“Many of the seats are still out there. You can buy them. They're available. Maybe people are not buying them. But that ‘90 percent of capacity’ really is a short term indicator. That's something that people should understand when we talk about this,” says Kambr Advisory Group’s head Chris Anthony.

Headlines in early April seemed to capture the impact that lockdowns and social distancing measures around the world have had on airlines: capacity was being cut by 90 percent.

Capacity, which refers to the number of seats an airline plans to offer across its scheduled flights, is generally a good bellwether of traveler demand. But the COVID-19 pandemic has thrown all normal measures of the willingness to fly into flux.

To put that metric in context, we turned to Chris Anthony, co-founder of Kambr Inc. and head of its Advisory unit [Full Disclosure: Kambr Media and Kambr Advisory are independent units operating under Kambr Inc.].

Kambr Media: We’ve been hearing that most airlines are operating at “90 percent of capacity.” Is that accurate? And what does that percentage actually mean?

Chris Anthony: Like many things in the airline industry, people love to throw out numbers. They love to say that “Airlines made 10 percent more revenue each year.” They like to say airline capacity grew by “x amount.”

They like to say that the airlines currently operating have cut 90 percent of their capacity due to COVID-19. That is a gross oversimplification.

Let's think about this from the perspective of consumer buying behavior. In a normal, non-COVID-19 environment, if you wanted to fly British Airways, that carrier would allow you to buy flights up to 330 days in advance. That means they have a schedule loaded in their system from today until 11 months out. But, just as those schedules differ by day, or by week, or by season, so do estimates of capacity. When an airline is cutting 90 percent of capacity, it's not saying it's cutting 90 percent of everything for all time.

So what does that that 90 percent refer to?

Very few airlines have implemented deep capacity cuts more than a couple of months out. They're trying to understand how the COVID-19 situation is going to develop before they take drastic action affecting their long-term schedules;  they want to see what happens in the near term.

So, though most airlines "have cut 90 percent of capacity," that's just what they're operating today. Maybe they've made those cuts out to the end of the month; many have. Many have extended them into May or June.

However, very few of those cuts extend beyond the spring or early summer. Even though an airline is operating that way right now, it’s probably still selling most of the carrier’s schedule from summer and beyond. Maybe they’ve taken some moderate cuts to their schedule. But that's why there is a very big difference.

Many of the seats are still out there. You can buy them. They're available. Maybe people are not buying them. But that “90 percent of capacity” really is a short term indicator. That's something that people should understand when we talk about this.

To put that in a greater context, what you’re saying is that the 90 percent we're talking about reflects how seats are being offered and filled today, as opposed to how they will be filled indefinitely or through the entirety of carriers’ schedules, correct?

Yes. And beyond availability there's another layer at work here: sold and flown.

You can take an airline that says, "Hey, I've cut 80 percent of my capacity. I'm only running 20 percent of my seats compared to pre-COVID-19 stats year over year."

But say we address that 20 percent of seats; 20 percent of the carrier’s seats are active and available. But the carrier might actually be selling only 50 percent of that 20 percent. If that’s the case, then the load factor is currently operationally 50 percent. But compared to what they would normally be flying, their load factor is a mere ‘10 percent of usual’ right now because it's 50 percent of the 20 percent of capacity that they are continuing to operate.

So that complexity is causing some confusion.

There’s another layer of complexity in this. And that's going to differ a lot by carrier.

While I think almost every major airline has made drastic cuts to their network, to their flight schedules, some have had more success than others in continuing to sell the seats that they have left available. And I think that varies. Big variables there are what part of the world are you operating in and the domestic vs. international dynamics of your traffic.

What is the most relevant metric that airline industry professionals should be looking at right now? Is it load factor? Is it demand? Is it something else?

You know, I'd say it's sentiment data.

This kind of data is indicative of how people feel about considering travel and their willingness to fly.

If we’re totally focused on schedule, the biggest indicator would be how far out is an airline cutting capacity? Because that tells a lot about what the airline is thinking internally, or what they're seeing in the marketplace, or a combination of the two.

As I said, an airline could have cut 80 or 90 percent of your flights. But if that's just through the month of May, and then they’re back up to a full schedule from June, that tells you that that particular airline is anticipating a return to normalcy much quicker than an airline which has 90 percent of cuts through June, 70 percent of flights cut in July and August, 30 percent of cuts in September, and then have a regular full schedule from October.

I do think the timeline here is actually the more relevant piece of information, rather than the percentage cut at any one moment in time.