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, led by Chairman Jerome Powell, is actively trying to achieve a "soft landing" for the U.S. economy, aiming to curb high inflation through aggressive interest rate hikes.
Inflation is primarily driven by a confluence of factors including post-pandemic pent-up demand, government stimulus, supply chain disruptions, and geopolitical events.
Economists indicate a significantly elevated risk of recession, with probabilities now exceeding 50% in the next 12 months, as the Fed balances cooling demand without causing a severe economic downturn.
The aviation industry faces a mixed outlook; commercial airlines currently benefit from strong travel demand and labor shortages, but rising costs and interest rates pose challenges for business aviation and flight schools.

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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.