An economic crisis on top of a medical one: Why airline traffic won’t fully recover until the mid-late 2020s

Open To All Readers

By Judson Rollins

Introduction

July 13, 2020, © Leeham News: As the world waits for the COVID-19 storm to abate, questions are growing over the duration of a demand downturn for airlines.

Many journalists and industry observers have been obsessively searching for “green shoots” indicating the beginning of a recovery, but much of this commentary misses the mark. For instance, much attention has been focused on capacity restoration in the US and China. However, little is known about the percentage of seats filled by Chinese carriers – and last week United Airlines told employees in an internal presentation that while US carrier capacity in July is back to 47% of 2019’s level, it believes industry traffic has only reached 28% and revenue just 19%.

Last month, investment research firm Bernstein published an analysis calling for narrowbody traffic to recover by 2023 and widebody traffic by 2025. This is consistent with most public forecasts from airlines, banks, and industry observers. The firm’s analysts said that single-aisle concentration in short-haul and domestic routes should see them returned to 2019 utilization sooner than twin-aisles due to reduced long-haul demand and lower demand in short-haul markets previously served by widebodies (e.g., in most of Asia).

LNA believes that 2024 is the earliest possible date for a return to 2019 global passenger traffic – and it could conceivably take until 2028. Many obstacles lie between the present situation and a full recovery: deployment of a successful vaccine (or vaccines), rollback of border restrictions, passenger confidence in the medical safety of air travel, and most importantly, restored willingness to pay by business and leisure travelers. Specific countries or regions – especially those with local vaccine production – may recover sooner, but a global recovery to pre-COVID traffic levels requires all these to happen at a global scale.

To be clear, LNA’s definition of “herd immunity” is that of the global medical community: population-level resistance to virus transmission that occurs because a large majority have been vaccinated or previously infected. This differs from an increasingly popular usage of the term in reference to the passive infection-oriented virus management approach taken by Sweden and other countries.

Summary
  • Widespread uncertainty means downturn likely to outstrip previous ones in duration, magnitude
  • Vaccine development may be expedited; global distribution will take longer
  • Herd immunity to COVID-19 is a prerequisite to confidence in travel safety, reopening of borders
  • Open borders, restored economic activity are keys to any rebound in business travel
  • Consumer travel requires confidence in personal income, availability of lower fares

Widespread uncertainty means downturn likely to outstrip previous ones in duration, magnitude

As widely reported, business investment has slowed significantly or even halted in most regions of the world as uncertainties abound across nearly every aspect of business operations. When it withdrew full-year earnings guidance in late April, paper products giant Kimberly-Clark cited “high levels of uncertainty [in] global business and economic activity, consumer and end-market demand, global supply chain operations, and volatility in foreign currency exchange rates and commodity costs.” When even a producer of toilet paper struggles with so many unknowns, it’s hard to imagine how other businesses can navigate the current environment.

Airlines are going to extra lengths to disinfect the cabin. Photo: Alaska Airlines.

Such a breadth of issues was not seen in previous downturns. All these unknowns make it difficult for any business to invest in people or infrastructure, which puts a hard brake on any economic recovery. Subsequent waves of COVID-19 cases will only increase these uncertainties.

A vast array of industries has already been affected by the current recession, as opposed to the global financial crisis of 2007-2009, where the downturn was highly concentrated in the financial sector and eventually radiated to others. During this period, GDP in developed economies fell by 3.3% according to the IMF. As of April 2020, the combined GDP of these countries had already fallen 6.1%.

Since 1900, the average US recession, or period of flat to negative GDP growth, has lasted 15 months. The longest was the Great Depression of 1929-33, which lasted 43 months. Global recessions are harder to define as developing-country GDP growth often remains positive even as developed countries see negative growth. In any scenario, however, it takes significantly longer than the technical end of a recession for full employment to be restored and economic output to return to its pre-recession trajectory.

The range of economic and medical uncertainties in the current crisis, combined with the breadth of industries affected, make it likely that the COVID-19 economic crisis will be of greater magnitude and duration than any since World War II. Whether it eclipses the Great Depression depends on how long economic activity is restricted by the pandemic. The social restrictions imposed by many governments to limit the spread of COVID-19, while necessary, will damage an ever-wider spectrum of companies and jobs. This in turn lowers consumer willingness to spend on anything other than essentials and reducing corporate willingness to invest in future growth. Both have obvious implications for airlines and their suppliers.

Vaccine development may be expedited; global distribution will take longer

Although rapid testing, contact tracing, and improved therapeutics will reduce the need for social distancing and local/regional lockdowns, international air travel will continue to be impaired by border restrictions, passenger concerns about infection, the sheer unpleasantness of anti-viral precautions (mask use, pre-departure testing, etc), and the inconvenience and lost productivity of self-isolation or quarantine requirements on arrival. Rolling back these measures will require herd immunity to COVID-19, meaning most people must be exposed to the virus through infection or a vaccine.

