Five Big Themes Facing The U.S. Airlines, And What These Could Mean

Aerospace & Defense Five Big Themes Facing The U. S. Airlines, And What These Could Mean Ben Baldanza Contributor Opinions expressed by Forbes Contributors are their own.

I write about airlines and travel to explain this crazy industry. New! Follow this author to improve your content experience. Got it! Jun 18, 2022, 02:33pm EDT | Share to Facebook Share to Twitter Share to Linkedin As the pandemic fades, U.

S. airlines are facing new threats that must be addressed to ensure . .

. [+] long-term survival. getty The U.

S. airline industry saw many years of prosperous growth and financial health until 2020. The pandemic stopped almost everyone from traveling, and the industry is still wondering what a full recovery will look like, or even if it will happen.

Most airlines took on a lot of new debt to stay alive during over a year of hemorrhaging cash losses. One industry executive once stated that the airline industry was one where “an every-10 year event happens every quarter. ” Even that executive would be shocked to see how the pandemic has created what is hopefully a once-in-a-lifetime event.

The cash loss and higher debt is not the only cloud on the industry’s horizon, however. The industry is now facing five import trends that may be threats if not properly addressed. Some of these can be solved by the industry itself, while others need a more enlightened regulatory environment to ensure long-term competitiveness.

Here are five trends affecting every U. S. airline in some way: Labor Shortages and Wage Pressure Labor shortfalls in the industry fall into two camps: pilots, and all other.

Pilot shortages are affecting mostly the smaller and regional airlines , as these become the training and recruiting ground for big airline pilot roles. This challenge really started in 2015, when the Federal minimum to receive an Air Transport Pilot Certificate (ATP) rose from 25o hours plus commercial airline experience to 1,500 hours . This artificial and arbitrary number has crippled the pilot pipeline in the U.

S. It now takes many more years and costs almost $250,000 just to get the minimum requirements to be hired. The apprentice system used for 80 years prior, and everywhere else in the world, was upended due to politics.

This law was changed due to political pressure following the crash of Colgan Air flight 3407. The NTSB ruled that crash to be due to pilot fatigue, but not to insufficient experience. The two pilots in that crash each had over 2,000 hours of flying experience.

The industry is reacting to this by creating training academies to help offset the cost of getting the required time to earn the ATP. ALPA, the nation’s leading pilot union, supports keeping the 1,500 hour rule and instead says the solution is raising pilot pay. The best solution is a return to the apprentice-based system, encouraging many more people to join this career path.

The U. S. is uncompetitive with the rest of the world on this issue.

Every day, hundreds of flights arrive in the U. S. from foreign airlines who still use the apprentice system.

If it were really unsafe to operate that way, the FAA would not allow that. Other than pilots, airlines are facing the worker pressure that all business are facing. It’s hard to work from home if you work on an airplane or in an airport.

There are good careers in the airline industry but there are also some jobs, meaning roles with high regular attrition. Labor, which historically has represented just over 30% of all airline expenses, is likely to move closer to 40% This means higher fares for consumers and continued efforts to figure out how to do more things with fewer people. MORE FOR YOU American Airlines Pilots Say Operations Managers Must Go After Summer Breakdowns The U.

S. Air Force Is Gradually Rebuilding Its B-52 Bombers From The Rivets Out An American Bomber Visited Malaysia. A Bizarre Mix Of Local Jets Rose To Meet It.

Incomplete Return Of Business Travel The full return of business travel has been a debated topic since the pandemic began . Delta Airlines recently reported that their business revenue was back to 2019 levels, but also mentioned that this was on lower volume and higher rates. Airlines for America, the industry’s lobby group, tracks multiple data sources and all suggest that corporate travel is stuck at 20% – 30% below 2019 levels.

Big airlines have indirectly accepted this by identifying new passenger types , like the ‘‘bliesure’’ traveler (combining business and leisure on the same trip), and the ‘‘premium leisure’’ traveler, those who pay more for a nicer flight experience. Given that corporate travelers have paid three to four times what leisure travelers paid, big airlines can’t make up even a small loss of this traffic base on volume alone. Studies are showing that corporations just aren’t going to travel as much.

