• Wed. Sep 21st, 2022

Five bold predictions for 2022 for the US airline industry

In 2021, I hit about 50% of the forecast I made at the end of 2020. The summer returns were disappointing even though the traffic was heavy, the widebody aircraft had few economically positive places to fly and Boeing did sold a lot of new 737 MAX aircraft. . But no American airline has filed for bankruptcy and no merger has been announced, and so much the better for the first of them at least. Not bad, given how hard this industry is to predict and how quickly things have changed, both back and forth in this economy.

As 2021 draws to a close, U.S. airlines head for an uncertain 2022, with the pandemic continuing to raise questions rather than dying out. This makes predictions harder, but still fun to try. I won’t allow myself to just re-predict something that didn’t happen in 2021, although I think bankruptcy might still be possible. So here are five new predictions that I think are likely to happen, even if they are not desirable:

Airline mask warrants will continue throughout the year

Some airlines began requiring masks to be worn on planes in 2020, and later the federal government imposed a mask warrant for anyone flying on a U.S. plane. This mandate has been extended twice and is expected to expire on March 18. Recently, the top CEOs of Southwest Airlines and American Airlines told Congress that “masks don’t add much” to safety on planes. Yet it is still very likely that this tenure will be extended due to the high transmission rate of the omicron variant, and furthermore, problems suggest that the tenure could continue for much longer.

When you’re sitting on the plane at cruising altitude, the argument that masks don’t help much makes sense. We all now know that air flows vertically in airplanes, is replaced every 2-4 minutes and how HEPA filters work. But in an airplane, there is more going on. What happens when a person boarding coughs while putting their luggage over their head? What happens when the Auxiliary Power Unit (APU) is not operating at the door so that no air is circulating until the motors start? What about people who eat or drink just slowly enough that they don’t wear their masks for most of the flight anyway? The flight attendants will be pushing for the warrant to continue to ensure their safety, and that is a good enough reason. Plan to wear a mask on an airplane year round, including when traveling during the upcoming holiday season.

The domestic share of the Big Four will drop to 60%

Following the consolidation of eight major airlines into four major airlines between 2008 and 2012, the four largest US airlines collectively achieved a market share of over 80%. But this spike raised prices for consumers and created an opportunity for low cost carriers to grow. Airlines like JetBlue, Spirit, Frontier and Allegiant have each experienced much greater growth than the Big Four. Meanwhile, the biggest carriers have rationalized hubs, relied on more connections through large hubs, and focused on international traffic for new sources of revenue.

The pandemic has accelerated this dynamic. With domestic commercial traffic still far from 2019 levels, America’s four largest airlines have had to cut capacity the most. This is due to the reduction in frequency and the withdrawal of older aircraft earlier than would have been necessary without the pandemic. Meanwhile, the cheapest US airlines saw a return of most of their traffic, being mostly discretionary leisure passengers, and expanded into new markets and ordered more planes. By the end of 2022, it is likely that these two effects will result in the four largest US airlines having a collective market share of 60% or less. It’s good for consumers in terms of the choice and price of tickets.

Narrow bodies will overtake jumbo jets on many transatlantic routes

Wide-body aircraft, such as the Airbus A330 and A350 or the Boeing 777 or 787, are used around the world for the longest journeys. Their range makes them particularly capable for certain routes, and their size allows airlines to offer plenty of business class seats, as well as generously sized economy cabins. Yet these planes are significantly more expensive to own and operate and, as such, create great risk for the airlines that operate them. A widebody plane can make more money than a small narrowbody plane in good times, but loses huge multiples in weaker times.

For this reason, and the greater range now available in the Airbus A321 and Boeing 737 models, airlines are increasingly choosing to use these small planes on many transatlantic routes. Delta Airlines has used the Boeing 757 in the same way for many years, and some airlines have used narrow-body planes specially configured for certain routes. The pandemic has also accelerated this trend, as jumbo jets need business traffic to be profitable, and long-haul business traffic has been the slowest to return. In the summer of 2022, small riders will dominate departures, if not seats, on shorter trips from the United States to Europe.

Airline loyalty programs will welcome less frequent travelers

The pandemic has threatened the economy of traditional airline loyalty programs. With fewer business travelers traveling regularly, airlines have had to rely more on credit card spending to maintain revenue. Additionally, rather than risk alienating those most engaged in the programs, airlines continued to maintain status levels for customers even if they had not traveled. This cannot go on forever, so at some point, the implicit prices of these programs will have to be recalibrated for a new point earning rate.

The likelihood that leisure traffic will represent a higher percentage of all travelers in the future also creates an opportunity for the largest US airlines. Defining what loyalty can mean to a less frequent traveler, and how to reward that loyalty, will expand those programs that have traditionally relied solely on frequent business travelers. Expect that in 2022 at least one forward-thinking American airline will launch an initiative as part of its program to reward less frequent travelers. As the flyer demographics change, so must the loyalty program.

Airline Executives To Stop Saying All Commercial Traffic Will Come Back

A year ago, a study was published that predicted that 19% to 36% of professional traffic would not return. This was based on examining the reasons people steal for business and estimating how changes in technology, views on working from home and personal risks would make business trafficking less likely to be there. ‘to come up. Despite this, CEOs of major airlines continue to talk about a full return of the business traveler. They also cite business travel statistics reaching 60% of 2019 levels, implying they will return to 100%.

In 2022, the reality of fewer company conventions and trade shows, the cost of intra-company travel and increased convenience with video for some meetings will finally be accepted and at least some airline executives will publicly say that all categories of business travelers are not likely to return fully. Instead, they will focus on growing the business base for travel that is still happening to revert to a previous baseline. This acceptance will also allow them to make decisions about their fleet, the configuration of their aircraft and the loyalty programs that naturally arise from a structural change in the number of business trips taken.

An absolute truth about every prediction is that it will be wrong in some respect. These five predictions all look probable at the end of 2021, so 2022 will be a difficult year for many airlines. As has been the case in recent years, the lowest cost carriers that can make money on the price sensitive leisure traveler will continue to lead the larger airlines that rely on return travel. business.