90% of traded goods (by volume) are moved by ocean freight. But since the industry lives in the shadows, it’s rarely talked about. This lack of attention has shielded maritime from disruption by challengers and startups. Resultantly, there is room for maritime to expand as a transportation medium.

Data to study the global maritime industry is limited. Nevertheless, what I have found has been nothing short of remarkable: an industry reminiscent of other protected industries (e.g., space and airlines) and one that just might be on the cusp of a revolution.

Nowhere are maritime opportunities more pronounced than in the United States. This is, in part, because the industry has been idle for so long. It is also because a robust maritime industry is critical to United States resiliency in the next era. But most importantly, the United States has developed several core competencies that could be transformative if applied to maritime.

A thriving United States-based maritime industry would be good for non-US stakeholders as well. For the United States maritime industry to achieve its potential, it must be globally competitive. That’s only possible if protectionist American trade laws are liberalized. Opening the United States maritime market means welcoming foreign investment and knowledge transfer. Perhaps by way of partnerships with non-US bodies that can assist with manufacturing & supply chain development.

Building a robust maritime industry in the United States may prove to be a once-in-a-generation opportunity for entrepreneurs and investors.

Part 1: Why Has the United States Become Uncompetitive in Maritime?

In 2021, the United States economy produced 24% of global GDP. The country also imported 14% of global trade volume (in dollars). Yet, the goods that the economy produced and exported were not transported on ships controlled by the United States. That’s because, United States flagged vessels carry just 1.5% of waterborne imports and exports by tonnage, and much of that capacity goes to shipments that must move on American ships—specifically, 100% of military imports and 50% of non-military government-owned cargo.

Given these numbers, the United States maritime industry is small. In fact, the GDP impact from the domestic maritime industry in 2019 was $42 billion or 0.2% of total United States GDP.

Maritime comprises three sub-sectors: shipbuilding, ship operations, and ports. In 2021, the global shipbuilding industry was worth nearly $150 billion. China, South Korea, and Japan build more than 90% of the world's ships. As of March 2022, the United States shipbuilding industry held just 0.24% of future orders.

As for shipping operations, less than 1% of ships sail under the flag of the United States. This compares to the approximately 5% of ships that sail under the Chinese flag. Furthermore, the three “big” alliances (i.e., 2M, Ocean Alliance, and The Alliance) account for more than 80% of total maritime container capacity. Of carrying capacity, the United States owns just 2.5% of the world's cargo fleet (in Dead Weight Tonnes - DWT).

The potential United States market for maritime extends beyond the country’s international trade needs. In fact, the United States may have the largest addressable domestic market for ocean freight. The country has incredible access to populated coastline. Specifically, 40% of the United States population lives in coastal areas, which account for less than 10% of total land area. The United States also contains two states and five territories primarily accessible via water (e.g., Alaska, Hawaii, Puerto Rico, Guam, etc.). However, despite its geographic advantages, only 2% of United States domestic freight travels by sea, compared to 40% in Europe.

Why has this happened? The reasons are threefold. First, protectionist United States maritime policy has had the opposite of its intended effect. It has throttled the industry, rather than empowering it. Second, alternatives became available, albeit at a higher cost. Whether in the form of road, rail, or foreign carrier, alternative modes of transit move goods that would otherwise be transported by water. Third, entrepreneurs and capital providers have largely ignored the sector in the United States. This may be because the industry is not consumer facing and is not an obvious opportunity. It may also be due to a belief that United States labor costs would not permit it to compete effectively.

The United States upholds two laws that have severely limited its maritime industry. The first is the Jones Act (Merchant Marine Act) of 1920, and the second is the Foreign Dredge Act of 1906.

The Jones Act mandates that domestic shipping service vessels are built, owned and flagged in the United States. It also requires ships to be staffed by United States persons. The Foreign Dredge Act of 1906 applies the same requirements to dredging vehicles. The intent of both was to create a healthy and thriving United States maritime industry, but the opposite has occurred.

As for dredging, the United States hopper dredging fleet has a collective capacity of seventy-four thousand cubic meters, compared to the nearly one million cubic meters controlled by European dredging operators. Dredging will be highlighted further in a future piece, but we will now refocus on shipping.

The effect of these acts is obvious. Comparable United States-built ships cost between six and eight times more than foreign-built ships (e.g., $190-330 million vs. $30 million). In 2010, direct operating costs of United States ships were 2.2 times greater than those of foreign competitors. To say nothing of the economies of scale and efficiencies born of larger and newer ships. Ships that the United States has not produced and does not operate. In unit costs, a TEU shipped from the Northeast to Puerto Rico costs $3,063. A journey  of a similar length (e.g., to the Dominican Republic) costs an average of $1,595 or 90% less than the domestic trip.

Although the United States industry has shrunk, global maritime shipping has grown. Since 1980, global maritime trade by volume is up nearly 300%. The 20 carrier list, which controls more than 90% of ocean capacity includes no United States based carriers. In lieu of its own carriers, the United States relies on foreign carriers for import and export activity. Can you imagine the uproar if it did the same for its foreign air service needs?

Source: Figure 1.5 of UNCTAD Review of Maritime Transport 2022

As for the domestic freight market, the United States fleet comprises 96 large merchant-type vessels today, down from more than 1,000 ships in 1960. This has resulted in an increasing number of goods shifting to road and rail transportation that could otherwise go by water. During this period, the volume of domestic ocean freight has declined more than 60%, while other modes of transportation have grown. The volume of goods transported by railroads, oil pipelines, and intercity trucks grew 48%, 106%, and 217%, respectively.

Ecologically and economically, this solution is a poor mix. Per tonne moved, road or rail emit 17-50% more carbon than waterborne transit. Trucks account for just 10% of vehicle miles traveled, but are responsible for more than 75% of road costs.

Where domestic goods must move over water, they do so at a high cost, either through expensive ocean carriers or by air. The cost of shipping has also incentivized the imports of foreign goods when domestic ones are available. In fact, Massachusetts imports LNG from Russia and other countries rather than Texas or Louisiana. Port-hopping is another technique that shippers use to serve domestic ocean markets, albeit inefficiently. This loophole allows foreign shippers to operate between two domestic ports with an international stop in the middle. For instance, a carrier might operate from San Juan to New York via Halifax.

The net effect is that the United States has lost any leadership that it once had as a shipbuilding nation. Along the way, the country’s maritime knowledge base has vanished as well. This includes an understanding of modern best practices in ship and port operations. Economically, United States-based producers of ships and ocean shippers serve captive or subsidized markets, which has created a monopolist environment for United States maritime producers. In microeconomics, the profit-maximization condition for a monopolist is the point at which marginal revenue meets marginal cost. Here, the profit-maximizing condition is lower than demand. In other words, the United States market for ships and shipbuilding is a monopoly. Correspondingly, the market is underserving addressable demand.

Figure 11.2 - the profit maximization by a monopolist (pg 442 of Besanko, Ronald R. Braeutigam’s Microeconomics - 4th edition)

Over time, the United States maritime industry has fallen behind. To get it going again, the United States should repeal both the Jones Act and Foreign Dredge Act. It should subsequently support maritime startups with export policy and technology investments. Bonus points for soliciting foreign investment in the United States maritime industry, which would undoubtedly expedite United States learning on the subject.

Part 2: Does Maritime Matter to the United States in a Post-Globalized World?

The impetus for my current maritime-related work is the trend of de-globalization. De-globalization is antithetical to globalization and is defined as the process of diminishing interdependence and integration between certain units around the world. The trouble is, as discussed in this previous post, globalization is not over. Nevertheless, the role of global trade and its impacts on maritime are changing.

Regardless of how they change, maritime will remain critical to the United States economy. To understand how, let us examine Antoine Frémont's "Is globalization a threat to maritime transport?" In this paper, Frémont outlines three scenarios for the global shipping industry. They describe a spectrum of possibilities, all of which rely on ocean shipping.

In a worst-case scenario, crises ensue (e.g., a hot war between the United States and China). This marks the end of East-West trade and initiates deeper regional trade ties. Meanwhile, global lanes (i.e., routes) cluster over the Atlantic and intra-Asia, north-south trade increases both in Asia and the Americas, and absent Western trading partners, China deepens relations with the Middle East and Africa.

The net effect in this scenario is less trade and global economic pressure. Consequently, the maritime industry would fail to meet global sustainability targets. This is at least in part due to inconsistent regional enforcement of emissions rules. The Europeans would enforce strict emissions rules that would create economic pressure because green technologies would not yet be mature enough to be in service at scale. For its part, port infrastructure would remain strategic to central government policy. Correspondingly, states would continue to provide debt and political support for port operations.

In the best-case scenario, multilateral negotiations would outline a road forward, which would clear the path for maritime's trajectory to remain mostly unchanged. Regionalization would still occur to a certain extent as nations work to secure strategic supply chains. This is essential and unavoidable given the lessons from the COVID-19 pandemic. Meanwhile, current geopolitical tensions reinforce the need for alternatives to globalized supply chains.

This best-case scenario sees two competing spheres of power in maritime: one centered on Asia and including the Pacific east and west lanes, and another as a European cluster with its heart in the Mediterranean. The latter would control Atlantic lanes. These spheres would push each other to decarbonize the maritime industry. Sustainable transportation could cause the unit costs of shipping to rise. Strategic port infrastructure would also expand under support from national governments. This would include the building of off-shore ports to ease coastal congestion.

Frémont's third scenario sits between the other two. Here, he assumes that recurring tensions will cause a suboptimal maritime order. Maritime traffic would shrink, and traffic volumes would decline as parties failed to align on mutually beneficial objectives. These might include expanding sea lane access, security reinforcement, or port expansion investments. Decarbonization efforts would also lack alignment, as each sphere of power would enforce its own standards. As a result, maritime emissions would likely fall short of Paris Accord targets.

