After the Lockdown is Over

Author: Alasdair Whyte, Co-founder of Corporate Jet Investor

With half of the world’s population (and much of the business aviation fleet) grounded, economists, lawmakers and analysts are frantically trying to work out how people will react when restrictions are lifted.

It is very difficult to predict because lockdowns like these do not happen very often. London and other plague towns were closed off in 1665. But the data is not particularly reliable. There was a construction boom in 1666, but this probably owed more to the Great Fire of London.

Which leaves us with China.

China is about six to eight weeks ahead of most of the world. Wuhan – a city of 11 million people – was put into lockdown on January 23 (Northern Italy went into lockdown on March 8). The Chinese government brought in measures across the rest of the country soon after and started to relax them in much of the country 59 days (8.4 weeks) later. Restrictions in Wuhan were only really lifted this month after 76 days of lockdown.

Chinese GDP fell 6.8% in the first quarter of 2020, according to China’s Bureau of Economic Statistics which released the data today. This is the first drop since the country started reporting quarterly figures in 1992 but it is not a surprise.

But it does not show us how consumers have responded to being allowed out again. There had been talk on Chinese social media about consumers heading out “revenge spending” after being kept inside. But that does not seem to be happening. The consensus from early April consumer surveys suggests that Chinese consumers are spending 80% of what they did before the lockdown. This makes sense when people are worried about jobs.

But people are moving. Data from TomTom, the car navigation company, shows traffic levels in big cities have almost reached average 2019 levels. Airline data company OAG says that there were 8m passenger seats available on domestic flights last week – below the 14.7m in the same weeks last year, but up from less than 4m seats during lockdown.

The numbers are a lot smaller for Chinese business aviation. In 2019 Asian Sky Group said the total mainland fleet was just 338 aircraft – less than you see in an average (pre-lockdown) day at Teterboro Airport. (Asian Sky Group will announce the 2019 figure online next week, which is likely to be slightly down on 2018.) But they are still relevant.

AirNav – which tracks jets with ADS-B air traffic management transponders – shows that flights to and from China fell by as much as 71% during the height of the lockdown. Both WINGX and ARGUS International are predicting a similar 70% drop in April for US and European business jet traffic.

Business aviation flights bounced back when the Chinese lock-down ended. In the first weeks of April 2020, flights to and from China were down between 23% and 27% on the same weeks in 2019. This is despite the country restricting international visitors.

Obviously the numbers are low (you can look at the data on AirNav’s RadarBox here) and may change as airlines return. But at least it is a guide to how utilisation and charter may bounce back when other countries and states reopen. AirNav also has fascinating videos showing business aviation activity in the US and Europe now.

There are signs that people and companies in the rest of the world want to charter aircraft and that airlines will not be ready to fulfil many trips. But, as we all know, there is a big difference between wanting something and being able to afford it. Research suggests that as many as one in four small businesses are completely closed during lock-downs and many will not reopen. We have never seen business aviation demand return quickly when many consumers (consumer spending is 70% of US GDP) and businesses are struggling.

This may be less optimistic than a lot of speakers on our Town Hall this week (you can watch it here). But as the world heads into what many people believe could be the worst ever global recession, a 25% drop in utilisation does not look absurd.

This is not to say people will not travel again in the long-term. There are a lot of articles being written about life changing completely following Covid-19. These are wrong.

During the Great Plague people also talked about travel and trade being stopped and avoiding large crowds. Months later, in October 1666, hundreds of people followed King Charles II to a small town called Newmarket where the modern sport of horseracing began. In a similar vein, Carnival Cruises says bookings for 2021 are strong.

Business aviation will bounce back. It always does. But it will take time.

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