How COVID changed the airline biz

Summary

Marketplace Morning Report - Episode Summary: "How COVID Changed the Airline Biz"

Release Date: March 12, 2025

The latest episode of the Marketplace Morning Report offers an in-depth exploration of how the COVID-19 pandemic has fundamentally transformed the airline industry. Hosted by Sabri Benashour and featuring comprehensive reports by Daniel Ackerman, along with discussions on steel and aluminum tariffs and US inflation trends, this episode provides listeners with valuable insights into the evolving economic landscape. Below is a detailed summary capturing all key points, discussions, insights, and conclusions from the episode.

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1. Expansion of Steel and Aluminum Tariffs

Host: Sabri Benashour
Guest: Nova Sappho

The episode begins with Sabri Benashour discussing the recent expansion of steel and aluminum tariffs with industry expert Nova Sappho.

• Tariff Expansion Details:

  • The existing tariffs, initially imposed during President Trump's first administration, are now extended to cover a broader range of products. "Now all of those derivative products also were excluded before. Now they're facing import levies," explains Nova Sappho ([01:54]).
  • Products affected include air conditioner parts, aircraft components, kitchen appliances, nuts and bolts, and bulldozer blades, among others.

• Impact Analysis:

  • The Boston Consulting Group's analysis indicates that the new tariff rules have more than doubled the amount of steel imports subject to import taxes.
  • Sector-Specific Effects:
    • Manufacturing and Construction: These industries are expected to bear the brunt of the tariff expansions.
    • Automotive Industry: S&P Global predicts significant impacts on automakers, although the overall inflation effect remains minimal.

• Economic Implications:

  • President Trump aims to boost domestic manufacturing by expanding steel and aluminum factories, including those in the auto manufacturing sector.
  • A critical outlook remains uncertain due to potential retaliatory tariffs from other countries, with the EU already signaling forthcoming import levies ([02:28]).

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2. US Inflation Trends

Host: Sabri Benashour
Reporter: Nancy Marshall Genser

Transitioning from tariffs, Sabri introduces Nancy Marshall Genser's report on the latest inflation trends in the United States.

• Consumer Price Index (CPI) Insights:

  • In February, the CPI increased by 2.10%, a slowdown from the 2.6% rise in January ([03:35]).
  • Key Contributors to CPI:
    • Shelter Costs: Accounted for nearly half of the CPI increase.
    • Used Cars: Prices saw a significant uptick.
    • Food Prices: Meat, poultry, fish, and eggs increased by over 1.5%, driven primarily by the soaring cost of eggs.

• Future Projections and Federal Reserve Stance:

  • The implementation of the new tariffs could increase US inflation by half to nearly three-quarters of a percentage point.
  • With CPI expected to hover around 3% through 2025, which is above the Federal Reserve's target of 2%, Bank of America forecasts that the Fed will likely maintain current interest rates through the end of the next year.
    • "With CPI hovering around 3%, we'll see little reason for an interest rate cut," states a Bank of America analyst ([03:35]).

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3. How COVID Changed the Airline Business

Host: Sabri Benashour
Reporter: Daniel Ackerman

The core segment of the episode features Daniel Ackerman's comprehensive report on the airline industry's transformation due to COVID-19.

a. Initial Impact of the Pandemic

• Pre-Pandemic Peak:

  • February 2020 marked a record period for airlines, with high traffic and revenue.
  • "February 2020 was a pretty good time for airlines," remarks industry consultant Robert Mann ([06:09]).

• Sudden Decline:

  • By April 2020, TSA screening numbers plummeted to levels not seen since the 1930s and 1950s.
  • "With no passengers, airlines cut staff and parked their unused airplanes out in the desert," explains Robert Mann ([06:19]).

• Government Intervention:

  • Over $50 billion in government support was crucial in preventing airlines from going bankrupt.

b. Recovery Phase

• "Revenge Travel":

  • As vaccination rates increased and restrictions eased in mid-2021, there was a surge in travel termed "revenge travel."
  • Nicholas Rupp notes, "They've got money to spend. They're ready to travel," attributing the rebound to stimulus checks and pent-up demand ([06:58]).