The deglobalized world might be better described as a reorganized one. The United States will still have global and domestic shipping needs, even if the lanes traveled shift. In her book, Homecoming, Rana Foroohar describes a need for resilience. Here, she means resilience with regard to the supply chain, domestic sourcing, and manufacturing capabilities, all of which are competencies that the United States traded for efficiency provided by globalization.

Foroohar identifies several industries that the United States should develop for a resilient future. They include agriculture and food, modern manufacturing, care (e.g. healthcare, early childhood education, etc.), and processing chips. These are important but so is safe, sustainable, and cost-efficient transport. The lack of resiliency in maritime exposes a great vulnerability in American transportation.

Militarily, the merchant fleet is also woefully inadequate to support a hot war. Notably, the Cato Institute described how vulnerable the United States fleet is in its 2018 critique of the Jones Act:

"When U.S. forces were deployed to Saudi Arabia during Operations Desert Shield and Desert Storm, a much larger share of their equipment and supplies was carried by foreign​ flagged vessels (26.6 percent) than U.S.-flagged commercial vessels (12.7 percent). Only one U.S.-flagged ship was Jones Act compliant. In fact, the shipping situation was so desperate that on two occasions the United States requested transport ships from the Soviet Union and was rejected both times. So scarce were merchant mariners that the effort required the services of two octogenarians and one 92-year ​old sailor."

Part 3: United States Investors and Entrepreneurs Can Change the World (of Maritime)

For strategic reasons, the United States should have a healthy maritime sector. Creating one would entail activating the flywheel on a startup ecosystem in which investors deploy capital to good ideas and entrepreneurs use that capital to build. Entrepreneurs would then push regulators for a favorable export policy environment, thus widening the market for United States ships and shipping services. These activities would generate returns, which would lead investors to deploy additional capital. Accordingly, the wheel turns.

Achieving favorable export policy likely means accepting foreign players into domestic service. In other words, repealing of the Jones Act and Foreign Dredge Act of 1906. The pressure from the global competitive environment would serve to fuel ambition at United States firms. Policy reform could then accelerate by aligning startup aims with other government interests (e.g., repealing the Jones Act for ships that meet certain emissions standards).

As described earlier, the United States has lost the comparative advantage that it once had in maritime. American firms, though, have established several other attributes that could benefit maritime operations. New players must leverage these comparative advantages to win in the maritime sector.

Examples of applicable advantages are numerous.

For instance, airlines in the United States have built enviable process power. Southwest Airlines famously pioneered its 10-minute turnaround. This allowed the airline to fly its same schedule with three aircraft rather than four. To make this happen, enplaning passengers lined up on one side of the jet bridge, while deplaning passengers passed on the other. The lack of assigned seating sped things up as well. Meanwhile, pilots and flight attendants jumped in to provision and clean the aircraft during a turn. Many of these traditions are still alive at the company. Other companies in the space, such as United Airlines, have found success digitizing every aspect of their operation. Human process improvement coupled with technology are critical to efficiency. Employing these learnings could help United States-based maritime startups leapfrog incumbents.

First-principles thinking and vertical integration have also contributed to disruption in traditionally incumbent industries. SpaceX's entry into the launch market is a good example.

The backbone of the United States launch industry is SpaceX's Falcon 9 rocket. Notably, SpaceX spent $390 million to develop its Falcon 9 program. That is 4-10x cheaper than NASA's own estimate for a similar program. A full accounting of how Elon Musk accomplished this is difficult to come by, but here are several of the drivers (sources: Austin Vernon Blog, LiftOff):

1. Component & manufacturing cost discipline

Using raw material costs as a guide, SpaceX compares raw material costs and the cost of buying the finished product off the shelf. The delta highlights two things: the cost of refining and manufacturing the part, and the margin in the supply chain. Those two areas represent a cost-saving opportunity. Separately, vertical integration saves money and controls destinies. By acqui-hiring the team at a machine shop that was shutting down, SpaceX halved its manufacturing costs. This also removed the incentive for the machine shop to work for any other customer.

2. Reusing rocket stages for multiple launches

The first stage of a rocket is the largest. Correspondingly, stage one can represent up to 75% of the cost of a rocket. Traditionally, rocket manufacturers dispose of the first stage of the rocket after launch. SpaceX is the first company to pioneer reuse of its stage one boosters. A feat it accomplishes through precision landings of stage one boosters on drone ships.

3. Increasing utilization

Processes are best implemented for frequent use. Lowering launch costs means more launches. This, in turn, means that people and equipment get better at launching frequently. Accordingly, they become more efficient, and each individual launch costs less. Fixed costs are also spread across multiple launches, which further lowers unit costs.

4. Using cheaper materials

Stainless steel alloys comprise the structure of Starship (i.e., SpaceX’s upcoming heavy lift rocket). These are 60-80% cheaper than the aerospace-grade aluminum often used. This example represents how SpaceX’s team has found low cost alternatives to incumbent material choices.

5. Using cheap fuel

SpaceX's Starship will run on methane rather than the RP-1 used to propel Falcon 9's Merlin engines. LNG (methane) is 15x cheaper at the time of this writing than RP-1.

Someone should conduct a similar analysis regarding the costs of ship-building processes in the United States. This will undoubtedly identify opportunities for build efficiency.

In the decade since 2010, investors poured more than $220 billion into mobility technology. The United States held the largest share (40%) of invested capital and companies. The autonomy and software sectors received the greatest investment. Other technologies on the top 10 list include batteries, charging, and semiconductors.

Investments in these and other areas should be considered for maritime applications. My next piece will describe the technologies that can have the biggest impact on maritime.

Ultimately, it is time to rebuild the United States maritime industry, and capital allocators and startup founders are the right people to make this happen.

Dalio is a billionaire hedge-fund manager and Zeihan a geopolitical strategist. This piece compares the two books' perspectives. But why write this piece? Because understanding is the first step to identifying opportunities. Government, entrepreneurs and capital providers should incorporate future theses in their planning processes.

Similar inputs, two different conclusions

Dalio and Zeihan both cite examples dating several hundred years. They both discuss their predictive models and input/output data. Both even agree that the American world order is ending. But they disagree on who will "win" in the post-American world order and why.

Dalio's argument - the US is in decline while China rises

Dalio concludes that there has been one winning dominant global power throughout history. That global power (which can be an aggregate of smaller powers) sets a "world order". The rise and fall of world orders follow a similar pattern throughout history. Dalio describes this pattern as "the long debt cycle".

The long debt cycle follows an internal and external cycle. Each of these affects the formation and, eventual, decline of the order. The internal cycle follows six stages:

1. A new order begins. The winners of the internal revolution consolidate power.

2. The power-holders create resource allocation systems and government bureaucracies.

3. There is a period of peace & prosperity.

4. Great excesses in spending & debt lead to the widening of the wealth gap.

5. Bad financial conditions & inequality lead to intense conflict.

6. Revolutions or civil wars cause a re-baselining of power. Sometimes these transitions of power are peaceful, but mostly they are not.

As an order passes through these phases, several determinants illustrate its status. These determinants are both causes and effects of the power's stage in the cycle. The factors Dalio tracks are: competitiveness, economic output, education, military strength, financial center, innovation/technology, trade and reserve currency status.

As a new order builds, education drives innovation & technology development. Competitiveness from tech leadership and cheap labor climbs. Economic output follows, which leads to rises in military strength. These factors mean heightened security and the creation of financial centers within the order. The order then becomes the most lucrative trading & investment partner. Which results in its currency becoming the preferred global reserve currency.

At this point, the power has reached its peak. Its people are wealthy and they make a lot of consumption purchases. The country becomes less competitive because of high labor costs and complacency. Consumption & uncompetitiveness lead the power to increase debt levels by borrowing. At this point it is over-indebted and has a large chasm between financial wealth and real wealth. (The former are market-inflated values (e.g. equities), the latter is the value of physical or hard assets).

The country should reduce expenditures, raise taxes on the wealthy and start paying down debts. Most generally, though, it will take the easier option of printing more money. This will devalue its currency and lead to a collapse of the financial system. Once restructured, its currency likely will not survive. If it does, it will not be the preferred currency for investment or as a store of wealth.

Dalio's analysis concludes that the US is in stage 5 of the order. Its education, innovation and economic output have fallen. Further, the US' debt levels continue to grow. As the US takes on more debt it is not spending the money on "productive" outputs. Rather it is paying for increased social programs. It also continues to print money to create stabilization measures. Recently these have resulted in a massive inflationary bump. Further the economic gains have benefited the wealthy more than the poor. The wealth gap is helping to fuel a rise in populism.

This means that the US order is likely ending. Dalio's model sees a Chinese-led order as the obvious successor to the ending US order. Deng Xiaoping's government opened China to global trade beginning in the 1970s. Since that time China has climbed the scale of determinants. China, of course, boasts a massive population. This has allowed it to develop quickly.

The CCP, like many Chinese dynasties before it, are planning for the long term. Dalio argues that China's long history has inspired a particular leadership culture. One that respects and observes China's extensive history. Mao’s leadership offered an example of self learning. In the early years of leading the CCP, Mao read the 20-volume Zizhi Tongjian. A set of texts covering 16 dynasties and 1,400 years of Chinese history.

Chinese leaders' couple their observation of history with clear implementation plans and metrics. Two examples include China's Vision 2035 and Belt & Road Initiative (BRI). In Vision 2035, China plans to solve extreme poverty and "create a moderately prosperous society in all respects". Measurable goals will illustrate progress to the wider Vision 2035.

China's Vision 2035 sets internal targets for China. BRI sets up a Chinese-backed network of trade infrastructure. The plan includes maritime and overland economic belt "silk roads". The overland economic belt includes railways, energy pipelines, highways and streamlined border crossings. These initiatives would connect China, Pakistan, India and much of Southeast Asia. The maritime silk road expands Chinese influence to accommodate expanding maritime trade. Initially, BRI would speed up port development. Presumably, over the long term, China would also increase its Naval presence.

