Telecommuting and the recovery of passenger aviation post-COVID-19

Abstract

Air passenger transport has been dramatically impacted by the COVID-19 pandemic due to lockdown policies and social distancing mandates. However, once restrictions were lifted, air traffic has reverted very slowly to pre-pandemic levels with many markets still recovering from the downturn. We try to understand what causes this sluggish recovery of air passenger transport and ask whether it could be related to structural changes in business and working arrangements post-pandemic. Specifically, we consider if the dramatic shift towards telecommuting and remote work has transformed the nature of business interactions in the marketplace, leading to a negative demand shock for air travel. We use U.S. city-level data on the fraction of jobs that can be performed remotely to proxy for telecommuting, and employ a difference-in-differences estimation method to investigate if air travel demand post-COVID is lower in cities with a larger share of remote work, all else equal. An event study analysis using monthly data evaluates differences in air passenger traffic across cities in the periods leading up to the COVID-19 outbreak and during its aftermath, distinguishing between cities with a higher versus lower share of remote jobs. All the estimation results lend support to the hypothesis that the raise in telecommuting following the COVID-19 pandemic has slowed down the recovery of air travel to pre-pandemic levels.