The earliest possible approval for any vaccine is October of this year, for a candidate under development of the University of Oxford’s Jenner Institute. However, researchers at the institute and pharmaceutical partner AstraZeneca caution that such approval would be based on limited clinical data and would likely only allow vaccination of high-risk groups. If multiple trials prove effective, full approval would probably follow in early 2021.

The Johns Hopkins School of Public Health estimates at least 70 percent of the world’s population – or 5.6 billion people – must be exposed to the novel coronavirus in order to achieve herd immunity. No company currently in the race to produce a successful vaccine has committed to a production capacity of more than two billion doses per year, although a couple are planning to start producing doses this year even before safety and efficacy have been proven to the satisfaction of regulators.

Even with pre-approval production of successful vaccines, worldwide production and distribution will take at least 18-24 months from approval absent significant supply chain, regulatory, or geopolitical hurdles, such as individual countries hoarding doses. This means global herd immunity is unlikely to take hold until late 2022 at the earliest, even if highly developed countries like the US achieve it sooner.

Herd immunity to COVID-19 is a prerequisite to reopening borders, confidence in safety of air travel

The (justifiably) accelerated pace of vaccine trials also means we may not know how effective any approved vaccine is until after it has been in wide distribution for some time. It’s also unclear whether any vaccine will provide long-lasting immunity or whether subsequent “booster” doses will be required. Moreover, virus mutation may mean new COVID-19 strains aren’t captured in the first round of approved vaccines.

With these risks in mind, individual governments are unlikely to roll back border restrictions until large portions of their respective populations have been vaccinated and new COVID-19 cases stay near zero for an extended period. LNA believes bureaucratic caution will lead most countries to take an additional 6-12 months after herd immunity is achieved before reopening to most inbound non-resident passengers.

This means most cross-border travel will be restricted until sometime in 2023 in an optimistic scenario. Network carriers dependent on inbound non-resident traffic, such as Turkish Airlines, or those reliant on non-local connecting traffic, such as Emirates or Singapore Airlines, will be among the last to return to 2019 traffic levels.

Even for domestic or regional travel, passengers must feel safe from infection before they’ll fly again. Mask use is widely believed to reduce infection risk, and Airbus and Boeing are touting the effectiveness of the HEPA filters installed on their aircraft. However, many travelers won’t be convinced that the close confines of an aircraft cabin are safe until rapid and reliable pre-departure virus testing is available, or virus case loads are low at both their origin and destination. Airlines can expedite this by leveraging the presence of key influencers demonstrating renewed convenience and comfort of air travel.

Most authorities will prioritize vaccination of those who have the most public contact: health workers, police and safety personnel, retail and restaurant staff – and hopefully airline flight and cabin crews. Vaccinating those who interface with the public is an easy way to “break the infection chain” early the fight against COVID-19. At the same time, the development of forgery-resistant vaccination credentials will make it easier for vaccine recipients to receive permission to enter countries whose borders would otherwise remain closed to foreigners. In theory, frequent travelers could also be given priority in a country’s vaccination queue, although this may raise questions of social equality.

Open borders, restored economic activity are keys to any rebound in business travel

Most countries will see a fall in economic output during the pandemic in direct proportion to their dependence on external trade and tourism. This means countries with greater internal consumption of domestic production should recover sooner than trade-dependent countries. Accordingly, domestic travel in the US, EU, and China is likely to return sooner than in most other regions. On the other hand, any significant economic downturn in trade-dependent countries will not begin to reverse until cross-border traffic flows are restored.

Growing geopolitical tensions are a risk that shouldn’t be ignored, and COVID-19 may create an excuse for “politics by other means.” For instance, could the US and EU impose reciprocal visa requirements on supposedly medical grounds? What if China were to cut off travel to/from the US or Europe? These are hypothetical questions, but a return to previous traffic levels assumes no material changes in freedom of movement.

Getting business travelers back on airplanes will require renewed economic activity, in addition to the obvious safety requirements. This will be a top priority for airlines as business customers contribute an outsized proportion of revenue in many markets. The higher yields these passengers bring will help get airlines closer to profitability, giving them confidence to restore capacity on a larger scale.

However, business travel after the 9/11 attacks in America never returned to the same extent as business travelers permanently adapted to their short-term inability to fly. Improved video conferencing technologies like Zoom, Skype, and Google Meet make a similar structural shift all but inevitable as businesses learn how to operate in a COVID-impaired world where air travel is challenging and inconvenient.

Consumer travel requires confidence in personal income, availability of lower fares

Leisure travel requires customers with adequate disposable income and confidence that their income levels will be secure for the foreseeable future. Any economic downturn damages both. To be coaxed back into air travel, the leisure passenger must believe a given destination is within their travel budget – not just in terms of airfare but also accommodation and activities.

