Top Six U.S. airline trends for 2023

The past two years have brought surprise after surprise to the airline industry. A pandemic that began in 2020 was followed by acute downsizing and then by a sudden surge in demand, which began in March 2022 and for which no one was prepared. Arguably, it took until Thanksgiving 2022 for U.S. carriers to catch up.

What will happen in 2023? The past is not the future, but some clear trends emerged in 2022. Threats to the air safety infrastructure mounted. A vanguard pilot deal at Delta Air LinesDAL +0.2%, reached Friday night, probably changed the labor landscape. United Airlines edged into the glare of news and politics and potential designation as a hot stock, while “bleisure travel” emerged as a hot topic. And yet, it remains clear that for some global airlines, the post pandemic economy remains troubling.

Here are the top six trends.

Threats to Aviation Safety Will Continue
U.S. commercial aviation provides what may be the safest transportation system in the history of the world, but two threats to the safety margin, from both outside and inside the industry, mounted in 2022.

In January, 5G deployment by telecommunications companies suddenly became a scary issue, as Verizon and AT&TT -1.4% sought to install towers too close to airports. In June, they agreed to delay some implementation until July 2023 as airlines retrofit aircraft. The dispute shocked the airline industry, which had not envisioned that anyone would so blatantly place financial concerns ahead of safety concerns.

“Airlines have been upgrading radar altimeters to improve their ability to tolerate interference,” the Air Line Pilots Association said in a recent press release. “The FAA is strongly urging airlines to complete the updates by July 2023, so that aviation safety can be assured when mobile wireless goes to full power at that time.” But it’s not so much the details that matter as the concept that safety is now negotiable.

Just as alarming is the continuing push for single pilot commercial aircraft.

Over 40 countries including Germany and the United Kingdom have asked the United Nations body that sets aviation standards to help enable single-pilot flights, and the European Union Aviation Safety Agency has also been working with plane makers to determine how solo flights would operate.

Dennis Tajer, spokesman for the Allied Pilots Association, which represents American pilots, recently told NBC News that single-pilot is a bad idea. “It is a soul-to-soul eye to eye contact with that other professional pilot that often makes the difference between really bad headlines or an uneventful flight,” Tajer said.

United Airlines Will Lead the Industry in Generating Buzz
It is worth noting that CEO Scott Kirby was among the approximately 300 guests invited to the state dinner President Biden hosted for President Emmanuel Macron of France on Dec. 1. United’s continued emergence as a player in the Biden Administration reflects the influence of Josh Earnest, once President Obama’s spokesman, now a United senior vice president.

In particular, United has been a leading advocate for carbon neutral flight operations. But it’s hard to think that, in the end, United will be significantly more carbon neutral than its competitors. United “does spaghetti theory greenwash better than others,” said aviation consultant Bob Mann. “Throws a lot of it up on the wall, and sees what sticks.

“I have always thought there to be no good result from corporations weighing in publicly on politics,” Mann said. “Why upset your customers and employees by taking a stand?”

United May Also Lead the Industry in Share Price Gain
Whatever United’s politics, it has been a clear stock market leader, and CowenCOWN +0.2% analyst Helane Becker calls it her top pick for 2023. United shares closed Monday at $45.03, down 1% YTD. Meanwhile, Spirit was down 46%, with American down 25%,Delta down 11%, Southwest down 10% and the S&P 500 Index down 17%.

“United has the greatest exposure to the ongoing recovery in higher-margin international travel among US airlines,” Becker wrote in a recent note. “The carrier has more lie-flat seats than all other US airlines combined and its hubs position it well to capture spending by high-net-worth consumers.”

Additionally, she said, United “has a strong liquidity buffer that should allow it to continue paying down debt and navigate any macro choppiness.”

Bleisure Travel Might Still Be a Thing in 2023
During 2022, the combination of business with leisure travel into bleisure travel emerged as a popular subject for analysis. Presumably, bleisure passengers travel at midday instead of the start and end of the day; travel midweek instead of Friday and Monday; fly to Bozeman to work remotely and also ski, and sit in Delta Comfort or Main Cabin Extra or United Premium Plus, because they can.

In October, Southwest CEO Robert Jordan said he sees the changes but ”What I think we want to be careful with is trying to decide that this is forever.” And consultant Mann said, “I will be shocked if ‘bleisure’ makes it into Webster’s dictionary.”

Labor Peace Will Follow the Delta Pilot Deal
Most pilot groups have been in contract talks for years. Talks have moved slowly partly because in pattern bargaining, every participant watches every other participant. Nobody wants to be first.

The risk of making deals too soon were clear in 2022. United ALPA leadership was attacked because in June, it tentatively accepted a 14.5% pay raise within 18 months. Then American offered 17%, soon raised to 20.4% over three years. Still, in October American pilots recalled their negotiating committee, which had tentatively agreed to cap the potential match with peers.

Late Friday, Delta ALPA reached an agreement in principle with the carrier, after three and a half years of negotiations. The deal would provide an immediate 18% pay raise and a cumulative raise of 34% after three years, plus multiple work-life balance improvements.

“Assuming an endorsement by Delta’s MEC, we anticipate AAL, UAL & LUV pilot negotiations to meaningfully accelerate, potentially removing the entirety of the industry pilot overhang by mid-year 2023, and thereby significantly improving the market’s labor cost confidence for at least the next four years,” JP Morgan analyst Jamie Baker wrote on Monday.

Recovery Will Be Tougher for Foreign Carriers Than for U.S. Carriers
Generally, U.S. and major European airlines look to be in a good spot, with high demand and reduced capacity, while carriers of Asia – particularly China – have yet to recover.

Ishka, a London-based global aviation information and advisory business, says that nearly the entire global airline industry could be threatened by the combination of inflation, high fuel prices, the strong dollar and deteriorating consumer confidence.

“There are major macroeconomic challenges that is driving uncertainty, particularly in Europe,” said Siddharth Narkhede, Ishka senior analyst Narkhede said in an email.

However, he said, “The North American and major European airlines have the benefit of relatively stronger balance sheets and liquidity so they are relatively better positioned to face the challenging economic environment.”

The International Air Travel Association said Tuesday it expects the global industry to earn a $4.7 profit in 2023 after three years of losses that declined to $6.9 billion in 2022. “The expected profits for 2023 are razor thin,” said Willie Walsh, IATA director general, in a prepared statement. “But it is incredibly significant that we have turned the corner to profitability.” forbes.com