An impending recession could shake up the travel industry. Here’s what travelers need to know.
Transcript:
STEVE TRENT: Yeah regarding a U.S. recession. And the impact on travel, you could have a number of things, I think. First off, it could depend in part. What kind of recession we have. Do we have a credit crunch style recession where a Fortune 500 companies are shedding their workforce? I think that’s going to be very tough going for everybody with little room to escape, you 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. That’s something where you would have, for example, less of an impact, arguably on network airlines.
Yeah, look, this is an interesting one. We absolutely would like to see higher consumer confidence. And when we think about consumer confidence should I say lower consumer confidence is impact on air travel. Certainly we want to see strong consumer sentiment. But 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.
So once again, we see, for example, premium passenger revenue looking more resilient than broad consumer confidence. So thinking about it this way, 40% of consumers have annual compensation of at least $100,000. That 40% is roughly 75% of commercial air travel. And if you’re a network airline, probably that wealthier swath of the population is an even bigger percentage of your passenger flow. So I think really broad consumer confidence. Yes, we’d like to see that come in stronger, but maybe it’s more important consumer confidence from relatively wealthy individuals. And if the stock market route continues, that is a place that could come under pressure.
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