This supports ESG initiatives as well since traveling less means less harm to the environment. At first it seems like this will only affect the largest airlines, since they carry most of the corporate business travelers. But that’s not true, since the traffic they must replace it with comes from the rest of the industry.

The cancellation of change fees was related to becoming more competitive with easy-to-use Southwest Airlines. Loyalty programs are changing to give more credit to non-flight spend on airline credit cards. The industry hasn’t come to a comfortable place yet on how this will evolve and what other changes are needed.

Access At The Largest U. S. Airports Airports can be constrained for three reasons: physical space, regulatory limitations, and economic limitations.

Among the largest U. S. airports, each of these has played a role in making it difficult to create competition in places like Atlanta, Chicago, Los Angeles, and New York.

In Miami, low-cost carriers avoided that airport for many years because it was economically inefficient to fly there. This artificially limited competition, and pushed a lot of flights to nearby Fort Lauderdale airport. In recent years, Miami changed this and the result is a big increase in low-fare service from Spirit, JetBlue, Southwest, and Frontier.

It’s harder and more expensive to create new gates and terminals, and the most significant limitations are at the three U. S airports with regulatory slot controls. New York’s LaGuardia and JFK airports limit the amount of traffic that can be scheduled and only those with a Federally-granted slot can operate.

The same is true at Washington’s Reagan (DCA) airport. With four large airlines controlling 80% of all domestic air traffic, finding ways to create competition is one of the biggest issues that will benefit consumers. When Willie Sutton was asked why he robbed banks, he responded “because that’s where the money is.

” For U. S. airlines, the money, meaning most of the people, are in the biggest cities and so those airports need competition.

Returning To Reliability When I teach may Airline Economics class, one of the first thing I tell my students about the industry is that supply and demand are often out of sync. Before the pandemic, this was true because travel demand is not evenly spaced throughout any one day, any one week, or any one season. Yet capacity, or supply, is largely fixed once the airline has paid for the airplanes and the crews.

Since the pandemic, this problem has gotten worse. The significant loss of demand when the pandemic hit encouraged early retirements and senior employee buy-outs. As demand has returned, the airlines have not been able to ramp up quickly enough and this has resulted in ongoing flight disruptions.

Each of the last holidays, and now as the industry enters a busy summer, have resulted in stories of flight cancellations and delays, disrupting thousands of passengers. This will take time to fix, and in the meantime every airline scheduling team has to work even more closely with the operating teams to ensure that the marketed and sold schedule can actually be operated. Many airlines have trimmed their summer schedules just for this reason, and as a result fares will be higher this summer and reliability will be better.

Still, problems will occur at the busiest times. Finding ways to be reliable as the busy summer ends will go a long way to helping the weaker-demand fall season to work for the industry. Fares are high today because of high demand and limited supply.

When that dynamic switches late this August, the fares won’t be sustainable and this puts a premium on reliability. How The Industry Can Becoming More Sustainable “Flight Shaming” was becoming popular in Europe before the pandemic, with whispers of this in the U. S.

As investors have demanded that companies start to report on non-financial ESG metrics along with their traditional financials, companies have looked to air travel as way they can cut their carbon emissions. This is a threat to airlines, and the way to address this is to own the sustainability message and embrace it. The industry has done this with a bold pledge to be net-zero by 2050.

Getting there won’t be easy, and requires and multi-pronged approac h. This will include more use of sustainable fuels, retirement of the most gas-guzzling and emissions-producing aircraft, and new technologies for both aircraft and engines. Companies who travel for their business must not feel that stopping air travel is necessary for them to be good stewards of the environment.

Some of this is inevitable, with the reliability and comfort now available with video technology. But losing traffic because of a perception that the activity itself is harmful is an existential threat to the industry. The industry understands this and is doing the right things to address it.

The airline industry is tough under any circumstances. Capital-intensive, people-intensive, and operationally-sensitive businesses require close attention to detail and non-stop focus within fast-changing macro environments. These five issues are far from the only things that airline leaders need to consider, but they are all big enough that avoiding any one of them could be disastrous.

The government can support this too, by eliminating harmful regulations and ensuring access for competitiveness everywhere. Follow me on LinkedIn . Check out my website .

Ben Baldanza Editorial Standards Print Reprints & Permissions.