As of 2020 more than sixty countries had signed onto the BRI. The projects are debt-funded by Beijing. In turn, this means an expansion of the global acceptance of the Renminbi.

Dalio's conclusion on China is clear: "China is now a major and expanding power." We should expect it to continue strengthening on key determinants. These include education, innovation & economic output. While the average education level in China is lower than that of the US, China's highly educated population is larger than that of the US. This may be a function of overall population size but is a notable advantage. Education and notable government-supported resources will fuel innovation. China already leads in adoption of new technologies. Its current population represents hundreds of millions of hyper-adaptive consumers. This has enabled the Chinese payments space to innovate far faster than those in the West.

It's not only in consumer technology that China is advancing. The country launched more rockets to space in 2021 than did any other. Further, what success the US had was almost entirely thanks to SpaceX. Traditional US government contractors (ULA, Lockheed & Boeing) are atrocious at actually doing anything. At the time of this writing, Lockheed Martin's Artemis I mission has only just launched after failing twice before. The failures marked the culmination of years of project delays and billions of dollars of cost overruns. The Chinese, meanwhile, are testing hypersonic missiles. Their guidance & control systems achieve accuracy within 24 miles of their targets. It's foolish to think that China is not capable of rapid innovation in advanced hard tech.

Zeihan's argument - globalization is over, the US will be the winner. But it's not for the reasons you think.

Growth has allowed the world to produce more, build more and do more. Several systems of government are at work in the world but more is better for people. In one way or another, each system strives for it. Zeihan believes we must now enter a period of less.

Underpinning this shrinkage are three basic principles:

1. Birth rates are in decline.

2. Global security provided by the American order will stop.

3. Geography is critical to success in the post-American order.

Declining birth rates mean fewer workers and consumers in the future

Underpinning the decline in birthrates are trends and policy. Urbanization has meant less space and generally improving wealth and education levels. Standards of healthcare have also improved women's access to birth control. Further, some governments have held restrictive policies designed to deliberately squash birth rates.

These factors combine to mean that humans are having fewer children. But birth rates are not equal by country. China, for instance, could see its population fall by half by 2100. The US by contrast is on track to grow.

Birth rate decline means fewer people in the future. Fewer workers, inventors and consumers. To make matters worse, China's population boomed before birth rates began to fall. This means that China is now reaching a time when the majority of its population are at retirement age. That phenomenon turns the well-fare pyramid upside down. A small number of working-aged people must support a large number of retirement-aged people.

The logical counterarguments to this problem are technology and immigration. Advances in automation allow humans to be more productive. Which then expands the number of services provided with a limited labor force.

Amazon offers a good example. It has progressively increased its use of autonomy in its distribution centers (DCs). Autonomous robots lower delivery costs and improve availability. By removing humans, Amazon reduces its fulfillment processing time and error rates. Robots also allow for smarter inventory management. Which, in turn, means Amazon can make more SKUs available. That's before mentioning that robots need less care than their human counterparts.

Society expects us to fear autonomy, but it's actually the arbiter of opportunity cost.

Immigration is, of course, a way to boost population numbers. Contrasting China's population decline outlook, several countries are on track to grow. India, Indonesia and parts of Sub-Saharan Africa will see strong population growth. If the US or China are willing to accept immigrants, their economic outlook will benefit.

Zeihan believes the US is more likely to tap immigration to its benefit than China. This is because the US was literally built on immigration. It has had a lifetime tradition of accepting immigrants.

Despite much rhetoric, the US has more immigrants than any other country in the world. Today, immigrants represent almost 14% of the American population. That is almost triple the share that it was in 1970. And 2/3rds of Americans view immigration as strengthening the country.

These attitudes favor immigration at large and bode particularly well for skilled immigrants. Immigrants are also most attracted to the US as an immigration destination.

Low tax rates and high earning potential make the US economically attractive. US Corporations can also use the H1B system to match open needs to immigrant talent pools. This allows US firms to select for foreign talent rather than asking the government to do so. The US is also home to almost half of the top 100 universities on the planet. These schools attract talented young immigrants who wish to study with others of similar skill levels.

By contrast, China has a long but mostly isolationary tradition. In recent decades, China has been a net exporter of people. As of 2020 there were only 1.5M overseas residents in mainland China. Compare this to some 10.5M emigrants who left China in the same period.

China's central planning focuses on building 'self-sufficiency'. This is an aim that makes it harder to accept immigration, despite its benefits. That doesn't mean that China cannot change its position on immigration. It does, however, put the country at a disadvantage in the global war for skilled migrants.

The end of global security means the end of globalism

Modern supply chains are global. They break up resource extraction and manufacturing into several steps. In effect, skills and materials can be combined at the 'optimal' place.

The underlying reason for this is that the cost of shipping is low. Large ships, containerization and refined port infrastructure have enabled economies of scale. A 'large' vessel today might carry up to 18,000 containers. Which makes each individual container very inexpensive to move (~$2,100 from Shanghai to LA as of this writing).

The backdrop that has allowed the growth of the sector is maritime security. Zeihan argues such security is in decline. A receding American order means the US is no longer a "global police force". For instance, the US no longer maintains a regular carrier presence in the Persian Gulf.

In 2021, the UN reported increases in piracy, armed robbery, terrorism and trafficking. The latter included nuclear materials, firearms and human trafficking.

So if ocean shipping becomes insecure, countries will deglobalize. Without incentive to export, governments will protect their domestic industries. By doing so they'll strive to decrease reliance on imports, which would be more expensive.

The question is whether maritime security can be maintained without a global arbiter. But that's a question of incentives. The Sino-American trade relationship has thrived despite differences of ideology. This is because there was economic incentive alignment for both parties.

Globalization meant countries could maximize the value of their comparative advantages. They will want to do so going forward. So countries reliant on trade will move to fill the pending security void.

Zeihan remains unconvinced that others can do so even if they wished to. Here he contends that only Japan and the US control Navies sufficient to patrol global trade routes. Currently, that is the case.

But the picture is changing. China's Navy (PLAN) is actually the largest in the world. Though fleet count is not a good measure of power. Instead, the technology and capabilities of the relative fleets is relevant. For instance, the US Navy counts 11 aircraft carriers and 92 cruisers or destroyers. By comparison, PLAN operates 2 aircraft carriers and 33 cruisers or destroyers.

It would be insane to judge the future based on current Navy sizes. Especially considering China's recent growth and trajectory. By 2025, China plans to double the size of its aircraft carrier and destroyer fleets.

Of course, the real strength of the US Navy is its ally network of regional powers. Japan, South Korea, Australia, New Zealand and the Philippines are Indo-Pacific allies. China, by contrast, claims only one formal ally, North Korea.

Naval growth and calls to action should improve maritime security, not weaken it. Additionally, economic incentives remain to build global supply chains. That does not mean the future will be the same as the past. Trading partners will change based on political and economic factors. Producers will desire to limit the risk of future supply shocks, like those seen in the pandemic. That will give rise to localized manufacturing. But the pendulum will not swing so far that the situation becomes binary.

A little too excitable?

Zeihan's book is contrarian and thought-provoking. Perspectives like his offer an antidote to conventional wisdom. For me, one example undermines his credibility completely.

In it, Zeihan discusses the effects of de-globalization on commercial aerospace. Here he claims that Airbus will fall apart because Europe will fall apart.

Zeihan claims that Brexit will result in the British aerospace industry aligning itself to Boeing. Which is a problem (for Airbus) because the UK builds engines and wing-structures.

But Airbus has limited exposure to a UK supply chain for those components. Rolls-Royce currently supplies engines only to Airbus' widebody lines (A330 and A350). And those two programs churn out just 10% of the volume of Airbus narrowbodies.

Zeihan argues Airbus' orderbook is at risk because of geopolitics. He's specifically concerned that some of Airbus' largest customers are Persian-Gulf based carriers. "With the Americans abandoning the Persian Gulf region... there is now way in hell that civilian aviation will continue to operate in the area," Zeihan writes.

Boeing's exposure is actually larger than Airbus' in the Gulf. Among the three largest carriers in the Middle East (ME3), 55% of in-service aircraft are Boeing made. From these carriers, Boeing holds 307 future orders while Airbus only holds 98. And Qatar Airways’ recent spat with Airbus makes it unlikely to buy Airbus planes again.

Zeihan's most egregious claim is that Boeing will 'take over global aviation'. This is the same Boeing that created a complete and total disaster of a new aircraft program (the 737 MAX). It's also the same company that needs an act of congress to certify the last two of the models in the family (MAX 7 & 10). And it’s the same company that has only just launched Artemis after spending $35B on the program. Meanwhile, SpaceX's Starship has nearly double the payload and cost a mere $2.5-$5B to develop. Boeing, at least, has a talented lobbying team.

Zeihan's conclusion that Boeing has the right to win on its own merits is laughable. His assertions that the Europeans are worse offenders at protectionist aerospace policy is wrong. This example in reference to the rest of the book’s conclusions leads one to question the quality of Zeihan's analysis.

Takeaways and thoughts on how to use these data points in the future

The American order is in decline. The balance of power is shifting. But this does not mean that globalization is over. The reality seems likely to be a compromise of Zeihan and Dalio's views.

Rana Foroohar, author of Homecoming: The Path to Prosperity in a Post-Global World, summarized globalization's future:

"Some people feel there is no middle ground between unfettered, 1990s-style hyperglobalisation and the nationalism (or even facism) of the 1930s. But there has always been a shifting balance between national interests and global ones; too much of the former results in protectionism or worse. Too much of the latter means that many lose trust in the system."

The exciting thing is the opportunity this shift creates. Manufacturing tech and local industry seem to be the most obvious beneficiaries. But a new world order and deglobalization mean new transportation needs.

Going forward, I'll focus on these opportunities in transportation and logistics technology. I'll begin by evaluating how relative transport systems are going to change. Then, I'll drill further to surface the most impactful trends. After that, I'll work to suggest theories for how we should affect those changes.

