Epoxy

March 2, 2021

Congratulations to Maureen Moke

Maureen is an original employee of Everchem when the company formed in 2002. Like Bob Daniele and Dave Patten, she worked at ARCO Chemical before Everchem.

Maureen has decided to retire and we celebrated her last day this past Friday. I know many customers, suppliers, and logistics providers worked with Maureen every day and wish her well. This is a post to let everyone know.

She will be missed by the Everchem family and here’s to a fantastic and well-earned retirement. Thank you, Maureen!

February 28, 2021

Restart Updates

Petrochemical restart efforts continue post-freeze

Houston — US Gulf Coast petrochemical producers were working to restart facilities that shut when a deep freeze hit the region the week of Feb. 15, but those efforts faced ups and downs amid detailed damage assessments.

Some producers were finding pinhole leaks or other problems in pipes exposed to sustained sub-freezing temperatures during startup processes. Market sources said ethylene producers were working to restart crackers once shut downstream derivative plants were deemed able to restart as well.

ExxonMobil, which has restarted the 826,000 mt/year cracker at its Beaumont, Texas, chemical complex, also was restarting three crackers with a combined capacity of 3.8 million mt/year at its Baytown, Texas, complex as well, according to a Feb. 26 notice the company distributed via a community hotline.

Two of three US propane dehydrogenation (PDH) plants also were working to restart, which helped prompt spot February polymer-grade propylene prices to decline sharply from Feb. 23 highs.

Market sources said, however, that the industry’s overall recovery from the freeze and its fallout on supply chain backlogs, was expected to stretch into Q2 2021, particularly if producers face lengthy repairs to plants after more than three days of sustained sub-freezing temperatures.

Global prices were rising on expectations of interrupted US supply and uncertainty of how long those interruptions would last.

“Raw materials already were tight,” a market source said. “Now we’re seeing more panic, buyers panicking, trying to lock everything in.”

Here is a rundown of fallout from the freeze:

FORCE MAJEURES

**Dow Chemical: Declared Feb. 19, on 2-ethylhexanol and butanol products from its Texas City, Texas complex

**Formosa Plastics USA: Declared Feb. 19 on US polyethylene

**BASF: Declared Feb. 19 on dioctyl terephthalate (DOTP), a plasticizer, at its Pasadena, Texas, site

**Westlake Chemical: Declared Feb. 19 on US caustic soda, chlorine, PVC and VCM; company has 2.9 million mt/year of US caustic soda capacity, more than 2 million mt/year of PVC capacity, 2.6 million mt/year of VCM; more than 2.26 million mt/year of chlorine capacity at five affected sites

**Formosa Plastics USA: Declared Feb. 18 on US PVC, 1.3 million mt/year of capacity at Point Comfort, Texas, and Baton Rouge, Louisiana, complexes.

**Dow Chemical: Declared Feb. 18 on multiple intermediate chemicals produced at plants in Deer Park, Freeport, Texas City and Bayport Texas, Hahnville, Louisiana, and Louisville, Kentucky; declaration includes vinyl acetate monomer (VAM), methyl methacrylate (MMA), glacial methacrylic acid (GMAA), butyl methacrylate (BMA), glycidyl methacrylate (GMA), 2-ethylhexyl Acrylate (2EHA), butyl acrylate (BA), and others; Dow informed South American customers

**Celanese: Declared force majeure Feb. 18 on multiple intermediate chemicals normally sold to customers in the US, Europe and the Middle East, including acetic acid, VAM, ethyl acetate and ethylene vinyl acetate (EVA)

**Total: Declared Feb. 17 on polypropylene produced at its 1.15 million mt/year La Porte, Texas, facility

**Formosa Plastics USA: Declared Feb. 17 on all chlor-alkali products

**LyondellBasell: Declared Feb. 16 on styrene monomer

**Vestolit: Declared Feb. 16 on PVC produced at its Colombia and Mexico plants on lack of upstream vinyl chloride monomer feedstock from US suppliers; plants have a combined 1.8 million mt/year of capacity

**Olin: Declared Feb. 16 on US chlorine, caustic soda, ethylene dichloride, epoxy, hydrochloric acid and other products produced at its Freeport, Texas, complex; ; on Feb. 18 Olin expanded the declaration in a separate letter to customers to include products made system-wide

