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The airline industry is being reshaped by the pandemic, writes Laurie Garrow. Chandan Khanna/AFP via Getty ImagesAbout the author: Laurie Garrow is a professor at the Georgia Institute of Technology and the president of AGIFORS, a nonprofit organization that focuses on airline research.
Over the last few months, multiple U.S. airlines, including American, Southwest, and Spirit, have canceled hundreds or thousands of flights over the course of several days, citing weather and staffing shortages as main factors for these disruptions. As customers contemplate flying this Thanksgiving, many are concerned about what lies ahead as they return to the skies.
Recent mass flight cancellations are due to a confluence of factors. Some of these factors will be temporary, but others will be more persistent and shape the future of airline travel.
In the spring of 2020, global demand dropped by 90-95%. Airlines throughout the world rushed to control costs, find new sources of revenue, and realign their flight schedules, staffing levels, and business models to minimize daily cash burn.
During the initial months of the pandemic, some airlines were forced to completely suspend operations. Others were able to generate new revenue streams by operating humanitarian flights that delivered personal protective equipment and ventilators to pandemic hotspots. These early measures were not enough to stem the high daily cash burn, and personnel cuts were inevitable. In some areas of the world, government support mitigated some of this impact, but layoffs, furloughs, and early retirement packages were common.
In 2021, many airlines moved from crisis to recovery mode as the rollout of vaccines began and international borders reopened. However, fundamental changes in passenger demand and booking changes are occurring, making it challenging for airlines to align their schedules and resources to match where and when customers want to fly.
Volatility in demand has increased as travel restrictions change and borders reopen. In some parts of the world, when a border reopened, flights sold out within hours. In other cases, when a country imposed strict quarantine requirements for entering passengers, bookings evaporated overnight.
The average lead times for bookings have also showed a high degree of volatility, going as high as 80 days in the initial days of the global lockdown and dropping to around 30 days when travel volumes were drastically lower than historic norms, according to Chuck Thackston, managing director of data science and research at the Airlines Reporting Corp. Customers want to book late and to have flexibility in a world where they don't know when and where the next wave of infections will come. In response, airlines have eliminated exchange and cancellation fees. But making it easier for customers to change flights also makes it harder for airlines to plan and operate schedules in a way that matches where and when customers want to travel.
Prepandemic, airlines normally created their flight schedules six to nine months in advance of departure. Schedule changes were uncommon, and it was straightforward to assign pilots and flight attendants to cover this schedule. It was also straightforward to decide how many reserve pilots and flight attendants were needed to handle unexpected events, such as bad weather. Staffing decisions before the pandemic were easy because airlines could predict demand with a high level of certainty.
The pandemic has made manpower planning much more challenging. If demand returns faster than expected, airlines simply don't have enough time to bring pilots back from furlough and have them complete the training that is required before they can fly.
Challenges associated with matching supply and demand in other areas of the travel industry have also been a factor in recent mass flight cancellations. Some pilots who had reached the limit on the number of hours they were allowed to work were required to stay overnight in a hotel and rest before they could return to flying, only to find hotels were sold out. In July, Julie Hedrick, president of the Association of Professional Flight Attendants, said that in some cases flight attendants for American Airlines had been sleeping in airports and outside of baggage-claim areas. The lack of hotel rooms further exacerbated flight delays and cancellations.
What should be clear from these examples is that the pandemic has thrown a lot of curveballs at the airline industry. Prepandemic, the industry was able to plan months in advance and set up flight schedules and hotel blocks that basically didn't change. When faced with operational delays, it was easier for airlines to recover.
Today, given the uncertainty and volatility in passenger demand, airlines have needed to become nimble in how they design their schedules. They are making schedule changes as close as 30 days or even three weeks from departure. Like much of the economy, the airlines' problems are driven by the virus. Volatility in passenger demand should subside as vaccines are widely disseminated and infections decrease. Airlines will be better able to match supply with demand, which will mitigate flight delays and cancellations.
The airline industry is being reshaped by the pandemic. Many expect that elimination of exchange and cancellation fees will be permanent, and several airlines are exploring ways to incorporate flexibility in assigning crew to flights. For example, instead of fixing the rosters a month in advance of departure, some airlines are using an approach in which crew members know which days they will have off three or four weeks from departure, but do not know which flights they are on until a week or two from departure. This enables airlines to maintain flexibility in scheduling flight while providing crew with information regarding their days off.
Incorporating flexibility in scheduling comes at a cost, though, in the form of higher wages to compensate crew. Other job categories are seeing wage pressures, as well, and it's likely that cost increases brought on by the pandemic will remain for years. The net-interest expenses of U.S. airlines doubled from 2019 to 2020 and will exceed $20 billion in 2021-2024, according to the trade group Airlines for America.
How long it takes to recover will depend on each airline. In the U.S., low-cost carriers serving domestic markets will benefit first. U.S. airline passenger volumes in the most recent week of travel were down 11% domestically and 37% internationally compared to pre-pandemic levels, according to Airlines for America. Allegiant, Spirit, and Frontier were the only three U.S. airlines that deployed more capacity in October of 2021 than October of 2018. In 2021, JetBlue added 24 new routes across the U.S. and Central America in 2021.
So if you are planning to return to the skies this holiday season, don't be surprised if your flight times change as airlines tweak their schedules. And be prepared for higher fares.
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