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Discover the latest numbers, news and market moves to know about each week with Ginger Chambless, Commercial Banking’s Head of Research.

Markets and Economy

Why Economic Takeoff Depends on Air Travel

Getting travelers back in the skies will likely accelerate economic recovery on the ground—but COVID-19 vaccines will need to dispatch passenger fears as effectively as the virus.

Key points:

  • Total U.S. boardings have fallen to less than half their pre-pandemic levels. Despite air travel’s relatively low infection rates, people are still nervous to fly.
  • Air travel has an enormous economic footprint—airlines and aviation manufacturers directly employ over one million workers.
  • Governments worldwide have recognized the industry’s importance, providing $159 billion in emergency support during the pandemic.
  • More flights may resume quickly as vaccines are rolled out.
  • The return of travel will likely release pent-up demand for new aircraft. 

Air travel’s incomplete recovery: Passengers are hesitant to return to the skies before COVID-19 vaccines become widely available. U.S. daily flights remain halved and international arrivals stand at only a quarter of pre-pandemic levels.

  • Unlike the dining and entertainment sectors, airlines have not been subject to government-mandated shutdowns—so passengers’ willingness to fly appears to be a major factor behind low ticket sales.
  • Flying appears to present low contagion risks—relatively few cases of COVID-19 have been traced to flights.
  • Still, people have grown understandably wary of spending hours in a confined space. The public’s reluctancy to fly seems unlikely to dissipate until the threat of COVID-19 disappears.

The economic power of flight: Air travelers patronize hotels, restaurants, local ground transportation systems and tourist attractions after they’ve reached their destinations. When these ancillary activities are accounted for, approximately 5% of the nation’s total economic activity is tied to air travel.

  • Airlines and airports directly employ almost 500,000 workers; aviation manufacturing accounts for another half-million jobs. 
  • The falloff in travel has been particularly challenging for the nation’s largest tourism economies in central and southern Florida, Southern California, Arizona and cities including Washington D.C., Nashville, Tenn. and Las Vegas.
  • Without a steady stream of arrivals, rental car companies may be delaying new fleet purchases. Business purchases of motor vehicles remain well below their pre-pandemic peak.
  • Ride-hailing workers who shuttle passengers to the terminal have also suffered. Almost six million gig economy workers have sought help from the Pandemic Unemployment Assistance (PUA) program.   
  • Cancelled travel plans have likely changed spending patterns. In the aggregate, this displaced spending has obscured the toll of air travel’s decline. This is why GDP is closing in on a full recovery, despite the dormancy of this significant segment of the economy.

Government aid is helping: Policymakers around the world recognize air travel’s importance to the global economy. Aid packages are helping airlines weather the pandemic.

  • The CARES Act provided $32 billion to keep airline workers on payrolls, and the second federal stimulus package included another $15 billion to recall 32,000 furloughed workers.    
  • Worldwide, emergency aid for airlines has totaled $159 billion1, covering approximately 38% of the industry’s projected pandemic revenue losses for 2020.
  • Emergency relief can keep workers attached to their jobs, helping the industry snap back when the pandemic subsides.

Increasing tailwinds: With vaccine distribution ramping up, U.S. passengers are likely to return to the skies in 2021.    

  • People will likely want to see their loved ones face-to-face as soon as they’re confident the pandemic has been contained. 
  • Similarly, business travel should quickly rebound. Many see teleconferencing as a stopgap measure, not a true replacement for on-site visits.
  • Passenger volume has been rising slowly, making gradual gains before vaccines were available. This may be a sign of pent-up travel demand.
  • Aircraft sales may strengthen throughout the year. Manufacturers currently have $475 billion in backlogged orders, and 400 Boeing 737 Max 8 jets—worth approximately $40 billion—are being prepped for delivery.

1.“Government Support to Airlines in the Aftermath of the COVID-19 Pandemic,” Journal of Air Transport Management, October 2020.

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman is the Managing Director and Head Economist for Commercial Banking. From regulations and technology to globalization and consumer habits, Jim's insights are used by companies and industries to help them better understand the changing economy and its impact on their businesses.

© 2021 JPMorgan Chase & Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/cb-disclaimer for disclosures and disclaimers related to this content.

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