That is going to become apparent fairly soon, he says, as airlines and lessors commence Q4. And financial year-ends will see ‘one of the big pieces that hasn’t come down the chute yet’ – evaluations and appraisals – accelerated by the year-end accounting cycle. ‘So we have a lot of things that are granular, that are nuts and bolts of the industry, coming our way – and most of them are bad. So before people become philosophical and start talking about their vision for the future their immediate focus is still on dealing with immediate challenges.’

'Before people become philosophical and start talking about their vision for the future their immediate focus is still on dealing with immediate challenges' - Peter Chang.

With regard to airlines, he believes that closures, Chapter 11s, liquidations, and administrations are inevitable, with consequent further job losses. ‘I think that in maybe 18 months or two years from now we’ll probably see a total landscape change. For airlines the situation will likely result in a scaling down and restructuring on the one hand and an increase in the cost of flying on the other.’

Chang emphasises there are no solutions yet to the question of safe travel.’ As an industry we’re still fumbling around trying to do things and reacting. Taking centre seats out is surely not the answer in a very cost and capital-intensive industry – reducing capacity and incurring the same costs is suicidal. It just shows we don’t have any idea of a right solution yet and the problems persist.’

He also cautions that using the recovery in passenger levels in the domestic Chinese market, where passenger numbers are now back to around 70 per cent the level they were in 2019, as a benchmark for recovery in developed western markets is unwise.

‘There is no knowing whether the business segment will really ever come back, at least within the next five years.’ he says. ‘Would the airline industry, with its existing cost structure, be able to withstand five years without business travel? The answer is no, not without some kind of organic structural change, and right now nobody knows how to do that, other than Chapter 11 and liquidation.’

He points out that the ownership structures of Chinese airlines is markedly different from those in the Western world. ‘They can do things like “$99 all you can fly” tickets, for example, which they sell by the tens of thousands. They can do all sorts of things that an American Airlines, United Airlines or Delta simply would not be able to do. So to say China has recovered by 70 per cent of its travelling public is not exactly the same.’

While China’s recovery does demonstrate willingness for people to return to air travel Chang is not convinced the same will happen in the US. ‘The public [in China] are going back to travelling by air, they’re not emptying the middle seats and they are showing confidence, tolerance, whatever you call it. But that’s unlikely to happen in the United States. If Delta, for example were offering a $49 round trip to New York I would be curious to see whether they would recover 70 per cent of the travelling public.

‘Then there’s the business travel part. What percentage of the Chinese domestic travel was dependent on business travel? That line is less clear than in the US or Europe. As long as Zoom stock is over $300 you can take it that business executives will not be back on the road anytime soon. And by the time a vaccine is discovered, human habit may have already changed. Speaking for myself, I can see that being a very possible outcome.’

Currently based on the West Coast of the US, Chang says: ‘I think there are many elements, some of them psychological / behavioural types of considerations versus pure economics, that makes the Chinese model a very dangerous one to use in projecting what the future for Western travel might be, in my opinion.’

With regard to the leasing sector he says there are too many fundamental building blocks changing at the one time that makes it impossible for lessors to plan for the future based on their experiences of four, five or six years ago, or even from 2008.

Reflecting on such factors as the influx of new capital into the leasing sector over the past decade, the short-term perspectives in recent years of the OEMs and their failure to regulate supply to meet realistic demand growth, and thus protect asset values, Chang believes that the pandemic has hit at the core of the last element in the commercial aircraft ecosystem that had remained positive-passenger demand.

‘You could make a guess and speculate that within two or three years virtually all lessors are going to be owned by banks – a significant proportion of them already are. And they are going to start to behave like banks; commodity business, thin margins, no longer entrepreneurial. It comes back to the financing environment and the challenge facing some lessors will be to raise the liquidity that’s required to keep going when they are losing, say, 40 per cent of their revenue. That’s particularly true when the industry’s opportunity to make up the numbers by selling assets has reduced as well. It is very, very tough. We’ve had too many years where our business model has been based on a perfect world and it is no longer perfect, it’s the opposite, so it’s going to be very difficult.