2022 was a huge year for air travel. With pilot strikes, a new ALPA president, summer delays, a bumper Delta contract, and renewed passenger demand it was certainly a year to remember. Now, with Christmas around the corner, USTN asks what does 2023 look like for air travel?
The big hope for airlines is that 2023 will be a year defined by growth. This year, the U.S. airline industry returned to profitability for the first time since the pandemic. Travel demand rebounded sharply, whilst consumers appeared willing to pay higher fares which have compensated for increased fuel costs. Further, business travel has returned to approximately 80% of 2019 levels - a trend which airlines will hope to see continue into the new year.
Delta Air Lines expects its earnings next year to nearly double thanks to “robust” travel demand. According to Delta executives, the airline is anticipating a revenue jump of 20% when compared to this year, while shares may jump as high as $6 dollars. The revenue hike is set to equate to a rise of $45.5 billion.
We’ve seen our recession,” CEO Ed Bastian said in an interview. “Consumers are prioritizing their spend, where they’re making choices, and they’re prioritizing investing in themselves and experience.”
This constitutes a sharp rebound following the record losses of 2020. But even compared to pre-pandemic levels Q4 earnings are expected to rise 7-8% against a 2019 baseline.
Delta has been tentative in restoring its full flight schedule to 2019 capacity. This caution has held back revenue but ensured a more reliable service. However, with the industry hiring at a pace, Delta is optimistic they will have restored the network to 2019 levels by the onset of next summer.
The airline will be more optimistic about filling ongoing pilot shortages now that it boasts industry-leading pilot contract terms. Delta has been described as having “raised the bar” with a 34% cumulative pay increase. As well as a one-time payment, Delta pilots will see their pay rise in three periodic increments set to constitute a $7.2 billion dollar investment in pilots over the next 4 years.
2023 will be defined by this race to find pilots. Airlines are still working to hire more employees to match travel demand after huge numbers were let go during the darkest days of the pandemic. American Airlines has hired 2,000 pilots this year but is looking to repeat that again in 2023. Meanwhile, Southwest is looking to intensify its employment drive. Having hired 1,200 pilots this year they hope to recruit 2,100 in the next twelve months.
Analysts suggest the industry remains 10,000 pilots short and that it will take until 2027 to resolve the issue. Until then, the power rests with the pilots. That’s why Delta’s contract proposal is expected to have an important knock-on effect. With Spirit, United and American still in talks with their pilots, it is anticipated that Delta has set a benchmark in such a competitive environment.
According to reports, Spirit has already improved its offer to match the 34% raise that Delta pilots are set to receive. Meanwhile, United and American promised “industry-leading” pay during the last round of negotiations. In light of Delta’s deal, the 14.5% and 19% raise they respectively offered will have to improve to remain competitive in a dynamic market.
All this will please the new President of ALPA, set to take up his role on January 1st. Captain Jason Ambrosi, former Delta pilot and distinguished union advocate, has made clear he wishes to see improved offers on the table as part of his commitment to a “member-focused representation style.”
Ambrose will take over from outgoing President Joe DePete, who oversaw perhaps the most difficult period in airline history during the Covid-19 pandemic. Ambrose, however, is keen to leave the pandemic in the “rear-view mirror” and “bring ALPA into the 21st Century.”
It's not all good news, however, as luxury travellers are set to be disappointed by changes to major airlines' loyalty schemes. Low-entry access to frequent-flyer perks look set to decline in 2023 as both American and Delta have made it harder to earn points.
As of March, American Airlines are set to create a "more meaningful travel rewards program", according to a company statement. However, the reality is that the number of required loyalty points to earn benefits has increased by 33%. The airline is also removing its MileSSAver and AAnytime awards, which were used to redeem frequent flyer miles for tickets set at minimum rates.
Similarly, Delta has also increased the threshold necessary to qualify for its SkyMiles scheme. For the carrier's Diamond Medallion status, travellers will need to up their spending from $15,000 to $20,000.
On the whole, the forecast is good for 2023. While pilot negotiations may continue to dominate the headlines as United and American pilots seek parity with those at Delta, service delivery and profitability should be up across the industry. 2023 should see a return to growth, an improvement in on-time delivery, and major milestones towards resolving the staffing shortage across the board.
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