**MEGlobal: Declared Feb. 15 on MEG produced at its Freeport, Texas, site

**LyondellBasell: Declared Feb. 15 on US polyethylene

**Flint Hills Resources: Declared Feb. 15 on polypropylene produced at Longview, Texas

**OxyChem: Declared Feb. 15 on US chlorine, caustic soda, EDC, vinyl chloride monomer and polyvinyl chloride

**LyondellBasell: Declared Feb. 15 on US polypropylene

**INEOS Olefins and Polymers USA: Declared Feb. 15 on polypropylene

**OQ Chemicals: Declared Feb. 15 on US oxo-alcohols, aldehydes, acids and esters produced at its Bat City, Texas, operations

SHUTDOWNS

**Westlake Chemical: 331,763 mt/year cracker, 249,475 mt/year chlorine, 274,423 mt/year caustic soda, 680,388 mt/year vinyl chloride monomer, 680,388 mt/year polyvinyl chloride, Calvert City, Kentucky

**Eastman Chemical: 7.33 million mt/year ethylene capacity, Longview, Texas

**INEOS: 1.89 million mt/year of ethylene capacity, Chocolate Bayou, Texas

**LyondellBasell: 3.26 million mt/year of ethylene capacity in Channelview, La Porte and Corpus Christi, Texas

**MEGlobal: 750,000 mt/year monoethylene glycol (MEG) plant, Freeport, Texas

**Total: 1.15 million mt/year PP, La Porte, Texas

**Lotte Chemical: 700,000 mt/year MEG, Lake Charles, Louisiana; 1 million mt/year joint-venture cracker

**Braskem: 360,000 mt/year PP Freeport, Texas; 400,000 mt/year PP La Porte, Texas; 225,000 mt/year PP Seadrift, Texas

**ExxonMobil: Cumulative 1.53 million mt/year from three units, HDPE and LLDPE capacity, Mont Belvieu, Texas

**Indorama Ventures: Port Neches, Texas, 235,867 mt/year cracker, 1 million mt/year ethylene oxide/MEG unit, 238,135 mt/year propylene oxide unit, and 988,000 mt/year of MTBE capacity; Clear Lake, Texas, 435,000 mt/year EO, 358,000 mt/year MEG.

**Olin: Freeport, Texas complex, with 3 million mt/year of caustic soda and 2.73 million mt/year of chlorine capacity; 748,000 mt/year of EDC

**OxyChem: Ingleside, Texas, 544,000 mt/year cracker; 248,000 mt/year chlor-alkali; 680,000 mt/year EDC; Deer Park and Pasadena, Texas, 1.27 million mt in PVC capacity; 1.79 million mt/year of VCM capacity; 580,000 mt/year chlor-alkali

**Shintech: Freeport, Texas: 1.45 million mt/year PVC

**Formosa Plastics USA: Entire Point Comfort, Texas, complex, including three crackers with a cumulative capacity of 2.76 million mt/year; 875,000 mt/year of high density polyethylene; 400,000 mt/year of low density PE; 465,000 mt/year of linear low density PE; two PP units with combined capacity of 1.7 million mt/year; 798,000 mt/year of PVC; 1 million mt/year of caustic soda and 910,000 mt/year of chlorine; 753,000 mt/year of VCM; 1.478 million mt/year of EDC; and a cumulative 1.17 million mt/year of monoethylene glycol operated by sister company Nan Ya Plastics.

**Dow Chemical: Certain units offline within Dow sites along the US Gulf Coast, but the company did not specify. Dow’s Gulf Coast operations two LDPE units with 552,000 mt/year and 186,000 mt/year HDPE; Dow’s Seadrift, Texas, complex includes 490,000 mt/year LLDPE and 390,000 mt/year HDPE; Dow told South American customers in a letter dated Feb. 16 that the company was assessing impact on PE production capacity “and we know that our ability to supply various products could be affected.”

**TPC Group: Houston site shut down, including 544,310 mt/year butadiene unit, when boilers lost steam

**Motiva Chemicals: Port Arthur, 635,000 mt/year mixed-feed cracker

**Shell: Deer Park, Texas, refining and chemical complex, including two crackers with a combined 961,000 mt/year of capacity

**Chevron Phillips Chemical: Pasadena, Texas, 998,000 mt/year HDPE; also has cumulative 5.35 million mt/year in capacity of six crackers in Port Arthur, Baytown and Sweeny, Texas

RESTARTS

**Shell: Norco, Louisiana, refining and chemical complex, including two crackers with a combined capacity of 1.42 million mt/year