However, as long as travel demand remains depressed, supply will fall in other parts of the travel ecosystem, especially hotels (partly offset by alternative providers like Airbnb). Some will be converted to long-term residential accommodation (i.e., apartments) or other uses. This infrastructure takes longer to restore than airline capacity, and its scarcity will have an obvious effect on prices in the meantime. Higher accommodation cost means a higher overall cost of travel and limits airlines’ ability to stimulate demand, further slowing the restoration of passenger traffic.

While airlines are likely to lead the market with additional capacity before demand is fully proven – as is already the case in the US – this will be a trial-and-error process. Airlines that restore capacity too quickly will see their profitability dented as too many seats chase too few passengers and are likely to pull back if they don’t stimulate enough demand at high enough yields to break even.

As passenger demand increases and airlines restore capacity, more seats will be made available at lower fares as airlines work to stimulate demand. This will happen as a natural outgrowth of the restoration of business and consumer confidence – but prior availability of lower fares is required to get budget-conscious travelers back in the air. To the extent that business travel is permanently impaired, low-cost carriers will have opportunities to fill any gaps left by full-service carriers.

There will be a long tail of leisure travel destinations waiting for traffic to return to pre-COVID levels. Each country’s or region’s recovery will depend on its distance from key inbound markets, relative cost, and stringency of border restrictions. Inexpensive destinations within close reach such as Cancun or Ibiza will see a return to normalcy much sooner than far-flung and high-cost ones like Mauritius or New Zealand.

Bottom line: Global air travel won’t be back to pre-COVID volume for several years

Airline traffic will return eventually, of course; history shows this to be inevitable. But the myriad factors at play – medical, regulatory, economic, and behavioral – are largely intertwined and will not be overcome at the same pace in all countries, or perhaps even across the developed world.

This analysis assumes no changes in the infectiousness of COVID-19. If the virus were to mutate into more infectious strains, or if vaccines do not deliver lasting immunity, then one would expect the timeline for airline recovery to be worse. Conversely, if subsequent strains prove to be less easily spread, the industry could see a return to pre-COVID traffic levels sooner.

All of this means previous demand downturns are unlikely to be reliable models for the duration or shape of a post-COVID recovery in air travel. It portends continued pressure on airlines, lessors, manufacturers, and suppliers for most of the decade.

58 Comments on “An economic crisis on top of a medical one: Why airline traffic won’t fully recover until the mid-late 2020s

  1. Very informative article. It’s possible that the view to reopening borders will not depend so much on herd immunity, since a vaccine is still a ways off.

    Rather, it may be based on parity of new infection rates, since those determine the risk of transmission. Or the perception that travel will not increase the risk of infection to the destination country, or the traveler. We see this already in the evolving EU rules for travel. That may be necessary for some time, in order to allow business activities to continue.

    This will also provide the correct political signaling to all countries, that they need to be comparable in their new infection rates. If a country allows their rates to be too high, as the US has, then they will become a pariah, which will generate internal pressure to change and improve.

    So perhaps the road to ultimate herd immunity will be gradual, with nations working toward suppressed rates of increase initially (flattened curve), with the more modest goal of parity with travel partners, but then rapidly expanding once a vaccine becomes available.

    This more gradual approach would allow for steady growth in the recovery. Many nations have already achieved low rates, so it seems like this would be a possibility for everyone, with appropriate leadership and cooperation from the public.

    This would seem to be in the best interest of all concerned, but whether it can or will happen, I don’t know.

    • Vaccines:

      The work on those did not start in a vacuum, both advances in the science as well as specific work on Covid type viruses.

      There are probably a dozen viable vaccines in trials right now, one has 30,000 test group.

      It was shown to have 3x the anti body rate of a recovered Covd cases. The only negative so far was feeling cruddy for two days (two dose regimen)

      There clearly is no guarantee, but there is a high probability of a number being effective to varying degrees.

      In addition, they are doing the production work in parallels so that if successful, they will be cranking out millions and hundreds of millions and then billions of doses in short order.

      There is in addition to that a world wide agreement on production and ramp up.

      While saying its a slam dunk is wrong, basing past vaccines speed vs current status can also be equally wrong.

      Japan got the wrong ships at Pearl Harbor, tech had moved on and it was the carriers that were central to fleet ops. A bunch of old slow battleships would have not changed early WWII one bit.

      We have to continue (where its in place) best practices, and as Arizona and Texas are learning at terrible cost, rhetoric does not stop a pandemic.

      Don’t dismiss the progress made on the vaccines let alone this one in particular and we may see the light at the end of this terrible tunnel by next spring for the nation (and hopefully the world)

  2. This is off-topic, but a 30 year old in Texas has died of coronavirus after attending a “COVID Party”, to show that the virus was a hoax. So that is the kind of thinking & behavior that will keep a nation travel-isolated from the world, as per my previous comment.

