Airlines have a lot to complain about. Everything is expensive — airplanes, airports, people, fuel — and yet customers mostly only want a really cheap fare. Airlines get blamed when it is their problem, like when they forget to load your bag. But they also get blamed when it’s not their fault, like when weather messes things up. When you mix machines, mother nature, and people, things are bound to fail fairly often and yet even a small flight delay sometimes results in a one-star review.
Despite this tough environment to run a business, there are real reasons to be thankful, too. As we move into 2023, the industry is facing robust demand and fuel prices are moderating. Here are five things the US airlines can be thankful for as the year turns over:
Demand Speaking, The Pandemic Is Over
Especially globally, the pandemic is not over yet. But for US travel demand, the pandemic ended in 2022. This means that people are no longer withholding travel because of pandemic safety. This is obvious in the strong leisure travel seen in 2022, and is supported by the return of business travel to about 85% of 2019 levels. For leisure travel, the person or people traveling pay for the tickets, so only they have to make the decision to go or not. For a corporate business trip, the person traveling does not pay for the trip, the company does.
There is no evidence that corporate workers are refusing to fly for their business. But there is plenty of evidence that businesses are consciously choosing to spend less on travel. This is both to be more efficient, and also to achieve sustainability goals. The fact that business travel volume has reached north of 80% of pre-pandemic levels is quite remarkable, given the strong corporate pressure to reduce expenses and reduce their own carbon footprint. When demand for travel is strong, that is a good reason for airlines to be thankful.
Rough Summer Now In The Past
Much of summer 2022 was operationally difficult for the US airlines. While cutting back quickly at the start of the pandemic was necessary, the relatively quick recovery of 2022 was harder to handle for most. Much of this was because of staffing shortages, not only from pilots but from flight attendants, airport workers, and more. By the end of the summer, most of the airlines had reacted to this by adjusting pay rates and hiring and training quickly. By the time Thanksgiving came around, airlines could schedule for demand and actually have enough staff to launch the flights.
This puts the airlines in a much better position going into 2023. There is likely no new surprise uptick in demand, and to a large extent the airlines are staffed for the rebound in traffic. This means that the peak periods in 2023, including the summer, should run much smoother as the level of capacity scheduled and sold better matches the human resources available. Now, if another bomb cyclone hits, airlines will face operational disruptions beyond their control.
A bomb cyclone wins the award for the geekiest weather term to break into the mainstream. Even though few can explain why these two words fit together to describe a cataclysmic weather event, it seems so much more descriptive than a winter storm or convective activity. Also, by putting such a dramatic term on this, airlines may get some relief from passengers who otherwise might expect that they could fly right through this. We’ll see if this gets overused in 2023, if for example a simple April shower is termed a springtime bomb cyclone.
Labor Cost Shakeups Coming Quickly
The expected big increases in pilot wages would not necessarily be seen as a reason for airlines to be thankful. But more than absolute cost, airlines are also concerned with relative costs and certainty. The recent proposal by Delta Airlines to its pilots, while not yet approved by their union, sets a standard that provides some certainty and gives the other airlines a sense of how they line up.
Making this kind of adjustment quickly, rather than letting this drag on for years, is a reason to be thankful. It allows the airlines to focus both on other labor groups, and also to think of ways outside of labor to offset these cost increases somewhat. Creative uses of technology, allowing customers to self-service when possible, and simplifying parts of the business are all ways that airlines can mitigate some effect of higher overall labor rates. Knowing the target to hit helps put boundaries around these activities.
Aircraft Delays Help To Control Capacity
Both Boeing and Airbus have had problems delivering airplanes on schedule. Airlines have complained about this as they’ve had to defer deliveries, and either grow less quickly or keep older, less fuel-efficient equipment around longer. So what’s to be thankful here?
The reality is the airlines almost always use new capacity in ways to destabilize prices. When forced by manufacturing delays, airlines will naturally control capacity to some extent and this is promising for more price stability in 2023. While most airlines returned to profitability in the second half of 2022, the next financial recovery for the industry is to show they can make money for the full year. Even if it takes not delivering them aircraft in time, this is a worthwhile goal.
Onboard Air Rage Has Greatly Reduced
It seems not that long ago that we were seeing weekly stories of onboard customer disruptions. Flight attendants were injured, flights were delayed, and the FAA recommended hefty fines. Thousands of people were banned from flying again on at least the airline where they misbehaved. A lot of this activity was related to mask wearing and non-compliance to mandates.
The removal of these mandates, along with some good no-tolerance towards this kind of behavior, has largely put this behavior behind the industry. That’s a great thing, and as the industry continues to return to normal this a stain that needs to not return. Airlines can be thankful for calmer skies in 2023.
There are a lot of reasons to be optimistic for the US airlines in 2023. It’s easy to focus on all the challenges and the negatives, and there is no doubt that the industry will face new challenges in the year. But strong demand, operational reliability, and controlled capacity all create a good environment for a full year of industry profitability.