An impending recession could shake up the travel industry. Here’s what travelers need to know.
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00:00Yeah, regarding a U.S. recession and the impact on travel, you could have a number of things.
00:05I think, first off, it could depend in part what kind of recession we have.
00:11Do we have a credit crunch-style recession where Fortune 500 companies are shedding their workforce?
00:19I think that's going to be very tough going for everybody with little room to escape.
00:25You know, on the opposite end of the spectrum, do we have a recession that at least somewhat spares wealthier consumers and, unfortunately, folks in the lower socioeconomic strata get further squeezed by tariffs?
00:42That's something where you would have, for example, less of an impact, arguably, on networker lines and the brunt of the impact on the discount carriers.
00:53We absolutely would like to see higher consumer confidence.
00:58And when we think about consumer confidence's, should I say, lower consumer confidence's impact on air travel, certainly we want to see strong consumer sentiment.
01:10But when we look at the numbers and we look at the correlation in terms of shifts in consumer confidence and airline revenue streams, the correlation is less than perfect.
01:22So, once again, we see, for example, premium passenger revenue looking more resilient than broad consumer confidence.
01:33So, thinking about it this way, 40% of consumers have annual compensation of at least $100,000.
01:40That 40% is roughly 75% of commercial air travel.
01:47And if you're a network airline, probably that wealthier swath of the population is an even bigger percentage of your passenger flow.
01:57So, I think, really, broad consumer confidence, yes, we'd like to see that come in stronger.
02:04But maybe it's more important consumer confidence from relatively wealthy individuals.
02:10And if the stock market route continues, that is a place that could come under pressure.