The word ‘recession’ surfaces in conversation and one’s initial thoughts are doom and gloom reside on the horizon. That depends. Is the U.S. economy looking at a mild recession or a replay of the Global Recession in 2008 when the world fell apart?
The headwinds and pressures that were prevalent in 2008 are not around en masse as the world saunters into the second half of 2022. Now, terms, such as, ‘supply chain disruption,’ ‘pandemic,’ ‘new normal,’ and ‘the great resignation’ abound. As ominous as those words have been over the past two-years the economy is still in a much better position as compared to 2008 – not as many ugly credit derivative swaps lingering now.
What Does All of This Talk of a Recession Mean for Aviation?
Let’s start with what constitutes a recession. According to the gold old reliable Oxford Dictionary a recession is two consecutive quarters of a fall in Gross Domestic Product (GDP). However, the National Bureau of Economic Research states it “involves a significant decline in economic activity that is spread across the economy and last more than a few months.” Where does the economy stand now?
According to Dr. Bill Conerly, economist and Forbes contributor, Real GDP dropped 1.6% in 1Q 2022 and the Atlanta Fed is calling for a 1.7% decline for 2Q 2022, so that would meet the two-quarter drop definition. Now…back to the aviation conundrum. A recession as the economy is moving would not detrimentally shock aviation.
Why Would Aviation Not Suffer?
After all interest rates continue to rise, thus, it will be more expensive to conduct business, and inflation is as high as it’s been in some decades. And, in the event you may have been isolating in a cave the past two and half years the airlines still cannot hire enough pilots, which was a pervasive quandary prior to the pandemic. In fact, previously mentioned quandary has only exacerbated since the late 2000 teens.
To put the pilot shortage into perspective Auburn University School of Aviation Assistant Professor and Chair, Aviation Management Program stated “about 50% of all Air Transport Pilot (ATP) certificate holders will reach the mandatory retirement age of 65 within 15 years, meaning half of the current pilot workforce will need to be replaced over the next 15 years.
Again, Why Would Aviation Not Suffer During a Recession?
Read this next statistic, read it again because the numbers are astronomical, and spend a brief moment pondering the implications. In an interview with The Harvard Gazette on May 11 of this year Jason Furman, Aetna Professor of the Practice of Economic Policy at Harvard Kennedy School said “I’m relatively unworried about a recession over the next year because consumer spending has continued to be very strong, and consumers have about $2.3 trillion of excess saving that they accumulated during the pandemic that could still spend over the next couple of years.”
Wow. That is a metric boat ton of money, and metric boat ton is an official measurement, so go look it up. No, don’t go look it up. This author made it up, but one gets the point. Savings are plentiful, the world is opening up, and people are ready to fly the coop…literally. So, go travel and do not be afraid to ask the Flight Attendant for the full can of Coke on your next flight.
Could there be an unseen economic shock lurking over the horizon that makes matters worse? Sure there could. It will be fun watching how the economy shakes loose in the next 12 to 18 months.