The Economic Smoke Signals
Are We Looking At The 1929 of Air Travel Demand?
When key economic dynamics falter, historically so does growth in air travel demand.
Is the hard-wired connection between these no longer valid? Is air travel now exempt from things like buying power, inflation and consumer confidence?
It’s More Than The Economy. Actually, there are four critical dynamics in play that could turn the current air travel demand sunshine into dank economic darkness. Not evenly all across the airport system, as each airport has different consumer strengths and weaknesses.
Just for starters:
Inflation has raised food prices 20% over the past two years. Overall, things are up over 17%.
Interest rates – on which sales of major items depend – are at a 22-year high. Venture capital is now above 8% and has in many cases dried up.
Regardless of the jive media stories, the vast majority of Americans think the nation is going the wrong way.
Consumer backlash – which can bring on inept DOT interference – due to real and perceived sloppy service. It’s getting to the point that airports may prefer NOT to have some service due to the consumer problems inflicted.
There are geo-political factors in play – ones that could be the next CCP-Covid event, albeit not a virus.
Add that to low confidence in the direction of the economy, and logic would tell us that wallets for leisure and business travel would be closing.
Is There Demand Momentum Overhang? But going into the summer, it has been gangbusters for airlines, at least if measured by seats occupied. New entrants Avelo and Breeze have registered very strong load factors. ULCCs such as Frontier reported almost 85%.
Seems there is a disconnect here. It could be due to a number of issues. The question is whether the industry is heading for a nasty 4th quarter. We are seeing some indications of capacity pull-downs and schedule adjustments, however.
Forget The Consensus. I would suggest taking a look at the most recent Aviation Unscripted™ video. It compares the happy national economic news reported by much of the media – or, more accurately, the factors ignored by it – with translations from the real world.
Then, it outlines the bellwether facts that every airport and community planner need to analyzed.
Invest eleven minutes for perspectives that run counter to ambient thinking.
Economic gravity can only be countered for so long. Click here to look at the future. Tongue in cheek, we get the official Bidenomics view, and provide real-world translations. Then, the video outlines the air service dynamics to watch.
Join us, and if you’ve got comments, have at it.