2023 Resolutions For The U.S. Airlines Industry

It is a good time to reflect on what has happened as the year comes to an end. What worked well, and where can we improve? Businesses need New Years’ resolutions the same way individuals do. The last year had some positive news for U.S. airlines, with an exciting new merger proposal and a return to profitability for most airlines. It was also yet another very safe year for the U.S. airlines, something we are all thankful for.

The ending year leaves plenty of room for improvement. Operationally this is true, but adapting to a higher wage environment and a changed business travel reality is necessary too. While the U.S. airlines can improve in many ways, here are five important ones:

Keep Cancellations To Minimum

Delayed flights frustrate customers, but cancelled flights really mess up a trip. In 2022, the U.S. airlines cancelled over 3% of their flights. This may not sound like a lot, but when each cancellation affects hundreds of customers you can see how this makes headline news quickly. The biggest way for airlines to reduce cancellations is to better coordinate the schedule planning team and the operations teams. The industry has a bad history of scheduling more flights than they can reasonably operate.

Even with this, things happen that result in flight cancellations. This can be from crew issues, maintenance realities, weather, and more. While sometimes a cancellation will the least disruptive action, airlines can adopt their policies to be more judicious around when a flight is delayed versus cancelled. By minimizing flight cancellations, airlines help customers in meaningful ways and also take a lot of political pressure off. A lot of airline industry regulation comes from airlines deciding not to step up to solutions themselves. For 2023, reducing cancellations significantly is the most important operational step.

Offset Labor Wage Increases With Other Cost Savings

Wages are. increasing in many industries and workers have more leverage. In the airline industry, pilots have the most leverage and over the next year they will see signifiant pay rate increases. This has already happened in the regional airline industry, as pay rate increases have been used to address significant pilot shortages. Beyond pilots, airlines are seeing wage pressure in airports, flight attendants, maintenance, and more. Labor has typically represented about 25% of an airline’s cost. Over the next few years, many have forecasted that this will move to north of 40%.

Passing this increase to consumers with higher fares is a not a realistic reaction to this. While average costs are increasing because of paying people more, marginal costs are still quite low. This keeps pressure on prices, and the industry can’t afford a reduction in traffic that would likely result from higher fares. The better answer is to find other areas to reduce costs to offset this expected increase in labor costs.

Technology is a big key here, including more consumer self service and automating simple, repetitive tasks. Frontier Airlines’ recent move away from call-based customer service also reduces their exposure to this piece of labor. Airlines can also simplify their businesses more, as complexity by definition raises costs. If airlines must spend more on people, they should challenge themselves to spend less in other areas and to use fewer people. This is an aspiration the industry needs as it moves into 2023.

Accept That Business Travel Is Fully Recovered

In he first year or so after the pandemic, U.S. airline leaders spoke about a full return of business travel and how soon that might happen. As time went on, business travel as a percent of 2019 continued to grow but the curve stated to flatten at about 75%. Slower increases continued and now it looks like like, on a volume basis, business travel is capped at about 85% of 2019. Higher air fares for this group has brought business revenue almost flat compared to 2019 for some airline.

Accepting this reality is a great 2023 resolution for the industry. Rather than continuing an unrealistic hope that all volume will return, airlines should better understand what this means and how they can adapt. American Airlines has started to create products for blended travelers.This recognizes that people do combine business and leisure trips and the airlines can make this easier for customers. Loyalty programs can evolve both to reimagine what loyalty means in a post-pandemic world and how these programs can be relevant for customers who don’t travel quite as much. This could also mean rethinking the seating configuration on aircraft, and the schedule density in terms of frequency per route.

Allow Busses To Take Over Very Short Flights

Bus service, for trips that can be driven in two hours or less, is a more efficient and sustainable way to bring passengers to a hub that flying on very short trips. Companies like Landline are revolutionizing service by making it seamless. Customers can check in at their local airport, board the bus, and pull up to a gate at the hub and have their bag connected. On the bus, people are in a bigger seat than if on a regional flight, with wifi, and so everyone wins.Airports like this idea but it brings more people into the facility but the busses to need as much infrastructure as the airplanes.

This approach to close-in cities relieves a regional industry that is struggling to find pilots, and whose costs are making their feed quite expensive for the connecting airline. By converting these short flights to bus service, customers are better off with reliable connecting service. Regional airlines can focus on longer flights that are more efficient for them. By thinking of the bus as an aircraft without wings, it can break down some natural concern with integrating this kind of service so closely with big hub connections. For 2023, it makes sense for every airline with regional feed to consider.

Be Kind And Help Out

These two simple phrases can be adopted by the airline industry, both for how they think of customer service and how that deal with their employees, too. For the customer, when industry employees are kind and help out, that’s exactly what customers want. As easy as it is to say these two phrases, it’s amazing how difficult it is to make these true every day and with every action. By reviewing all customer policies through this simple filter, airlines would likely eliminate many policies and change others.

Within the company, be kind and help out is a great way to think about employee relations. It’s the way we all want to treated and also gives us a call to action to help out in ways we can. If resolutions are aspirational, think about how much better the airlines could become if they adopt and live by these five words!