Current Affairs
February 26, 2021
Air Travel
Why Economic Takeoff Depends on Air Travel
Getting travelers back in the skies will likely accelerate economic recovery on the ground—but COVID-19 vaccines will need to dispatch passenger fears as effectively as the virus.
by:
JIM GLASSMAN, HEAD ECONOMIST, COMMERCIAL BANKING Feb 02, 2021
Key points:
- Total U.S. boardings have fallen to less than half their pre-pandemic levels. Despite air travel’s relatively low infection rates, people are still nervous to fly.
- Air travel has an enormous economic footprint—airlines and aviation manufacturers directly employ over one million workers.
- Governments worldwide have recognized the industry’s importance, providing $159 billion in emergency support during the pandemic.
- More flights may resume quickly as vaccines are rolled out.
- The return of travel will likely release pent-up demand for new aircraft.
Air travel’s incomplete recovery: Passengers are hesitant to return to the skies before COVID-19 vaccines become widely available. U.S. daily flights remain halved and international arrivals stand at only a quarter of pre-pandemic levels.
- Unlike the dining and entertainment sectors, airlines have not been subject to government-mandated shutdowns—so passengers’ willingness to fly appears to be a major factor behind low ticket sales.
- Flying appears to present low contagion risks—relatively few cases of COVID-19 have been traced to flights.
- Still, people have grown understandably wary of spending hours in a confined space. The public’s reluctancy to fly seems unlikely to dissipate until the threat of COVID-19 disappears.
The economic power of flight: Air travelers patronize hotels, restaurants, local ground transportation systems and tourist attractions after they’ve reached their destinations. When these ancillary activities are accounted for, approximately 5% of the nation’s total economic activity is tied to air travel.
- Airlines and airports directly employ almost 500,000 workers; aviation manufacturing accounts for another half-million jobs.
- The falloff in travel has been particularly challenging for the nation’s largest tourism economies in central and southern Florida, Southern California, Arizona and cities including Washington D.C., Nashville, Tenn. and Las Vegas.
- Without a steady stream of arrivals, rental car companies may be delaying new fleet purchases. Business purchases of motor vehicles remain well below their pre-pandemic peak.
- Ride-hailing workers who shuttle passengers to the terminal have also suffered. Almost six million gig economy workers have sought help from the Pandemic Unemployment Assistance (PUA) program.
- Cancelled travel plans have likely changed spending patterns. In the aggregate, this displaced spending has obscured the toll of air travel’s decline. This is why GDP is closing in on a full recovery, despite the dormancy of this significant segment of the economy.
Government aid is helping: Policymakers around the world recognize air travel’s importance to the global economy. Aid packages are helping airlines weather the pandemic.
- The CARES Act provided $32 billion to keep airline workers on payrolls, and the second federal stimulus package included another $15 billion to recall 32,000 furloughed workers.
- Worldwide, emergency aid for airlines has totaled $159 billion1, covering approximately 38% of the industry’s projected pandemic revenue losses for 2020.
- Emergency relief can keep workers attached to their jobs, helping the industry snap back when the pandemic subsides.
Increasing tailwinds: With vaccine distribution ramping up, U.S. passengers are likely to return to the skies in 2021.
- People will likely want to see their loved ones face-to-face as soon as they’re confident the pandemic has been contained.
- Similarly, business travel should quickly rebound. Many see teleconferencing as a stopgap measure, not a true replacement for on-site visits.
- Passenger volume has been rising slowly, making gradual gains before vaccines were available. This may be a sign of pent-up travel demand.
- Aircraft sales may strengthen throughout the year. Manufacturers currently have $475 billion in backlogged orders, and 400 Boeing 737 Max 8 jets—worth approximately $40 billion—are being prepped for delivery.
February 26, 2021
Air Travel
Why Economic Takeoff Depends on Air Travel
Getting travelers back in the skies will likely accelerate economic recovery on the ground—but COVID-19 vaccines will need to dispatch passenger fears as effectively as the virus.
by:
JIM GLASSMAN, HEAD ECONOMIST, COMMERCIAL BANKING Feb 02, 2021
Key points:
- Total U.S. boardings have fallen to less than half their pre-pandemic levels. Despite air travel’s relatively low infection rates, people are still nervous to fly.
- Air travel has an enormous economic footprint—airlines and aviation manufacturers directly employ over one million workers.
- Governments worldwide have recognized the industry’s importance, providing $159 billion in emergency support during the pandemic.
- More flights may resume quickly as vaccines are rolled out.
- The return of travel will likely release pent-up demand for new aircraft.
Air travel’s incomplete recovery: Passengers are hesitant to return to the skies before COVID-19 vaccines become widely available. U.S. daily flights remain halved and international arrivals stand at only a quarter of pre-pandemic levels.