• Leisure vs. Business Travel:

  • Leisure Travel: Saw a strong resurgence as consumers sought to reconnect with friends and family.
    • "So it was leisure travelers that first brought back the airlines," says Robert Mann ([06:58]).
  • Business Travel: Did not recover at the same pace due to the widespread adoption of virtual meetings via platforms like Zoom.
    • "Business travel didn't see the same rebound. Managers learned Zoom could do the trick just fine," Mann explains ([07:05]).

c. Long-Term Industry Changes

• Route Dynamics:

  • The decline in business travel impacted routes to smaller cities, leading to the discontinuation of profitable services previously sustained by high-fare business travelers.
    • "They were subsidized by the 5 or 6 very high fare business travelers who were lying in those markets," Mann adds ([07:16]).
  • Some routes may never return, fundamentally altering the airline network structure.

• Supply Chain Challenges:

  • The pandemic disrupted aircraft supply chains, causing delays in deliveries from manufacturers like Boeing and Airbus.
    • "Manufacturers like Boeing and Airbus are still behind on deliveries of new planes," states Henry Hartevelt ([07:45]).

• Lessons Learned:

  • Airlines recognized the importance of maintaining excess aircraft to meet unexpected demand surges.
    • "A key lesson here is when you're faced with a crisis, stay away from knee-jerk reactions," advises Henry Hartevelt ([08:02]).

• Current Challenges:

  • With major airlines like Delta, American, United, and Southwest slashing their revenue forecasts due to slowing demand, the industry faces ongoing turbulence.
    • "Delta, American, Southwest, United have all cut their first quarter growth forecasts or warn demand is slowing," Sabri summarizes ([05:24]).

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Notable Quotes

• Nova Sappho on Tariffs:
  "Now all of those derivative products also were excluded before. Now they're facing import levies." ([01:54])

• Robert Mann on Pandemic Impact:
  "With no passengers, airlines cut staff and parked their unused airplanes out in the desert." ([06:19])

• Henry Hartevelt on Recovery:
  "So it was leisure travelers that first brought back the airlines." ([06:58])

• Robert Mann on Business Travel:
  "They were subsidized by the 5 or 6 very high fare business travelers who were lying in those markets." ([07:16])

• Henry Hartevelt on Supply Chains:
  "Manufacturers like Boeing and Airbus are still behind on deliveries of new planes." ([07:45])

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Conclusion

This episode of the Marketplace Morning Report meticulously examines the ripple effects of COVID-19 on the airline industry, highlighting both immediate impacts and long-term structural changes. From the drastic reduction in passenger numbers and the subsequent financial lifelines provided by government interventions to the nuanced recovery marked by a surge in leisure travel but a stagnation in business travel, the report underscores the multifaceted challenges and adaptations within the airline sector. Additionally, the discussions on expanded steel and aluminum tariffs and the current state of US inflation provide a broader economic context, illustrating the interconnectedness of various industries and policy decisions. Through expert interviews and data-driven analysis, listeners gain a comprehensive understanding of the intricate dynamics shaping today's business environment.

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This summary is crafted to provide a clear and detailed overview of the episode's content, ensuring that even those who haven't listened can grasp the essential discussions and insights shared.

Transcript

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[Sabri Benashour]

Got a Lot More expensive from Marketplace I'm Sabri Benishour in for David Brancaccio. It's not just tariffs on steel and aluminum that go into effect today. It's tariffs on hundreds of products made from those metals. Air conditioner parts, aircraft parts, kitchen appliances, nuts and bolts, bulldozer blades, Marketplaces Nova Sappho is here with more Hinova Good morning Sabri. So technically we actually already had some steel and aluminum tariffs in place. This is an expansion of them. Can you break that down for us?

[Nova Sappho]

That's right. These tariffs date back to the first Trump administration steel and aluminum tariffs, but there were a lot of exemptions along the way. For example, some countries like Japan had quotas with which they could export to the US a certain amount of product before the higher tariffs kicked in. Now that's all gone. Now all of those derivative products also were excluded before. Now they're facing import levies. So all of this is a big change. Analysis from the Boston Consulting Group found that the new tariff rules more than double the amount of steel imports alone. Sabri which are facing new import taxes.

[Sabri Benashour]

And what should we expect the consequences.

[Nova Sappho]

Of this to be well, President Trump says he's seeking to bring more manufacturing to the US to expand steel and aluminum factories, but also others such as in auto manufacturing. That Boston Consulting Group analysis I mentioned does find that these tariffs are going to impact the manufacturing and construction industries the most. Now, interesting. Interestingly, when it comes to the broader economy, S and P Global predicts that the impacts just from these specific tariffs will be relatively negligible on prices overall, but a very significant impact on specific industries like automakers. A big caveat in all of this is that analysts have not yet considered the impacts of retaliatory tariffs from other countries, and the EU has already announced that they will impose some all right, Marketplace is NovaSafo.

