The looming threat of a government shutdown could carry significant challenges for the travel industry, potentially resulting in daily losses nearing $140 million. The aviation sector is anticipated to be the hardest hit, with the possibility of essential workers being required to work without pay.

Yahoo Finance Live is joined by Boyd Group International President Mike Boyd to discuss the implications for consumer travel and the challenges that may arise for the Federal Aviation Administration.

"Overall, it's just going to accelerate a decline in the efficiency of our air transportation system... also issues of oversight of airlines, oversight of airports, oversight of manufacturers and components," Boyd says. "That's where the real sand might get into the works."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

SEANA SMITH: A government shutdown would have dramatic implications for the US travel economy, with some estimates putting the hit at around $140 billion a day. The aviation sector is a key focus. While many essential staff like air traffic controllers are expected to report for duty without pay, workers calling in sick could be an issue yet again.

We want to bring in Mike Boyd, Boyd Group International President. And, Mike, lay this out for us because estimates are all over the place and exactly what a government shutdown-- the impact that is going to have on the travel industry. What's your view?

MIKE BOYD: Well, I think initially, air travel will be just as inconvenient as ever. We have understaffed air traffic control systems right now and the employees know they're going to get paid eventually. The real issue is long term.

And it's not just things like training. [? Buddha Air ?] brought that up. That really won't come into play. What really will come into play is the day-to-day regulation that the FAA has over airports, airlines, and also aircraft manufacturers, where Boeing won't be able to get that inspector to take a look at that new system they want approved on an airport. And Eastern Wyoming won't be able to get an FAA inspector to come and look at the New runway. Over a period of time that could have a hit.

BRAD SMITH: Would this also impact some infrastructure projects, especially, given the environmental reviews permitting that would be disrupted and some of these infrastructure projects taking place in or around or at airports?

MIKE BOYD: It would. In the near term it certainly wouldn't have much of an effect because it's only going to be several days probably. But nevertheless, in terms of hurting the environment, that's not going to be the case. I don't think, per se. It'll just-- you shut down the whole air transportation system, that's a lot less jet fuel going into the air.

But nevertheless, the bottom line of the whole thing is the FAA is in a situation right now where it needs to get reorganized and revisited. We've got new electric airplanes coming along line that are really heading for a brick wall regulation wise. We really can't take these people off of those jobs because thats critically important. You and I don't see that. But in five years-- in five weeks, five months, we probably will.

SEANA SMITH: Mike, what about the traveler's behavior? Do we typically see people maybe canceling their trips if we see a government shutdown?

MIKE BOYD: I think people that don't really look into it, probably would assume, yes, if the government shuts down, my airplane might shut down. Let's not go see grandma right now. There'll be some of that. But I think overall at least if this doesn't last more than a couple of-- more than a week or so, we're not going to see a whole lot of anything.

I don't see a walkout. I don't see people calling in sick. These controllers and TSA people, they know they're going to get paid. It's just going to be a little late paycheck and there might be something after accelated when it comes.

BRAD SMITH: Certainly, and that was the case back in 2019, where we did see absenteeism on the rise, especially, after that two week period because of delayed paychecks. Now, what kind of impact would that mean for the airline operators should we get to that point?

MIKE BOYD: Well, right now, today, our air traffic control system has been a wonderfully bipartisan, mismanaged thing over the last 20 years. So I don't think we're going to see anything missing right now. But overall, it's just going to accelerate a decline in the efficiency of our air transportation system, mainly because of the ATC system. But also issues of oversight of airlines, oversight of airports, oversight of manufacturers and components, that that's where the real sand might get into the works.

BRAD SMITH: And, so, as you were mentioning earlier, it also impacts the safety checks therein. So what type of resumption would we be talking about thereafter?

MIKE BOYD: Well, I don't think we'll see anything with safety. Look, the airline industry today, they know that safety is really expensive. So you're not going to have that problem. But getting back on, we bring up a real good point.

When you shut something down, getting it back. Getting that FAA inspector back to take a look at that new system that a component manufacturer is putting together might take weeks. So it'll delay a lot of things and will hurt some companies. There's no question about it because it won't be able to produce the systems they want to produce or develop them, that sort of thing.

It could be again-- that's where you got these billions of dollars and millions of dollars a hit-- it's not people getting on the airplane at gate seven at LaGuardia.

BRAD SMITH: All right, Mike Boyd, Boyd Group International President. Mike, always a pleasure to get some of your insights and analysis around this. We'll hope that we don't get to that point. But you may be getting another call from us.

MIKE BOYD: I'd love to. Thank you, sir.