- Unlike the dining and entertainment sectors, airlines have not been subject to government-mandated shutdowns—so passengers’ willingness to fly appears to be a major factor behind low ticket sales.
- Flying appears to present low contagion risks—relatively few cases of COVID-19 have been traced to flights.
- Still, people have grown understandably wary of spending hours in a confined space. The public’s reluctancy to fly seems unlikely to dissipate until the threat of COVID-19 disappears.
The economic power of flight: Air travelers patronize hotels, restaurants, local ground transportation systems and tourist attractions after they’ve reached their destinations. When these ancillary activities are accounted for, approximately 5% of the nation’s total economic activity is tied to air travel.
- Airlines and airports directly employ almost 500,000 workers; aviation manufacturing accounts for another half-million jobs.
- The falloff in travel has been particularly challenging for the nation’s largest tourism economies in central and southern Florida, Southern California, Arizona and cities including Washington D.C., Nashville, Tenn. and Las Vegas.
- Without a steady stream of arrivals, rental car companies may be delaying new fleet purchases. Business purchases of motor vehicles remain well below their pre-pandemic peak.
- Ride-hailing workers who shuttle passengers to the terminal have also suffered. Almost six million gig economy workers have sought help from the Pandemic Unemployment Assistance (PUA) program.
- Cancelled travel plans have likely changed spending patterns. In the aggregate, this displaced spending has obscured the toll of air travel’s decline. This is why GDP is closing in on a full recovery, despite the dormancy of this significant segment of the economy.
Government aid is helping: Policymakers around the world recognize air travel’s importance to the global economy. Aid packages are helping airlines weather the pandemic.
- The CARES Act provided $32 billion to keep airline workers on payrolls, and the second federal stimulus package included another $15 billion to recall 32,000 furloughed workers.
- Worldwide, emergency aid for airlines has totaled $159 billion1, covering approximately 38% of the industry’s projected pandemic revenue losses for 2020.
- Emergency relief can keep workers attached to their jobs, helping the industry snap back when the pandemic subsides.
Increasing tailwinds: With vaccine distribution ramping up, U.S. passengers are likely to return to the skies in 2021.
- People will likely want to see their loved ones face-to-face as soon as they’re confident the pandemic has been contained.
- Similarly, business travel should quickly rebound. Many see teleconferencing as a stopgap measure, not a true replacement for on-site visits.
- Passenger volume has been rising slowly, making gradual gains before vaccines were available. This may be a sign of pent-up travel demand.
- Aircraft sales may strengthen throughout the year. Manufacturers currently have $475 billion in backlogged orders, and 400 Boeing 737 Max 8 jets—worth approximately $40 billion—are being prepped for delivery.
February 25, 2021
Durable Goods Surge
US Durable Goods Orders Surge In January To Pre-COVID Highs
by Tyler DurdenThursday, Feb 25, 2021 – 8:37
Having slowed for 3 straight months, analysts expected US durable goods orders to re-accelerate and they were not wrong as preliminary January data showed a huge 3.4% MoM jump (more than triple the +1.1% MoM expected).
Source: Bloomberg
That is the ninth straight monthly rise in durable goods orders after the March/April collapse, with orders up 4.5% YoY to pre-COVID highs…
Source: Bloomberg
Core capital goods orders, a category that excludes aircraft and military hardware and is seen as a barometer of business investment, rose 0.5% after an upwardly revised 1.5% gain.
https://www.zerohedge.com/economics/us-durable-goods-orders-surge-january-pre-covid-highs
February 25, 2021
Durable Goods Surge
US Durable Goods Orders Surge In January To Pre-COVID Highs
by Tyler DurdenThursday, Feb 25, 2021 – 8:37
Having slowed for 3 straight months, analysts expected US durable goods orders to re-accelerate and they were not wrong as preliminary January data showed a huge 3.4% MoM jump (more than triple the +1.1% MoM expected).
Source: Bloomberg
That is the ninth straight monthly rise in durable goods orders after the March/April collapse, with orders up 4.5% YoY to pre-COVID highs…
Source: Bloomberg
Core capital goods orders, a category that excludes aircraft and military hardware and is seen as a barometer of business investment, rose 0.5% after an upwardly revised 1.5% gain.
https://www.zerohedge.com/economics/us-durable-goods-orders-surge-january-pre-covid-highs
February 24, 2021
Restart Updates
Polar storm paralyses US Gulf Coast petrochemical sector
By Rebecca Trager24 February 2021
The polar storm that descended into the US Gulf Coast on 14 February, bringing unprecedented prolonged freezing temperatures to many parts of Texas, dramatically disrupted petrochemical supplies. Approximately 75% of total US ethylene capacity remained offline as of 23 February, according to analysis by Kevin McCarthy, who covers the global chemicals industry for the Connecticut-based equity research firm Vertical Research Partners, and colleagues.
