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Airlines Going Under

Fragrant Harbour A forum for the large number of pilots (expats and locals) based with the various airlines in Hong Kong. Air Traffic Controllers are also warmly welcomed into the forum.

Airlines Going Under

Old 27th Apr 2020, 01:05
  #41 (permalink)  
 
Join Date: Dec 1998
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It really does get funnier the more times you say it.
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Old 27th Apr 2020, 03:32
  #42 (permalink)  
 
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pull up numbers - the global numbers of flyers in 2003 and even in 2008 were NOT close to the numbers that came into effect between 2012-2019. To recover to that level especially with global border closures, jobless rates beyond comprehension and tightening of other basic sources of income - the least of my bloody worries is to take a selfie in front of the Eiffel. Time to change jobs - and pronto

Originally Posted by YellowFever777 View Post
What on earth are you basing your numbers on? Post 2008 the markets went on the longest bull run in history. This pandemic has been a black swan event for the world economy because we were woefully underprepared for it, however just like the crash of 2008 this too will pass.

I certainly don't have the answers but I am certainly more optimistic of a medium term recovery, trying to predict 15 years out from now is insanity. The vacuum created by the airlines that have gone bust will be filled by new airlines or expanding surviving airlines.

The only thing that is certain is that the sh1t well and truly hit the fan this time, the next 2-5 years no one really knows.
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Old 27th Apr 2020, 03:34
  #43 (permalink)  
 
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Apocalyptic but 100% spot on

Originally Posted by Flex88 View Post
It matters not about good or poor management, if there's NO fuc**ng passengers, they go tits up. Period.. And this is what's in store for the next few years being extremely optimistic.
Numbers; the top 4 biggest US airlines are losing 100 MILLION US$ per day - EACH !! Populate those figures to EVERY major airline in the world, get out your calculator and I doubt you can calculate the number unless your calculator can express scientific notation. Then take a wild guess at all the medium to small airlines ..
For those above basing their thoughts on 2008 & SARS.. You need to read more economic news as to what's going on !!! The US ALONE has already lost about 3 TRILLION $ in GDP (this not including lost income/salary).. that's in the US in just a 2 month period.. Get out that calculator again and just take a rough guess at the ROW numbers. Europe, Asia, Aus/NZ, South America +++.. This is money that has simply "vanished" never to be seen, spent or invested and VERY IMPORTANTLY, NOT Taxed (meaning, governments spending like drunken sailors with NO income)...
In the US "alone" already this coming week will see approximately 30 MILLION unemployed.
There is ZERO rosy pictures for the industry and adding to this, China (the CCP) has managed, in a 4 month long lying spree, to alienate nearly every country in the world so one might expect, over the next years, for those lucrative cargo shipments of rubber dog shit to collapse as well..



I'd personally stop those expensive Cable TV Sports channel subscriptions and cancel next years vacation reservations while you can.. This is just getting started..... B well.
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Old 27th Apr 2020, 03:41
  #44 (permalink)  
 
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What I do know is that predicting a downturn some 50% longer than the 1920s depression is at the batshit crazy end of the pessimism spectrum.
There was no depression in the 20s. There was a short, sharp recession (about a year and a half long). This was followed by the “roaring 20s”, a period of massive growth and prosperity.

So how accurate and useful is your opinion when you don’t even know what you are talking about? Suggest you read up on what led to the great Depression in the 1930s and you will see a lot of parallels.
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Old 27th Apr 2020, 04:51
  #45 (permalink)  
 
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Originally Posted by Sqwak7700 View Post
There was no depression in the 20s. There was a short, sharp recession (about a year and a half long). This was followed by the “roaring 20s”, a period of massive growth and prosperity.

So how accurate and useful is your opinion when you don’t even know what you are talking about? Suggest you read up on what led to the great Depression in the 1930s and you will see a lot of parallels.
  • The Great Depression was a worldwide economic depression that lasted 10 years. It began on “Black Thursday," Oct. 24, 1929.
  • The depression was caused by the stock market crash of 1929 and the Fed’s reluctance to increase the money supply
  • GDP during the Great Depression fell by half, limiting economic movement.
  • A combination of the New Deal and World War II lifted the U.S. out of the Depression.

​​​​​​Would you be happier if I edited my original post to read 'the depression which began in 1929 and lasted 10 years' sqwak?
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Old 27th Apr 2020, 10:08
  #46 (permalink)  
 
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Originally Posted by YellowFever777 View Post
  • The Great Depression was a worldwide economic depression that lasted 10 years. It began on “Black Thursday," Oct. 24, 1929.
  • The depression was caused by the stock market crash of 1929 and the Fed’s reluctance to increase the money supply
  • GDP during the Great Depression fell by half, limiting economic movement.
  • A combination of the New Deal and World War II lifted the U.S. out of the Depression.

