What the Holiday Season Means for the Aviation Industry
Airlines and airports are preparing for what could be a record-breaking holiday travel season in the United States. Being a year in which the relatively low fuel prices kept airline tickets reasonably within reach, more people are expected to leverage air travel. A more robust economy has further boosted travelers’ capacity to fly, meaning that the upcoming festive season could see airports more crowded than ever.
According to The Guardian, the number of air passengers increased 5% in 2019, while a separate report by Airlines for America shows that ticket prices declined for the fifth year in a row. The average domestic air ticket cost $350 this year, including government fees and taxes, a 15.9% drop from 2014.
These factors have so far combined to earn US airlines and airports a lot of revenue in 2019. An IATA report published in June shows that US airlines will bank $15 billion after-tax profit this year, up from $14.5 billion in 2018. Annual airport revenues, meanwhile, are set to reach an all-time high of $30 billion.
“Airports are flush with cash,” A4A Senior Vice President for Legislative Regulatory Policy recently confirmed. “They’re reporting record revenues.”
Profits to Peak Over the Festive Season
Although the industry’s trade group, Airlines of America has not issued projections yet, airlines and airports are already planning for even bigger numbers over the holiday season.
At the incredibly busy Hartsfield-Jackson Atlanta International Airport, for instance, officials are preparing for a 4% to 6% rise in passengers between November and December compared to 2018. In 2018, 16.6 million passengers passed through the airport over the same period.
“We’re expecting huge numbers,” said the airport’s deputy general manager, Balram Bheodari, recently.
It’s not just the increased traffic that will earn aviation more revenue over the busy December holiday, though. Another factor is the inevitable rise in ticket prices, thanks to increased demand!
Airlines use dynamic pricing to determine how much passengers pay for a ticket. In dynamic pricing, the price for a good or service changes in response to the market conditions. To maximize revenues (and hence profits), an airline sells the right products (seats) to the right people at the right time and place.
With demand set to soar to new heights over the next two months, you can only expect airlines to up air ticket prices in line with their dynamic pricing strategies.
Impact of the Extended Boeing 737 Max Grounding
The extended grounding of the Boeing 737 Max aircraft will also likely influence ticket prices. Originally expected to resume operations on December 3, 2019, the 737 Max is now scheduled to re-enter service on January 16, 2020, leaving the massive number of holiday travelers with even fewer seats. With fewer available seats, It’s likely going to raise ticket prices during the short-term.
“Airlines are left operating at a reduced capacity,” says Tract Stewart of Airwatchdog.org. “With seat supply diminished during a period when demand is very high, ticket prices will go up."
It Promises to be a Huge Season for Aviation
With more people planning to fly and overall costs (including fuel prices) down compared to last year, the demand for the aviation workforce will increase as well. Expect to see new positions being posted over the next few months as the industry tries to align the labor force with the demand for air travel over the next few months.
As you’d expect, every airline and airport is laying the ground to take maximum advantage. The Atlanta Airport, for example, is increasing overall hours worked by 20% through seasonal hires and overtime. “It’s equivalent to adding 5 to 7 new hires per shift during peak times,” says Bheodari.