**Baystar Polymers: Restarting 408,000 mt/year HDPE unit at Bayport, Texas

**Dow Chemical: Restarting three crackers at Freeport, Texas, with a combined 3.2 million mt/year of ethylene capacity

**Flint Hills Resources: Restarting 658,000 mt/year PDH unit, Houston

**Dow Chemical: Restarting 750,000 mt/year PDH, Freeport, Texas

**Braskem: Restarting 450,000 mt/year PP, La Porte, Texas

**Dow Chemical: restarting 680,000 mt/year cracker in Orange, Texas

**ExxonMobil: Beaumont, Texas, restart activity begun; 826,000 mt/year cracker operational; 225,000 mt/year HDPE; 240,000 mt/year LDPE; 1.19 million mt/year LLDPE with some HDPE capacity

**ExxonMobil: Baytown, Texas, restart activity begun; three crackers with a combined capacity of 3.8 million mt/year; 800,000 mt/year PP

**Sasol: Restaring 380,000 mt/year EO/MEG, Lake Charles, Louisiana

**Formosa Plastics USA: 513,000 mt/year PVC, 653,000 mt/year VCM, Baton Rouge, Louisiana

**LyondellBasell: Lake Charles, Louisiana, joint-venture 470,000 mt/year LLDPE; 420,000 mt/year LDPE

PRICES

**February US polymer-grade prices fell 9.25 cents/lb on the day to 85.50 cents/lb FD UDG, and March prices fell the same amount to 76.75 cents/lb FD USG. February prices have fallen 40.50 cents/lb from an all-time high of $1.25/lb FD USG on Feb. 23; March prices have fallen 18.25 cents/lb from 95 cents/lb on the same date.

**US spot ethylene prices for March rose 1.75 cents on the day and 7.50 cents on the week Feb. 26 to 52.75 cents/lb FD Mont Belvieu, while forward-month April ethylene was assessed at 52.75 cents FD Mont Belvieu, also up 1.75 cents on the day and 8.50 cents on the week. March Choctaw ethylene was assessed at 52.50 cents/lb FD Choctaw, up 2 cents on the day and 9 cents on the week Feb. 26, while forward-month April ethylene was assessed at 51.75 cents/lb, up 2 cents on the day and 9 cents on the week.

https://www.spglobal.com/platts/en/market-insights/latest-news/petrochemicals/022721-petrochemical-restart-efforts-continue-post-freeze

February 28, 2021

Restart Updates

Petrochemical restart efforts continue post-freeze

Houston — US Gulf Coast petrochemical producers were working to restart facilities that shut when a deep freeze hit the region the week of Feb. 15, but those efforts faced ups and downs amid detailed damage assessments.

Some producers were finding pinhole leaks or other problems in pipes exposed to sustained sub-freezing temperatures during startup processes. Market sources said ethylene producers were working to restart crackers once shut downstream derivative plants were deemed able to restart as well.

ExxonMobil, which has restarted the 826,000 mt/year cracker at its Beaumont, Texas, chemical complex, also was restarting three crackers with a combined capacity of 3.8 million mt/year at its Baytown, Texas, complex as well, according to a Feb. 26 notice the company distributed via a community hotline.

Two of three US propane dehydrogenation (PDH) plants also were working to restart, which helped prompt spot February polymer-grade propylene prices to decline sharply from Feb. 23 highs.

Market sources said, however, that the industry’s overall recovery from the freeze and its fallout on supply chain backlogs, was expected to stretch into Q2 2021, particularly if producers face lengthy repairs to plants after more than three days of sustained sub-freezing temperatures.

Global prices were rising on expectations of interrupted US supply and uncertainty of how long those interruptions would last.

“Raw materials already were tight,” a market source said. “Now we’re seeing more panic, buyers panicking, trying to lock everything in.”

Here is a rundown of fallout from the freeze:

FORCE MAJEURES

**Dow Chemical: Declared Feb. 19, on 2-ethylhexanol and butanol products from its Texas City, Texas complex

**Formosa Plastics USA: Declared Feb. 19 on US polyethylene

**BASF: Declared Feb. 19 on dioctyl terephthalate (DOTP), a plasticizer, at its Pasadena, Texas, site

**Westlake Chemical: Declared Feb. 19 on US caustic soda, chlorine, PVC and VCM; company has 2.9 million mt/year of US caustic soda capacity, more than 2 million mt/year of PVC capacity, 2.6 million mt/year of VCM; more than 2.26 million mt/year of chlorine capacity at five affected sites

**Formosa Plastics USA: Declared Feb. 18 on US PVC, 1.3 million mt/year of capacity at Point Comfort, Texas, and Baton Rouge, Louisiana, complexes.