    • This phenomenon is not unique to the USA. “Neanderthal” GenZ/Millennial behavior in various countries is putting a severe strain on containment of the CoViD pandemic. We’ve seen it in Britain and (some countries in) the EU, and in Australia. But you can’t put an old head on young shoulders. And aside from that, we’re dealing here with the “I wan’t” generations, and the concept of “no” doesn’t sit well with them. Not all of them, of course…but enough of them to cause a problem in the current context.
      This phenomenon seems to be less of an issue in SE Asia. I wonder if a Buddhist mindset might be a possible explanation?

      • I think it may be due to the cultural shift we’ve seen over the last few decades. Making the case that your position is right, has evolved into making the case that the opposing position is wrong.

        To do the former requires work, developing facts and evidence and rational arguments. To do the latter only requires sowing suspicion, doubt and distrust. That’s a far lower bar to meet your objective. It appeals to the lowest aspects of human nature, rather than the highest.

        Although this has been going on for awhile, Trump is probably our first leader who does it overtly and in the open, with no pretense of an appeal to facts or reason. That is pretty shocking for a President of the USA.

        Trump is not alone, we’ve seen others before, like Joe McCarthy. Fortunately McCarthy was soundly rebuked by figures of high journalistic stature, such as Ed Murrow. His broadcasts on McCarthy were a brilliant exposure of the true morals & principles at work, by contrasting them with the American ideals of justice and fair play.

        I wish we had someone like that today. But perhaps Trump is smarter than McCarthy, in that he has also worked to discredit the press, thus heading off that vulnerability in the minds of his followers.

        I know that this man in Texas was responsible for himself, but I still feel sorry for a guy who told his nurse before dying that he didn’t know, he thought it was a hoax. He died for no reason, and the people who misled him will go right on misleading others.

      • in my experience, the stupidity seems to largely be isolated to the 35+ crowd. the vast majority of Millennials are being much more responsible.

        for instance, I have yet to see someone under 40 not wearing a mask at the grocery store or even Walmart, yet I see many wearing characteristic hats and no masks in the 40+ crowd.

        so – as a GenXer, stop blaming the millenials for the GenX/BabyBoomer behavior.

    • Americans want to be free to be stupid

      Nothing highlights local peculiarities like a global pandemic. The US has 4 per cent of the global population and 25 per cent of infections from a virus that began half a world away.

      This anomaly comes as no surprise to students of American history. Historian Frederick Jackson Turner could have predicted the nation’s confused response to Covid-19 more than a century ago. His landmark 1893 essay The Significance of the Frontier in American History has long been criticised for promoting a self-aggrandising view of US exceptionalism. But critics miss the fact that Turner believed Americans could be exceptionally stupid.

      https://www.ft.com/content/95b9ee10-11be-4530-beb3-42b3ea7b5db0

      • You really should correct that.

        Some idiots want to be stupid. That impacts the rest of us.

        Americans by a significant majority are fully on board.

        • OVNI-999 believes the testing numbers reported by the local authorities from afrika, iran, turkey, soviets, ecuador, china (then), others… are correct. Like Qatar with 100k infections. 100 dead. Must be superior genetics.

          It’s life when you live only in one self fitting reality.

          Boy, am i still glad to came to these shores. Jesus.

          • @ivorycoast

            your enthusiasm for your new country is admirable but you should not be so quick to diss the old continent

            Widely said to be at very high risk of massive mortality, I seem to remember various UN agencies predicting 2M deaths, Africa is doing rather well, at least so far

            Youth, health, and undoped by Western drug régimes are said to be contributing factors

            The testing figures everywhere in the globe are slightly blurry, and many countries on the continent have debt furloughs or forgiveness in return for adherence to donor/creditor imposed measures, and are eager to show their appreciation by encouraging figures

            Africa with a K, is that a riff on Amerika?

          • @ivorycoast

            “OVNI-999”: What’s that supposed to mean?

          • @Gerrard White

            Antibiotic resistance is also a much bigger problem in the United States than in Northern Europe and some African countries….

            Less resistant bacteria in Norway

            One recent hypothesis on the very high mortality of the coronavirus in Italy and Spain is that these countries have had major problems with antibiotic resistant bacteria.

            The coronavirus paves the way for people to develop severe pneumonia and blood poisoning (sepsis) that cannot be treated with antibiotics.

            Dag Berild, a professor and doctor of infectious medicine at the University of Oslo believes that treating coronavirus patients will be easier in Norway, thanks to the fact that Norwegian hospitals have had far fewer problems with antibiotic resistant bacteria than most other countries.

