It’s most certainly true that air travel isn’t going to be the same, as this newspaper recently editorialized. It’s probable though that it’s going to change in ways no one is really waking up to as yet. Of course, this is always true of the future, none of us can read that exactly. But the ways flight will change are an interesting insight into the more general economy as well.
We don’t know what the new rules are going to be about social distancing on board and all that. Currently, the European at least idea is that the middle seat in any row will be left empty. If that happens forever, then flying will become much more expensive given the smaller number who can travel on any one flight.
It’s also most, most, unlikely that such rules will last forever. Either because we all rebel against such restrictions in the end or because, again, in the end, a cure or treatment is found. However, the ways in which the industry will change seem obvious enough.
Near all airlines, without government support, are bankrupt now. Even if they appear to have decent amounts of cash they don’t really – they’re sitting on prepayments for tickets which will have to be returned at some point, or the flights were taken.
Every airline that can, has therefore taken great gulps of that government aid. Those that can’t, well, Virgin Australia has gone into liquidation and Richard Branson is talking of selling part of Virgin Galactic to keep Virgin Atlantic going.
Further down the market into those companies none of us have ever heard of the industry estimates are that at least 400 will go bust -- into proper liquidation that is -- and there will thus be some 2,000 or more airliners, about 10% of the global fleet, repossessed.
We might think that that’s the end of that flight capacity then. Except that the airliners themselves will still exist. So will all the trained crews. We’re not about to start ploughing up the airport runways. Aviation fuel is now as cheap as it has been in decades.
And all those things which exist but which aren’t being used become very, very, cheap. That is, as all the existing airlines go bust over the next year or so is the finest time ever to be launching a new airline. Well, OK, maybe not in the sense of how many passengers you’ll get and all that but it is in terms of how much it will cost to get going.
And the thing is, if you’ve got trained staff, a plane, a credit card for some fuel, and the airport will let you land, there you pretty much do have an airline. The only thing you’ve got to add is a system for selling tickets. I’ve actually watched some friends attempt to launch a regional airline in the US.
They failed, because of course they did, but they did get into the air for a few months before they failed. It’s less difficult than we all might think -- especially if friends of mine can manage it, it must be. This all indicates a larger lesson about the economy as a whole.
There’s a difference between a company or organization going bankrupt and the destruction of actual economic assets. The company is just the definition of who owns and who manages. We can change both of those without the destruction of the actual assets themselves.
If, for example, a farmer goes bust the land is still there. There’s the same amount of water around. Whatever equipment he had still existed. Sure, it’s a terrible experience for him but for the economy as a whole it doesn’t really matter. The same is true of airlines or anything else.
On the other hand, if the planes, or the land, or the water, were to disappear entirely, were destroyed, then we’re all permanently poorer by the absence of that economic asset. The lessons from this being two-fold. Firstly, we expect recovery from a recession where lots of people go bankrupt to be pretty quick.
Because all those assets still exist, people will start to employ them to do something, the economy will return. Different people will own it, they may well be doing slightly different things, but recovery is a matter of using what is already there, not of having to go and invent and build it all.
Secondly, it doesn’t really matter all that much that lots of people go bankrupt. Sure, it’s nasty for them, but we shouldn’t listen too hard to the claims that this, that or the other business must be saved. Save those economic assets, yes, but we don’t need to save the corporation, the wrapper they currently sit in.
It’s hugely, vastly more important that economic assets continue to exist than it is who owns them. Thus whatever economic assistance we give at this time isn’t to prop up companies or organizations. We can and should alleviate the struggles of people, certainly, but companies don’t really matter.
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.