**Dow Chemical: Declared Feb. 18 on multiple intermediate chemicals produced at plants in Deer Park, Freeport, Texas City and Bayport Texas, Hahnville, Louisiana, and Louisville, Kentucky; declaration includes vinyl acetate monomer (VAM), methyl methacrylate (MMA), glacial methacrylic acid (GMAA), butyl methacrylate (BMA), glycidyl methacrylate (GMA), 2-ethylhexyl Acrylate (2EHA), butyl acrylate (BA), and others; Dow informed South American customers

**Celanese: Declared force majeure Feb. 18 on multiple intermediate chemicals normally sold to customers in the US, Europe and the Middle East, including acetic acid, VAM, ethyl acetate and ethylene vinyl acetate (EVA)

**Total: Declared Feb. 17 on polypropylene produced at its 1.15 million mt/year La Porte, Texas, facility

**Formosa Plastics USA: Declared Feb. 17 on all chlor-alkali products

**LyondellBasell: Declared Feb. 16 on styrene monomer

**Vestolit: Declared Feb. 16 on PVC produced at its Colombia and Mexico plants on lack of upstream vinyl chloride monomer feedstock from US suppliers; plants have a combined 1.8 million mt/year of capacity

**Olin: Declared Feb. 16 on US chlorine, caustic soda, ethylene dichloride, epoxy, hydrochloric acid and other products produced at its Freeport, Texas, complex; ; on Feb. 18 Olin expanded the declaration in a separate letter to customers to include products made system-wide

**MEGlobal: Declared Feb. 15 on MEG produced at its Freeport, Texas, site

**LyondellBasell: Declared Feb. 15 on US polyethylene

**Flint Hills Resources: Declared Feb. 15 on polypropylene produced at Longview, Texas

**OxyChem: Declared Feb. 15 on US chlorine, caustic soda, EDC, vinyl chloride monomer and polyvinyl chloride

**LyondellBasell: Declared Feb. 15 on US polypropylene

**INEOS Olefins and Polymers USA: Declared Feb. 15 on polypropylene

**OQ Chemicals: Declared Feb. 15 on US oxo-alcohols, aldehydes, acids and esters produced at its Bat City, Texas, operations

SHUTDOWNS

**Westlake Chemical: 331,763 mt/year cracker, 249,475 mt/year chlorine, 274,423 mt/year caustic soda, 680,388 mt/year vinyl chloride monomer, 680,388 mt/year polyvinyl chloride, Calvert City, Kentucky

**Eastman Chemical: 7.33 million mt/year ethylene capacity, Longview, Texas

**INEOS: 1.89 million mt/year of ethylene capacity, Chocolate Bayou, Texas

**LyondellBasell: 3.26 million mt/year of ethylene capacity in Channelview, La Porte and Corpus Christi, Texas

**MEGlobal: 750,000 mt/year monoethylene glycol (MEG) plant, Freeport, Texas

**Total: 1.15 million mt/year PP, La Porte, Texas

**Lotte Chemical: 700,000 mt/year MEG, Lake Charles, Louisiana; 1 million mt/year joint-venture cracker

**Braskem: 360,000 mt/year PP Freeport, Texas; 400,000 mt/year PP La Porte, Texas; 225,000 mt/year PP Seadrift, Texas

**ExxonMobil: Cumulative 1.53 million mt/year from three units, HDPE and LLDPE capacity, Mont Belvieu, Texas

**Indorama Ventures: Port Neches, Texas, 235,867 mt/year cracker, 1 million mt/year ethylene oxide/MEG unit, 238,135 mt/year propylene oxide unit, and 988,000 mt/year of MTBE capacity; Clear Lake, Texas, 435,000 mt/year EO, 358,000 mt/year MEG.

**Olin: Freeport, Texas complex, with 3 million mt/year of caustic soda and 2.73 million mt/year of chlorine capacity; 748,000 mt/year of EDC

**OxyChem: Ingleside, Texas, 544,000 mt/year cracker; 248,000 mt/year chlor-alkali; 680,000 mt/year EDC; Deer Park and Pasadena, Texas, 1.27 million mt in PVC capacity; 1.79 million mt/year of VCM capacity; 580,000 mt/year chlor-alkali

**Shintech: Freeport, Texas: 1.45 million mt/year PVC

**Formosa Plastics USA: Entire Point Comfort, Texas, complex, including three crackers with a cumulative capacity of 2.76 million mt/year; 875,000 mt/year of high density polyethylene; 400,000 mt/year of low density PE; 465,000 mt/year of linear low density PE; two PP units with combined capacity of 1.7 million mt/year; 798,000 mt/year of PVC; 1 million mt/year of caustic soda and 910,000 mt/year of chlorine; 753,000 mt/year of VCM; 1.478 million mt/year of EDC; and a cumulative 1.17 million mt/year of monoethylene glycol operated by sister company Nan Ya Plastics.