​​​​​​Would you be happier if I edited my original post to read 'the depression which began in 1929 and lasted 10 years' sqwak?
Sorry but I think you've confused what's happening today as just part of the "business cycle".

From RD https://www.macrobusiness.com.au/202...t-and-history/ :

Think of the central bank as having a bottle of stimulant that they can inject into the economy as needed with the amount of stimulant in the bottle being limited. When the markets and the economy sag they give them shots of the money and credit stimulant to pick them up, and when they’re too hot they give them less stimulant. These moves lead to cyclical rises and declines in the amounts and prices of money and credit, and goods, services, and financial assets. These moves typically come in the form of short-term debt cycles and long-term debt cycles. The short-term cycles of ups and downs typically last about eight years, give or take a few. The timing is determined by the amount of time it takes the stimulant to raise demand to the point that it reaches the limits of the real economy’s capacity to produce. Most people have seen enough of these short-term debt cycles to know what they are like—so much so that they mistakenly think that they will go on working this way forever. They’re most popularly called “the business cycle,” though I call them “the short-term debt cycle” to distinguish them from “the long-term debt cycle.Over long periods of time these short-term debt cycles add up to long-term debt cycles that typically last about 50 to 75 years.[2]Because they come along about once in a lifeti me most people aren’t aware of them; as a result they typically take people by surprise, which hurts a lot of people. The last big long-term debt cycle, which is the one that we are now in, was designed in 1944 in Bretton Woods, New Hampshire, and was put in place in 1945 when World War II ended and we began the dollar/US-dominated world order.

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Old 27th Apr 2020, 10:54
  #47 (permalink)  
 
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Originally Posted by exfocx View Post
Sorry but I think you've confused what's happening today as just part of the "business cycle".

From RD https://www.macrobusiness.com.au/202...t-and-history/ :

Think of the central bank as having a bottle of stimulant that they can inject into the economy as needed with the amount of stimulant in the bottle being limited. When the markets and the economy sag they give them shots of the money and credit stimulant to pick them up, and when they’re too hot they give them less stimulant. These moves lead to cyclical rises and declines in the amounts and prices of money and credit, and goods, services, and financial assets. These moves typically come in the form of short-term debt cycles and long-term debt cycles. The short-term cycles of ups and downs typically last about eight years, give or take a few. The timing is determined by the amount of time it takes the stimulant to raise demand to the point that it reaches the limits of the real economy’s capacity to produce. Most people have seen enough of these short-term debt cycles to know what they are like—so much so that they mistakenly think that they will go on working this way forever. They’re most popularly called “the business cycle,” though I call them “the short-term debt cycle” to distinguish them from “the long-term debt cycle.Over long periods of time these short-term debt cycles add up to long-term debt cycles that typically last about 50 to 75 years.[2]Because they come along about once in a lifeti me most people aren’t aware of them; as a result they typically take people by surprise, which hurts a lot of people. The last big long-term debt cycle, which is the one that we are now in, was designed in 1944 in Bretton Woods, New Hampshire, and was put in place in 1945 when World War II ended and we began the dollar/US-dominated world order.
Yes my friend, as noted previously I am familiar with the article. Dalio also said recently that he expects a 3 to 5 year recovery period. He hasn't given a prediction about the airline industry as far as I'm aware. He is also just one man and not infallible - "He also thanked the Chinese for their work on coronavirus, noting that doing so was political: “The Chinese, in many ways, are helping with things that are needed to manage this crisis.”"

The point I've been trying to make is that no one knows for sure what the recovery will look like, especially not over a 15 year timescale.
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Old 27th Apr 2020, 12:12
  #48 (permalink)  
 
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A few facts from history

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!!

Last edited by aviation_enthus; 27th Apr 2020 at 17:04.
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Old 27th Apr 2020, 12:36
  #49 (permalink)  
 
Join Date: Apr 2018
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Originally Posted by aviation_enthus View Post
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!!
Here here.
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Old 27th Apr 2020, 14:44
  #50 (permalink)  
 
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Originally Posted by aviation_enthus View Post
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.

Last edited by Slasher1; 27th Apr 2020 at 15:25.
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Old 27th Apr 2020, 16:54
  #51 (permalink)  
 
Join Date: Jun 2001
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Originally Posted by YellowFever777 View Post
Here here. [sic]
Where where?
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Old 27th Apr 2020, 17:02
  #52 (permalink)  
 
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Originally Posted by Airbubba View Post
Where where?
Hear! Hear!

Apologies for my shocking grammar.
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Old 27th Apr 2020, 22:07
  #53 (permalink)  
 
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Originally Posted by YellowFever777 View Post
What on earth are you basing your numbers on? Post 2008 the markets went on the longest bull run in history. This pandemic has been a black swan event for the world economy because we were woefully underprepared for it, however just like the crash of 2008 this too will pass.
Because it's not an economy problem alone like in 2008. The economy disaster happens on top of a very natural one.

