow body and A330-200 and -300 wide body aircraft. Conversions could also impact the market for dedicated military variants.

Boeing has always had a strong passenger to freighter conversion business, and other companies also offer passenger to freighter conversions of airliners. There are currently proposals for 777-300ER passenger to freighter conversions, but with the pandemic accelerating retirement of 777-200ERs (in favor of more efficient 787s and Airbus A350s), there is a possibility of a flood of used passenger aircraft on the market, depressing acquisition prices, making passenger to freighter conversions very economically compelling, and negatively impacting the new build dedicated freighter market, especially the long-term prospects of the 777-200F.

Finally, on the wide-body front, talk of further stretches of the A350-1000 and 777-9 have been talked about, but with the pandemic reducing overall demand, both of these seem less likely.

Therefore, it is a reasonable assumption for the decade of the 2020s, major wide-bodied airliner production will look like this:

Airbus: A330-900neo, A350-900, A350-1000

Boeing: 787-9, 787-10, 777-9X

Dedicated freighters and military variants can keep a line in production even when significant economic downturns cause passenger orders to be deferred or canceled. In the case of the Boeing 767, it will remain in production for another several years. If more orders are made for 767-300F or KC-46A aircraft, production will continue longer.

In the narrow-body airliner space, the smaller end of the series is also likely to be impacted.

Airbus presents a very interesting case, due to its acquisition of Bombardier’s C-Series airliner (now the Airbus A220). Airbus ended production of the A318 in 2013. Airbus has offered an A319neo, but orders have been very limited (~1% of total A320neo family orders), with fully half of the A319neo orders from one airline, Spirit Airlines. Spirit’s order was made in late 2019, with the A319neo portion finalized in January, just prior to the pandemic’s impact. Will this order survive? Would it make sense strategically for Airbus to steer A319neo demand to the A220-300? After a wave of A320neo orders, the current "hot" model of the A320neo family has clearly become the A321neo, which is targeting the Boeing 757-200 replacement market.

The biggest challenge for Airbus trying to steer demand for the A319neo towards the A220-300 is the A319neo shares a common pilot type rating with other aircraft in the A320 family. But, if it can overcome the cost impact of this, it opens up increasing opportunities for the A220 family.

Assuming Boeing recovers from the 737MAX issues, and is able to shift production exclusively to the MAX and wrap up the 737 Next Generation line, it is reasonable to assume the majority of the 737MAX line will be the -8, -9, and -10. Only two airlines have ordered the -7, Southwest (a large 737-700 customer), and WestJet (also a large 737-700 customer). Like the Airbus A319neo, the 737MAX-7 orders represent just over 1% of total 737MAX orders.

With the Boeing 757 aging (the last model was produced in 2004), the 757-200 replacement market is becoming a factor. As a result, like the A321neo, the 737MAX-10 is becoming popular.

Unlike Airbus, Boeing has nothing like the A220 to shift 737-700 demand to. Also, Boeing is likely to get some military and business jet business for the 737MAX-7. Airbus is now promoting an Airbus Corporate Jet (ACJ) version of its A220, which may compete directly with the ACJ version of the A319. Military versions of the A320 family have not been significant, as European militaries have been more likely to use commuter or business jet platforms for smaller use cases, and the A330 for larger purposes.

Regardless, the A319neo (if it survives) and the 737MAX-7 will represent very small portions of the production of these families, more like the A318s and 737-600s of the prior generations. As such, their production runs may be limited, and production wrapped up at some point early in the production runs, allowing manufacturing optimization to focus on the larger variants.

For the A220, the A220-300 clearly dominates the orders, being the "sweet spot" of passenger capacity, range, and operating costs.

The reasonable assumption for narrow-bodied airliners for the decade of the 2020s will look like this:

Airbus: A220-300, A320neo, A321neo

Boeing: 737MAX-8, 737MAX-9, 737MAX-10

The Boeing 767-300ER represented a unique passenger capacity and range capability which is not easy to replace. Aircraft like the Airbus A321LR and XLR will support about 170 international two-class seats, while the 767-300ER supported about 215, and the next step up, the 767-400ER, Airbus A330-200, or Boeing 787-8 support about 240. The gap between 170 passengers and 240 passengers is fairly significant. Next are the range considerations. The Airbus A321XLR has a range of about 4,500 nautical miles, compared to the 767-300ER’s 6,000nm. While 4,500nm may look fairly long-ranged, one has to consider traveling westbound against winter headwinds, which will reduce that range down to about 3,600nm vs. the 767-300ER’s 5,000nm. This makes a route like the 3,980 nm Charlotte, NC to Munich, Germany route (think BMW automobile related business) likely require a refueling stop in the winter. The options are a connection either in Europe or in the US to a larger aircraft.

The prospect of the pandemic forcing the aircraft manufacturers to consolidate production to fewer models, may allow both Boeing and Airbus to consider new options by the middle of the 2020s. Boeing, if it gets the 737MAX issues behind it, consolidates the 787 at Charleston, and gets the 777-X out the proverbial door, could again look at its proposed New Midsize Airplane (NMA). If 767-300F and KC-46A production is continuing, it could again look at a derivative of the 767, perhaps with a new wing and certainly with the latest generation engines, but this seems unlikely. Alternatively, the shuttered 787 line could be restarted with a shortened 787 with a new wing and engines for this market—but the line could also be retooled for an all-new airplane. Or, most likely, a new airplane could be designed (the proposed Boeing "797"). If the 767 line wraps up by mid-decade, and the Everett 787 line is shuttered, it means the 777-9 would be the only aircraft manufactured in Everett, and the prospect of a new design is increased. I think the most likely outcome is an all-new design proposed in the latter part of this decade.

Likewise, Airbus has the option of looking at aircraft between the A321neo and the A330-900neo. The prospect of an "A322" stretch of the A321 to go after the intra-Europe and US domestic market is possible. Also, while Airbus is rarely mentioned in conjunction with a middle of the market (MoM) aircraft like Boeing is with the NMA, it is certainly possible Airbus could consider something to go after the market once dominated by the 767-300ER.

In summary, I expect the following to happen in the airliner industry. I do not expect the 777-8X or the A330-800neo to be produced. If the Spirit Airlines A319neo order is withdrawn, I do not expect Airbus to continue to offer the A319neo. If it does go forward, I expect the A319neo to wrap up production shortly thereafter. I expect the 737MAX-7 to wrap up after the Southwest and WestJet orders are fulfilled, with the possible exception of business jet and military variants. I expect Airbus’ dedicated freighter and military variant product to wrap up in the next few years, and given the glut of low-time wide-body aircraft on the market, I expect Boeing’s dedicated 777 and 767 freighter orders to dry up, resulting in those lines wrapping up by mid-decade. Likewise, if there is not a follow-on order of KC-46A military refueling tankers, it is possible the 767 line wraps up by mid-decade. I expect the 787-8 variant to wrap up in a few years as well, possibly with the transition of the 787 line to Charleston. I also do not see a market for stretches to the A350 and 777 beyond the A350-1000 and 777-9X. Finally, I expect these consolidations to set up the aircraft manufacturers to explore new designs in the latter years of the decade of the 2020s.