            “We can thus hope for fewer deaths in Norway than in Italy. We are better off here in that regard,” says Berild.

            https://sciencenorway.no/crisis-epidemic-mortality/very-low-mortality-rate-from-coronavirus-in-norway-compared-to-other-countries/1661751

            Almost 80% of all antibiotics in the United States aren’t taken by people. They’re given to cows, pigs, and chickens to make them grow more quickly or as a cheap alternative to keeping them healthy. These drugs could give rise to superbugs—bacteria that can’t be treated with modern medicine—and things are only getting worse. In 2013, more than 131,000 tons of antibiotics were used in food animals worldwide; by 2030, it will be more than 200,000 tons.

            https://www.sciencemag.org/news/2017/09/are-antibiotics-turning-livestock-superbug-factories

          • > Africa with a K, is that a riff on Amerika?

            I learned German too after I was 30y old and I just Love that language.. so I insert a k once in a while :-))

          • > @ivorycoast
            “OVNI-999”: What’s that supposed to mean?

            A pun on a character in a German science fiction called Perry Rhodan. 3000 books. Look it up. Mnemonically, the brain maps you call sign to that to me 🙂

          • “”Like Qatar with 100k infections. 100 dead. Must be superior genetics.””

            Of course numbers can’t be correct.
            But genetics could play a role.
            Some people could be able to eat SARS-CoV-2.

            I’m not in the medical business, but recognized this.
            I met a girl from Ghana, her skin was dark like the night, so a real Ghana girl. We were eating Haribo gummy bears, only one each and let it melt in the mouth, not chewing. When I told her how these gumms are made she spit it out. Her bear was very torn, had holes and was in very bad shape, hard to recognize as a bear. My bear was still in my mouth and in great shape, I think because I’m not fom Ghana.

            I think her mouth water is very aggressive. Most black people have good white teeth, this might be because of this aggressive mouth water, no chance for food parts to survive inside the mouth.

            SARS-CoV-2 has a skin made from fats. That’s why we can destroy it by wasking hands for 30 seconds, opening the fat skin.
            I could imagine aggressive mouth water could do it too.

          • @Leon: “Most black people have good white teeth,”

            Let’s not go there. This smacks of stereotyping.

            Hamilton

        • @TransWorld

          Those were not my words — was that so difficult to comprehend?

          The writer of the piece in the Financial Times is a history professor at Texas A&M University and a senior fellow at Stanford’s Hoover Institution (not known as a liberal think tank).

          Here are a few more excerpts:

          From the pilgrims’ landing place of Plymouth Rock to the California goldfields, successive waves of migrants battled the environment. They pictured themselves as self-reliant, even as they claimed government giveaways like “free” land wrestled by the US cavalry from native populations. Pioneers were prone to populism and intolerant of government advice. They considered no man (and certainly no woman) their superior, regardless of greater experience and education.

          The relationship between the keepers of the pioneer flame and the scientists trying to keep the nation safe from Covid-19 was bound to be fraught. Anthony Fauci, the Brooklyn-born scientist who has headed the National Institute of Allergy and Infectious Diseases since the 1980s, has been cast as meddling easterner in this cowboy morality play.

          Stiff-necked resistance to authority is not limited to western or southern states. New Hampshire, one of the original 13 colonies, remains the epitome of what Turner called Americans’ “antipathy to control”. The state motto, “Live Free or Die”, helps explain why it is the only US state without an adult seatbelt law and one of only three that do not require motorcyclists to wear helmets.

          A Trump supporter recently explained his opposition to mask wearing in phrases redolent of America’s old anti-authoritarian bent. “It’s muzzling yourself, it looks weak,” he said, “especially for men.” A North Carolina group that opposes masks has urged Facebook followers to burn “your submission muzzle because you are not a sheep”.

          This attitude has a long history. “Scorn of older society, impatience of its restraints and ideas, and indifference to its lessons” characterised the frontier mentality, Turner wrote.

          • I see the format now.

            It does not change it, you are always going to have a number of idiots, that does not reflect the majority.

            Trump lost the election by close to 3 million votes. While not a large majority, it does clarify that he was not popularly elected.

            The Electoral collage should have been killed long ago, just like slavery, women not being able to vote.

            We make progress even if its slow and at great loss.

          • @TW, et al: leave politics out of this discussion.

            Hamilton

      • @OV-099

        I quite agree – not only the heavy pharma consumption in the US but especially the ingestion of huge doses of antibiotics used in ind-ag, which weakens the human and makes him fat, as it does of course the original animal it is fed to

        As of course this bug arises from ind ag spreading to areas until recently wild, and incorporating wild animals reared next to the usual pigs etc

        Africans not only have little pharma, they have little ind ag, once it gets going however one may expect more and perhaps nastier bugs

        • Lol. No antibiotic did not protect us from AIDS.
          Largely nonsense logic.

          Anyway, wear your mask.

