Update: What Would a Recession Mean for Aviation?

As talk increases about an economic downturn, two economists weigh in on possible impacts for the industry.

Michael Wildes

Monday, September 26, 2022 at 10:33 AM ET

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Demand for air travel is up, but how would a recession affect things? [File photo: Adobe Stock]

Key Takeaways:

The Federal Reserve is attempting a "soft landing" for the U.S. economy by aggressively raising interest rates to combat high inflation, which is driven by strong post-pandemic demand and supply chain issues.
This strategy carries significant risks, including the potential for a recession and higher unemployment, as the Fed's actions increase the cost of borrowing and doing business.
While commercial airlines currently benefit from resilient consumer demand for travel, other aviation sectors like business aviation and flight schools face increased costs and financial challenges.
Economists increasingly predict a high probability of a recession, indicating that the Fed's goal of achieving a "soft landing" for the economy is becoming more difficult to realize.

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Jerome Powell, the chairman of the Federal Reserve, is not a pilot, but he started talking like one when the economy began to nosedive earlier this year.

Specifically, Powell said he would try to “land the plane softly,” and that “plane” is the U.S. economy. It’s the biggest economy in the world, and with more than 329 million passengers on board, a lot is at stake because unless he sticks that landing, the effects—and an economic ground stop—could be felt worldwide.