My father-in-law is my bellwether for certain things: Sage parental advice, late adoption of technology. He’s lovably stubborn and likes things his way. He lives nearby to us, thankfully. At nearly 70, he’s also my at-home barometer for how an older generation of Americans is thinking about things. I asked him recently how he felt about flying. He typically travels about two to three times a year, always shopping on price for economy tickets. His response was telling.
He had two trips planned for late this year. One to California for his sister’s 90th birthday and another to the east coast for reunion of his high school friends. He’s not going to be making either trip, he told me last week. He just didn’t feel safe getting on an airplane until there’s a vaccine. “Why risk it?” he told me.
While he did not participate in an April survey by the International Air Transport Association, the trade group found a major chunk of the population shared his thinking. Some 40% of respondents said “they could wait six months or more” before flying again after the COVID-19 pandemic is contained.
In many ways, it’s the post 9/11 take-off-your-belt-and-shoes or three ounce bottle of shampoo version of public health. It has a distinct intent, but it’s not the most direct way to make people feel safe — and mitigate a risk to human life. And so we’ve gone from security theater to public health theater. This attempt to pull people back to flying collides with official government orders to stay home, travel bans and border restrictions that tell travelers not to fly. And that’s all swirled with the uncertainty of when this will be contained.
There are only two factors that will bring people back to flying — and one will take longer than the other and airlines cannot control either. The first is a vaccine, which won’t be ready optimistically until September at the earliest. All the other tips and tricks of trying to convince people that sitting in an aluminum or carbon fiber tube will pale to individuals actually being inoculated from this virus.
The second may be even more challenging. Can you or your employer afford to fly?
In times of economic expansion, namely the preceding 10 years, the growth of the global middle class meant an increasing propensity for flying. Airlines rode the wave and low-cost carriers boomed as those who could never afford to fly, did so for the first time with great enthusiasm. This is especially true in China, which is struggling to get traffic above 45% of pre-COVID-19 levels.
“A whole lot of that was discretionary,” said Matt Barton, partner at Flight Path Economics in a conversation with The Air Current and Visual Approach’s Courtney Miller this week. “When you really dial it back when the economy gets ugly a lot of that stuff goes away.”
“As the aviation industry has developed over time, we’ve become increasingly…over-leveraged or over-geared with respect to how much of this demand…and the supply associated with it is dependent on what is purely a luxury commodity, a luxury product,” he added. “I know we like to think in the industry that airline travel is essential, and certainly some of it absolutely is…but there is a fair bit of it that isn’t. And that bit of it that isn’t has been growing. And a fair bit of that demand is brittle.”
Getting on an airplane to visit friends and relatives (VFR flying) is elective and a function of someone’s ability to spend on a ticket and, in turn, be received by those same friends and relatives who have the economic wherewithal to host the visit. Tellingly, in IATA’s passenger survey, 69% said they could “delay a return to travel until their personal financial situation stabilizes.”
(Full disclosure: The Air Current is a sponsor of the new video podcast series.)
Businesses, too, need to feel comfortable getting back to any level of travel and expense spending. If the goal is survival, this will likely be one of the last things to come back. GDP growth is an amazing multiplier for air traffic. Demand for air travel generally two to three times economic expansion and the same is true for contraction.
Barton found that the amount of time it takes the airline industry to recover compared to when the economy recovers has grown over time when looking at the 1991 Gulf War, the September 11, 2001 attacks and the 2008 Global Financial Crisis.
It was nearly unthinkable in the beginning of March that our work and travel patterns may change forever. Many dismissed TAC’sMarch 6 report on the potential changes as catastrophic thinking but it was anything but. “I think there will be some behavioral patterns that will change, no question about it, I think it will take some time to understand what that means,” Bastian told CNBC on Thursday. “I don’t think we’re turning into a telecommuting workforce. I do think we’ll have a portion of travel that will move over to telecommuting.”
“Once customers feel safe to travel — and it’s not just physically safe, it’s also financially safe,” said Bastian. “Once that happens, and it may take two, three years to build it back, people will come back.”
But at a strategic level, there’s a deeper worry that is gnawing at the industry’s leaders. Aviation is a mature market, intensely cost focused and disruption-averse. The existential worry is that aviation and aerospace has completed its ascent over the last century and the peak is behind us.
Beyond a vaccine and the economic ability to travel, more consolidation – fewer airlines with fewer flights – now looks like the norm for at least the foreseeable future. It’s psychologically safe to wave one’s hands and say, “Yes, of course it’ll come back.” It may, but the business of flying will be forever changed.
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