The $1 Trillion infrastructure bill. When it passes it will be one of the most substantial federal investment programs and will drive demand for freight rail growth. For years global trade held inflation in check. The pandemic shut the system down. The Fed’s monetary policy and government spending have fueled strong consumer demand. Now we have constrained global supply chains, rising commodity prices and tight labor markets. Relaxing of pandemic border restrictions will result in transatlantic air travel rebounding in 2022 like domestic travel did this year. U.S. air travel restrictions are set to be lifted in November (with proof of vaccination and a negative coronavirus test – no quarantines required).
Consumers will have to manage through this period of higher inflation (the Fed’s updated inflation outlook – over 4% for 2021). Intermodal operations remain backlogged as container vessels wait for unloading berths off the Port of LA. Efficient transport requires goods to move seamlessly. Ocean vessels, ports, truckers, and railroads must work together. Containers are sitting dockside for an average of eight days, up from two before the pandemic. Trains are waiting for loads due to a lack of truck drivers. Delays in one area have led to bottlenecks in others. Global One in Joliet was so backed up in July that the Union Pacific temporarily halted all trains arriving from the West Coast so it could clear the yard. U.S. farmers can’t get containers as shipping lines are increasingly sending empty boxes back to Asia as quickly as possible rather than inland for grain export. Class Ones are running fewer trains, longer distances, on tighter schedules. Precision Scheduled Railroading resulted in thousands of rail workers being furloughed, and air carriers now face a pilot shortage as demand returns.
While a pilot shortage looms, aircraft values are recovering as the domestic stored passenger narrowbody fleet declines. Passenger twin aisles are currently being used on all cargo international flights. Industry sources expect less than 5000 aircraft will remain in storage at the end of 2021 (down from a high of 17,000 units at the peak of the pandemic). The in-service fleet is flying fewer hours. Widebody equipment values remain down, narrowbody valuations have on average recovered, (737NG/737-800 values are up), and regional aircraft values are up (ATR 72, E190). Competition and low interest rates have driven some lease rate factors to .55%.
Domestically, imported semiconductor component delays have led to a slowdown in manufacturing production. Third quarter U.S. Growth was hampered by the microchip shortage as supply chain disruptions caused by the pandemic impacted the automotive and industrial market segments. This demonstrates just how fragile the extended global supply chain has become. Bottlenecks are now expected to last through 2022. Commodity prices are edging up (West Texas Intermediate crude recently traded above $84 a barrel and Brent above $86.00). With inflation lasting longer than anticipated, bond markets are starting to reflect expectations of interest-rate increases. Tight labor markets, easy monetary policy, government spending, international tensions, and Asia Pacific travel restrictions will remain. Carbon, climate, and politics are wild cards.
Consumer demand and supply shortages will lead to inflation. Transportation equipment values will head up. Make informed decisions on where to find air and rail investment alternatives.
Glenn P. Davis, 312-635-3161
 Forbes, September 22.
 October 2, The Washington Post “This month, the median cost of shipping a standard rectangular metal container from China to the West Coast of the United States hit a record $20,586, almost twice what it cost in July, which was twice what it cost in January.”
 October 31, American Airlines cancelled about 1,800 flights due to a shortage of pilots and flight attendants
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