Air passenger traffic has returned with a vengeance. And airlines reap tremendous rewards when people take to the skies for business and pleasure. However, long-standing operational problems and some new ones have arisen to the detriment of many travellers.
As of March 19, 2023, over 160 million people were stopped at airport security checkpoints, just 2 percent fewer than the passenger check numbers reported for 2019.
However, as airlines weathered the worst of the COVID-19 pandemic, they reshaped themselves into leaner organizations, with fewer flights in an environment of higher demand for seats on those flights. The resulting imbalance between supply and demand put upward pressure on air fares and made it easier for airlines to raise ticket prices.
The net effect was a path to profitability. The three legacy airlines American, Delta and United all showed a trend toward profitability in 2022, despite rising fuel and labor costs and lower seat capacity. For example, Delta reported earnings of $1.4 billion in the December quarter of 2022 alone. American Airlines and United Airlines also made good gains.
With much leaner operations, however, the trade-off between profitability and robustness comes into play. This was showcased in full during Southwest Airlines’ 2022 Christmas crisis and actually cost the airline hundreds of millions of dollars in revenue as passengers become stuck on its network. This apparently prompted its CEO, Bob Jordan, to take draconian measures to ensure a meltdown like this never happens again, investing hundreds of millions of dollars in modernized IT systems and infrastructure that will cushion future disruptions.
However, with more passengers and fewer flight options, air travel is becoming less reliable and therefore more risky for passengers.
Delayed or canceled flights can result in missed connections, with limited alternatives to get travelers to their final destination on time. Even when such flight options exist, crowded planes mean seats may not be available. This has had a significant impact on all travellers, particularly those departing from smaller airports who rely on smaller regional jets to fly to hub airports.
Airlines understand the “special sauce” for profitability. They learned this lesson from the past when they had excess capacity filled with heavily discounted tickets. Their revenue per available seat mile was abysmal, making it difficult to maintain profitability.
Now the reverse situation has occurred, with revenue per available seat mile above 2019 levels and a load factor (percentage of available seats occupied) in excess of 80 percent. Adding capacity would effectively add passengers, but at a marginally less profitable level. The net effect would be lower overall profitability.
Airlines are entitled to operate for profit. However, when they also need to serve a national transportation need, the line between profit and service must be carefully crossed.
As airlines were decimated by the COVID-19 pandemic shutdowns, the federal government allocated funds to ensure they maintained their equipment and human capital infrastructure in anticipation of the day when air travel and profitability would return. That day is now, and the payback can come in the form of higher levels of service.
This would negatively affect the bottom line. However, they would not be in the position they are in today without the support of the taxpayers, who also bear the inconveniences of a lower level of service.
Somewhere between maximizing profitability and maximizing service lies the happy medium. The Department of Transportation shouldn’t have to use a big stick to encourage such actions. While adding capacity isn’t a profitable business strategy, it is a smart service strategy by improving relationships with flyers and the public.
If airlines don’t take such action, they could find themselves in the unenviable position Southwest Airlines found itself in at the end of 2022 and the resulting negative public perception.
Airlines have a locked audience and can continue to focus on profits and happy shareholders. Yet the price paid for ignoring passengers’ needs fosters an antagonistic relationship that helps no one.
As much as passengers need to be patient with airlines when travel events deteriorate due to weather and force majeure, airlines need to be sympathetic to passengers to meet their travel needs, even when no one is asking them to, and with little benefit to their butt line.
Sheldon H Jacobson, Ph.D., is a professor of computer science at the University of Illinois Urbana-Champaign. As a data scientist and operations researcher, he applies his expertise in data-driven risk-based decision making To Evaluation and information of public order.
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