It seems likely that routine international air travel may not resume until the end of June at the earliest. That, more than President Trump’s wishful thinking, is a true indicator of what economic recovery will look like.
As any good student of law and economics would say, the best indicator of commercial expectations can be found in commercial enterprises—the market signals that indicate what businesses truly anticipate.
And if any enterprise is likely to be a leading indicator of economic expectations, it seems that the airline industry is a good candidate. Few other industries are under as much economic pressure (and thus anxious to resume operations), yet few are at as much risk from the virus (both because international travel is a significant vector for the spread of infection and because airplanes are, themselves, potential incubators of illness). And, unlike the cruise industry, which is similar in many respects, air travel is not a wholly discretionary choice. When air travel resumes, the first travelers will be those for whom it is essential or nearly so.
International travel, in particular, is likely to be the most sensitive indicator of a full recovery. The globalized nature of the pandemic has led many nations to close their borders or restrict entry. We can anticipate that domestic travel restrictions will ease much earlier than international ones and, thus, that the resumption of international air travel is likely to be a realistic signal of the resumption of economic activity at a level approaching that of pre-pandemic “normal.”
To be sure, much of the resumption of air travel will be logistically difficult. In the aftermath of the 9/11 attacks and the resulting shutdown of international air travel, it took the aviation industry months to resume normal operations. Travel interest was down, supply chains were disrupted and residual fears of further attacks required the deployment of new security measures. We can expect much the same when it comes to post-COVID-19 travel. Fear will diminish interest in travel, aviation systems will be disrupted and new health measures will need to be deployed. Indeed, if anything, the continuing virus-related disruptions may be deeper and longer-lasting than those that followed the 9/11 attacks.
That reality, far more than President Trump’s desire to “reopen” the country on May 1, is what will control. The president may think that he has “total authority” to manage the economy, and he may even issue “guidance” on reopening that has no legal compulsory effect. But commercial enterprises, taking counsel from public health officials, are going to be much more cautious in relaxing commercial restrictions than the president might like them to be.
My personal experience is instructive. As readers of this blog may know, my wife and I have a second home in Costa Rica. When we came down here for winter just after the new year, our plan was to return to the U.S. around May 15. Last month, the airline we are booked on (Southwest) canceled that flight, and we rebooked on a flight scheduled to depart on June 6. Earlier this week, we learned that the June 6 flight had been canceled, and we are now booked for the very end of June.
The cancellation is not the result of a demand issue. The U.S. government has run two emergency evacuation flights from Costa Rica to Houston and both were fully booked, even at very high prices. And the June 6 flight that got canceled was, we are told, also fully booked. Clearly, Southwest (which has every incentive to resume operations as soon as practical) is taking this cautious approach because its own internal analysis of the costs and benefits of resuming international service led to that assessment.
To be sure, a few other airlines are still accepting reservations for late May flights between Costa Rica and the U.S. Likewise, some airlines appear to be offering flights to Europe in roughly the same time frame. It is possible, of course, that Southwest is being overly cautious and that international travel will resume earlier than the end of June. But one may also suspect that the other airlines are overly optimistic and that, when push comes to shove, they, too, will postpone the resumption of flights.
And there you have it. International air travel is a better indicator of economic vitality than the president’s predictions. Or, if you prefer to personalize it, you can call it the “Paul Rosenzweig indicator.” The world will be approaching normal when I can come home.