Originally Posted by
aviation_enthus
I don’t agree with the OP’s 15 year timeline, nothing in history has resulted in a downturn that long. No disease outbreak in the last +300 years has lasted that long either.
But this won’t be a ‘quick V shaped recovery’ either. Anyone that is expecting that, eg loading up on debt to keep maintaining their lifestyle until it all recovers, is absolutely bonkers!!!
Even IATA predictions show a V shape recovery taking until 2022. Every other forecast they have is longer, 2024 and onwards.
9/11 resulted in a 30% drop in domestic USA traffic. It took 3 years to recover to the same point and by then the industry was more efficient.
SARS was isolated to SE Asia so can’t really be used as an example.
The Great Depression provides an economic example for what happens when governments don’t intervene like they do now (quantitative easing etc). Again the airline industry was tiny back then so comparisons are useless.
Another interesting statistic, there is a measurable link to household savings versus stock market returns. Basically as the stock market declines the household saving rate goes up. In the GFC with a 40% decline household savings increased from 2% -> 8/10% of income. What this tells us is that the average household may still go to Ibiza/Caribbean/Bali/etc but they aren’t going to go every year or may aim for a cheaper destination.
Travel restrictions on international travel will remain probably throughout 2020. China has had another outbreak in the city of Hubei, placing another 10 million people on lockdown. Individual countries may get it under control and allow domestic travel, but if ticket prices are higher, more people will drive instead of flying. Exactly like they used to when airfares were more expensive.
So given all the above I’ll add my 2 cents and make a prediction but only basing it on the above points.
- more airlines will go broke, even into 2021. This will be because demand won’t recover quickly and those airlines with plenty of cash but slow to react management will find themselves in dire straits when demand doesn’t come back soon enough.
- travel demand will reduce. I’m guessing the first full year of no restrictions will be in the order of 30-40% reduction on 2019 figures.
- I don’t think our first full year of no restrictions will start until mid 2021 at the earliest. So until then demand will be ‘must travel’ with mandatory quarantine at the other end for international.
- job losses will continue throughout the year in ALL industries. While companies may not go bankrupt they’ll be trimming the fat so to speak and making their operations more efficient.
- with all the uncertainty in the economy households will save more money and be careful where they spend it. This will continue through 2020 and will be a dampening effect on any economic recovery despite government intervention.
What would I do? No idea. Hang on to my job and hope for the best at this stage. But if I was made redundant I’d most likely change industries and go in a different direction.
History has pretty much all the answers you’ll ever need. It may not have happened exactly like this before, but there will always be enough examples (of many things) to put together your own jigsaw puzzle and guess at least the direction things might go.
Good luck to everyone!!
This is very good and I think alot of it correct. Not to get too much into the causes of the US Great Depression (which no one would agree on anyway) but overinflated stocks and margins (similar to the US's current intermediate vehicles like derivatives and CDOs, etc.) were the triggering event. In the current one, governments have chosen to do incoherent knee-jerk broadband shutdowns (which shakes out the hedges and CDOs and collapses the Jenga tree)--without regard to opportunity costs--rather than a targeted approach--which is completely bonkers and will have far reaching downline effects. Kinda like curing the disease by shooting the patient. At the same time chosen to take on massive amounts of debt (most governments in republics have little real money and have no choice but to tax, borrow, or print). It's "Atlas Shrugged" all over again. In a market economy, everyone is essential (except perhaps those who are trying to dictate who's essential and who's not).
Keynesian economics ('pump priming' -- done both by Hoover and Roosevelt) is really tricky and never has been done well (problem being the core assumption is you get something for nothing which is never true). In the case of the US, combined with an ill timed trade war (not dissimilar to the oil shenanigans) it had the net effect of pulling the US from a very bad recession into a very deep depression. While there is some argument for maintaining stability of a money supply (i.e. either liquidity via credit or real money value--in the incipient stages deflation is the biggest threat followed by hyperinflation depending on the currency authorities skill and luck. Not unlike pouring gasoline onto some smoldering embers and trying to control the fire when it relights) -- preserving its value from deflation as well as inflation. But the raw pork contained in most governments stimuli simply result in most of that money blown on hats and jets for corporate big wigs and pet projects. With a 'tip' making it down to the general population. It has been a path to ruin in the past with a government loosing control of a fiat monetary system. During the 2008 event it later resulted in controllable but significant loss of dollar value and real inflation over several years (which was eventually stabilized). In that case though the assets were backed by at least SOMETHING -- overvalued paper -- but something of value. In this case not so much. And for borrowing everyone owes everyone else so there's this rolling huge sea of debt. Which eventually finds its way to the backs of folks who do real work (i.e. the traveling public many of whom are unemployed and trying simply to eat).
There's really nowhere to hide. Cash savings gets devalued by downline inflation; investments are wholly unstable and unpredictable as are commodities and everything else. Real estate and tangibles can hold value but get eaten into due to loss of demand and increasing carrying costs (maintenance and taxes which are indexed to inflation). So (IMHO) it's not possible to try to outguess this. What to do ? Nothing -- and keep on keeping on; enjoying life in the process. The thing I would NOT do is hole up wasting the days of ones' life.
Given that governments are taking on massive debts, I can't see how individuals should be expected to behave any differently. But I can't see a boom in discretionary travel (especially given the virus hoo-haw and incoherent continuing quarantine procedures across borders) being a part of that. It wouldn't be on the top of my bucket list to get on either cruise ships or airplanes. Additionally, with all the BS accompanying 'restarting' economies that never should have been shut down from above in the first place (and politicians saving face for destroying their economy over a flu) lots of inefficiencies will be introduced into otherwise productive economies. So I don't see the 'relight with a vengeance' as happening and REALLY don't see the average Joe or Jane beating down the door for vacations somewhere exotic. Especially after spending some time in their own backyard and perhaps figuring out their own backyard (and some places not all that far from it) is a pretty nice place to be.