A travel rebound is being forecast for the world’s airline industry in 2023, but challenges remain such as uncertainty over the economy and a shortage of pilots. Airlines are expected to benefit from the pattern of consumers returning to the skies as post-Covid-19 travel demand continues to pick up, aided by China’s loosening of flight restrictions in January, according to credit rating agency DBRS Morningstar. “On the other hand, the sector is highly sensitive to any macroeconomic downturn and declining consumer purchasing power. Considering these factors, we expect sector performance to remain strong during the first half of 2023, but the second half could be challenging,” said DBRS Morningstar in its 2023 outlook for the global airline industry. The IATA, a group that represents global carriers such as Air Canada and WestJet, is forecasting a profit of US$4.7b this year in the sector. That would mark the first annual profit since 2019, which saw a US$26.4b profit. However, any profit would be a sharp contrast to the string of losses during the pandemic, notably red ink of US$137.7b in 2020, a US$42b loss in 2021, and a projected loss of US$6.9b in 2022. “Even with changing patterns in the corporate world, such as a shift to hybrid working models and more in-person events, corporate travel is expected to recover in 2023, although we do not expect it to reach pre-pandemic levels any time soon,” said DBRS Morningstar. “The air cargo segment, which provided great support to sector revenues during the pandemic, has already started to normalize in 2022 with volumes back to pre-pandemic levels.” <br/>
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The head of the FAA said Wednesday the agency has taken steps to avoid a repeat of the technology failure last month that briefly halted all flights nationwide, but he said he couldn’t promise there won’t be another breakdown. Separately, acting FAA administrator Billy Nolen defended the safety of airline travel in the United States after recent incidents at John F. Kennedy Airport in New York, in Austin, Texas, and off the coast of Hawaii. Still, Nolen said, he is putting together a team of experts to review airline safety. “We are experiencing the safest period in aviation history, but we do not take that for granted,” Nolen said during testimony before the Senate Commerce Committee. “Recent events remind us that we cannot become complacent.” The committee’s hearing was billed as an examination of the failure of an FAA system that provides safety alerts to pilots, but lawmakers were most animated when they quizzed Nolen on the recent flight scares. Sen. Ted Cruz, R-Texas, showed a video re-enactment of the Feb. 4 Austin incident in which a FedEx cargo plane flew over the top of a departing Southwest flight. Both planes had been cleared to use the same runway. The FedEx pilots aborted their landing just in time to avoid a collision. "How can this happen?” Cruz asked. “How did air traffic control direct one plane on to the runway to take off and another plane to land, and have them both within 100 feet of each other?” Nolen said the incident is still under investigation by his agency and the National Transportation Safety Board, but he suggested that the fact the planes did not collide should be reassuring. <br/>
The message from Mesa Airlines could not have been clearer if the US regional carrier had written “Help Wanted” across the sky. Last week the company announced it would pay a $110,000 signing bonus for captains who join, as well as offering an accelerated career path to higher-paying, more prestigious jobs at United Airlines. It was the latest sally in an industry battle for cockpit talent that is improving pilot wages but contributing to worse service for smaller communities. Regional carriers fly shorter routes to outlying cities with jets that contain fewer seats than those flown by carriers such as United, Delta Air Lines or American Airlines. The mainline airlines own some regional subsidiaries, while other companies such as publicly traded Mesa or SkyWest Airlines fly under contract with their larger partners. Regional airlines pay pilots the least, while mainline carriers top the industry’s remuneration ladder. The relationship between the two has become more complicated as mainline carriers poach from the regionals’ ranks to solve their own staffing shortages. “We clearly have gone through a rough patch,” Mesa CE Jonathan Ornstein told investors last week. “We are very focused on pilot production.” Regional carriers lose about 20 per cent of their pilots in a normal year to mainline carriers, but last year it was more than two-thirds. A shortage of pilots has contributed to cuts to air service in smaller cities, with 161 airports losing more than one in four commercial flights between 2019 and 2022, according to the Regional Airline Association. Fewer pilots also may increase pressure at budget carriers such as Frontier Airlines and Spirit Airlines to pay their own aviators more and preserve their profit margins by raising fares. United chief executive Scott Kirby said last month that the pilot shortage is driving up low-cost airlines’ labour expenses, closer to those of a traditional mainline carrier. “The era of $4 prices from Los Angeles to Cabo [San Lucas, Mexico] and $7 from New York to Florida or $9 from Houston to Central America are probably a thing of the past,” he said. “It’s up to other airlines to decide how to price the product. But I’m pretty sure it’s not up to them what’s happening to their cost structure.” The supply of pilots has tightened over the past two decades, but it never reached a crisis because demand for air travel, and consequently demand for pilots, dropped after the 9/11 terrorist attacks and the 2008 financial crisis, said aviation consultant Kit Darby. <br/>
