Incorporating Shock Events into Aviation Demand Forecasting and Airport Planning (2024)
Chapter: 11 Step A: Identify Shock Events of Interest
CHAPTER 11
Step A: Identify Shock Events of Interest
In attempting to identify shock events, it is important to have a clear idea of what is meant by the term “shock event.” As discussed previously, shock event is used in this document as it provides a general idea of the concept without any implied assumptions around the level of prior knowledge (black versus grey swan) or likelihood of occurring (low probability). Planners and decision-makers are encouraged to consider what shock events to which the airport is exposed. Such shock events could cause traffic development to diverge considerably from the long-term trend, perhaps permanently.
Using History as a Guide, Not a Predictor
In considering potential shock events, it is useful to review past events as a starting point for the identification of and a guide to how the events may play out. However, care should be taken to avoid assuming that future events will exactly follow the pattern of past ones. For example, the airline hijackings of the 1960s, 1970s, and 1980s were very different from the terrorist attack of 9/11 even though the latter involved hijackings. Similarly, the impact of the SARS outbreak in 2003 was quite different from that of the COVID-19 pandemic despite both pandemics being caused by a coronavirus. As discussed below, there is a need to be imaginative when considering potential shock events. Nevertheless, examining past shock events does provide some guidance and can offer lessons learned.
In considering potential shock events, it is useful to study past events as a starting point for identification of events. However, care should be taken to avoid assuming that future events will exactly follow the pattern of past ones.
Table 5 provides a list of shock events that have affected airports in the past, based in part on the research described in earlier sections. These events have been grouped into the following categories.
- Air market – shock events arising from changes in the aviation industry or the market served by specific airports.
- Terrorism/war – events targeting or indirectly impacting the aviation industry.
- Natural events – natural disasters with short- and long-term impacts on aviation.
- Technology – technological changes within the industry or from competing industries.
- Pandemic – both regional and global outbreaks.
- Economic – events in the general economy with implications for aviation.
- Environmental – effects of climate change and climate change policy.
- Social – attitudes toward and demand for air travel.
- Political – national and international political events.
The table is not meant to be an exhaustive list of potential shock events but rather to seed the thinking about shock event identification.
Table 5. Examples of past shock events impacting airports.
| Category or Type | Examples | Commentary |
|---|---|---|
| Air Market | ||
| Carrier failure or exit | St. Louis (STL) – TWA; Cleveland (CLE) – United; Wilmington (ILN) – cargo; Pittsburgh (PIT) – US Airways. | The failure or exit of a carrier can lead to a substantial decline in traffic from which the airport may not fully recover. |
| Carrier entry/stimulation | Bellingham (BLI) – Allegiant; Orlando Sanford (SFB) – Allegiant; Williston Basin (XWA) – various airlines. | The entry of a new carrier (often an LCC or ULCC) surging traffic can drive the need for changes to the airport development. This has to be balanced against the possibility that the carrier may reallocate capacity elsewhere. |
| New airport competition | Singapore (SIN) versus Dubai (DXB). | Singapore experienced a slowdown in the development of connecting traffic over the last two decades as Dubai (and other Middle Eastern hubs) emerged as a major competitor for Europe-Asia traffic. |
| Terrorism/War | ||
| Terrorist attack on the aviation system | 9/11 terrorist attacks (2001); Liquid bomb plot (2006); “Underwear bomber” (2009). | The 9/11 terrorism event resulted in a prolonged decline in traffic and significant changes to airport facilities and operations. Subsequent attempts have led to further security changes. |
| Terrorist attack on individual targets (airports or tourism) | Bali bombing (2002); Glasgow airport ramming attack (2007). | The Bali bombing, which did not target the airport but rather the tourism area, depressed tourism at this resort for several years (and with it, traffic at local airports). The Glasgow attack had only a short-term impact on traffic, although it did lead to additional security requirements in the UK. |
| Regional conflict | Kuwait (1991); Afghanistan (2001); Iraq (2003); Ukraine (2022). | These wars have led to depressed traffic levels (concerns about reprisal attacks) and in some cases, increased fuel prices. While their effects have been relatively short-lived, there is the potential for them to trigger other market effects (e.g., air carrier distress). |
| Natural Events | ||
| Hurricane | Hurricane Katrina (2005). | While most hurricanes have minor long-term effects on airports, Katrina precipitated a long-term decline in traffic due in large part to factors outside the airport’s control. |
| Tsunami/earthquake | Indian Ocean (2004); Sendai, Japan (2011); Christchurch, New Zealand (2011). | The destruction of travel and tourism infrastructure can lead to a prolonged decline in air traffic. |
| Volcano eruption | Eyjafjallajökull, Iceland (2010). | The volcanic eruption in Iceland closed much of European air space for nearly 2 weeks due to concerns about volcanic ash damaging aircraft (the largest air traffic shutdown in Europe since the Second World War). Volcanic eruptions can potentially generate ash clouds for several years. |
