Airport Experience® News - ACDBE & Small Business Issue 2024

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AIRLINES

and work travel requirements. On the international front, the legacy carriers dominate the transatlantic and Asia Pacific markets, at least from the U.S. carrier perspective. “Generally the transatlantic traffic has remained quite strong, particularly last year. And it looks like this year is going to be another strong year for travel to Europe,” Bilous says. “Asia Pacific travel was the last to recover post pandemic. It’s still not back to where it was, but for the most part it’s a small share of overall revenues for the network carriers.” That solid grounding is prompting some carriers to re-direct their strategies. In fact, Swelbar sees “a fascinating flip of how this industry’s been approached for decades,” he says. A clear effort is underway – courtesy of Delta and United, in particular – to de-commoditize air travel. “This industry has been a commodity industry for 45 years,” Swelbar says, but he notes new strategies in the post-pandemic environment.” “Through the pandemic it was the network carriers that were slow to recover, and the growth was from Southwest Airlines and the ultra-low-cost carriers

(ULCCs),” he says. “United and Delta, particularly, did not begin to grow until the international and the business traveler began to show a pulse. They are very focused on those passengers. “We have started to see the real segmenting of the aircraft,” Swelbar continues, “with first class, business class, premium economy and basic economy.” With focus on the more premium levels of service, the two carriers are attempting to differentiate from the pack and appeal to a more discerning traveler. “Clearly during the pandemic, people were willing to buy up, and now we see the ULCCs questioning [their strategies],” Swelbar says. “I have always questioned whether there is room for all 13 significant carriers in the economy space anyway.” He adds that while network carriers are growing, ULCCs are pulling back on their growth and showing financial distress. ULCC Struggles and Strategies Several ULCC carriers pivoted quickly post-pandemic, shifting their capacity to capitalize on markets that were friendly to travelers and away from some of the

Systemwide U.S. Scheduled Service Passenger Airlines Quarterly Net Income (Billions of Dollars)

$5.5

$2.0

$1.6

-$1.2

-$1.6

2Q 2023

3Q 2023

4Q 2023

1Q 2023

1Q 2024

Source: U.S. Department of Transportation’s Bureau of Transportation Statistics

A Flip Flop? The legacy carriers are heavily reliant on business and international travel, which typically provide strong margins that drive profitability. Bilous notes that both those drivers are solid. “I think we’re seeing a pretty steady recovery in business travel - it’s coming back although it’s still not to the levels where it was pre pandemic,” he says, noting the changing nature of work

U.S. Average Domestic Quarterly Fares, 3Q 2020–1Q 2024

Unadjusted Fares (Current Dollars) In ation-Adjusted (2024 $)

$421

$411

$400

$401

$394

$389

$397

$394

$392

$372 $385

$388 $388

$383

$382

$368

$366

$359

$356

$345

$328

$327

$314

$311

$307 $300

$292

$261

$260

$245

3Q 2020

4Q 2020

1Q 2021

2Q 2021

3Q 2021

4Q 2021

1Q 2022

2Q 2022

3Q 2022

4Q 2022