Economist: Impact of airline shutdowns has ‘striking similarity’ to 9/11 aftermath
Hawaii's tourism industry is expected to see a sharp second-quarter loss in domestic traffic, similar in scale to the aftermath of the Sept. 11, 2001, terrorist attacks, according to Bank of Hawaii's chief economist, Paul Brewbaker.
As a result of the abrupt closures of Aloha Airlines and ATA Airlines, the bank's latest forecast predicts a 3.9 percent drop in visitor arrivals in 2008. Tourism is expected to recover in the fourth quarter, after the busy summer season.
"Looking at the forecast, it bears a striking similarity to the aftermath of 9/11," he said. "Not to overdramatize things, but its useful to think about the post-9/11 experience as a template for the current response of domestic tourism."
While the latest estimates are in flux, the bank's 2008 forecast anticipates a 0.3 percent decline in jobs and a 0.1 percent growth in personal income.
The near-flat growth in personal income, compared to a previous forecast of 1 percent, takes into account inflation at 4.1 percent. The state's unemployment rate for the year is projected at 4 percent.
A weaker-than-expected mainland economy, higher-than-expected oil and commodity prices, a harder-than-expected credit crunch, and a weaker starting point for local employment and income also contributed to the new forecast's more conservative outlook, the report said.
Due to the fallout from the airline closures, the report forecasts a 7 percent to 11 percent drop in visitor arrivals in the second quarter, with some recovery in 2009.
Visitor arrivals for the year are expected to total 7.08 million, down from 7.36 million in 2007, though a 3.8 percent recovery next year is estimated to bring arrivals back up to 7.21 million.
The April 2008 forecast was adjusted downward to reflect an immediate 15 percent to 20 percent loss of transpacific lift and the expectation that the credit crunch, high fuel costs, a global shortage of airplanes and weak U.S. discretionary consumption will not make it easy for another carrier to replace air seats.
The forecast prior to the two airlines shutting down was about a 2 percent decline in tourism this year, as a result of a slowdown due to the mortgage crisis and financial meltdown.
"Travel and tourism is a luxury discretionary consumable, not like food where people eat it every day," Brewbaker said.