If that sounds like a fun journey to you, continue reading my work on the Incubate Aerospace newsletter and my personal blog and get in touch.

So I’ve merged my personal website and blog onto Substack. From now on, I’ll post all of my essays (aerospace and non-aerospace) here.

So what’s been on my mind and what will I write about next?

Startup aerospace remains a topic I ponder frequently. Beyond that, I wrote this piece on Deglobalization and theories of the forthcoming world order. I’ve also spent the last three months learning and writing about the US maritime industry. Next, I expect to deep dive possible disruptions to the road and rail industries.

I can't wait to share what I learn with you. Thanks for being here.

Airline travel looks different than it did before the pandemic. For now, the industry has achieved a "new normal". It won't be the last.

The Economist likened flying in the pandemic to air travel after 9/11. Following 9/11 airlines locked cockpit doors, added armed air marshals, and banned sharp objects. Later, liquids, shoes, and laptops came under scrutiny. Now, travelers expect a consistent if intrusive airport security experience.

The airline passenger experience is still evolving. Countries continue to change entry and exit requirements based on health data. Airlines have rolled out enhanced cleaning, health, and safety protocols. Cabin crews enforce government policies, like mask mandates.

As the pandemic "ends,” some industry changes will stay. Carriers may vary their policies and the stringency of enforcement. But health officials are likely to continue recommending masks, quarantines, and vaccine passports. In five years' time, it will not be uncommon to see passengers wearing masks, even if not required.

Air carrier business models have changed

Airlines grounded hundreds of aircraft starting in March 2020. I imagine the scenes at airline headquarters looked like Wall Street in 2008 (like this clip from Margin Call).

Governments stepped in to support, preserving jobs and saving the industry from bankruptcy. Though controversial, this support allowed the airlines the necessary breathing room to plan. Without it, they would've only kept a barebones corporate staff to manage the tactics of a shutdown. That's before mentioning the effects on aircraft values, airline supply chains, and frontline workforces.

This allocation of resources to strategy allowed airlines to reset in several ways. Corporate "bloat" is like a smoking habit. You tried something, got hooked on it and found it was harder to quit than you expected. Like most businesses, airlines hide a lot of bloat in their corporate structures. In airline world, "bloat" is many fleet types, unprofitable routes, and operational inefficiencies.

So during the pandemic, inefficient and aging aircraft types left the fleets in droves. The gargantuan Airbus A380 is a good example. Lufthansa, Etihad and Air France all retired their A380 fleets. Other carriers such as Singapore Airlines and Qantas retired A380s as well. One airline leader, Nico Buchholz, estimated that nearly half of the global A380 fleet will remain grounded forever.

Changes were not limited to long-haul or high capacity airplanes. Airlines culled both their mainline and regional fleets as well. The optimization equation involves several factors: useful life, ownership, operating, and opportunity costs. The post-pandemic mix of aircraft is what you'd expect—boring and efficient. Fewer types with lower unit costs and increased consistency.

Demolition, though, is only half of the renovation process. After deciding which aircraft to part with, airlines examined their future fleet needs. Most airlines emphasized the need for flexibility in designing their future fleet structures. Future demand, particularly for corporate travel, is quite unknown, so the ability to adjust system capacity quickly is important.

Ultra Low Cost Carriers remain bullish on the return of leisure travel. It has been the most resilient demand sector in the past. While mainline carriers downsized, Indigo Partners, private equity owner of Frontier, Wizz Air, Volaris and Jetsmart, placed an order for 255 Airbus A321neos.

Networks, too, got a refresh. JetBlue, for instance, finally closed its Long Beach focus city and shifted the flying up to LAX. While Long Beach Airport is convenient for many in Southern California, it wasn't the right hub airport for JetBlue. Since 2015, JetBlue’s West Coast network has focused on premium (business class) transcontinental markets. Passenger demographics and the revenue environment at LAX make it a better fit than Long Beach.

British Airways shuttered its operations at London Gatwick early in the pandemic. The airline has reopened Gatwick with mainline long haul operations. But rather than restarting its old short haul network, BA is launching a new low cost airline instead. Called EuroFlyer, this has likely been the right commercial fit for Gatwick for some time. As with JetBlue in Long Beach, the pandemic gave the BA team the political cover to actually do it.

Airlines are also adjusting their approach to revenue. Here, they seem to be converging more toward the carrot and less the stick. First, the big three eliminated change fees altogether. They also rolled out an increased number of low cost premium seats. Delta completed installation of its Premium Select cabin on widebodies. The cabin is similar to international Premium Economy or US domestic First Class. Interestingly, space for this cabin seems to have come through a slight reduction of Delta One business class seats. Emirates, too, began flying its previously announced Premium Economy product.

Unlike the "penalizing" structures associated with fare unbundling, these changes are customer friendly. They encourage customers to spend more money based on perceived value. These changes started before the pandemic, but are more important because of it. The loss of corporate demand means airlines must capture more value from leisure. In a time of changing conditions, flexibility became an important buying criteria.

These efforts should better align product offerings with customer demands. The trouble is, airlines still don't know what the right equilibrium should be. For the moment, short haul leisure travel has returned. Business travel remains sluggish, though its return is also accelerating. Then again, real estate is valuable even through a downturn. Historically heavy business travel routes, like those to London Heathrow, have not recovered. Yet airlines still find it worthwhile to operate them to protect their real estate.

At last, airlines took capital and reputational risk by partnering with startups

If there is a silver lining to the pandemic for airlines, it is that they have gained the freedom to take risk and innovate.

Why did the pandemic enable this? First, airlines received financial help. This follows the same logic as giving at risk kids reliable housing. If you're not worried about having a safe and quiet place to do your homework, you're more likely to do it. Without government aid, airlines would have had to cut to a minimal corporate staff. That staff would've focused on survival alone, leaving little time for anything else. But with government support, airlines were free to focus both strategically and tactically.

The pandemic also allowed airlines time to experiment. Passenger counts fell to record lows. This allowed airlines to onboard new technologies with minimal passenger disruption. In normal times, those cutovers would need months or years of planning. 

Yet, in some cases, airlines had little choice but to move quickly. This was particularly true of information about travel restrictions and testing requirements. American Airlines, for instance, built a 'travel guideline' tool on its website. Sherpa powers the tool, and though Sherpa was founded in 2015, we can thank the pandemic for this new level of adoption. Verifly is another example. It's a mobile app that airlines adopted to streamline testing and vaccination requirements. As passenger flows recover to pre-pandemic levels, airlines and regulators need increased automation.

The scope of airline investment in future technologies was very broad in 2021. Airlines backed future aircraft types and alternate aircraft propulsion systems.

United ordered Boom Supersonic's Overture and Archer's Maker eVTOL aircraft. Several other airlines including American Airlines, Virgin Atlantic and Japan Airlines also deepened their commitments to the air taxi sector. British Airways and Alaska Airlines threw their weight behind hydrogen-powered aircraft startups.

Concerns about global climate change remain a primary topic of conversation. Airlines, like all industries, must decarbonize. Most of these investments offer a step down the path to sustainable aviation. These are not firm commitments in most cases but they are still meaningful. They prove that startup aerospace has finally captured the attention of airlines.

That may seem insignificant, but airlines have rarely taken so much reputational risk. When the C-Series (now A220) came to market, airlines shied away from ordering it. The Boeing and Airbus duopoly offered easier solutions than taking risk on an unknown airplane type. Even though that type was developed by a highly reputable regional aircraft OEM. 

Yet, tolerance for calculated risk-taking seems to have grown in corporate America lately. It has only been 15 years since smartphones first came to market. Leaders today cannot deny the seismic shift they created. With that rate of change in mind, I'm glad to see airlines leaning forward on technologies of all sorts.

The question is how enduring will strategic airline investing be? It isn't hard to imagine some airlines using technology investing as a marketing tool. Something they can walk away from when the going gets tough.

JetBlue and its Tech Ventures subsidiary are a counter-example. They started investing in travel startups long before the pandemic. Today, they continue to support startups that enable travel. And through the pandemic, they've doubled down on their commitment to the sector. More on that in a future piece.

That we’re talking about the future is a victory

A year ago, the airline industry was on its knees. Its recovery was anything but assured. Yet the fact that airlines are now thinking about their existence 2, 5 and 10 years after the pandemic began is a huge win.

The industry is not yet out of the woods. 2022 will bring its share of challenges and changes. Yet, the structural changes airlines made during the pandemic are here to stay. They will usher in a new era of travel and position airlines for success, despite the continued uncertainty of this time.

Demand shocks are normal in the airline industry. September 11, the 2008 financial crisis, SARS, and the COVID-19 pandemic all torpedoed demand for air travel. The COVID-19 pandemic was by far the worst. Passenger demand plunged lower than in other shocks and remained depressed for longer.

In the US both leisure and corporate travel were annihilated early in the pandemic. Regional leisure travel has almost fully recovered. Corporate travel, though, remains far below its 2019 levels. Its return appears less certain—from both a timing and demand perspective.

Will the historic corporate travel demand base return? How will the pandemic transform corporate travel over the long term?

My hypothesis is that corporate travel demand will actually outpace pre-pandemic demand for three reasons:

1. Long lasting migratory patterns.

2. Geography flexible and agnostic hiring.

3. Increased productivity enabled by technology solutions.

Travel that won't return

Some travel isn’t coming back. McKinsey classifies corporate travel as either internal or external. Internal travel is for intracompany purposes. This includes team building, training, or inspection of field operations. External travel refers to engagements outside the company. This includes in-person meetings with clients or partners, trade conferences, and sales calls.

Content-heavy and routine trainings can likely remain remote in the long term. So too can the earliest sales call prospecting. Often first relationship meetings are with the wrong teams. That's because business developers often start with the teams they can contact. Early prospecting conversations conducted virtually save time and travel expense.