**Dow Chemical: Certain units offline within Dow sites along the US Gulf Coast, but the company did not specify. Dow’s Gulf Coast operations two LDPE units with 552,000 mt/year and 186,000 mt/year HDPE; Dow’s Seadrift, Texas, complex includes 490,000 mt/year LLDPE and 390,000 mt/year HDPE; Dow told South American customers in a letter dated Feb. 16 that the company was assessing impact on PE production capacity “and we know that our ability to supply various products could be affected.”

**TPC Group: Houston site shut down, including 544,310 mt/year butadiene unit, when boilers lost steam

**Motiva Chemicals: Port Arthur, 635,000 mt/year mixed-feed cracker

**Shell: Deer Park, Texas, refining and chemical complex, including two crackers with a combined 961,000 mt/year of capacity

**Chevron Phillips Chemical: Pasadena, Texas, 998,000 mt/year HDPE; also has cumulative 5.35 million mt/year in capacity of six crackers in Port Arthur, Baytown and Sweeny, Texas

RESTARTS

**Shell: Norco, Louisiana, refining and chemical complex, including two crackers with a combined capacity of 1.42 million mt/year

**Baystar Polymers: Restarting 408,000 mt/year HDPE unit at Bayport, Texas

**Dow Chemical: Restarting three crackers at Freeport, Texas, with a combined 3.2 million mt/year of ethylene capacity

**Flint Hills Resources: Restarting 658,000 mt/year PDH unit, Houston

**Dow Chemical: Restarting 750,000 mt/year PDH, Freeport, Texas

**Braskem: Restarting 450,000 mt/year PP, La Porte, Texas

**Dow Chemical: restarting 680,000 mt/year cracker in Orange, Texas

**ExxonMobil: Beaumont, Texas, restart activity begun; 826,000 mt/year cracker operational; 225,000 mt/year HDPE; 240,000 mt/year LDPE; 1.19 million mt/year LLDPE with some HDPE capacity

**ExxonMobil: Baytown, Texas, restart activity begun; three crackers with a combined capacity of 3.8 million mt/year; 800,000 mt/year PP

**Sasol: Restaring 380,000 mt/year EO/MEG, Lake Charles, Louisiana

**Formosa Plastics USA: 513,000 mt/year PVC, 653,000 mt/year VCM, Baton Rouge, Louisiana

**LyondellBasell: Lake Charles, Louisiana, joint-venture 470,000 mt/year LLDPE; 420,000 mt/year LDPE

PRICES

**February US polymer-grade prices fell 9.25 cents/lb on the day to 85.50 cents/lb FD UDG, and March prices fell the same amount to 76.75 cents/lb FD USG. February prices have fallen 40.50 cents/lb from an all-time high of $1.25/lb FD USG on Feb. 23; March prices have fallen 18.25 cents/lb from 95 cents/lb on the same date.

**US spot ethylene prices for March rose 1.75 cents on the day and 7.50 cents on the week Feb. 26 to 52.75 cents/lb FD Mont Belvieu, while forward-month April ethylene was assessed at 52.75 cents FD Mont Belvieu, also up 1.75 cents on the day and 8.50 cents on the week. March Choctaw ethylene was assessed at 52.50 cents/lb FD Choctaw, up 2 cents on the day and 9 cents on the week Feb. 26, while forward-month April ethylene was assessed at 51.75 cents/lb, up 2 cents on the day and 9 cents on the week.

https://www.spglobal.com/platts/en/market-insights/latest-news/petrochemicals/022721-petrochemical-restart-efforts-continue-post-freeze

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.

https://www.jpmorgan.com/commercial-banking/insights/treating-the-airline-industrys-passenger-problem?mkt_tok=MzE4LVlNVy05MjUAAAF7fgjkJKGHuE5UvWBJi5elHsVEIN9NDsF-8U813OUlHMPeTmcIHla63Lrjr7EHy2kMk7lBbvfwR7QZsR4hwOlG6LYQxcL0FwDJcab967H9sJ2E5w

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.

https://www.jpmorgan.com/commercial-banking/insights/treating-the-airline-industrys-passenger-problem?mkt_tok=MzE4LVlNVy05MjUAAAF7fgjkJKGHuE5UvWBJi5elHsVEIN9NDsF-8U813OUlHMPeTmcIHla63Lrjr7EHy2kMk7lBbvfwR7QZsR4hwOlG6LYQxcL0FwDJcab967H9sJ2E5w