          • @ivorycoast

            This is not about about AIDS, nor about malaria (nor…)

            It is about coronavirus – can you see a distinction

          • @ivorycoast

            Few in Africa wear masks, many fewer than in US – yet US deaths are a lot higher – there are other reasons to explain why US is dying while Africa is not

            You want to be logical about health – back to Africa, you’ll be healthier and less confused about spelling

    • “.. 30 year old died of coronavirus after attending a “COVID Party”, to show that the virus was a hoax.”

      Think of it as evolution in action. 🙂

      The UK already has shown an atypical trend for younger infected to die from CoVid19.

    • Immunity is characterized by several different responses in the body. Some are shorter term and some are longer term. We know those response are triggered by COVID for most people, that’s why so many recover, or are asymptomatic.

      What’s unclear is how long those responses may last. There hasn’t been enough elapsed time yet for the initial immunity to wear off, assuming it does. So right now, there are very few reports of COVID reinfection, few enough that they are a tiny percentage of infections and may have other causes.

      If we go by experience with other coronaviruses, immunity is challenged much more by permutations of the virus in succeeding generations, than by loss of immunity to an infection from one permutation, Except of course for immuno-compromised individuals, who are always at risk of infection.

      Another factor is that for other coronaviruses, even if infection occurs by another variant, there is still partial recognition & protection from the first, in that the body responds more quickly and ably, so the symptoms are milder.

      So the answer is we don’t know for sure yet, but looks like the immunity is valid for at least 4 months, and possibly 6 months. That’s all we can say at this point.

      If we begin to see large numbers of second infections, then we’d still have to examine the genetics to see if it’s a different variant, or the same. That would give us much more information than we have now.

      • Indeed Rob.

        Still an alarmist study. Let’s see how replicated this will be.

        SKorea’s data seem to really indicated folks did not get infected twice. I have some trust in that data origin.

  3. I think 80% of air travel is for leisure. Probably driven by available budget, pressure to keep up, experience new things and risk assessment.

    Maybe acceptance it’s ok to have most holidays 300-400nm out is a threat to civil aviation. Our travel industry will fight that idea for sure.

  4. The airline industry will never return to 2019’s level of fossil fuel burned — 97 billion gallons a year and climbing — for all the reasons that you mention for slow traffic return AND rapid growth in public concerns about climate change

    • I think you underestimate the power of human stupidity.

      If we continue progress it will be because of national policies not individual waking up.

      At one time the US led the world in Environmental awareness. Hopefully we will live to see that happen again.

      And yes I was a skeptic, short term I saw fuel mileage go way down and operating issues with the messed up early emissions ramp way up (an electronic carburetors was an idea whose time never came)

      What I did not account for was tech progress and learning and we now have cars that meet emissions and then some that can do 180 mph.

      But it takes a national directive and regulations to do that. Oddly much like fighting Covd.

    • It will.

      You can’t power airliners with electricity with what we know or think we will know today in 20 years. Airplanes will be in the xx decades the last real carbon powered mechanical device. Spare us nuclear powered airplanes 🙂

      We knew we could power cars with electricity 20 years ago. Was a question of getting the cost equation so john doe could purchase one.

      Not airplanes. And that’s fine because we these were still on carbon and not much else => planet saved carbon-wise. Airplanes are 2-3% at most of emitted carbon. Hysteria aside.

      Now… plastics? A real problem still. No end in sight.

      • Electricity is not the problem for aircraft. The low energy density of storing it in batteries is, however.

        • That’s what I meant by indirect Reference but did not made it 100% clear indeed. Thanks.

          Love my electric Tesla. Electricity everywhere!

      • “”Now… plastics? A real problem still. No end in sight.””

        Evidence of Polyethylene Biodegradation by Bacterial Strains from the Guts of Plastic-Eating Waxworms.
        Indian-meal moth have been known to infest commercial pet food, such as cracked corn used for bird feed. Moth larvae can chew through plastic bags, so even unopened infested packages will be opened from inside.
        Enterobacter asburiae and another Bacillus from the larvae’s stomach was put on PE-foil and the foil got holes.

  5. What is the break point in sector length when referring to NB vs WB (apart from the obvious 1 vs 2+ aisles)? My guess is flights that are short enough to see no steepening in the curve of number of passengers needing the toilet in flight. But I haven’t seen this detailed.

    Also, NZ is not far flung to somoene in Australia. I don’t know whether increased travel from Australia will make up for reduced from elsewhere. But it isn’t cut off from the world.

    When you talk about traffice recovering do you mean that all seat types will have recovered by the dates given, or that overall seat occupancy will have recovered but in perhaps a different mix, or something else? Personally I think it is quite likely that corporate/business numbers will never reach pre Covid19 levels again. Recovery to a reduced level per head/4 revenue/whatever within existing users will lag societal/IT changes and new customers will never arrive in sufficient numbers due to policies to mitigate climate change.