| Technology | ||
| Fleet grounding | DC-10 (1979); Boeing 737 Max (2019). | The Boeing 737 Max aircraft was grounded by the FAA between March 2019 and December 2019 due to safety concerns. Exposed airlines had to cancel large numbers of flights. |
| Electric aircraft | In development. | The use of electric aircraft is anticipated before the end of the decade. While some deployments will be replacements of conventional aircraft, the economics of these aircraft could result in new route opportunities and changes to airline networks. |
| Category or Type | Examples | Commentary |
|---|---|---|
| New mobility models | Urban Air Mobility. | UAM is the use of small, highly automated aircraft to carry passengers or cargo at lower altitudes. This has the potential to affect demand profiles and route networks at airports. |
| Alternative/competing industries | Videoconferencing. | The move to videoconferencing and online working during the pandemic may have impacted some elements of business air travel, although it is not expected to be a full replacement. |
| Pandemic | ||
| Global pandemic | Spanish flu (1919); Swine flu (2009); COVID-19 pandemic (2020). | The dramatic and long-term impact of COVID-19 on the aviation sector is well documented in this report. While swine flu was fairly global, it did not result in restrictions on border crossings or air travel. |
| Regional pandemic | SARS (2003); MERS (2012); Ebola (2014). | These outbreaks caused traffic declines in the affected regions. Concerns about a more global spread could lead to wider travel restrictions. |
| Economic | ||
| Severe recession | Great Recession 2008–2009. | While economic recessions are not particularly surprise events, the severity and global impacts of the 2008/09 recession were a shock and led to significant impacts in aviation through reduced demand, airline mergers, and changes to air networks. |
| Oil price shocks | OPEC oil embargo (1970s); Prerecession (2007/08); Russia’s attack on Ukraine (2022). | The dramatic run-up in global oil prices in 2007/08 led to the introduction of fuel surcharges raising costs for passengers as well as cargo shipments and precipitating changes in global fleets toward larger, more fuel-efficient commercial aircraft. |
| Decline of local business/sector | Athabasca Oil Sands, Alberta, Canada (2014/15). | A rapid decline or closure of a local business sector or major employer can lead to long-lasting negative impacts on traffic. As the global price of oil fell in 2014, traffic fell at the Fort McMurray International Airport (YMM), the primary gateway to the Athabasca Oil Sands in Alberta, as development and employment were rapidly curtailed, resulting in a long-lasting decline in traffic. |
| Development of a new local sector | Amazon Air Hub at Cincinnati/Northern Kentucky International Airport (CVG). | A significant development or expansion of a local/regional economic sector can rapidly spur traffic growth. Increased traffic may be a long-lasting ‘level shift’ or may be more transitory over a shorter period. |
| Environmental | ||
| Carbon pricing or cap and trade | ICAO Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA); EU Emissions Trading System. | While not a shock in the sense that their development is well documented, the application to aviation and potential for increased penalties for carbon emissions could have a significant and long-lived impact on traffic development. |
| Effects of climate change | Rising sea levels; increased average air temperatures; increased extreme weather events. | Impacts on airport operations could lead to changes in fleet mix and network. Airports may need to divert capital resources to mitigate the effects of climate change (e.g., building sea walls). |
| Category or Type | Examples | Commentary |
|---|---|---|
| Social | ||
| Social attitudes toward air travel | Flight shame or flygskam. | Flight shaming or flygskam is an anti-flying social movement, aimed at reducing the environmental impact of aviation. It started in 2018 in Sweden and has gained some traction in other parts of Europe. To date, this has not been a significant movement in the United States. |
| Political | ||
| Policy or political changes | 2016 UK Brexit Vote. | The decision by referendum for the UK to leave the European Union impacted air carrier services that previously benefited from the unrestricted traffic rights and ownership rules within the EU. For example, some UK-based airlines had to establish new bases within the EU to comply with new ownership laws. |
Methods for Identifying Shock Events
While Table 5 provides a starting point for shock event identification, there will be a need to consider the specific situation of the individual airport and benefit from the knowledge and viewpoints of the people working at the airport. Therefore, some form of elicitation process with the airport management team is recommended. Ideally, this would involve input from a range of key functional areas to ensure all perspectives are covered, including some or all of the following:
- Airport operations, security, and safety;
- Commercial and marketing;
- Finance;
- Facility development and planning;
- Community/stakeholder relations and legal; and
- Depending on the airport, representation relating to passenger, cargo, and GA traffic.
It is anticipated the exercise would be internal to the airport. While there may be some benefit from including outside stakeholders (airlines, tenants, local government, tourism/cargo/community groups, etc.), it could lead to the censoring of some ideas. For example, it may be uncomfortable to discuss airline failure in front of representatives of the airline industry. Nevertheless, the airport will want to make sure that someone from airport management can speak to the perspective of outside sectors.