Source: © Joe Raedle/Getty Images
The situation in the aftermath of what’s been dubbed the ‘icepocalypse’ of 2021 is very fluid, with the status of plant operations being updated continually, but the data coming in reveals how badly Texas-based chemicals capacity has been impacted by the record-breaking cold weather. Texas is the petrochemical hub of America.
As of 23 February, 100% of epichlorohydrin production was offline, as was about 90% of ethylene glycol production, more than 70% of polypropylene production, over 60% of epoxy resins production, and about 40% of propylene production, Vertical Research Partners finds.
Shutdowns include one or more crackers operated by Chevron Phillips Chemical, Dow, ExxonMobil, Formosa Plastics, Lyondell and Motiva, according to McCarthy’s research note. In addition, Sasol has also reportedly reduced rates at Lake Charles, Louisiana and Indorama appears to have throttled back or shut down ethylene and ethylene oxide at Port Neches, Texas. Likewise, Lyondell’s ethylene oxide is down at Bayport, Texas.
Most of the 150-plus petrochemical facilities in the Houston area are expecting to come back online sometime this week, according to Chad Burke, president and chief executive of the Economic Alliance Houston Port Region. Some are working through repairs while others are waiting on utilities and feedstock supplies to be restored, he says.
Waiting on utilities
An anonymous representative of one of the largest integrated refining and chemical companies in the Houston port area reports being in ‘various stages of startup’ across its different facilities in the area. Meanwhile, a plant manager at another chemical company in the region says the majority of the roughly 75 sites in the vicinity, including their own, are down waiting to receive utilities like natural gas, steam, nitrogen and water. ‘At this stage it looks like another week before utilities return,’ the plant manager, who also preferred not to be identified, said on 22 February.
Although it is difficult to estimate the impact of these facilities being down for the better part of two weeks, it’s bound to be significant since Houston is the largest petrochemical complex in the world, producing more than 40% of America’s chemicals and about 25% of its fuels.
‘The vast majority of petrochemical plants and refineries in the state ceased all production manufacturing and were idling, except for those that were generating power to help provide added support to the state’s electric grid,’ Hector Rivero, president and chief executive of the Texas Chemical Council and the Association of Chemical Industry of Texas, tells Chemistry World.
At this stage it looks like another week before utilities return
Because Texas doesn’t normally have such extreme weather, the state is not prepared and resourced to handle such conditions. There have been ice storms in Texas over the years, but they are generally brief events. This most recent storm was a multi-day hard freeze.
Many chemical plants in the state and nearby Louisiana are not designed to operate in such extreme conditions, so equipment failures and frozen process lines can decrease operational reliability, explained McCarthy and colleagues in their recent research note. They also cautioned that ‘unfavourable network effects’ can exacerbate the situation because many assets are dependent upon neighbouring plants for utilities, like electric power, and the supply of feedstock or intermediates required to operate.
A ‘mad scramble’
In fact, the storm’s extended freeze caused downed power lines and power loss across Texas, and the state had to initiate rolling blackouts to try to ensure that power demand did not exceed supply. These forced outages will certainly impact global supply and demand for chemicals, Rivero says. Indeed, he points out that the price of gas has already soared in parts of Texas and across the US.
‘With all of these facilities being shut down, a lot of the supply chain was also impacted,’ Rivero adds. ‘It is kind of a mad scramble to secure the resources needed to be able to come back online, and that is starting to happen now.’
A key lesson learned is the need to improve the security of the electricity supply regionally, experts suggest. Aside from the temporary challenges posed by the ice storm, which were severe, the scarcity of electric power also created significant consequences for chemical companies. Manufacturing plants had to shut down because of the need to divert and conserve electric power so that it could be preserved for residential and emergency needs. That is a weakness in the system that had remained under-appreciated prior to this severe weather event.
But there is perhaps some good news to be found in a surprising place. The ongoing pandemic has significantly changed the supply chain, and that could help with the recovery of Texas’ petrochemical industry from this natural disaster.
The interruptions caused by the Covid-19 shutdowns actually deepened the inventories of feedstocks, intermediate products like chemicals and resins, and finished products, according to Burke. ‘Both manufacturers and customers recognised the importance of increasing inventories to insulate against supply chain interruptions,’ he explains. ‘Those lessons learned should actually serve to decrease the time it takes now to get back into production.’
Everchem Updates Archive 
Sign Up for Email Updates