Two major recessions have plagued the world this millennium. The Great Recession of 2008 was, at the time, the worst recession since the Great Depression of the 1930s. Many people lost their jobs and houses while others became uncertain about their financial future. Unfortunately, the pandemic-caused recession of 2020 was deeper and more damaging to the retail and services sectors including the airline industry. Use the theory of supply and demand to predict the effect of the 2020 recession for the next five years on airline demand (the willingness and ability of people to purchase airline tickets), supply (the willingness and ability of airlines to provide flights), and price (the average price of an airline ticket).

Assignment

The federal government collects and makes an immense amount of data on the US economy available to the public, including large airline datasets. Having made your predictions, use the US airline industry data from the US Bureau of Transportation Statistics (BTS) to see if the industry reacted as you expected.

To obtain the data to test your predictions, find a BTS customizable data table following these steps: 1) Google "Bureau of Transportation Statistics", 2) use the search box for "Air Traffic", 3) select "U.S. Air Carrier Traffic Statistics" which will return a customizable table. (Note: The BTS occasionally changes the presentation of the data which affects the steps needed to find data. It may be necessary to modify this search slightly.)

Customize your data by selecting:

• From 2019 until the end of the recession or to an endpoint of your interest
• Domestic
• Scheduled
• Passengers, then select the statistics of interest (scroll to the bottom for selection criteria)

Prices are, of course, another piece of this puzzle. BTS provides a table of national fares. To find this data, use the BTS search box for Air Fares. Locate National Level Fares Since 1995. Again, the BTS occasionally changes the database names and files, so you may need to modify this search.

Based on your research, answer the following in list form.

• Would either or both of the supply and/or demand curves shift? Support your answer.
• What is the predicted effect on the quantity of air travel and on the average price?
• Illustrate your predictions with a supply and demand graph. Graphs are relatively easy to draw in MS Word; use INSERT/Shapes from the menu.
• In just a few sentences, discuss whether the data supports your predictions for average airline price and quantity.