[Sabri Benashour]

Thank you so much.

[Nova Sappho]

You're welcome.

[Sabri Benashour]

Inflation in the US in February cooled down quite a bit. The Consumer Price index just dropped. It's a break we really needed 2.8% yearly inflation. It's not as low as we'd like it to be, but it's better than the month before. Marketplace's Nancy Marshall Genser has more Inflation.

[Nancy Marshall Genser]

Rose more slowly last month. The Consumer price index was up 2.10percent in February, a bit cooler than the half percent rise in January. Almost half the CPI increase was due to the cost of shelter. Used car prices were also up up prices for meat, poultry, fish and eggs were up more than 1.5% in February. That was mostly driven by the soaring cost of eggs. S and P Global economists say if President Trump's tariffs are fully implemented, they'll increase U.S. inflation by a half to nearly three quarters of a percentage point. With the CPI hovering around 3% through 2025, well above the Federal Reserve's inflation target of 2%. The Fed starts its next meeting on interest rates this Tuesday. With INFL above its target, bank of America sees little reason for an interest rate cut. In fact, BofA expects the Fed to stay on hold through the end of next year. I'm Nancy Marshall Genser for Marketplace.

[Sabri Benashour]

Foreign.

[Daniel Ackerman]

If you want to be savvy about the economy, the Marketplace newsletter is just what you need. Every Friday you'll get explainers and analysis that make sense of everything from the moving markets to grocery prices. No jargon, no hype, just smart takes delivered to your inbox. Sign up [e-mail] subscribe.

[Sabri Benashour]

Now. Something from the file of unintended consequences Slashing government jobs and spending has slashed government travel and that is showing up in demand for flights. Delta, American, Southwest, United have all cut their first quarter growth forecasts or warn demand is slowing. A decline in government travel is just one reason. The big one, of course, is that consumers and businesses have been getting more anxious about the direction of the economy. This downturn comes five years to the week after the official start of the COVID 19 pandemic, when airlines faced a truly existential threat. This week we're looking at how various industries have recovered from the economic shock of pandemic times and how they've been changed by it. Marketplace's Daniel Ackerman has this report.

[Robert Mann]

February 2020 was a pretty good time for airlines, says industry consultant Robert Mann.

[Daniel Ackerman]

The irony was early February was record traffic, record revenue.

[Robert Mann]

Of course, that wouldn't last. By April, there were days when TSA screened fewer than 90,000 travelers, says Henry Hardevelt of Atmosphere Research.

[Henry Hartevelt]

We hadn't seen a number that low in the United states since the 1930s 50s.

[Robert Mann]

With no passengers, airlines cut staff and parked their unused airplanes out in the desert. It took more than $50 billion in government support to keep airlines from going bankrupt. But then, in the middle of 2021.

[Henry Hartevelt]

As more people were vaccinated, as restrictions started to ease, we saw domestic and international travel explode. So called revenge travel.

[Robert Mann]

People wanted to get back out there and see their friends and family, says Nicholas Rupp, an economics professor at East Carolina University.

[Daniel Ackerman]

They've gotten stimulus checks, so they've got money to spend. They're ready to travel. So it was leisure travelers that first brought back the airlines.

[Robert Mann]

Business travel didn't see the same rebound. Managers learned zoom could do the trick just fine, consultant Robert Mann says. That hurt routes to and from smaller cities where previously just a handful of business travelers could make it profitable to fly a 50 seat airplane.

[Daniel Ackerman]

They were subsidized by the 5 or 6 very high fare business travelers who were lying in those markets. And if that type of demand doesn't exist anymore, then the cross subsidy doesn't exist and the service will be eliminated, Mann says.

[Robert Mann]

Some of those routes may never return, even with business travel picking up lately, the pandemic has also had a lasting impact on aircraft supply chains, says Henry Hartevelt of Atmosphere Research. Manufacturers like Boeing and Airbus are still behind on deliveries of new planes.

[Henry Hartevelt]

So a key lesson here is when you're faced with a crisis, stay away from knee jerk reactions. There are airlines that wish they hadn't gotten rid of airplanes because when demand hit, they could have used those planes.

[Robert Mann]

Airlines may soon get a chance to apply some of the lessons they learned back then. This week, Delta, American, United and Southwest all slashed their revenue forecasts as consumer sentiment runs into turbulence. I'm Daniel Ackerman for Marketplace, and in.

[Sabri Benashour]

New York, I'm Sabri Ben, ashore with the Marketplace Morning Report from apm American Public Media.

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