Forecasting Temporal World Recovery in Air Transport Markets in the Presence of Large Economic Shocks: The Case of COVID-19

17 Pages Posted: 9 Jun 2020 Last revised: 30 Nov 2020

See all articles by Sveinn Vidar Gudmundsson

Sveinn Vidar Gudmundsson

Reykjavik University

Mattia Cattaneo

University of Bergamo

Renato Redondi

University of Brescia - Department of Industrial Engineering

Date Written: June 8, 2020

Abstract

This paper estimates the relationship between the strength of economic shocks and temporal recovery in the world air transport industry. Our results show that world recovery of passenger demand to pre-COVID-19 levels is estimated to take 2.4 years (recovery by late-2022), with the most optimistic estimate being 2 years (recovery by mid-2022), and the most pessimistic estimate 6 years (recovery in 2026). Large regional differences are detected, Asia Pacific has the shortest estimated average recovery time 2.2 years, followed by North America 2.5 years and Europe 2.7 years. For air freight the results show a shorter average world recovery time of 2.2 years compared to passenger demand. At the regional level, Europe and Asia Pacific are comparable with average recovery times of 2.2 years while North America is predicted to recover faster in 1.5 years. The results show that the strength of economic shocks of various origins impacts the linear growth of passenger and freight traffic and the temporal recovery of the industry in a predictable transitory way. Hence, the impact of the COVID-19 recession will represent a temporary, although long-lasting, correction to previous growth levels.

Keywords: COVID-19, air transport, recovery time, demand, passengers, freight, regional

JEL Classification: R41, L93, Z31, Z32

Suggested Citation

Gudmundsson, Sveinn Vidar and Cattaneo, Mattia and Redondi, Renato, Forecasting Temporal World Recovery in Air Transport Markets in the Presence of Large Economic Shocks: The Case of COVID-19 (June 8, 2020). Available at SSRN: https://ssrn.com/abstract=3623040 or http://dx.doi.org/10.2139/ssrn.3623040

Sveinn Vidar Gudmundsson (Contact Author)

Reykjavik University ( email )

Menntavegur 1
Reykjavik, 102
Iceland

Mattia Cattaneo

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

Renato Redondi

University of Brescia - Department of Industrial Engineering ( email )

Via Branze, 38
Brescia, 25123
Italy

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