Travel that will return

Technology allows business developers to see clients in many time zones on a single day. Client managers can work on deals in different stages and product lines. This is the sales model perfected by SAAS. By necessity it was also the one adopted by all business developers during the pandemic.

Business developers realize they can create value via remote connections, but they also understand that enduring relationships benefit from in-person visits. Sussing out the details of joint-business activities is easiest over discussions with subject matter experts. Meals and social outings deepen bonds and lead to more profitable outcomes.

In short, the pandemic should supercharge business developers’ abilities. The critical first step is incubating partner discussions remotely. Then deal makers can maximize the value of in-person visits to shorten closing times. In essence, the efficiency of remote prospecting  should actually increase deal flow and therefore travel demand.

Colleagues, teams and whole companies have on-boarded remotely over the past two years. The pandemic has taught all of us that remote-first is possible. But, strategic planning, steering and working sessions seem far more effective in person. As restrictions ease, teams will also likely desire to connect frequently for high-impact discussions.

The pandemic has raised the stakes for travel. To justify the expense and risk of travel, organizations should raise the stakes on prep work. This shift resembles Jeff Bezos' famous "narratives". When pitching a new idea, Amazon employees come armed with 6-page narrative. Executives read the narrative during the meeting and discussion follows. This process ensures that employees conduct exhaustive analysis and make concrete recommendations. Applying similar pressure for limited in-person interactions will also maximize strategic planning outcomes.

New sources of travel enabled by geography

Technology and the pandemic have made work remote and distributed, while the realities of long term leases mean employers remain physically headquartered in major metros. Bringing employees back to the office - even for just occasional internal networking - presents a new source of demand, and from new geographies. 

McKinsey estimates that 40% of jobs can be remote into perpetuity. The technology allowing this phenomenon has existed for some time. Companies are now accepting remote-first work because of its efficacy in the pandemic.

Unbounded, people are moving in droves to more affordable and better lifestyle cities. The fastest growing US cities in the pandemic haven't been coastal tier 1s. Instead, the list includes cities like Phoenix, Denver, Austin, Nashville, and Charlotte. The pandemic accelerated a trend from the previous decade.

These moves are likely to result in sustained increased demand for air travel. Companies are likely to shift spend to internal travel for remote workers. Something that can be offset by reduced rents in expensive geographies. It should also mean lower labor costs as pay begins to reflect that of lower-cost jurisdictions.

What this means for airlines and travel providers

Industry consensus seems to represent a bear case for corporate travel. McKinsey estimated a 20% reduction in corporate travel demand by 2023. A GBTA survey from September indicated that 47% of managers had canceled "most trips".

Despite the current data, I'm bullish on the future of corporate travel. The pandemic has induced structural changes to how humans work. Business travel will come back - it will just be in different geographies and benefit different airline operating models. 

US airlines are likely to see improvements to both volume and yields on regional routes. Spurred by shorter and more frequent trips from new home cities to headquarters. Mid-sized cities like Charlotte and Denver are already well positioned to accommodate increased local traffic. They are home to large connecting hubs but as higher-margin local traffic increases, connecting traffic can be shifted elsewhere in the system. This shift will be accelerated by more efficient regional aircraft which are the lowest hanging fruit for hydrogen, hybrid and electric solutions.

As for long haul travel, the jury is still out. Structural changes to where people live will benefit secondary long-haul markets - like Air France’s Denver to Paris or Turkish’s Dallas to Istanbul routes. Though, the underlying reasons for travel have changed less for long-haul than regional travel. Long haul has always had a higher bar because of its expense and time requirements. As nations ease their entry and exit restrictions, the demand base will likely return to near pre-pandemic levels. This return of transoceanic capacity could be accelerated because of ever-worsening supply chain congestion and increasing demand for belly cargo.

Demand for travel has historically outpaced analyst expectations. We should expect the same trend on the return of corporate travel. If only one thing is certain - the post-pandemic world will not look the same as it did before.

For those that don’t know, I started my career as a network planner for JetBlue. Airline planning offers a dynamic problem-solving work environment and a source of pure joy for airline nerds. The process of network design is a mix of behavioral economics, statistics, and game theory. We make educated, data-driven guesses at how our customers and competitors will react to our route decisions. 

Novel airline networks

I love thinking about novel airline routes, particularly those that put an existing airplane type to work in a new franchise. 

Designing an airline network is as much an art as a science. Aircraft are flexible. They can fly in unique geographies and be configured with different cabins. United's Airbus A320s only hold 150 passengers, while Frontier's carry up to 186. This flexibility allows entrepreneurs to craft new business models around the same airplanes.

Here are a few of my favorite disruptive airline franchises: 

JetBlue's Mint

JetBlue launched its Mint business class product in 2014. Its initial routes were New York (JFK) to San Francisco (SFO) and Los Angeles (LAX). Prior, JetBlue had underperformed its competitors on these routes because it didn’t offer a premium product. 

The demand for Mint and the sources of that demand surprised both JetBlue and the industry. Mint was designed  to cater to high-value leisure customers, not to business travelers. The first surprise was just how many business travelers upgraded on their own dime. The second surprise was how much pressure those same fliers put on their firms to offer Mint. Despite being a budget-premium offering, the product was much better than established business class offerings in the market at the time.

JetBlue has always served markets where it could stimulate traffic. Mint's performance proved that premium markets could be stimulated as well. The stimulatory effect was so strong JetBlue expanded Mint to several new markets that had little existing premium service and no regular lie-flat seating. 

JFK originating transcon flying grew, as did Boston and Fort Lauderdale. Then during peak seasons, JetBlue started flying Mint to the Caribbean. Most recently, the company inaugurated Transatlantic service to London.

None of this would've been possible without the Airbus A321. The airplane offered enough floor area for premium and core (economy) cabins and had sufficient range for transcontinental flying. This wasn’t always the case - early versions of the A321 had limited range because it was just a longer, heavier version of the A320. Extra fuel tanks and a light passenger configuration made regular transcon flights possible. 

To tackle the Atlantic, Airbus had to extend the A321’s range even further with its LR variant. If it chose, the forthcoming A321XLR would allow JetBlue to fly even further onto the European continent.

Emirates and the A380

Emirates Airline got its start in the mid 1980s. The airline grew modestly at first but by the mid 2000s it seemed unstoppable. The airline's momentum was a critical pillar to the clever development of Dubai. 

The Emirate of Dubai, unlike its neighboring emirates, does not have any on-shore oil. Underpinning its economic success is a free trade policy and a focus on tourism.

The success of tourism & business hubs are dependent on air traffic. Dubai’s rise to prominence depended on it's national airline. To help it grow, Emirates developed an ingenious commercial strategy. 

Dubai sits within an eight hour flight of two-thirds of the world's population. Rising incomes in much of the developing world meant that more people could also afford to fly. So Emirates built a modern Silk Road, connecting passengers from Europe and Africa to Asia and Oceania.

Most airlines shied from the A380, arguing few markets could support so much capacity. They were generally correct. But Emirates had unique needs for such a beast. A380 meant that Emirates could carry huge passenger loads out of landing slot constrained airports. Pre-pandemic Emirates flew nine daily A380 trips between London and Dubai. Trouble filling the airplane? No problem. Underserved markets in India, China and swaths of Africa are available to stimulate demand.

The A380 had another unique characteristic - its space. Creative product designers imagined palatial premium cabins. The first and business class cabins of the A380 occupy the entire second deck. It is even outfitted with a bar at the rear of the cabin. Best of all, Emirates designed its airport infrastructure around the airplane. The Emirates lounges at Dubai Airport sit levels above the main mezzanine. From there, passengers may board directly onto the second level of the A380. Who wants to see economy passengers anyway?

The A380 defined Emirates' brand. It's now an airline people aspire to fly and clamor to work for. That brand suits the city of Dubai and continues to draw travelers from around the globe. Other airlines in the region are good but nothing beats flying an Emirates A380 to DXB. 

British Airways' "banker shuttle"

I first flew the Airbus A318 from Denver to Chicago (Midway). My mother's employer (Frontier Airlines) had bought the airplane. I don't think anyone understood the term 'unit economics' at the airline then. But it was a fun little airplane configured with 120 seats and an abnormally tall tail.

The A318 was designed to be a regional sister to the A320. Short and light, the A318 offered strong hot & high climb performance. Frontier and Avianca were drawn to it as both operated at high altitude airports.

That excellent climb performance was handy for another airline - British Airways. BA equipped its A318s with 32 business class seats and sent them across the pond to New York. The trip originated at London's City Airport, right next to London's banking centre. The service catered to time-sensitive premium passengers, who might've flown Concorde before. 

On the westbound leg, the A318 stopped in Shannon, Ireland. The runway at City Airport was too short for a nonstop crossing. BA turned the stop into a positive, as passengers could preclear US customs. The flight then arrived domestically in the United States.

BA's "banker shuttle" as it became known is more novel than transformative. The other two network examples were about building on the capability of the airplane. BA’s transatlantic A318 service was about creatively making use of the aircraft’s limitations.

Nonetheless, I love the creativity that went into developing the service. BA used an otherwise orphan airplane type to serve a highly premium market. Most airlines don't like the risk of technical stops. BA, though, embraced the nuance to create an awesome experience. Airlines should be willing to take these kinds of risks.

Why it matters

The lesson from these stories is aircraft are flexible and opportune markets nascent. Route planners and entrepreneurs need not think linearly about the potential of markets. 

JetBlue recognized that premium leisure markets were highly elastic. Emirates recognized the value of its hub geography for connecting flows. It also saw the vitality of air service to the development of Dubai as a prominent world-class city. British Airways took a regional airplane and turned it into a high-yield machine. 

Gordon Bethune was a legendary Continental Airlines CEO. He saved the airline (from itself). Nonetheless, he said of JetBlue, "I don't think JetBlue has a better chance of being profitable than 100 other predecessors with new airplanes, new employees, low fares, all touchy-feely... all of them are losers. Most of these guys are smoking ragweed."

