2023 Resolutions for the U.S. Aviation Industry

Now is a good time to reflect on what happened at the end of the year. What is working well and where can we improve? Businesses need New Year’s resolutions just as much as individuals. There was some good news for U.S. airlines last year, including exciting new merger proposals and a return to profitability for most airlines. It’s been another very safe year for American Airlines, and we’re all grateful for it.

The year that ended left a lot of room for improvement. Operationally this is true, but it is also necessary to adapt to a higher wage environment and changing business travel realities. While there are many areas in which American Airlines could improve, here are five important ones:

minimize cancellations

Delayed flights can frustrate customers, but canceled flights can really mess up travel. In 2022, American Airlines has canceled more than 3% of its flights. That might not sound like a lot, but when each cancellation affects hundreds of customers, you can see how this can quickly make headlines. The biggest way airlines can reduce cancellations is to better coordinate flight planning and operations teams. The industry has a bad history of arranging and operating more flights than is reasonable.

Even then, things happen that lead to flight cancellations. This could come from crew issues, maintenance status, weather, etc. While cancellations are sometimes the least disruptive action, airlines can adopt their policies to be more sensible when it comes to flight delays and cancellations. By minimizing flight cancellations, airlines help customers in a meaningful way, while also taking a lot of political pressure off. A lot of airline industry regulation comes from airlines deciding not to figure things out on their own. For 2023, significantly reducing cancellations is the most important operational step.

Offset labor wage increases and other cost savings

Salary veins. Increased in many industries, workers have more influence. Pilots have the most leverage in the aviation industry, and their pay will rise sharply next year. This is already happening in the regional airline industry, as wage rate increases have been used to address a severe pilot shortage. In addition to pilots, airlines also face wage pressures in airports, flight attendants, maintenance and other departments. Labor typically accounts for around 25 percent of an airline’s costs. Over the next few years, many predict this will exceed 40%.

Passing this increase on to consumers with higher ticket prices is not a realistic response to this. While average cost increases by paying people more, marginal cost remains low. That has put pressure on prices, and the industry cannot afford the loss of traffic that higher fares might cause. A 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 recently dropped call-based customer service, which also reduced their exposure to the job. Airlines can also further simplify their operations, since complexity, by definition, drives up costs. If airlines have to spend more on people, they should challenge themselves to spend less in other areas and use fewer people. That’s the aspiration the industry needs as it heads into 2023.

Accept the fact that business travel has fully resumed

For the first year or so after the pandemic, U.S. airline leaders talked about a full return to business travel and how soon that might take place. Business travel as a percentage of 2019 continued to grow over time, but the curve suggests a flattening out around 75%. Growth continues to slow, and business travel now appears to be capped at around 85% of 2019 levels in volume terms. Higher ticket prices for this group resulted in almost flat business revenue for some airlines compared to 2019.

Accepting this reality is the industry’s great resolution for 2023. Instead of continuing to hold unrealistic hopes that all passenger traffic will recover, airlines should better understand what this means and how they can adapt. American Airlines has begun building products for the hybrid traveler. This recognizes that people do combine business and leisure travel, and airlines can make it easier for customers to do so. Loyalty programs can evolve to reimagine what loyalty means in a post-pandemic world, and how these programs are relevant to customers who travel less frequently. It could also mean rethinking the seating configuration on planes, as well as the frequency density of each route.

Allow buses to take over very short flights

For trips that can be driven in two hours or less, bus service is a more efficient and sustainable way to bring passengers to a hub that is a short flight away. Companies like Landline are revolutionizing service through seamless connectivity. Customers can check in at the local airport, board the bus, then stop at the gate at the hub and connect with luggage. On the bus, people have bigger seats than on regional flights, there’s wifi, so everyone wins. Airports like the idea, but it would bring more people into the facility, but buses would require as much infrastructure as planes.

This proximity to cities relieves regional industries that are struggling to find pilots, and the cost makes their feed very expensive for connecting airlines. By converting these short-haul flights to bus services, customers can enjoy reliable connecting services. Regional airlines can focus on more efficient long-haul flights. By imagining buses as planes without wings, it breaks down some of the natural concerns that tie such a service so closely to mega-hub connections. Every airline with a regional feed should consider it by 2023.

be kind and helpful

These two simple phrases can be adopted by the airline industry both for how they view customer service and how they deal with their employees. For customers, that’s what customers want when industry employees are friendly and helpful. It’s easy to say those two phrases, but it’s amazing how difficult it is to do it every day and every action. By reviewing all customer policies through this simple filter, the airline may remove many policies and change others.

Inside a company, being friendly and helpful is a great way to think about employee relations. This is how we all want to be treated, and a call to action to help in any way we can. If the resolution is aspirational, think how good airlines would be if they took those five words and made a living from them!

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