As long as there is no cure for the root of all this evilness, traveling around the world will remain a risk and thus limited. While the recovery potential is definitely there, many states won't allow unlimited global travel for a while, at least a year is a good guess, maybe even longer.
I certainly don't have the answers but I am certainly more optimistic of a medium term recovery, trying to predict 15 years out from now is insanity. The vacuum created by the airlines that have gone bust will be filled by new airlines or expanding surviving airlines.
15 years is indeed a bit pessimistic, with that I would agree. It could take 1-2 years until we have a working vaccine, after then it should be possible to resume more or less unlimited air travel, but it won't happen instantly. Up to 5 years from now is a good guess.

No matter how you view it, it's a major disaster and the airline industry is probably hurt much more than any other business branch except maybe general tourism.


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Old 27th Apr 2020, 23:28
  #54 (permalink)  
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Aus Health director has indicated that International Travel restrictions "will" remain in place for another 3 - 4 months "at least" .... Some countries may leave these in place for "much" longer..
Up to and including Sept this year estimate is 1.2 BILLION less passengers, ⅔ LESS capacity (I believe this to be optimistic) and Europe/Asia to be hardest hit...

https://conservativebrief.com

Please note in these charts they do not speculate past the 3rd or 4th quarter..
Read the details. Some of the facts/charts DO NOT include "domestic" travel contraction ...

There is as well, no influence from economists re the expected wave of bankruptcies, home foreclosures that are 100% expected starting in about 2 > 3 months.
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Old 28th Apr 2020, 00:13
  #55 (permalink)  
 
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In the Depression people could spend money if they wanted to. Now they can't - they will hoard it. That means lack of demand. Lack of demand leads to lack of supply which leads to lack of jobs. The stock market hits and unemployment figures have more or less matched the Depression from 1929-1933. The differences now are that we've passed that in the last 4 weeks (not 5 years) and even in the Depression if I'd given you $10,000 you could have gone out and partied like it was 1999 - now you just cant do that.

Forgive the use of US figures, it's easier to use a single set we are all relatively familiar with. In 2008 US unemployment hit 15.3m, as of today there are likely 30-33m unemployed, which equates to something in excess of 25%.

30+ MILLION people effectively on welfare and not spending (forget about travelling!) in ONE economy is staggering. This is a catastrophe of unimaginable proportions - certainly at this stage I don't think anyone has a clue as to what is happening. Stock market players certainly don't - negative oil prices, bank collapses, there is no manual for this ultimate black swan event. If anyone had suggested 30% unemployment and oil at MINUS $40 even 4-5 weeks ago they would have been put away.

Airlines, travel and hospitality are the front lines. It's not going to be pretty for anyone, but even when people can travel again, they will likely be very cautious and that's even if they do actually have the money to do so....

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Old 28th Apr 2020, 01:43
  #56 (permalink)  
 
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As the tide goes out we'll get to see who has been swimming naked.
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Old 28th Apr 2020, 02:13
  #57 (permalink)  
 
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In that case, I hope to christ there are enough to hide the (admittedly) diminutive but still horrific sight of Alan Joyce!!
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Old 28th Apr 2020, 04:29
  #58 (permalink)  
 
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A few facts from history
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.
Japan’s stock market hit its peak in the late 80s. So did their property market. So going on 30+ years and they’ve had ups and downs, but have never recovered and the trend is only going one way (let me spoil the surprise, Japan in negative rates for several months now)

Of course the outbreak will go away. We are already seeing better data showing the massive overreaction. But the virus was just the trigger device on this nuclear debt bomb. The fact that the global economy exploded how it did has nothing to do with the virus and was years in the making.

Remember negative rates started way before the virus, and so did the repo market meltdown as well as the complete reversal on tapering by the Fed.
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Old 28th Apr 2020, 10:18
  #59 (permalink)  
 
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It’s galling that ordinary individuals and businesses are struggling whilst the pigs in the banking and hedge fund world roll around in free money from the Federal Reserve, meanwhile Joe six pack gets a 1200 dollar one off payment to keep him quite.
Welcome to the new feudal reality where banks and investment companies gorge themselves on free hand outs, leaving the plebs to claim a pitiful universal income from the state.
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Old 28th Apr 2020, 11:07
  #60 (permalink)  
 
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There is nothing to fear but fear itself. But it’s upon us and it’s real.

Pilots are technical, generally people aren’t. Politicians certainly aren’t. It occurred to me a while ago that it’s very difficult screwing up a sim/sector and reading about it. Politicians get that a million fold. It must hurt tremendously to do what you see as your best and be derided. Being written up as killing people is something most would do anything to avoid.

No winners in this, but tough love ain’t going to cut it in the popular press and (aside from the Wuhan/Auschwitz method of control) that’s what people will read about for generations to come....

No easy answers. It’s a catastrophe.
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