This is the first in a series of essays exploring the economic, social and cultural effects upon the daily lives of persons living in the United States, western Europe and more broadly around the world, as we emerge from the global Covid-19 lockdown pandemic.
By Matthew Parish
Just as in March 2020 countries across the world started imposing severe restrictions upon their citizens’ freedom of movement and work, in the name of preventing physical proximity between people that my lead to increased contagion, in May 2020 the roll of lockdowns was reversed. In the United States the reversal was initiated in part by conflict between federal and state governments who harboured different priorities on the scale of weighing healthcare and economic interests one against the other, and in part by the courts who ruled that executive actions to restrict constitutional liberties overreached. In Europe the lockdown went on for somewhat longer as less transparent domestic political procedures struggled with the same calculus of health versus economics. Once the lockdowns were reversed, however, it had become clear that many things had changed and many of those changes would be permanent.
Perhaps the most fundamental change that everyone has experienced is a gross diminution in the capacity to travel, both domestically and abroad. The roads and trains are empty, public transport within cities is scant, and international air travel capacity has been reduced by, on various estimates, between an astonishing 95% and 99% globally.
Every manager of a process, whether in a commercial or public sector setting, knows that procedures are far easier to stop than to start again. To stop a procedure such as an airline flying, one merely mothballs the assets and send everyone home. By contrast to start the same procedure requires colossal and intricate effort. Staff must be re-trained after a period of absence. Pilots are out of hours. Cabin crew have not been practising their safety drills. The pre-packaged onboard foods are no longer being supplied. The company that prints the immigration forms may have gone out of business. Furloughed staff, paid to stay at home, have become used to being lazy. A number of those staff will have been lost, and replacing skilled staff typically takes between three and six months. In the context of delivering goods, these are often known as supply chain management issues. But in the context of public transport, skilled personnel are needed to work in complex environments (stations, airports) that will also have been mothballed; and in unison with governments (consider police, immigration officials and safety regulators) to undertake sophisticated work (checking an aeroplane or train for technical faults; refuelling; flying). Shutting down a means of transport such as the global airline industry, may mean it cannot get started again: or only at enormous expense.
This explains why across Europe national railway services were kept moving throughout the lockdown period, even though nobody much was travelling on them. The economic logic in doing so was that while the trains would be run at an absolute loss with no passengers while lockdown continued, the size of that loss would be vastly outweighed by the costs of restarting services after they had been mothballed. Thus empty ghost trains were maintained in service throughout the lockdown period with substantial (50-80%) service, with large taxpayer subsidies. The effect of this in countries such as the United Kingdom, in which the railways are nominally in private ownership, was to nationalise the railways in all but name, reversing a British policy of privatising public transport that stretches at least back to the early 1990’s. Bus services were also permitted to keep running across Europe, at the liberty of the bus companies where they perceived demand. By contrast air travel was effectively prohibited through bans upon people travelling abroad. In many cases governments prohibited their citizens from foreign travel, and prohibited foreigners from entering their countries save under pain of the most onerous bureaucratic conditions. As a result the airlines, for the most part deprived of government subsidies accorded to the railways, self-imploded. They had no customers; their margins are small; and at the time of writing (late May 2020) the majority of European airlines are no longer effectively in operation.
In mid-May 2020 the European Union started to roll out an unofficial travel policy amongst its members and its neighbours, which it sought to impose across Europe. The rule would permit travel across European frontiers under either of three conditions: firstly that the traveller had a negative “PCR test” (polymerase chain reaction test, involving a swab in the nostril) dated within the last 72 hours; proof of onward travel (i.e. transit); or an order made at the frontier that the person self-isolate in private accommodation for a period of 14 days upon arrival. These requirements appeared in substantial part arbitrary, and differing governments have shown themselves more or less receptive to adopting the EU’s proposed model. PCR tests are unreliable: they produce a significant proportion of false negatives. There is even a debate about just how unreliable they are. They are expensive, the typical fee at the time of writing being EUR200. This is a substantial tax upon foreign travel; a foreign vacation will require EUR400 in test fees. The test is not easily available in all countries or regions. The caveat that onward transit travel be shown for exemption can be easily forged with something so simple as an international bus ticket purchased on the internet and then cancelled. The obligation to self-isolate at private premises for 14 days is very difficult to enforce in practice if travellers come in any numbers. The police cannot go round to everyone’s house every day. The address given may be false.
This regime, which is being implemented more or less begrudgingly and in various versions across Europe in late May 2020, has the effect of deterring mass travel. It will put off tourists. Many countries rely upon international tourism for foreign revenues in the summer period, and they are doing everything they can to evade these EU strictures, because the net result if they are imposed with any effectiveness is to strangle rejuvenation of the tourism and hospitality sector that has also been hit so badly by the Coronavirus lockdown (a matter to be covered in a later essay). Without mass tourism, the aviation industry will have even lower a prospect of recovery from its sudden seizure in March 2020. The era of budget airlines ferrying passengers across Europe for moderate prices will evaporate, because those budget airlines will no longer operate (or not in nearly as large numbers). Tourists, already poor, will stay at home.
