IDEAS home Printed from https://ideas.repec.org/a/eee/jaitra/v91y2021ics0969699720305871.html
   My bibliography  Save this article

Forecasting temporal world recovery in air transport markets in the presence of large economic shocks: The case of COVID-19

Author

Listed:
  • Gudmundsson, S.V.
  • Cattaneo, M.
  • Redondi, R.

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.

Suggested Citation

  • Gudmundsson, S.V. & Cattaneo, M. & Redondi, R., 2021. "Forecasting temporal world recovery in air transport markets in the presence of large economic shocks: The case of COVID-19," Journal of Air Transport Management, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:jaitra:v:91:y:2021:i:c:s0969699720305871
    DOI: 10.1016/j.jairtraman.2020.102007
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0969699720305871
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jairtraman.2020.102007?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Justin Doran & Bernard Fingleton, 2014. "Economic shocks and growth: Spatio-temporal perspectives on Europe's economies in a time of crisis," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 137-165, November.
    2. Amankwah-Amoah, Joseph, 2020. "Note: Mayday, Mayday, Mayday! Responding to environmental shocks: Insights on global airlines’ responses to COVID-19," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 143(C).
    3. Kurt Fuellhart & Kristien Ooms & Ben Derudder & Kevin O'Connor, 2016. "Patterns of US air transport across the economic unevenness of 2003–2013," Journal of Maps, Taylor & Francis Journals, vol. 12(5), pages 1253-1257, October.
    4. Xu, Shuojiang & Chan, Hing Kai & Zhang, Tiantian, 2019. "Forecasting the demand of the aviation industry using hybrid time series SARIMA-SVR approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 122(C), pages 169-180.
    5. Ron Martin, 2012. "Regional economic resilience, hysteresis and recessionary shocks," Journal of Economic Geography, Oxford University Press, vol. 12(1), pages 1-32, January.
    6. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    7. Jong-Wha Lee & Warwick J. McKibbin, 2004. "Globalization and Disease: The Case of SARS," Asian Economic Papers, MIT Press, vol. 3(1), pages 113-131.
    8. Michael D. Bordo & Joseph G. Haubrich, 2017. "Deep Recessions, Fast Recoveries, And Financial Crises: Evidence From The American Record," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 527-541, January.
    9. Boonekamp, Thijs & Zuidberg, Joost & Burghouwt, Guillaume, 2018. "Determinants of air travel demand: The role of low-cost carriers, ethnic links and aviation-dependent employment," Transportation Research Part A: Policy and Practice, Elsevier, vol. 112(C), pages 18-28.
    10. Tsui, Wai Hong Kan & Ozer Balli, Hatice & Gilbey, Andrew & Gow, Hamish, 2014. "Forecasting of Hong Kong airport's passenger throughput," Tourism Management, Elsevier, vol. 42(C), pages 62-76.
    11. Hakim, Md Mahbubul & Merkert, Rico, 2016. "The causal relationship between air transport and economic growth: Empirical evidence from South Asia," Journal of Transport Geography, Elsevier, vol. 56(C), pages 120-127.
    12. Pearce, Brian, 2012. "The state of air transport markets and the airline industry after the great recession," Journal of Air Transport Management, Elsevier, vol. 21(C), pages 3-9.
    13. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    14. Harumi Ito & Darin Lee, 2005. "Comparing the Impact of the September 11th Terrorist Attacks on International Airline Demand," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 12(2), pages 225-249.
    15. Chin, Anthony T.H & Tay, John H, 2001. "Developments in air transport: implications on investment decisions, profitability and survival of Asian airlines," Journal of Air Transport Management, Elsevier, vol. 7(5), pages 319-330.
    16. Andre Jungmittag, 2016. "Combination of Forecasts across Estimation Windows: An Application to Air Travel Demand," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 35(4), pages 373-380, July.
    17. Warwick McKibbin & Roshen Fernando, 2021. "The Global Macroeconomic Impacts of COVID-19: Seven Scenarios," Asian Economic Papers, MIT Press, vol. 20(2), pages 1-30, Summer.
    18. Sun, Xiaoqian & Wandelt, Sebastian & Zhang, Anming, 2020. "How did COVID-19 impact air transportation? A first peek through the lens of complex networks," Journal of Air Transport Management, Elsevier, vol. 89(C).
    19. Chi, Junwook & Baek, Jungho, 2013. "Dynamic relationship between air transport demand and economic growth in the United States: A new look," Transport Policy, Elsevier, vol. 29(C), pages 257-260.
    20. Rappoport, Peter & Reichlin, Lucrezia, 1989. "Segmented Trends and Non-stationary Time Series," Economic Journal, Royal Economic Society, vol. 99(395), pages 168-177, Supplemen.
    21. Macilree, John & Duval, David Timothy, 2020. "Aeropolitics in a post-COVID-19 world," Journal of Air Transport Management, Elsevier, vol. 88(C).
    22. Phillips, Robert F., 1996. "Forecasting in the presence of large shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1581-1608.
    23. Grubb, Howard & Mason, Alexina, 2001. "Long lead-time forecasting of UK air passengers by Holt-Winters methods with damped trend," International Journal of Forecasting, Elsevier, vol. 17(1), pages 71-82.
