Labor Force

The Continued Costs of COVID-19 and Lack of Flights

Today, we are living in a historical period of the first “services recession.” This recession started with the invisible enemy, or better known as the COVID-19 virus, which interrupted our daily lives. With this widespread impact and unexpected conditions on our economy, it is difficult to detect any similarities or patterns from past recessions. As we watch the pandemic continue to unfold, we see new changes arising. In the United States, we are watching the psychological effect of fear and the evolving work-from-home lifestyle affect domestic air travel.

Although U.S. domestic air travel was never shut down in response to the pandemic, the stay-at-home orders and fear of contracting the virus quickly reduced the number of passengers. During the month of March, the majority of states issued their “stay-at-home” orders. Consequently, the Transportation Security Administration, reported a 50% decrease in travelers in the month of March 2020 compared to the number of travelers in March 2019. Although stay-at-home orders are now uplifted, air travel remains at very low numbers. This is largely due to the fear of the virus and continuing social distancing efforts.

In 2001, we saw the same fear of traveling after the 9/11 attacks. Based on data collected from the Dollar Flight Club Survey, the prices of flights went down by 18% a few months after the attacks. Once the fear settled down, airlines started raising their ticket prices and there was a 25% price increase by 2003. Similarly, this may happen with our current situation as fear of traveling remains. This is a possible pattern we may see in the future, however, it is important to consider the factor of COVID-19’s effect on the U.S. workforce.

Gallup Panel Data reported that 31% of Americans worked from home in March, and by mid-April, this number increased to 62% of Americans working remotely. This data illustrates how the pandemic tested the value of the work-from-home structure. Our technology today gave us the tools for many companies and organizations to make the transition of their office into their living room. Among the population of Americans that have the ability to work from home, surveys reported that they would prefer to work-from-home even after the pandemic. In fact, the Global Workplace Analytics’ Global Work-from-Home Experience Survey found that U.S. office workers are 75% more productive at home compared to 63% in the office. This higher level of productivity may influence companies to permanently make the transition to a more blended work-from-home environment beyond the crisis.

In addition to the advantages of working at home, many companies and businesses have switched to virtual conference calls through services such as Zoom and other online platforms. For instance, O’Reilly Media, a company that hosted events and in-person conferences for hundreds to thousands of tech-publishing companies, has switched to online virtual conferences. Laura Baldwin, the President of O’Reilly Media, stated that they will no longer be hosting in-person conferences in the future and completely switch to online events (2020). As more companies decide to make this switch to virtual conference meetings, it is possible for the demand of flights to continue to decrease.

Taking into account that both the fear of the virus and the popularity of virtual-work platforms will persist, the more likely the number of travelers will stay at an all time low. As a result of low demand, we could see domestic flight prices drop for a prolonged time or even permanently.

References:

https://www.dropbox.com/s/fd1i4r6xqhfjlfx/The%20Coronavirus%20crisis%20will%20be%20the%20first%20services%20recession.pdf?dl=0

https://www.tsa.gov/coronavirus/passenger-throughput

https://news.gallup.com/poll/311375/reviewing-remote-work-covid.aspx

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