Demand for travel insurance in the United States is set to jump this year, as more Americans turn cautious after a spike in flight cancellations and lost luggage in the last two months upended holiday plans of tens of thousands across the country. Cancellations jumped 73% to 210,503 flights in 2022 from a year earlier, as per flight tracking website FlightAware, largely due to adverse weather and network outage. Led by Southwest, the nation's carriers including American Airlines and Delta Airlines canceled hundreds of flights during the December-January period. Reflecting the nervousness, sales of travel insurance policies jumped 16% in the two-week period between Dec. 26 and Jan. 8, from the previous two weeks, according to data from policy comparison website Squaremouth. Policy sales soared 81% in 2022 from a year earlier, the company said, and were up 449% from 2020. "We expect demand for travel insurance could increase by another 30% this year," Squaremouth's Marketing Manager Steven Benna said. A travel insurance typically covers claims made for baggage loss, flight cancellations, loss of passport, bounced hotel bookings among others. Emergency medical cover and trip cancellation were the top reasons to buy a travel insurance, as per a survey of 500 US-based travelers by World Nomads, which insures independent travelers from more than 130 countries. The firm saw a 56% increase in policy sales from December 2022 to January 2023, compared with the same period a year ago. The rise in appetite for travel insurance may also send premiums higher in 2023, pushing insurers to tweak coverage or increase the bar for claiming insurance, according to an insurance broker and executive of a travel risk firm. "It wouldn't surprise me if it (premium) exceeded the rate of inflation across the board," Dan Richards, CE for travel risk and crisis management firm Global Rescue told Reuters.<br/>
German labor union Verdi has called for warning strikes at the nation’s major airports on Friday by public service, air security, and ground-traffic workers. The Feb. 17 action would affect airports in Frankfurt, Munich, Stuttgart, Hamburg, Dortmund, Hannover, and Bremen, Verdi said in a statement Wednesday. The actions typically affect domestic flights. The union is calling for wage increases for workers amid significant increases in costs of living from higher energy prices and record inflation.<br/>
China's January air passenger traffic rose 34.8% from a year earlier, the aviation regulator said at a regular news conference on Thursday, after the country abandoned its strict zero-COVID policy. China has also resumed scheduled passenger flights with 58 countries since its border reopening on Jan. 8, state media CCTV quoted the Civil Aviation Administration of China (CAAC) as saying. Last week, 98 domestic and foreign airlines operated a total of 795 international flights, up 65% from the week before China abandoned quarantine for arrivals, CCTV reported. China was the world's largest outbound tourism market before COVID-19 shut down global travel, with its overseas visitors spending $255b in 2019. Chinese people, cut off from the rest of the world for three years by stringent curbs, flocked to travel and online booking sites ahead of borders reopening. Air passenger numbers during the Lunar New Year travel period from Jan. 7 to Feb. 15 rose 39% from last year's holiday travel, CAAC said. A CAAC official said air transportation recovered rapidly in January, with strong demand between cities such as Beijing, Shanghai, Guangzhou, Shenzhen and the popular holiday destination of Sanya on Hainan Island during the Lunar New Year period.<br/>
Inbound tourism to Japan has begun to recover since the easing of COVID-19 border controls but a shortage of staff has become an increasing problem for the airline industry, as many who left their jobs during the pandemic have not returned. Airport staff quitting due to the sharp decline in travelers during the height of the pandemic has resulted in a more than 20 percent decrease in security inspectors nationwide. Although airlines have made concerted efforts to secure personnel for ground operations, many occupations in the industry require qualifications and experience, meaning a return to an adequate supply of staff will take time. "Forty percent of the security staff at Fukuoka Airport quit during the pandemic. We don't have a normal situation," said Tatsuya Yamanaka, an assistant manager of the human resources department at security firm Nishikei, which conducts security inspections at the airport. While the company had been capable of handling six passenger lanes at security checkpoints for international routes before the pandemic, it can currently only manage three to four at a time. At the international terminal, where the number of visitors to Japan from South Korea, Southeast Asia and other regions has increased significantly since the relaxation of border measures, it is now not uncommon to see long lines of people snaking through the baggage inspection area, with waiting times often over 30 minutes. But congestion is also a daily occurrence for domestic flights.<br/>
Indonesian airlines have expressed optimism that passenger figures on domestic routes are on track to get back to the pre-pandemic level in Q1 2024, nearly a year faster than previously estimated. Indonesian National Aviation Association (INACA) secretary-general Bayu Susanto said the complete recovery of the domestic aviation industry, initially expected for late 2024, was now projected to take place as early as Q1 next year, assuming “the current trend persists”. IATA estimates released on Dec 6 see the Asia Pacific (APAC) airline industry reaching the 2019 level in 2024. Statistics Indonesia (BPS) recorded 52.56m domestic flight passengers in 2022, which is 68.5% of the 76.68m passengers transported in 2019. “The challenges for the recovery of domestic routes [are] high interest rates, which impact the price for plane charters, the rupiah-dollar exchange rate and the high fuel price,” Bayu said Tuesday. He elaborated that airlines’ financial condition had been deeply impacted by the pandemic and that the effect was still felt until now, hampering the recovery. He went on to say that the waiting line for aircraft maintenance and the slow movement of spare parts in supply chains also impacted the recovery pace. For international routes, Indonesian airlines are also looking at faster growth than previously estimated, with INACA now projecting the full recovery in Q3 next year – faster than the initial forecast of 2025.<br/>