Transportation economics in the age of coronavirus
Institutional Communication Service
4 May 2020
The global economy is seeking to recover from the crisis caused by the novel coronavirus pandemic, with the expected return to normalcy that could take several months, if not more. Some sectors have been affected more than others, like the travel industry, the resiliency of which could be a testbed for others. Rico Maggi, professor of economics and Director of the USI Institute for Economic Research, shares in a short video his forward-looking views on air travel and transportation in the wake of the crisis.
The looming economic crisis is expected to have a relevant impact on the global economy. According to Prof. Maggi, we will probably see a differently globalised economic system based on more autochthonous national economies. This could include some reshoring of certain industrial activities, with shorter supply chains and economic policies introduced to protect national or regional markets. As a consequence, we may see lower global economic growth in the short and medium term.
For the travel market – both business and leisure – this means short term pains but also long term gains. “In the medium and long run I expect see business travel volumes to return to prior levels”, says Prof. Maggi. “However, it would occur for different purposes, for instance we could see more national or regional travel in response to the new focus on domestic markets. Similarly, leisure travel will eventually pick up, once travellers feel more comfortable to do so, though in the short and medium term I would expect them to choose short-range destinations, for instance within a same continent or region, rather than long haul international flights”.
Professor Maggi specialises also in Tourism economics, and runs the Master’s degree in International Tourism at USI. “Tourism entails a certain level of ‘adventure’, which means that tourists will want to enjoy the ‘exotic’ element of travelling abroad in the “new” and less open world. The supply side response might be a significant return to charter flights to keep prices low”.
In general, the air transport market will follow this trend, with a sharp drop in demand now and consistent recovery in the medium and long term. “Liquidity issues will provoke further consolidation in the airline sector, we will see low-cost or niche carriers with tight margins squeezed out of the market”, Maggi explains. “On the other hand, there could be a return to “fake” flagship national carriers, subsidised by governments and hailing higher prices due to stronger regulation and eco-taxes. But I also expect innovation, such as the introduction of the sharing model in the skies, which is something we already know on the ground with automobiles”.
In conclusion, Prof. Maggi comments also on the recent news of the liquidation of Lugano Airport. “I don’t see a return to established routes from or to Lugano by full service or even low-cost carriers, but there could be significant growth through the sharing model and the offering of strategic connections to destinations based on shared ownership and lease arrangements of aircraft, in addition also to the mentioned revival of charter traffic”.