Morningstar - Q4 2020 - 55

U.S. Female Labor Force Participation Rate
75%
2002. Many wondered whether airlines'
demand would ever recover, given consumers'
persistent fear.

As EX H IB IT 6 also shows, however, starting
in 2004 the short-run impact of 9/11 started to
dissipate. Revenue passenger miles began
catching up to GDP. By the late 2010s, the ratio
of air travel to GDP even surpassed pre-9/11
levels. At least at the big-picture level,
9/11 had at most a very slim long-term impact
on air travel, despite the large shock in the
short run.
However, we did find one potential area of
long-term impact from 9/11 on air travel. We think
business customers realized that the telephone
and newer communications technologies like
email were effective substitutes for short business
trips. This caused a structural shift in the
market and allowed more leisure-focused low-cost
carriers to take substantial market share and
forced legacy carriers to retreat to international
travel, which is more structurally protected
from low-cost competition.
How applicable are these lessons to
understanding the postpandemic world? Again,
the big picture is that air travel after 9/11
eventually mostly recovered in aggregate, even
after being depressed for several years.
Short-haul business travel did appear to be
permanently affected, but it's possible
this trend would've played out even without 9/11,
as the development of new communications
technologies also probably played a role.

of economic and societal impact. Nevertheless,
by virtue of taking place in the context
of modern society,
thesejoined
pandemics
can shed
More women
the
workforce
1940s, but the
some light on
COVID-in19the
's impact.
increase was not exceptional.

Because of a lack of comparability and data,
among other reasons, we did not analyze some
of the earlier pandemics, including the Spanish

0
1890

1920

Pandemics in Recent History
Finally, we examined the history of recent
pandemics for lessons on COVID-19's potential
impact. None of these pandemics had anywhere
near the short-term impact that COVID-19
has had, which is why we extended our analysis
to the other historical episodes that were
much more akin to COVID-19 in magnitude

1950

1980

2010

EXHIBIT 5

Permanent Change Oil demand remained lackluster even after the 1974 - 85 price
shock faded.
Real Oil Price ($bbl/rhs)

World Oil Demand (mmbpd, lhs)

1940-1973 Trend
100

120

76.49
90

75

1974-85 Average

60

50
42.7

1986-2000 Average

30

25

0

0
1965

1970

1975

1980

1985

1990

1995 2000

Source: Rystad, BP Statistical Review of Word Energy, Morningstar.

EXHIBIT 6

Fear of Flying Ebbs Air travel levels eventually rebounded from their post-9/11 dips.
Number of Enplaned Passengers

Therefore, we think 9/11 had at most a
modest impact on long-term air travel. The fear
initially created by the attacks did depress
consumer demand for air travel in the short run,
but this effect eventually faded.

flu (1918 - 20), which resulted in at least 50 million
59
deaths across the globe. In the short run, the
50
Spanish flu did cause massive disruption to society.
In addition to the catastrophic death toll, there
was widespread imposition of social distancing
measures-such as wearing face masks, closing
25
schools and movie theaters, and discouraging
public gatherings-that helped contain and

Industry Revenue Passenger Miles

Real GDP
160

Air travel caught
back up to GDP.

140

By 2003, ratio of air travel to GDP
had fallen by 10% due to 9/11.

120
100
80
60

1995

2000

2005

2010

2015

Source: Bureau of Transportation Statistics, FRED, Morningstar.

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55
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