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COVID-19: The Future Foretold in Phoenix

by Roger Lanctot | 4月 09, 2020

“We should take comfort that while we may have more still to endure, better days will return: we will be with our friends again; we will be with our families again; we will meet again." - Britain's Queen Elizabeth, speaking of the coronavirus pandemic

Her words echoing with Churchillian sincerity and gravitas, Britain's Queen Elizabeth spoke to a troubled nation and world this week, seeking to summon a global stiff upper lip in the face of the collective peril posed by COVID-19. It is a monumental task to inspire confidence and fortitude in the face of still unfolding misery and all encompassing uncertainty.

There are multiple points of uncertainty in this time of COVID-19 including questions as to how severe the current crisis will become at its peak, and how long and when the recovery will come. The Queen had nothing more than platitudes to offer, like every other sovereign or scientist struggling to come to terms with a virulent virus.

Some have turned to satellite images from Maxar to make sense of the scope of the current crisis. Transportation - of both goods and people - is the most visible manifestation of COVID-19's impact and the story is told in images of empty freeways, overflowing rental car parking lots, and parked airplanes littered across the landscape.

In fact, the rental car industry is facing its own mini-crisis seeking parking space for its idled vehicles around the country. Unlike ride hailing operators Uber and Lyft, whose drivers disappear with the decline in demand, rental car operators must continue to pay for their vehicles - including their storage.

Because the rental car operators derive upwards of 50% of their volume from airport operations, it is airport parking lots that are now swamped by unused cars. This highlights the essential role that airports, airplanes, and airlines play in the economy. It also raises questions as to the nature and timing of the recovery from COVID-19.

When and whether a cure or vaccine is found for COVID-19, will travelers return to the friendly skies? Will seating and air circulation on airplanes need to be modified to allay the concerns of jittery travelers? Will business travel ever return to previous levels or will it be replaced by virtual conferences and videoconferencing?

The administrators of Phoenix's Sky Harbor International Airport, the third busiest airport in the U.S. provided their thoughts on the subject in late March - identifying their estimate of when the lowest point in air travel out of PHX will be reached, how low that will be, and how long it will take to recover to pre-COVID-19 levels.

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The Arizona Republic reports that in a recent meeting before the Phoenix City Council on how the new coronavirus is affecting Sky Harbor Airport's operations, Director of Aviation Services James Bennett said: “You could probably combine all of the impacts (from severe economic events) in the history of the airport together and not see something as shocking as what we are experiencing right now.”

Bennett proceeded to forecast a four year recovery before PHX will return to pre-COVID-19 traffic levels. To reinforce his point he noted that the current downward trend had yet to hit its nadir as additional flights continue to be cancelled.

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Airlines have been at the forefront of the COVID-19 fight. A report in yesterday's New York Times noted that hundreds of flight attendants and pilots have either tested positive for COVID-19 or are suffering the effects of the disease.

Airlines are a critical pivot point for the post-COVID-19 recovery. When one considers the potential speed of a recovery it is important to take into account the level of employment/unemployment at the time of the turnaround, the overall level of economic activity, the willingness and ability of companies to hire/re-hire employees, and the resilience of financial markets.

What will be new this time around will be the willingness of the employed and unemployed to re-engage in economic and social activity - to once again be in close contact, sometimes very close, with other human beings. Some people and some organizations may shift entirely to remote working rewiring the transportation infrastructure.

Airplanes pose the ultimate test of a willingness to be in close proximity to other humans for a prolonged period of time - and to pay handsomely for the privilege. Assuming all other economic factors being equal - including a return to traditional office spaces and commutes and restored near-full employment - will the prospect of a plane ride not forever be altered?

Mr. Bennett of Sky Harbor Airport estimates that it will be four years before we return to our January 2020 selves - our pre-COVID-19 behavior and the related levels of economic activity. That's some mean messaging from a man who can look out the windows of the control tower at PHX and see oceans of parked cars and perfect rows of parked airplanes. James Bennett sees the future and, for the short-term, it is bleak.

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SOURCE: Denver Airport long-term parking lot as seen from Maxar satellites on March 7 (left) and March 24th (right).

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