The form of the elicitation process deployed should encourage a diversity of viewpoints and open-minded thinking. The focus is not on achieving consensus but rather on “casting a wide net.” Therefore, an approach such as structured brainstorming is recommended. Structured brainstorming is a systematic process for the liberal generation of ideas from a number of participants by encouraging each of them to volunteer their creative inputs in an atmosphere that is free of criticism and judgment from other participants. The structured part ensures that the brainstorming is focused and goal-oriented.
The focus is not on achieving consensus but rather “casting a wide net.” Therefore, an approach such as structured brainstorming is recommended.
Structured brainstorming generally works best with small groups, preferably diverse in background and experience. The ideal format is a face-to-face session since this has been found to be most effective in sparking ideas and encouraging discussion. However, if that is not possible,
internet video calls or similar technology can be used. In situations where the group cannot make the time commitment to moderated sessions, an asynchronous process can be used where the information is elicited through online tools, e.g., short surveys administered by email to collect the information and follow-up communications to refine the final information, which can be presented as a wiki page or electronic document. Regardless of the format, the process benefits from careful and experienced facilitation. This facilitation could be done by an outside expert or by the consulting firms already involved in the project (e.g., for forecasting or planning support). A good facilitator ensures that all viewpoints are heard and makes sure to draw out ideas from quieter people whose ideas may be as good or better than those who are more vociferous.
The broad structure and characteristics of the structured brainstorming are as follows.
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Set a clear objective and scope.
The participants should receive clear messaging on what shock events they should consider. The shock events should be strategic, significant, and challenging to the business rather than minor accidents or variations. At the same time, the events considered should also be plausible and relevant to the airport; expending time on shock events that are neither (e.g., an extraterrestrial invasion) will weaken the exercise. Nevertheless, care must be taken not to dismiss ideas as implausible simply because there is a lack of historical precedence; a careful balance needs to be made.
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Educate and prime the participants by discussing past events.
This can utilize the information in Table 5 and previous sections in this guide as well as research conducted before the discussion. At the same time, emphasize the need for thinking outside of these examples.
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Structure the discussion to aid the thinking.
For example, the shock events could be considered in the categories set out in Table 5: air market, terrorism/war, natural events, pandemics, economic, etc. Alternatively, the standard STEEP categorization can be used. As previously discussed in Part II, STEEP is an acronym for society, technology, environment, economy, and politics and is a means of categorizing ideas in elicitation exercises. The STEEP analysis approach is similar to PEST (political, economic, socio/cultural, technology) or PESTLE (political, economic, socio/cultural, technology, legal, environment) analysis. Depending on the size of the discussion group, subgroups could be created to look at one or more of the categories. These can then be shared and discussed with the other subgroups.
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Encourage wide-ranging and imaginative thinking.
Participants should feel that they can put forward ideas without judgment, and the moderator should ensure all voices are heard. At the initial stage, the bar should be set fairly high in regard to rejecting ideas. The question to be satisfied should be, “Why can this event be rejected?” rather than, “Why should it be included?”
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Elicit ideas of the basic characteristics of the event.
How will the event impact the airport, such as the overall scale, duration of the event, etc.? This does not need to be a detailed or data-driven exercise but will allow a greater understanding of how the event is perceived. The discussion can also include the probability of the event, although, as discussed previously, the probability is often subjective and subject to bias, and there is a risk that low probabilities will be used to reject ideas.
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Ensure a balance of dialogue.
While the initial ideas should be free from judgment, to avoid self-censorship or less vociferous participants from being “shouted down,” this does not mean that all discussion and (constructive) criticism should be avoided. Recent empirical evidence suggests that, within a cooperative environment, if people do point out that some ideas have problems, it often sparks others to share ways to improve on initial ideas (Curhan, Labuzova, and Mehta 2020).
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Identify common themes.
The facilitator can point out common themes in different shock events. For example, there may be several events that result in substantial traffic declines lasting several years. The overlapping nature of these impacts can help narrow the more detailed scenario forecast in Step B, “Develop Scenario Forecasts That Incorporate Shock Events.”
Simplifying the Process
The use of structured brainstorming and other elicitation techniques is designed to develop a comprehensive set of potential shock events drawing on knowledge from across the organization. However, some airports may not have the time and resources to undertake this process. In this case, airport management can still draw on the examples given in Part I and Table 5 as guides to relevant shock events. At the most basic level, the most challenging shock event that most airports could face is a large decline in traffic sustained for an extended time, as occurred for many airports during the COVID-19 pandemic. Consideration can be given to a shock event of this nature regardless of its exact cause or development. For example, a small commercial or GA airport might want to consider an unnamed shock event leading to a reduction of 50% of aircraft operations lasting for 2 years. In addition, consideration can also be given to a small number of other shock events, such as the entry of a new carrier leading to rapid traffic growth or the loss of a certain segment of traffic or certain customers.
Outcome
This step will generate a list of potential shock events that could impact the airport, with summary information on the anticipated characteristics and effects. This in itself can provide insightful information to engage and challenge airport management and planning. It can also be incorporated into a risk register if the airport maintains such a system. It will also guide the scenario forecasts in Step B.