    24. Marazzo, Marcial & Scherre, Rafael & Fernandes, Elton, 2010. "Air transport demand and economic growth in Brazil: A time series analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(2), pages 261-269, March.
    25. Balke, Nathan S. & Fomby, Thomas B., 1991. "Shifting trends, segmented trends, and infrequent permanent shocks," Journal of Monetary Economics, Elsevier, vol. 28(1), pages 61-85, August.
    26. Birolini, Sebastian & Cattaneo, Mattia & Malighetti, Paolo & Morlotti, Chiara, 2020. "Integrated origin-based demand modeling for air transportation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 142(C).
    27. Geoffrey H. Moore, 1961. "Leading and Confirming Indicators of General Business Changes," NBER Chapters, in: Business Cycle Indicators, Volume 1, pages 45-109, National Bureau of Economic Research, Inc.
    28. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hanson, Daniel & Toru Delibasi, Tuba & Gatti, Matteo & Cohen, Shamai, 2022. "How do changes in economic activity affect air passenger traffic? The use of state-dependent income elasticities to improve aviation forecasts," Journal of Air Transport Management, Elsevier, vol. 98(C).
    2. Wang, Sen & Gao, Yi, 2021. "A literature review and citation analyses of air travel demand studies published between 2010 and 2020," Journal of Air Transport Management, Elsevier, vol. 97(C).
    3. Hosseinkouchack, Mehdi & Wolters, Maik H., 2013. "Do large recessions reduce output permanently?," Economics Letters, Elsevier, vol. 121(3), pages 516-519.
    4. Dey Tirtha, Sudipta & Bhowmik, Tanmoy & Eluru, Naveen, 2022. "An airport level framework for examining the impact of COVID-19 on airline demand," Transportation Research Part A: Policy and Practice, Elsevier, vol. 159(C), pages 169-181.
    5. Tolcha, Tassew Dufera, 2023. "The state of Africa's air transport market amid COVID-19, and forecasts for recovery," Journal of Air Transport Management, Elsevier, vol. 108(C).
    6. Darne, Olivier & Diebolt, Claude, 2004. "Unit roots and infrequent large shocks: new international evidence on output," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1449-1465, October.
    7. Olivier Darné & Amélie Charles, 2011. "Large shocks in U.S. macroeconomic time series: 1860-1988," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 5(1), pages 79-100, January.
    8. Olivier Darné & Claude Diebolt, 2006. "Chocs temporaires et permanents dans le PIB de la France, du Royaume-Uni et des États-Unis," Revue d'économie politique, Dalloz, vol. 116(1), pages 65-78.
    9. Charles, Amélie & Darné, Olivier, 2012. "Trends and random walks in macroeconomic time series: A reappraisal," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 167-180.
    10. Iyer, K. Chandrashekhar & Thomas, Nivea, 2021. "An econometric analysis of domestic air traffic demand in regional airports: Evidence from India," Journal of Air Transport Management, Elsevier, vol. 93(C).
    11. Lee, Jim, 1996. "Testing for a unit root in time series with trend breaks," Journal of Macroeconomics, Elsevier, vol. 18(3), pages 503-519.
    12. Roel van Elk & Marc van der Steeg & Dinand Webbink, 2013. "The effects of a special program for multi-problem school dropouts on educational enrolment, employment and criminal behaviour; Evidence from a field experiment," CPB Discussion Paper 241.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Phillips, Robert F., 1996. "Forecasting in the presence of large shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1581-1608.
    14. Wang, Yanzai & Hao, Chengzhi & Liu, Dawei, 2019. "The spatial and temporal dimensions of the interdependence between the airline industry and the Chinese economy," Journal of Transport Geography, Elsevier, vol. 74(C), pages 201-210.
    15. Pedersen, Torben Mark & Elmer, Anne Marie, 2003. "International evidence on the connection between business cycles and economic growth," Journal of Macroeconomics, Elsevier, vol. 25(2), pages 255-275, June.
    16. Dantas, Tiago Mendes & Cyrino Oliveira, Fernando Luiz & Varela Repolho, Hugo Miguel, 2017. "Air transportation demand forecast through Bagging Holt Winters methods," Journal of Air Transport Management, Elsevier, vol. 59(C), pages 116-123.
    17. Darné, Olivier, 2009. "The uncertain unit root in real GNP: A re-examination," Journal of Macroeconomics, Elsevier, vol. 31(1), pages 153-166, March.
    18. Fiteni, Inmaculada, 2004. "[tau]-estimators of regression models with structural change of unknown location," Journal of Econometrics, Elsevier, vol. 119(1), pages 19-44, March.
    19. Franco Bevilacqua & Adriaan van Zon, 2004. "Random walks and non-linear paths in macroeconomic time series: some evidence and implications," Chapters, in: John Foster & Werner Hölzl (ed.), Applied Evolutionary Economics and Complex Systems, chapter 3, Edward Elgar Publishing.
    20. Zhao, Bing & Wu, Hao & Wang, Nuo, 2022. "Changing characteristics of the industrial correlation and economic contribution of air transport in China: An input–output analysis," Journal of Air Transport Management, Elsevier, vol. 104(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jaitra:v:91:y:2021:i:c:s0969699720305871. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/journal-of-air-transport-management/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.