Punk'd Again by the CDC?
By Stephen J. Coonan, ATP, Accredited Senior Appraiser, American Society of Appraisers
In my last article, barely three weeks old now, “that as many as 200,000 to 1.7 million Americans could die….For the coronavirus, there will be between two and six times as many infections, and between four and 40 times as many deaths, in the absence of social distancing or as-yet-nonexistent pharmaceutical interventions.” Comes now however, less than a month, new projections from the same mouths, The Center for Disease Control, that the “projected 2020 mortality will be in the range of some 70,000 souls”.
So what is it? 70,000 or 1.7 million? I remember in the early nineties that HIV would infect everyone but cloistered nuns. Originally believed to be a gay only disease, the panic began when the CDC said anybody could be infected.
At that time, I had a background in FAA mandated employee drug testing. See PRESS TELEGRAM, August 23, 1990, Pilots say no to drugs. Since the testing protocols were similar, I produced and sold the first In-Home HIV testing kit in the United States. See USA TODAY, March 25, 1992, Firm offers at-home tests for AIDS virus. The protocol was simple enough. A finger stick was done at home and then mailed into the Lab for antibody screening and confirmation. The delivery of the result was made anonymously in a few days.
I soon sold the business to Chemtrak, an affiliate of Johnson & Johnson. It was shuttered a year later because the general population no longer considered themselves at risk. The panic was over and mainstream Americas became comfortable with the great probability that the HIV virus was not going to affect them. And by the way, so is the panic associated with COVID-19.
The CDC projected at the time that up to 10% of the population would be wiped out. It was scripted straight from the annals of Chicken Little. While devastating, the mortality rate was a fraction of what originally was projected.
I don’t like it but I understand why they do it. Most of us do not react quickly unless it looms right in our face. Panic is one tool they have to ensure that we will take their warning seriously. The lockdown is another. Unfortunately, it now occurs to many that this lockdown has been a disastrous mistake.
To find some perspective of the situation as it stands today, I did some comparing of the COVID-19 mortality tally against the top ten other causes of death in 2008 in the United States. (Source, Mortality in the United States, 2018, CDC National Center for Health Statistics.)
From above, some interesting observations:
COVID 19 (projected 2020) will kill 1 out of every 4473 persons in America.
Heart Disease and Cancer kill more than 1 million Americans each year.
AIDS still kills 16,000 Americans, even though a containment cocktail treatment has been successfully produced that keeps HIV positive patients from developing AIDS.
What is the impact of all of this on aviation? It’s the economy. Aviation cannot rebound any faster than industry as a whole. My observations are:
Experts in the field are still predicting a 20% drop in asset values.
Activity will return to a new normal but values will not.
OEMs have a huge challenge ahead. Plan on consolidations and some bankruptcies even with stimulus money.
Summer published values will start at 5% lower than Spring and go from there.
Utilization is dropping and will continue to be slow until industry can get its sea legs. That will take a minimum of three months and could last as long as a year.
Fractional operators will need greater time to sanitize and secure their clients on turnarounds.
Pilots have come to grips with unpredictable furloughs and terminations. Keeping pilots current is going to become a huge expense.
Financing will become more difficult due to the administrative log jam associated with getting applications through the system.
I hope to report on more positive prospects in the upcoming weeks. Stay tuned.
Yours,
SC
About the author:
Stephen Coonan has been appraising aircraft of all types for over twenty years and has been through five major stock market reversals. His $20 billion valuation portfolio spans clients such as NetJets, Goldman Sachs, Morgan Stanley, Citibank, and Deutsche Bank. Please feel free to contact him with your comments at 877-266-7791 or sr@planesworth.com.
