The Five Most Important Airline Stories Of 2022

The year 2022 has seen a robust return of airline traffic, and many airlines have earned profits for the first time since the first quarter of 2020. The year included major operational disruptions, and higher fares as demand was strong even with fewer flights flown. Yet like any year, a lot happens in the U.S. airline industry.

Choosing the top stories of the year is tough because a lot has happened. I chose these stories based on the impact to the industry going forward. Here are five biggest things that happened in 2022 that will affect the operating environment in 2023 and beyond:

JetBlue Wins Battle For Spirit Over Frontier

In February of 2022, Spirit Airlines and Frontier Airlines announced plans to merge in a mostly stock and small cash deal. This seemed inevitable to many as the airlines share an ultra-low cost business model, and Frontier’s major owner and CEO each came from Spirit. While the world was contemplating what this merger might mean, JetBlue surprised many with an all-cash bid for Spirit that would pay their shareholders a larger premium that the Frontier deal offered nominally.

After several failed attempts at getting shareholder approval, it became clear that Spirit’s shareholders liked the JetBlue deal better. Certain cash at a meaningful premium was preferred to stock with uncertain future value, even for those that liked the business model story of the initial deal. In late July, 2022, the Spirit board formally rejected the Frontier offer and agreed to terms with JetBlue. While this deal will require a review by the U.S. Justice anti-trust offices, as would have the Frontier deal, JetBlue claims that the combination offers a significantly better chance of competing with the four largest U.S. airlines. (I serve on the JetBlue board of directors.)

Boeing Not To Release New Mid-Sized Plane Until 2035

Boeing, a proud American manufacturer, somewhat quietly announced that they would not release a new mid-sized aircraft until at least 2035. This means that a company with a huge history of innovation and leadership is basing the next decade or more on a plane originally designed in the 1960s, the Boeing 737. Arguably Boeing’s fleet offerings today are struggling today against a more aggressive Airbus. Pushing this decision off for so long suggests a change in the importance of commercial aviation for the company.

Consistent with this, Boeing also moved their headquarters from Chicago, IL to Arlington, VA, just outside of Washington, DC. This suggests that their strong military design and manufacturing division is growing in importance and priority. Meanwhile, Airbus has bet big on hydrogen as a major component of sustainability. While they aren’t committing to a hydrogen powered aircraft until at least 2035, their core offering of the A320NEO and variants is newer than the 737 by a few decades. They also have set milestones on this hydrogen mission to help ensure they make this target. EasyJet, an Airbus operator, and engine maker Rolls Royce successfully ran an airline engine on hydrogen in November.

The Boeing actions are concerning for a company so important to aviation. It suggests that Boeing can’t keep up with a world moving very quickly. This could have significant implications for the industry over the next decade.

Summer 2022 Operations Bring Ire To DOT Secretary

The summer of 2022 was difficult for airline operations. Airlines cut capacity quickly when the pandemic first hit, but airlines found it harder to build back than to cut. Blaming staffing shortages, weather, and even air traffic control, airlines had a high rate of flight cancellations and many long flight delays.

In August, Department of Transportation Secretary Pete Buttigeig called in the head of the largest U.S. airlines and declared the cancellations as unacceptable. Yet blaming just the airlines was seen by many as short-sighted, since the problems, while realized at the airlines, related also to airports, air traffic control, and even labor unions as well. The role of governmental regulations, or at least governmental pressure, is uncertain as the industry moves into 2023. The Secretary has made it clear, however, that airlines will be held accountable when things go wrong, even if they can’t fix it alone.

Russian Airspace Closes, Forcing Many Flight Changes

The war in Ukraine affects the global airline industry in a few ways. Most directly is the closure of Russian airspace for many countries, in retaliation for Ukranian support. Russia is a physically large country, and not being able to use their airspace has caused flight cancellations and some long detours. Europe to and from Asia is most affected, especially from Scandinavia and other northern hubs.

While some lose due to this, other hubs benefit. The Middle East hubs are far enough south that they can serve India and other Asian spots without crossing Russia on the way. When people can’t go some places, that doesn’t mean they don’t travel at all. They just go someplace else, and those places benefit from that.

Pandemic Is Over For Airline Travel

Despite the operational challenges of the summer, airlines were happy to see a strong return to travel that extended even beyond the summer. Leisure travel reached levels close to 2019, and that bodes well for a profitable and growing 2023 for the industry. The business travel segment is still somewhat uncertain. Most airlines reported business volumes at north of 80% compared to 2019, but higher fares made business revenue also close to 2019.

Airlines are figuring out what total demand looks like post-pandemic. Ideas like blended travel, or combining business and leisure trips, and premium leisure travel has airlines thinking about new service offerings and new travel products. This is encouraging and has airlines innovating in interesting ways.

The airline industry is constantly changing. Each year brings new challenges and opportunities. Just a year ago we saw the start of two new airlines in the U.S., Avelo and Breeze, and this year was the closest to normal since 2020. But normal doesn’t mean without significant events, and the issues here will help drive changes in 2023 and beyond.