    And so airline business models must change and in turn so must manufacturer/infrastructure etc models.

    On top of this, the most glaring takeaway for the airlines in particular (but all of the air transport industry) is how hopelessly lacking in resilience many of their models or businesses were, absent government largesse. And where will governments find money for any future need that occurs any time soon? Nowhere (unless they are able to inflate away their eyewatering debt at very uncomfortable levels).

    So, if any operator in the industry believes a windespread treatment and/or vaccine that goevrnments and publics accept is not available imminently, recognises the need for resilience and subscribes to the view of reduced business demand, models must change and fast.

    My feeling though is that politics (as in party, but also in reporting and in scientific choices), not the virus itself, is the real drag now. So absolutely agree that tarffic within state (primarily USA, China and EU) borders offers the most dependability near term.

    • @woody

      The Australian and New Zealand governments agreed an ‘airbridge’ or ‘bubble’ on May 5th but have not implemented it, and look likely not to

      Both countries need tourism as well as business travel, but this is not going to happen for some long time

      The price of initial success, already breaking down in Aus, is long term isolation, and very probably a continuing régime of lockdown, which will bring compound failure

      If you are going to fail, best to do so quickly, like US

      • I hadn’t seen news of the airbridge being abandoned.

        Yes, the “let it rip” vs “keep a lid on it” argument is a worthwhile one that appears to have been too subdued where it matters.

        • @woody

          The airbridge was never operated : it was more of a PM photo op than a practical solution

          The ‘second wave’ now shutting down Victoria has put an end to any chance the airbridge might one day be operated

          Qantas just cancelled all international flights until March next year

          In Aus it is said the government fear a large scale brain drain

          The problem with quarantine and isolation is that they hit the human at every level, and result in an all round diminishing of the immune system, quite apart from disruption to the social system, and not even to mention the economic effects, which in turn have a negative impact on health, on the social system etc etc and so on, a vicious self repeating cycle

          Prolonged quarantines and lockdowns have a cumulative effect – after all the word derives from the habit of limiting such to 40 days

          Aus and NZ are, currently, looking at years of isolation, and repetitive outbreaks of ‘hard’ lockdowns, mandated and made inevitably the only response by the supposed success of the initial lockdown

          It seems that more and more are realising that evenly enough balanced general world wide levels of herd immunity will be the only way to stabilise living with the bug, whether vaccines are invented or not

  6. Business travel will not get back to previeous levels. Companies have smelled blood for further spending reductions. New meeting tools and the high productivity of many in the home office showed that business travel is more of a perk than a necessity. The reduced efficiency of online meetings is compensated with the increased available work time.
    Leisure travel will be hit by higher prices. The reduced frequencies will affect the efficiencies of operations that are currently optimized for very high frequencies. After a consolidation phase, prices have to go up to ensure profitable operations. If a profitable airline generates about 5% profit from its operations, then this equates – for example- to the last 10 sold seats of 200. No airline can maintain 20% lower loads over a longer period without restructuring.Also services on the hubs need to be charged to fewer flights, driving costs up additionally.

    • In our personnel world we shifted to a Remote session for a weekly item.

      It works really well.

      I can see business takign full advantage of that and reducing costs as well as less impact on people (happier employees though not all business care about that sadly)

  7. I believe your statements that “Open borders, restored economic activity are keys to any rebound in business travel” and “Consumer travel requires confidence in personal income, availability of lower fares” omits an extremely important aspect, that is availability of comprehensive travel insurance with affordable premiums.
    Without insurance that will cover the traveler in the event that they are infected by Covid-19 or affected by Covid-19 related closures / cancellations while away, many people will be very reluctant to travel.

    • i fear that the rate on infection in the US amongst other places mean that they will be excluded from world travel for an extended period of time

  8. Article pretty much sums up a lot of the article/discussions/opinions from the last weeks’ Pontifications column.

    Time to diversify from aviation.

    • Well Russia has all the technology and institutional knowledge to build a wide body airliner and have done so before . China just wants all the IP as it struggles with copies of western airliners for its two planes that are supposed to be at EIS stage.

  9. The Leeham News forecast is a world class hedge!

    How might it be correct? Let’s see . . . well . . . provided the recovery is in 2024 and perhaps as late as 2028. That is a five year hedge, but who is counting?

    I can just see the future articles now proudly proclaiming “you read it here first.”

    Remember the cardinal rule of forecasting is to forecast often. Always remind the reader about the forecasts predicted correctly and never mention the incorrect forecasts.