The aviation industry is in particular trouble because aircraft, circulating air and packing passengers closely in tight spaces, are particularly effective vehicles for the spread of highly contagious diseases. Regulations can therefore be expected restricting the density of passengers in an aircraft at any one time, just as they have been imposed in restaurants, supermarkets and churches (so-called “social distancing”). Hence there has been discussion of having a rule that on an aircraft with six seats across, only four passengers will be allowed to occupy the seats on each row. Given that the costs of flying an aircraft to a destination are approximately fixed irrespective of the number of passengers on the aircraft; and margins in the passenger airline industry are low, the net result must be a substantial increase in ticket price per passenger to accommodate the lost revenue. On the assumption that each passenger will have to pay an additional sum equal to half a lost passenger’s revenue in respect of the middle seat, ticket prices can be expected to jump at least 50% by virtue of this measure alone.
The very rare flights available during the lockdown have been mercifully cheap. That is because where an airline has taken a decision to fly a route through the lockdown notwithstanding the absence of passengers (whether by reason of not wanting to suspend its service completely with the corresponding heavy restart costs, or because a skeleton service is being maintained by government subsidy), they have been happy to receive any revenues they can in respect of flights that are inevitably running at a loss. As airlines start up again, passengers will be in deficit because they will be nervous of flying (perhaps rightly so given the transmission rates of Covid-19 in enclosed spaces) and put off by government regulation of the kind described in this essay. Moreover consumers will be short of money after two months of economic devastation caused by lockdown, in which banks have not been extending credit and many employees have been furloughed or made redundant, leading substantial numbers of families in large part reliant upon government payments to workers. Therefore such limited cash as consumers may have at their disposal they may be less inclined to spend upon a perceived luxury such as foreign travel.
The consequence of all this will be that in an intermediate period between airlines’ restart and an adjustment to the inevitably soggy market conditions of the post-lockdown economy, flying will remain very cheap. But then airlines will adjust their supply of airline seats downwards, as they come to realise that the demand for them by customers is worse than they feared. When airlines recalculate their new margins, free of any tailing government subsidies that must inevitably end, ticket prices will shoot up. Airlines will scale back their operations. Many airlines have been announcing substantial redundancy programmes. This will continue. The airlines to emerge out of the Coronavirus lockdown will be fewer in number, smaller, and substantially more expensive. Air travel will revert to being a luxury of the wealthy and business travellers, and the most well-to-do tourists.
It is hard to predict whether people will continue to drive as much as they used to. During the lockdown and immediately after it, oil prices have been entirely speculative and driven by forwards: traders’ guesses as to what might happen to the oil markets after lockdown is over. There has not been a substantial market in physicals, because people across the world have not been driving their cars. Astonishingly, the hydrocarbon market has just ground to a halt. With consumers remaining poor after the end of the lockdown, it is hard to imagine that car use will not be regarded as a diminishable or expendable luxury. Therefore demand for petrol / gasoline is likely to remain substantially depressed compared to pre-virus levels. We all may become a lot less interested in the price of oil as a result, as we start upon the beginnings of a post-hydrocarbon age. The clean air in London, New York and Delhi is testament to the effects of this already being felt. We may have substantially won the global battle against climate change and environmental damage caused by hydrocarbon pollution at a single stroke, and governments may now regulate to preserve this new, cleaner status quo. Anticipating this, governments are presently encouraging walking and cycling as alternatives to the motor car. The car industry itself may collapse, as people do not spend their limited post-virus financial resources replacing existing vehicles. Instead they will repair their current cars.
The result is that more of us will travel by train and bus, and we will take fewer international holidays and more domestic ones. We may live fitter, cleaner, healthier lives, walking and exercising more when we need to travel through our cleaner cities that are less blighted by hydrocarbon consumption. The principal casualties, aside from the international tourism industry (which we will consider later in this series), will be international families with relations abroad. There will be fewer such families, as maintaining those international connections will become more a luxury of the wealthy. There is undoubtedly a sense in which our experiences of travel will be moving back in time, maybe by as many as forty or fifty years.
Matthew Parish is an international lawyer and scholar of international relations based in Geneva, Switzerland. He is an Honorary Professor at the University of Leicester; was elected as a Young Global Leader of the World Economic Forum; and has been named as one of the three hundred most influential people in Switzerland. An expert in UN reform, he is the author of several books and over three hundred articles. www.matthewparish.com
The views expressed in this article do not necessarily reflect those of TransConflict.