Bethune fell prey to the trap of industry experts. Experts struggle to imagine a different product market fit from their own. But as David Neeleman continues to prove, there are untapped use cases for the same airplanes. 

It's time to innovate and we don't need to wait for new airplanes to do it.

30 years after its demise, Pan Am is still one of the most well known brands in history.

Juan Trippe, Pan Am's CEO from 1927-1968, was equal parts inventor, persuader and conquistador. His  hubris and stubbornness were legendary. If he had pursued his vision with any less fervor, airplanes and airlines wouldn't exist as they do today.

Trippe’s obstinance led to several generations of world-changing aircraft. These fleets revolutionized aviation and thrust forward new categories of commercial service. As we think about the potential impact of several new aircraft today - from urban aircraft to supersonic jets - Trippe and Pan Am hold lessons from the past on how to build the future.

Pan Am was the dominant global air carrier for six decades before succumbing to bankruptcy in the face of regulatory changes and an aging cost-structure. Though Pan Am eventually failed, it will forever hold a legacy of having built a global empire in the sky. To do so, the company navigated countless political, economic and technical challenges.

Trippe, for his part, always saw the potential of the business. He never relented in his striving to conquer the sky.

Here are a few of the lessons Juan Trippe has for the aviation conquistadors of today:

1. Build operational nodes and establish incumbency

There are two points here - first, central operational bases (or hubs) are important success drivers. Second, incumbent benefits (holding the number one or two position in any market) contribute significantly to the viability of the business.

Airlines benefit from network effects. Hubs or nodes are cost effective. They allow for economies of scale and operational efficiency. A central base of operations enables crews and aircraft to be efficiently scheduled. If one aircraft is grounded, another is usually available to take its place.

Hubs also accrue revenue benefits. The largest airlines offer the best schedules and most connectivity. They also earn the most revenue. All those cost and revenue benefits enable profitability. A strong hub that throws off cash is the perfect basis for growth. 

Trippe built incumbency into Pan Am's business plan. He understood that his leverage was directly tied to other's reliance on his company.

First, Trippe procured several airmail contracts from the US government. By doing so, Trippe secured guaranteed revenue for Pan Am. Pan Am's first air mail route was from Key West to Havana. From there, Pan Am grew to carry air mail to other parts of Latin and South America. To further strengthen Pan Am's position, Trippe negotiated exclusive landing rights everywhere he could.

After dominating Latin America, Trippe copied the strategy in other regions. Initially, across the Pacific and, eventually, the Atlantic.

Startup and on-demand airlines should closely consider the efficiency benefits associated with network hubs. Surf Air proposes on-demand air travel, while Joby promises electric aerial ridesharing. The on-demand nature of these operating models is meant to emulate Uber. 

Infrastructure, crews and spare parts, though, will have to be concentrated at airports or vertiports. While a trip may be sold nearly instantly through an app, successful on-demand airlines will concentrate their network assets. This probably means scheduling many aircraft on a few highly trafficed routes (i.e. LAX to the downtown LA metro station). 

The key is prioritizing operational efficiency and building incumbency in select geographies before expanding. In this way, the operator copies and pastes what has worked elsewhere in new geographies. 

2. If you don't like how the table is set, turn over the table.

Grit, resilience and pliability are necessary attributes for all startups. Pan Am offers a version of them with wings. 

Trippe was never dealt exactly the hand of cards that he wanted. Instead, he took the hand he was dealt and traded for a better one. To do this, Trippe maintained a dogged approach toward his end goal but was flexible about how he'd get there.

Two examples from Trippe's legacy come to mind. Trippe's first airline job was as Vice President and Manager of Colonial Air Transport. There, he pushed to expand the airline rapidly. He wanted to add new airplanes and routes. Colonial's owners, however, preferred making a profit to rapid growth.

What they failed to realize was that scale is everything in the airline business. Trippe, for his part, left Colonial and founded the Aviation Corporation of America. There, he bid on the Key West to Havana route, alongside two other operators. In the end, the Assistant Postmaster General, W. Irving Glover, encouraged the three bidders to merge. Trippe, negotiated to become President and General Manager of the newly merged Pan Am.

Later, in 1939, Trippe was removed from his role as CEO of Pan Am and demoted to President. The move didn't last long. Trippe had spent years centralizing control of the affairs of Pan Am. The man designated to oversee the executive committee was Thomas Morgan. He said of Trippe, "(he) had everything so snarled up nobody could ever untangle it." In this way, Trippe was irreplaceable. By 1940 he had re-taken the reins as CEO at Pan Am.

Startup operators, too, should also seek to maintain a degree of pliability. The market enabled by new aircraft technologies is yet unknown. While the objective may be clear – to build new networks of flying enabled by technology. The order in which that happens and with which players involved, is yet unknown. The key is to hold onto the end goal and approach it with great discipline. The solutions, though, must be as flexible as Juan Trippe.

3. Go where the technology allows, then buy a better airplane.

From the day he joined the business, Trippe wanted to serve the transatlantic market.. Unfortunately, airplane technology was a long way off when he started. The first scheduled airline flew in 1914 with a route across Tampa bay.

Airplanes were hardly better in 1922, when Trippe formed Long Island Airways. So he flew where he could - shuttling wealthy families from New York City to their summer homes on Long Island. He launched service to Atlantic City and, with several stops, flew to Canada and the Caribbean.

Trippe made good use of the aircraft, but pushed relentlessly for more performance. Each successive generation of aircraft was to be faster and offer more payload and range.

Trippe knew what was possible with the technology of the day. He developed his own rudimentary knowledge of aircraft and hired the best. Andre Priester, Pan Am's head of operations, was instrumental in pushing the envelope on aircraft safety and performance. Charles Lindbergh, too, served as a technical consultant to Pan Am.

Leveraging Lindbergh and Priester's expertise, Trippe played aircraft manufacturers against each other. Trippe's most impressive chess moves came at the dawn of the jet age when he needed a jet capable of nonstop transatlantic flights.

Boeing had committed to building the 707 around Pratt & Whitney (P&W) JT3C (J57) engines. Those engines, though, wouldn't enable transatlantic performance. So Trippe went to P&W to buy 120 experimental JT4A (J75) engines without an airplane to fly them on. P&W only made the sale when Trippe threatened to buy from the British Rolls-Royce.

From there, Trippe proceeded to play Douglas and Boeing against one another until he got not one, but two transatlantic aircraft. Douglas committed to building a stretched version of the DC-8.  Boeing redesigned the 707 around the JT4A and produced the 707-320. In 1960, Pan Am inaugurated the first regular transatlantic jet service on its 707s.

New forms of aviation ought to do the same as Pan Am. Create commercially viable businesses around emerging aircraft technology. As the technology improves, the potential of the business case will too.

Kinect Air is a startup air operator launching with today's technology and an eye to the future. The company will start with Pilatus PC-12 and Cirrus SR22T aircraft. Eventually, it will employ VoltAero Cassio 330 hybrid-electric aircraft. The former will allow Kinect Air to offer an initial product at an attractive price point, albeit one higher than a truly transformational aircraft could achieve. 

The Cassio 330 will be the desired game changer, allowing Kinect Air to achieve a much lower cost per seat mile. That will open up both new markets and much more demand on existing ones. Eventually, autonomy and alternate propulsion will make airplanes cheaper than buses.

4.  If there is no runway, build one.

The United States has a lot of public airports - more than 5,000. Most airports, though, don’t support normal passenger operations. To operationalize, these airports will need investment in passenger facilities, air traffic upgrades and several other areas.

In the mid 1930s, Trippe's plans to launch transatlantic service fell apart. So he turned his attention to the Pacific. North America and Asia could connect via Alaska, but the arctic climate made operations difficult. Instead, Trippe looked to cross at the equator - directly across the Pacific. It was possible, but only by stopping several times. The China Clipper would fly via Hawaii, Guam and the Philippines. It would also need two more stops on remote islands - Midway and Wake. Unfortunately, neither Midway nor Wake was ready for service.

Midway was at least inhabited and could be modified to employ a water runway and terminal building. Wake, though, was hardly even recorded on the map. When an expedition was sent there, little went according to plan. After much effort,including blasting the coral reefs out of Wake’s shallow lagoon, the bases became adequate for air service. 

Building Pan Am's Pacific bases was a challenge that most would've considered impossible. They took longer and cost more than originally anticipated. Yet, building them enabled the first Pacific air crossings. If they hadn't, the flywheel of progress might never have started. Consequently, our world would be less connected and a countless number of innovations wouldn't have been possible.

Aerospace startups need not be afraid to build. Runways, terminals, digital and physical infrastructure are all needed. With a long term vision, economics will sort themselves out. The key is to remove the blockers that prevent new technologies from commercializing at scale. That means building!

Sources used for researching this paper: 

•  An American Saga, Robert Daley

• SkyGods - The Fall of Pan Am, Robert Gandt

• Empires of the Sky, Alexander Rose

Aviation accounts for 2.5% of global CO2 emissions and may contribute up to 3.5% of warming. The sector's share of emissions will rise in coming years. 

Flygskam is a Swedish word meaning "flight shame". Climate activist Greta Thunberg made it popular. To flygskam is to discourage people from flying. Asking them to transition to less-polluting transport methods or simply to stay home.

The term implies a binary option—stop flying and we live, or keep flying and we die. This ultimatum ignores aviation's economic and human contributions. Aviation directly contributes 2.5% of US GDP and indirectly 5+%.

More importantly, civil aviation contributes to global peace. Connection encourages empathy.

At the formation of the International Civil Aviation Organization (ICAO) in 1943, President Roosevelt encouraged equal international access to aviation. Roosevelt said, "I hope you will not dally with the thought of creating great blocs of closed air, thereby tracing in the sky the conditions of future wars." Here, FDR is referring to empires of the past who attempted to dominate by control of the sea. Their attempts to restrict passage almost always resulted in conflict. Open skies offer a pathway to peace. Closed skies, like the closed sea cordons of the past, a track to conflict. 