  10. Outside the US there is one other variable – the availability of high-speed railways. The key here is that it is much easier to believe (or imagine) that one is in a reasonably safe location in terms of protection from infection in a modern train than in any modern airliner. More spacious, much easier to reduce seating capacity and still operate at a profit – and of course for journeys of up to 4-500 miles as quick and for shorter quicker when going city center to city center. There is already some evidence in Europe that business travel (those tired of endless Zoom sessions) has moved to train in numbers. (pardon – lost citation).

    • Plus it is an EU objective to switch shorter distance travel (I think it is sub 1000km) to rail. Which is why I felt years ago, along with improving resilience to shocks, that Airbus should have looked to take all of Bombardier and redefine the business it was in. The global rail pie would have been smaller than previous decades, given the strength/size of Chinese rail manufacturing.

      • Rail is great if you happen to be living in a city pair that is (already) connected by rail; if not, then it starts to become a pain in the neck in terms of increased travel time.
        In addition, rail requires VERY expensive infrastructure to cross large bodies of water. Ireland is in the EU, but it’s an island that is not connected to the rest of the continent by a bridge/tunnel…just like Corsica, Sardinia, Crete, and multiple other examples. For those situations, short-range flights are still the only viable option.
        On the subject of building new rail infrastructure, Greenies should inform themselves more thoroughly about the HUGE CO2 footprint associated with the production, shipment and laying of the VAST quantities of concrete and steel used in (thousands of kilometers of) rail lines. And also in the transmission losses associated with powering those lines. Current estimates is that it takes about 30 years to environmentally amortize that initial CO2 footprint…but 30 years corresponds to 2-3 generational steps in improved aircraft efficiency, so the goal posts are actually receding during the amortization process.
        A huge advantage of aviation in that regard is that planes don’t need physical infrastructure once they’re off the ground: they can fly between any two points without requiring any form of connecting causeway.

        It’s great that the EU is taking the environment more seriously, but I think they need a strong dose of realism before investing vast sums of money. Unfortunately, much of the environmental debate is dominated by emotion rather than rationale.

        • You are leaving out a ferry hop.

          Linked right and avoid airports? Huge win.

        • Of course there are exceptions, such as low population density peripheries, islands and so on but the objective of the EU to transfer shorter distance (as I wrote, I think it is sub 1000km) travel from air to rail is definitely substantially achievable. And there isn’t much infrastructure to go (your CO2 argument) as a majoriity of the high speed backbone is now in place, as are the masses of very long standing standard speed and local lines. Simply look at a population map and rail network map of the EU.

          And one of the key benefits of rail, that has only increased since 9/11, is the ease and speed of getting from village/town/city centre to village/town/city centre travel for anyone (the majority) who dodn’t live very close to a significant airport).

          As for the generational steps in aircraft efficiency, the same happens with rail. For example, the current sets on order in France are to be 20% more efficient and 30% less costly on maintenance than existing stock.

          Rail can’t be an exclusive solution as there are locations and connections that it doesn’t work for (such as Ireland to the rest of the EU) but for a majority of the EU population it does.

          • @woody

            The next generation maglev trains are supposed to be able to achieve 650k per hour

            So extend the 1000km you mention to 1,500km or more

  11. @ivorycoast

    your enthusiasm for your new country is admirable but you should not be so quick to diss the old continent

    Widely said to be at very high risk of massive mortality, I seem to remember various UN agencies predicting 2M deaths, Africa is doing rather well, at least so far

    Youth, health, and undoped by Western drug régimes are said to be contributing factors

    The testing figures everywhere in the globe are slightly blurry, and many countries on the continent have debt furloughs or forgiveness in return for adherence to donor/creditor imposed measures, and are eager to show their appreciation by encouraging figures

    Africa with a K, is that a riff on Amerika?

  12. You’re assuming travel is a business or leisure centric. What if it’s commute based, and pension style travel.

    There are multiple multi lateral flows that I think you’re missing out on. I keep hearing about expanded open skies and fifth freedom rights for Korean carriers to China. I also keep hearing multiple points in ASEAN via HKG and TPE to multiple cities in USA. I hear about triangle flights being rampant.

    Why would there be a lag between 2022 when the EUSFTA as well as similar agreements with RCEP nations as well as Mercosur going into effect, and 2023 for SQ and the other airlines who have gained hub rights ex SIN. If what you say is true, then the world will only have 364 days before the demographic of Singapore transforms into something unlike what it is.

    As for drug use, to be honest I have been advised even after confessing to my psychiatrist to continue to be a functioning substance user. He advised that they have an anxiety reducing effect, and due to the magnetic storms, will reduce the euphoria to caffeine levels eventually. Plus unlike for western cultures, sexual frustration and Armageddon rumors don’t mix well in Asia. We just stop having sex, and that frustration is building up as a continent. It’s being credited as the reason why war committed by Asians causes soldiers to be more sexually than combat motivated.

    Anyway, COVID19 is supposed to take a step back for the Earth geology to put on a big show.

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