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Will air passenger numbers take off again?
Mark Roulston •
Travel restrictions imposed to try and control the spread of COVID-19 caused a 97% fall in the number of passengers using London’s Heathrow airport. A prediction market running on Hivemind’s AGORA platform suggests passenger numbers will still be at least 80% below normal in August.
London’s Heathrow airport is one of the world’s busiest. Last year it handled nearly a quarter of a million flights and 75 million passengers. This year will be different. On 19th March 2020, in response to the spread of the coronavirus that causes COVID-19, the U.S. State Department issued a Level 4 “do not travel” advisory suggesting that U.S. residents avoid any international travel. Other countries introduced similar restrictions.
On 1st April 2020 Pew Research reported that over 90% of the World’s population were covered by travel restrictions imposed by governments, in an effort to try and control the pandemic.
Unlike other countries, the U.K. did not close its borders. The restrictions put in place by other countries, however, had a huge impact on Heathrow, both as a point of entry to the U.K. and as a global hub for connecting flights.
While March’s Heathrow passenger figures showed a 52% drop on the previous March, April’s figures were even more staggering, with a 97% fall from the previous year, with only 206,324 people using the airport. Numbers improved slightly in May with 227,230 using the airport.
In June some countries cautiously began to ease travel rules. Some groups of nations created “bubbles” in which people could travel relatively freely within the bubble while still restricting entry to the bubble.
On 8th June, the U.K. introduced quarantine rules under which people entering the country have to self-isolate for 14 days. This policy has been challenged by airlines and many countries have now been exempted, but it is still likely to suppress passenger numbers.
The question of when Heathrow passenger flows will recover is obviously important for the airport, and for the airline industry in general, but it is also a proxy for the recovery of the broader economy. For this reason, we created an informal demonstration prediction market for the number of passengers that will use Heathrow in August 2020 on the Hivemind AGORA platform (beta). AGORA synthesises the different judgements of the people taking part in the market to generate a probability distribution for August’s passenger numbers.
The participants are beta-testers for the platform and their collective view is not optimistic:
The price for each outcome range can be interpreted as its implied probability, suggesting only a 50% chance that passenger numbers will exceed 1 million this August, compared with almost 7.7 million in August 2019.
The participants in this market were not chosen for any particular expertise or knowledge of global aviation, and their primary incentive to take part was only to learn more about the AGORA platform. Nevertheless, this market illustrates how AGORA can aggregate the judgements of multiple people into a unified probabilistic forecast which could be used to make a decision as well as to evaluate risk.
If you are interested in learning more about AGORA you can sign up to be a beta-tester and create your own prediction markets, as well as participating in some of our demonstration ones.