The answer is not to limit flying. Instead, we must innovate to move forward.

Commercial aviation suffers from a persistent lack of innovation. The duopoly shared by Boeing and Airbus stymies innovation. Startups, who must live or die by the products they ship, offer hope. It is in startups, therefore, we must trust (and invest). 

Airlines, for their part, should support a dynamic approach. Open-mindedness to integrating and deploying cutting-edge technologies is key. Here, it also makes sense to build the muscles capable of operationalizing cutting-edge technology. Corporate venture arms, like JetBlue Tech Ventures or United Airlines Ventures, allow airlines to study emerging technologies in their infancy. Regulations and customer pressure help push the adoption of those technologies at scale.

Aircraft propulsion, fuel sources, aerodynamics and materials all offer room for greater efficiency.  Engines and fuel sources offer the most direct benefit and near-term potential. The technologies most promising include: Sustainable Aviation Fuels (SAFs), electric aircraft, and hydrogen (H2). Each has its strengths and limitations, but all must be part of the solution.

Sustainable Aviation Fuels (SAF) are “drop-in” technologies, meaning they are a near-equal substitute for existing Jet A/A-1 fuel. SAFs are greener than Jet A because they are renewably sourced from feedstock or carbon sequestration, which offsets the carbon released when they are burned.

Municipal waste, agricultural residues and waste lipids are the basis for bio-SAF. Each time we introduce fossil jet fuel, we create a new source of carbon emissions. By contrast, bio-SAFs use input materials that degrade back into the atmosphere anyway. In this way, bio-SAFs do not introduce new carbon emissions. Bio-SAFs, though, are not as green as we'd like. Current bio-SAF conversion methods (like HEFA) only yield 70-80% GHG savings.

Power-to-Liquids (PtL) is a better alternative. PtL sequesters carbon from the air and uses clean electricity to refine it. Under this process, GHG emissions are lowered by 99%. The product, electro-SAF, is also scalable since atmospheric carbon is readily available.

Airplanes have long lifespans and the scalability of SAFs dramatically improve emissions on aircraft that will continue to fly for a long time to come. Besides, Jet A and SAFs have the highest power-density ratio to volume of the viable options. Electrics and hydrogen cannot offer the same range, speed or economic performance. Even if we phase them out in the future, the industry must lean into SAFs now.

But the challenges facing SAFs today are multi-fold.

First, SAF supply won't be as green as we'd like until electro-SAFs are manufactured at scale.

Second, SAF supply is small - less than 0.1% of jet fuel consumed in 2020. Scaling too, is taking longer than expected. Supply chains have come up short because of lack of investment. This of course is caused by limited demand. Which is due to high prices. It’s the classic chicken and egg conundrum associated with maturing new technologies. Fortunately, low-priced PtL production is on its way. Commercial electro-SAFs are set to ship next year, but it'll take time to develop and scale the solution.

Third, economic incentives to scale SAF production haven’t been aligned. Or at least, they haven’t been as aligned as they could be. Bio-SAFs currently cost 3 times as much as fossil fuel. McKinsey forecasts that the cost of SAFs will come down, but only to twice the price of fossil fuel by 2050.

If that is true, the market for air travel could contract.

But not everyone agrees that SAF production will need to be that expensive. Prometheus, a startup producing electro-SAF, recently signed American Airlines as a customer. The price for 10M gallons of jet fuel? One cent less than fossil jet fuel. Whether that price is sustainable long term remains to be seen. 

If electro-SAF prices are actually lower than Jet A, SAFs can stimulate demand. If not, the air travel market could contract because of higher airfares. A doubling of jet fuel prices would add an estimated 20% to fares. At a conservative -1 price elasticity, that would mean 20% fewer passengers.

The key is to create an economic incentive structure that encourages adoption of SAF. Carbon pricing, public infrastructure investments and public pressure offer an effective cocktail. 

Carbon pricing schemes would tax fossil jet fuel. SAFs could then be offered at parity or less than fossil jet fuel. This would in turn, drive up demand for SAFs. In the short run, that demand spike could cause SAF prices to rise (on limited supply). But it would also speed up production ramps and encourage other makers to join the race. 

Governments in the US and Europe are already bolstering their support for SAF. In May, US lawmakers introduced legislation creating a tax credit for SAF blenders. Europe’s mandate to cut emissions 55% by 2030 (vs 1990 levels) is also encouraging demand for SAFs.  In addition, governments should invest in SAF R&D and infrastructure. Research grants help mature the technologies necessary to scale. Infrastructure subsidies accelerate the scaling of supply.

Passengers, too, can incentivize airlines to speed up their transition to SAFs. The first airlines to adopt SAFs will experience a brand halo and modest premiums to revenue. Today the greenest airlines have the newest airplanes and highest average seat densities.

Frontier claims to be America's greenest airline. It packs 186 seats on an Airbus A320. United flies just 150 seats on the same airplane. The onboard experience, too, is very different. Waiting for behavioral change, though, is the hardest part to solving any structural problem. Switching airlines, particularly for frequent fliers, is a lot to ask. SAFs, however, allow passengers to reduce their carbon footprint without compromising experience.

Electric aircraft are a promising option for short-haul regional travel (sub 500NMi). Electric aircraft promise simplified maintenance protocols and increased reliability. Electricity itself, too, is a less expensive propulsion source than Jet A. Because of this, electric aircraft should have much lower operating costs than regional jets or turboprops. 

If powered by renewable electricity, electric aircraft have zero operating emissions. Electric engines do not emit greenhouse gases or other noxious tailpipe emissions. Renewable energy production isn’t a given, though. In 2010 only 10% of US grid energy came from renewables. NREL estimates the number could increase to 80% by 2050. The electric airplane is only as green as the energy that charges it. 

If scaled, electric regional aircraft could serve many use cases. Network carriers could use electric aircraft to replace and supplement their existing regional aircraft fleets. Startups could begin connecting regional destinations in a point-to-point format. Regionally, this would enable a time and cost effective alternative to driving.

NASA's white paper on Regional Air Mobility (RAM) illustrates the massive potential of efficient RAM aircraft. Americans live an average of 16 minutes from their nearest airport. There are 5,050 public use airports in the United States. Yet, just 30 airports account for 70% of passenger traffic. The average American adult makes two car trips per day. If 1% of existing American drivers transitioned to the skies on 19-passenger RAM vehicles at 80% load factors, daily flights in the National Airspace System would increase sevenfold (from 45,000 today to 320,000).

Cost is the primary barrier to growing regional aviation today. This is where electric aviation offers breakthroughs. Fuel and maintenance are two of the biggest drivers of cost in aviation. A Beech 1900 burns 110 gallons per hour. At $2.02 per gallon of Jet A (Delta’s 2019 fuel cost), it consumes $222 of fuel per hour. Eviation’s Alice consumes 433 kWhs of energy per hour. At 10.84¢ per KWh, Alice consumes a mere $47 per hour in energy. 

Heart Aerospace estimates maintenance activities to cost 100 times less than on turbine engines. Electric aircraft though have added costs as well. Rather than expensive engine overhauls, current battery systems need to be replaced frequently. Batteries are a massive driver of costs. Batteries also do not shed weight as they discharge. This means aircraft batteries must be up sized for the same mission (vs. turbine aircraft).

The weight and cost of batteries lead Leeham News to conclude electric aircraft are infeasible substitutes. Leeham believes battery packs for aviation are likely to cost $400-$500 per KWh. That is some 3 times more expensive than EV batteries which fell to $137 per KWh in 2020. The delta is explained by certification requirements and limited production volumes.

Certification requirements do make aircraft more expensive than automobiles. Demand for aviation batteries, though, is likely to be large enough to achieve economies of scale. Take, for instance, a manufacturer that delivers 1,400 units per year over a 10 year period. If each aircraft required a battery swap twice per year, the OEM would need to supply 31,000 batteries per annum. That is more than the number of Chevy Bolts delivered last year.

The aviation use case stresses batteries to their limits. Reserve requirements and weight sensitivity mean the battery is sized for its mission. This also means that the battery's capacity is only a small percent depleted when it's swapped. The remaining capacity still has significant residual value for other uses. Grid-storage, buses or trucks are all natural use cases for used aircraft batteries.

Modern aircraft also make use of lighter airframe structures and improved aerodynamics. Both of these make more room for battery weight or payload.

Voilá! The recipe for an electric regional aircraft: battery density and cost improvements, combined with modern materials and aerodynamics.

Hydrogen (H2) is likely to power regional, mid and, eventually, long haul aircraft. Design complexity scales in this way as well.

Hydrogen has many benefits. It is abundant, and has several manufacturing pathways. It also eliminates CO2 emissions in flight, though not H2O or NOx. Hydrogen-powered aircraft reduce total climate effects of aviation by 75-90% (compared to fossil jet). 

Hydrogen's challenges are technology, supply chain, commercial maturity and certification.

While more dense than Jet A on a mass basis, hydrogen is about four times less dense on a volume basis. This means hydrogen requires more space to carry the same specific energy. Hydrogen’s volatile nature usually involves storing it in the fuselage, rather than the wings. This means hydrogen-powered aircraft need bespoke designs to accommodate a large fuel tank in the fuselage. Blended wing bodies offer one such concept. 

Burdened by the tiny nature of the H2 molecule, hydrogen is difficult to transport. It cannot flow over existing oil pipeline infrastructure where leakage is likely. The most logical way to produce H2 is via micro-sites near where it'll be consumed. Those manufacturing sites aren't built yet. To begin building them, the market has to demonstrate commercial acceptance. 

