Flights to DLM - Disrupted Labor Market

Bill Gates predicted a couple months ago that over 50% of business travel would be gone forever, replaced with telework platforms like Zoom, Microsoft Teams, and Google Meet. His reasoning stands that because companies now have the infrastructure and systems in place to support remote work, business travel will be reserved for only the most critical trips. This shift in traveller composition has enormous ramifications for the travel industry. According to industry group Airlines for America, US airlines generate 50% of their revenue from business travel even though this category accounts for just 30% of trips. The aviation industry has already been decimated by the pandemic, laying off thousands of workers. Consequently, what do these changing business practices mean for the industry's labor market in the long-term? Tempered business travel will cost human capital, worsen job polarization, and trickle down to manufacturers.

What makes business travel so lucrative is that firms pay full-price for their employees' business trips. This contrasts independent fliers who scour for the best deal possible. Deutsche Welle explains how this downturn will particularly hurt flag-carriers who are more reliant on corporate fliers. Lost demand will translate into less flights and fewer job opportunities for flight-attendants, plane technicians, etc. At Heathrow Airport, one third of employees have lost their jobs. Even in countries like Australia, where covid-19 has been stamped out, 80% of aviation workers "fear losing their jobs when jobkeeper ends." Australia's aviation industry employs 80,000 people. Such job cuts will brush aside the training and human capital aviation employees have accumulated over time. With the skill premium drastically reduced, few individuals will pursue aviation education/careers in the moment; Balpa, Europe's pilot union, discourages beginning pilot training and points to the continent's 10,000 currently unemployed pilots. 

The median pay for a flight attendant is just over $50,000. Compared with median US income of $31,000, a flight attendant job is well-paying. Unemployed flight attendants, mechanics, and airport personnel now have to find jobs that are typically low-paying. Skills like CPR and flight-safety no longer contribute to one's productivity, so people's skill sets no longer stand out. Forcing aviation workers into low-paying jobs will worsen job polarization. Jobs in areas like airline service are transformed into Zoom tech-support. Some who successfully complete retraining may sustain their income levels, but this pandemic's disruption will make retraining, especially for older workers, difficult. Many in the aviation industry also do not hold advanced degrees, so costs of new education will hinder already cash-strapped workers.

Reduced business travel cuts the bottom line of airlines which then purchase fewer aircraft. The impacts of changing business practices will trickle down the supply chain and hurt many more people than just airline/airport employees. In January, for example, Boeing received more cancellations than orders for new aircraft. Aircraft manufacturers are also major recipients in the recent $1.9 trillion relief package with the government recognizing the industry's precarious position. Stimulus aims to blunt the main punches of the pandemic, limiting the economic damage to those directly employed in aviation. The long-term loss of business travel, however, will prolong this downturn and erase some of the sector's dynamism. Telework platforms are, in some manner, automating travel; travel is no longer an absolute necessity. Firms will likely eliminate the intra-company travel that accounts for 20% of business trips. Decreasing corporate travel will first hurt aviation employees, trashing human capital and forcing low-paying jobs, and then spread on to manufacturers.

Sources:

• https://www.dw.com/en/zoom-vs-handshake-battle-to-impact-business-air-travels-fate/a-56802955
• https://www.theguardian.com/business/2021/feb/10/most-australian-aviation-workers-fear-losing-their-job-when-jobkeeper-ends-survey-finds
• https://www.theguardian.com/business/2020/nov/05/dont-become-a-pilot-as-there-are-no-jobs-just-huge-debts-says-union-balpa-covid-europe-unemployed
• https://www.washingtonpost.com/business/2021/03/07/restaurants-venues-covid-relief/
• https://www.cnbc.com/2021/02/09/boeing-delivers-26-planes-in-january-as-cancellations-continue-to-outpace-new-sales.html