How Hybrid Work Is Changing Airline Industry Seasonality

One challenge with managing an airline is seasonality. Seasonality affects wide periods of the year — more people travel to Florida in February than in July, for example. But it also affects day of week patterns. Travel on Thursday through Sundays has been typically much busier than travel on Mondays through Wednesdays. Holidays affect this too. Travel around many major holidays tends to peak based on when in the week the holiday happens, or how long the holiday period is.

As the airline industry is figuring out post-pandemic travel patterns, one trend is actually helping the industry. This is a leveling out, to some extent, of what used to be very peaky travel demand. This appears to be related to the fact that people can stay connected to their work even when traveling for fun. This concept, now spoken of as blended travel, is making it a bit easier for airlines to manage capacity but also requires revenue management data systems to learn so forecasts can be more accurate. It also could affect aircraft maintenance and crew vacation patterns.

How Work Affects Travel Seasonality

Until the recent pandemic, working had a great effect on travel patterns. This was especially true around holidays. When July 4 fell on a Monday or Friday, for example, it was common for people to take one day off to combine for a long weekend. Holidays that companies gave off often directed when trips could be taken because it was ok not to be in the office on those days.

Work, for kids, usually means school. School also affects travel, and this was always evident in strong summer travel followed by a big drop-off in travel volume starting in the middle of August. At Spirit Airlines, we used to joke that September was the only month with six weeks. That’s because it started on about August 15, in terms of back to school travel drop-off.

Holiday Impact Of Hybrid Work

Hybrid work schedules are changing this. United CEO Scott Kirby has said that hybrid work means that every weekend can be a holiday weekend. When people can work from home, that means they can work from anywhere. This allows a much more fluid view of travel possibilities, and all of a sudden specific holiday days off aren’t fixed guideposts any more. This allows more combining with weekends, and de-peaking of days that used to be when everyone had to get home.

This is not a short-term phenomenon. Almost three-fourths of all U.S. companies say they plan to keep a hybrid work schedule in place. Almost 60% of workers say they would choose a company that offers this flexibility over one that doesn’t. This is good for airlines, as soon as they figure out and adapt to its implications.

Summer Peaks Changing

In Summer 2022, the U.S. airlines had a strong demand summer but there were concerns about a large unit revenue decline as the summer ended. People, including me, thought this because of decades of data about how the fall behaved compared to the summer. But it didn’t happen. As kids went back to school, people kept traveling because they could work while traveling. Fall 2022 was very good for U.S. airlines, and some thought it was so good that they feared it might not happen again and called this “revenge travel.”

It will happen again, and going forward. Hybrid work makes more travel possible, smoothes what used to be peaks, and creates opportunities for the airlines. The fall strength is likely to replicate this year, but still there will be a strong summer period as well.

Yield Management Impacts

Yield Management, the big-data science that forecasts demand and helps airlines offer the best prices, took a hit when the pandemic happened. That’s because years of finely-tuned forecasts by market and days of the week fell apart. Airlines couldn’t predict what would happen in the next week, let alone in 90 days. With a stronger 2022 and 2023 shaping up well, these systems are learning what post-pandemic demand is and they are becoming useful again. Users of these systems will see things unusual to them, however. That’s because booked revenue, meaning tickets that have been bought but not yet flown, looks different when holidays de-peak and when every weekend can be a holiday. Over time, both the systems and the users will get better calibrated to the new demand reality.

Another yield management impact could be what is known as fare dispersion. This refers to the difference in price between the lowest fare sold and the highest fare sold for any single flight. If an airline is expecting that some people will ultimately pay $2,000 to take a flight, it impacts how many cheap fares the airline can sell. If the lowest fare on this flight is $200, the mistake of selling too many of them could be to not have enough seats left to sell for $2,000. That’s a big mistake, so systems would bias and stop offering the $200 fare to not let that happen.

Scott McCartney, the long-time “Middle Seat” columnist for the Wall Street Journal, has said that the days of one person paying $2,000 and another paying $200 on the same flight are largely gone. Instead, he posits, everyone is paying $500. The yield management implication of this, if true, is considerable. If most people are paying in a tighter range of fares, the airline can make different, but more accurate, decisions about every fare to offer through the sales life of a flight.

Impacts To Airline Operations

Another airline implication of reduced seasonality could affect both aircraft maintenance and crew vacation. Maintenance is required on all aircraft, and some of this activity, known as “heavy maintenance,” takes the plane out of service for a period of time. Historically, airlines have tried to get all of their heavy maintenance work done but still have most of the fleet available during the peaks. One way to do this is to do some maintenance before it is required, called “burning green time.” With fewer peaks and a fall that doesn’t drop off, airlines may be able to plan more maintenance without concern of the time of year the plane would be unavailable.

Similarly, it is most efficient for an airline to have crew members take vacation time when demand is not so strong. This has tended to encourage bunching of vacation at weaker times of year, so that more people are available during the peaks. As travel smooths out somewhat, more crews will be able to take vacation time when it best for them.

This reality is still evolving. Hybrid work is real and here to stay. How much this changes holiday peaking and seasonal shifts is still not fully understood. But all signs are that this is likely better for the U.S. airlines once their systems, people, and processes adapt to this new normal.