Hydrogen fuel cells have been in development since the mid 2000s. Auto giants continue to bring a limited number of hydrogen-powered cars to market. While the technology seems to work fine, it hasn't caught on yet. Electrics promise simplified maintenance and lower operating costs. Proof of commercial acceptance will have to come from a segment other than automotive.

Beyond H2 supply, there are several other ecosystem elements that need focus. There is no workforce that can service hydrogen fuel cell aircraft. Nor is there widespread manufacturing of hydrogen propulsion components on or off the aircraft.

On certification, there is no current certification basis for hydrogen powered aircraft. The many startups working in this space will work with regulators to establish one. They are simply behind their electric counterparts.

All this means hydrogen is a promising long term option. But it will take longer to mature and scale than industry would like. Startup ZeroAvia plans a 2023 entry-into-service (EIS) date for its first aircraft. Airbus on the other hand, is targeting a 2035 EIS  for its first hydrogen-powered aircraft. The latter seems more likely. 

Hydrogen, it seems, has always been the propulsion source of the future. Perhaps it is, but it's not here yet.

Industry should support these promising technologies. Each has a unique role to play in aviation’s journey to sustainability. SAFs offer dramatic near-term GHG reductions at similar prices to fossil jet. Electric aircraft have the potential to unlock affordable regional transportation by air. For many frequent commutes, doing so would mean a structural shift from the ground to the air. Hydrogen offers a pathway to alternate propulsion for all segments of air travel.

For their part, airlines can help accelerate the pace of maturity for these technologies. Directly, airlines offer operational design advice and bolster investor confidence for early-stage companies. Indirectly, airlines have deep ties to government. These links encourage smart and achievable emissions standards.

Airlines can also foster the adoption of carbon pricing schemes. The aim is to credit efficient aircraft operations against the cost of emissions. Thus, airlines are incentivized to adopt greener aviation tech. JetBlue and Joby Aviation recently announced a pilot of this concept. Others should follow suit. 

Technology allows us to stay connected in previously unimaginable ways. As our distant connections deepen, so too does our empathy for one another. Aviation allows for the existence of a network of super highways stitching civilizations together. 

That fabric is important. Grounding aviation is not the answer. Inaction, though, is just as bad. Industry, regulators and entrepreneurs must nurture technology advancements and innovation. In this space, it's also too early to be discriminatory. No single technology is the clear winner. It’s likely we’ll need all of them to make aviation truly sustainable. For now, industry should support the development of them all. The market will see the weakest be weeded out on their own.

United’s recent order for 15 Boom Supersonic Overture aircraft prompted an AvTalk Podcast episode on the likelihood of Overture entering service. Guests Jon Ostrower and John Walton joined the show to discuss the market size and viability of a modern supersonic transport. Both conclude that supersonic flight is unlikely to return at scale, if at all.

My previous experience leading airline business development for Boom Supersonic tells a different story on the fundamentals of a market for high speed flight.

Comparing supersonic airliners to premium cabin economics 

To fairly evaluate a modern supersonic transport in the existing marketplace, it is necessary to identify the right point of comparison. Boom and Exosonic plan to match premium cabin fares. The relevant economic comparison is a supersonic aircraft versus a subsonic premium cabin. Analyzing economics for subsonic aircraft by cabin is a novel idea for airlines. Most of the ones I spoke with during my tenure at Boom only evaluated economics at the aircraft level. 

Premium seats take 3-4 times as much space as economy seats do. They are heavier and need amenities that constrain space and increase fuel burn. Therefore, each premium seat carries a higher operating cost per seat and carbon allocation. Once you properly compare supersonic transports to subsonic premium cabins, the economics of supersonics become compelling. 

Customers in premium cabins assign a high value to their time. Many travel in premium cabins to assure rest and productivity. By matching existing premium cabin costs, SSTs can be considered a similar class of product at a higher speed.

Aircraft Utilization, Patterns & Demand Directionality

Utilization and Aircraft Reliability

Ostrower described Concorde’s utilization as “lazy,” due to passenger time-of-day preferences and slot limitations.

Concorde was indeed a low utilization aircraft. On its core JFK-LHR route, BA flew each tail an average of 4 hours per day through the 1990s. Designed in the 1960s, Concorde's utilization was also constrained by its technical limitations. Plagued by frequent scheduled and unscheduled maintenance, it couldn't fly high utilization patterns.  

A modern supersonic airliner would necessarily deliver far better reliability. New aircraft use modern materials, engine technology, and incorporate health monitoring practices, each of which contributes to aircraft reliability.

Given the high cost of a supersonic aircraft, high block hour production is a critical input to the economic equation. Reduced maintenance downtime allows for fixed costs to be spread over more hours, lowering the per-hour operating cost.

High reliability and aircraft utilization are prerequisites to supersonic commercial viability. 

On Schedule Patterns

Some of the busiest airports in the world have limiting operational hours and curfews. That’s why it is critical for modern SSTs to be able to serve a variety of global markets. A diverse set of destinations would allow a modern SST to fly when Concorde could not. 

Since Concorde's retirement, the world has gotten richer. Advancements in technology, manufacturing, and trade have opened new premium travel markets. Routes with dense premium traffic—potential supersonic routes—now include:

• Europe to the Middle East

• North & South Asia to the US West Coast

• North America to South America

• Europe to the US West Coast (if supersonic flight is allowed over unpopulated areas of Northern Canada)

Non-western premium markets now rival those connecting the traditional financial centers. In 2019, airlines flew 75% as many seats on the London to Dubai route than they did on the New York to London route. The balance of wealth and power has shifted beyond the North Atlantic. No longer will supersonic transports serve only a limited subset of bankers traveling over the North Atlantic. 

Technology has revolutionized traveler time-of-day preferences. Computers offer flexibility about when and how we choose to be productive. One can sit on an airplane equipped with high-speed WiFi and have a productive work day while in transit, making shorter daylight flights more attractive. 

With supersonic travel, this might mean departing New York at 8 am and landing in London at 5 pm, in time for dinner. The result is a short but productive day on the aircraft, followed by an energetic evening. Adequate rest in a real bed allows the traveler to be up and working the next day. 

By comparison, sleeping on today’s sub-7-hour red-eye is difficult, particularly when interrupted by two meal services and poor lighting. Transatlantic redeyes result in a groggy morning and the need for an afternoon nap. On my subsonic trips across the Atlantic, even in premium cabins, I don’t recall ever feeling well rested upon arrival.

Premium transatlantic markets offer a similar comparison point to premium US transcontinental markets. The divergence is the time zone differential. To improve red-eyes, airlines have deployed international-style lie-flat premium seats on US transcons. Yet, morning departures tend to outperform redeyes on trip revenue with passengers choosing to work part of their day on the flight.

Supersonic transports allow transatlantic flights to resemble transcons, effectively transforming uncomfortably short redeyes into daylight flights. If it’s an option, passengers prefer to fly during the day.

Departure times for large-cabin business jets crossing the Atlantic illustrate this point. Many depart early ET-time (5:00 or 6:00am) to arrive in Western Europe by mid-evening. This behavior illustrates a time-of-day preference for ultra time-sensitive customers.

Demand directionality

Concorde's load factor was imbalanced between eastbound and westbound transatlantic trips. Westbound trips recorded a higher load factor because in local time, Concorde arrived before it departed. Thus Concorde actually lengthened the usable day when flying westbound.

A modern supersonic airliner might be different because of availability and price. Afternoon and early evening flights weren't regularly on offer with Concorde. If they were, we could expect performance similar to afternoon transcons. An example is the late afternoon (3:20pm) departure from LA that arrives in NYC before midnight (11:51pm).

These flights would become even more attractive if priced at existing premium fares. By comparison, Concorde tickets came at a two-to-four-fold premium.

At price and schedule parity, load factor imbalance might not be an issue. 

Will passengers pay a premium to fly faster?

If so, how much?

To caveat—any new commercial supersonic airliner should aim to be on par with the economics of a subsonic premium cabin. From that starting point, premiums would only sweeten the revenue story. 

The FAA recommends a value of $63.20 per business passenger-hour. Multiplying that number by supersonic time savings offers an estimated revenue premium. In the case of a New York-to-London passenger, one might assume a time-saved value of around $200. Passengers (and their employers) should be willing to apply those savings toward fares. A $200 premium is approximately 10-20% above existing transatlantic business-class fares.

Concorde proved that there is a market, however small, for faster flight. The development of a new supersonic airliner would be justified by a multi-hundred aircraft market. To achieve this scale, supersonic fares must have a lower premium than that of Concorde's, but some premium over subsonic business class may be tenable.

Concluding Thoughts

A modern supersonic transport cannot and will not resemble Concorde. We should stop using Concorde as the backdrop for a future supersonic market.

Certifying a new transport category airplane is a risky, multi-billion-dollar endeavor. Yet today, more than ever before, hard tech businesses are thriving. Fueled by the remarkable success of SpaceX, commercial space is receiving unprecedented investment. Not long ago, traditional OEMs relegated electric vehicles to the dust-bin of history. In Tesla, we found a maverick unwilling to accept the status quo.

The question, then, is not whether there is a market for supersonic travel. It is whether Boom, and other startup supersonic manufacturers, can execute well.

It is easy for industry experts to raise objections to tackling hard things. But entrepreneurs and optimists shift the burden of proof to ask “why isn’t this possible?” and “what would it take to make this true?”. By not asking these questions, we risk missing the opportunity to build a better world. 

If you build it, they will come.

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Welcome to Incubating Aerospace, my newsletter about bright ideas in transportation.

Here, I'll write about startups and their sectors. I'll outline technical challenges, commercialization risks and policy hurdles.

In the first season we'll discuss supersonics, sustainable aviation, and regional air mobility. On deck are ocean freight, logistics tech and commercial UAVs.

I'm glad to see you - subscribe here to join me on this journey.

-Matt

Disclosure: This newsletter in no way constitutes investment advice. It is only for entertainment and informational purposes. I may hold investments in the companies, industries or sectors discussed.