Top six airline trends for 2023 include security threats and more United

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

What will happen in 2023? The past is not the future, but some clear trends have emerged in 2022. Threats to aviation security infrastructure have increased. An avant-garde pilot contract with Delta Air Lines
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, reached Friday evening, has likely changed the labor landscape. United Airlines has come under news and political fire and been branded a hot stock, while “leisure travel” has become a hot topic. And yet, it remains clear that for some global airlines, the post-pandemic economy remains a concern.

Here are the top six trends.

Aviation security threats will continue

American commercial aviation provides what may be the safest transportation system in the history of the world, but two threats to the margin of safety, both from outside and within the industry, accumulated in 2022.

In January, telecom companies’ 5G rollout suddenly became a scary issue, like Verizon and AT&T
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sought to install towers too close to airports. In June, they agreed to delay part of the implementation until July 2023 as airlines upgrade planes. The dispute shocked the airline industry, which had not imagined anyone would so blatantly put financial concerns ahead of safety concerns.

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

Equally alarming is the continued push for single-pilot commercial aircraft.

More than 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 Aviation Safety Agency to the European Union also worked with aircraft manufacturers to determine how solo flights would work.

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

United Airlines will lead the industry in generating buzz

It should be noted that CEO Scott Kirby was among approximately 300 guests invited to the state dinner that President Biden hosted for French President Emmanuel Macron on December 1. United’s continued emergence as a player in the Biden administration reflects the influence of Josh Earnest, once a spokesman for President Obama, now a senior vice president of the United States.

In particular, United have 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 their rivals. United “does the spaghetti theory greenwash better than the rest,” said aviation consultant Bob Mann. “I throw a lot of it on the wall and see what sticks.

“I’ve always thought there’s no good outcome for companies that publicly weigh in on politics,” Mann said. “Why upset your customers and employees by taking a stand? »

United could also lead the industry in share price upside

Regardless of United’s policy, he has been an undisputed leader in the stock market, and Cowen
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Analyst Helane Becker calls it her top pick for 2023. United stock closed Monday at $45.03, down 1% year-to-date. Meanwhile, Spirit was down 46%, with American down 25%, Delta down 11%, Southwest down 10% and the S&P 500 Index down 17%.

“United is the most exposed to the ongoing recovery in higher-margin international travel among U.S. airlines,” Becker wrote in a recent note. “The carrier has more stretch seats than all other US airlines combined and its hubs position it well to capture spending from affluent consumers.”

Additionally, she said, United “have a strong cash reserve which should enable it to continue to service debt and weather any macro unrest”.

Bleisure Travel could still be a thing in 2023

In 2022, the combination of business and leisure travel in leisure travel has become a popular topic of analysis. Presumably, bleisure passengers travel at noon instead of the start and end of the day; travel mid-week 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, as they can.

In October, Southwest CEO Robert Jordan said he saw the changes, but “what I think we want to be careful about is trying to decide it’s forever.” And consultant Mann said: “I would be shocked if ‘bleisure’ made it into Webster’s Dictionary.”

Labor peace to follow Delta pilot deal

Most pilot groups have been in contract talks for years. The talks have moved slowly in part because in the typical negotiation, each participant monitors every other participant. Nobody wants to be the first.

The risk of making deals too soon was clear in 2022. ALPA’s united leadership came under attack because in June it tentatively agreed to a 14.5% pay rise in 18 months. Then the American offered 17%, soon increased to 20.4% over three years. Yet in October, the American drivers recalled their negotiating committee, which had tentatively agreed to limit the potential game with their peers.

Friday evening, 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 increase and a cumulative 34% increase after three years, as well as multiple work-life balance improvements.

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

The recovery will be more difficult for foreign carriers than for American carriers.

Generally, US and European airlines appear to be in a good position, with strong demand and reduced capacity, while Asian carriers, particularly China, have yet to recover.

Ishka, a London-based global aviation information and consultancy firm, says virtually the entire global airline industry could be at risk from a combination of inflation, high fuel prices, dollar strength and deteriorating consumer confidence.

“There are major macroeconomic challenges that are fueling uncertainty, particularly in Europe,” Siddharth Narkhede, principal analyst at Ishka Narkhede, said in an email.

However, he said, “North American and European airlines enjoy relatively stronger balance sheets and liquidity, so they are relatively better positioned to weather the challenging economic environment.”

The International Air Travel Association said on Tuesday it expects the global industry to make a profit of $4.7 billion in 2023 after three years of losses that fell to $6.9 billion in 2022. “The expected earnings for 2023 are extremely slim,” said Willie Walsh, IATA’s chief executive. , in a prepared statement. “But it’s incredibly significant that we’ve turned the corner to profitability.”