Five Bold 2022 Predictions For The U.S. Airline Industry

In 2021, I hit on about 50% of the predictions that I made in late 2020. Summer yields were disappointing even though traffic was strong, wide-bodies had few economically positive places to fly, and Boeing sold a lot of new 737MAX airplanes. But no U.S. airline filed for bankruptcy protection and no merger was announced, and that’s good for the first of these at least. Not bad, given how hard this industry is to predict and how quickly things have been changing, both forwards and backwards, in this economy.

As 2021 comes to close, the U.S. Airlines are heading into an uncertain 2022 with the pandemic continuing to raise questions rather than sunsetting. This makes predictions tougher, but still fun to try. I won’t allow myself to just re-predict something that didn’t happen in 2021, even though I think a bankruptcy might still be possible. So, here are five new predictions that I believe are likely, even if not desirable, to happen:

Airline Onboard Mask Mandates Will Continue All Year

Some airlines started requiring masks to be worn on airplanes back in 2020, and later the federal government imposed a mask mandate for anyone flying on a U.S. airplane. This mandate has twice been extended and is currently scheduled to expire on March 18, 2022. Recently, two high profile CEOs from Southwest Airlines and American Airlines testified to congress saying that “masks don’t add much” to safety on airplanes. Yet, it is still highly likely that this mandate will be extended due to the high transmission rate of the omicron variant, and further there are issues suggesting the mandate may continue for much longer.

When sitting in the airplane at cruise altitude, the argument that masks don’t help much makes some sense. We all know by now that air flows vertically on airplanes, is replaced every 2-4 minutes, and how HEPA filters work. But on an airplane more things happen. What about when someone on boarding coughs while putting their baggage overhead? What happens when the auxiliary power unit (APU) isn’t running at the gate so no air is flowing until the engines start? What about the people who eat or drink just slowly enough to keep their mask off most of the flight anyway? Flight attendants will lobby for the mandate to continue to keep themselves safe, and that reason is good enough. Plan to wear a mask on a plane all year, including when you travel next holiday season too.

The Big Four’s Domestic Share Will Drop To 60%

Following the consolidation of eight large airlines into four huge airlines between 2008 and 2012, the four largest U.S. airlines collectively reached a market share of over 80%. But this peak raised prices for consumers, and created an opportunity for low-cost carriers to grow. Airlines like JetBlue, Spirit, Frontier, and Allegiant, have each grown at rates much greater than the big four. While these carriers have grown, the largest carriers have rationalized hubs, relied on more connections through big hubs, and have focused on international traffic for new sources of revenue.

The pandemic has accelerated this dynamic. With domestic business traffic still far off its 2019 levels, the largest four U.S, airlines have had to cut the most capacity. This has come from reducing some frequency, and retiring older equipment earlier than would have been required without the pandemic. Meanwhile, the lowest-cost U.S. airlines have seen a return of most of their traffic, being principally discretionary leisure passengers, and have expanded into new markets and ordered more planes. By the end of 2022, it’s likely that that these two effects will result in the largest four U.S. airlines having a collective market share of 60% or less. This is good for consumers in terms of choice and ticket prices.

Narrow-bodies Will Overtake Wide-bodies On Many Transatlantic Routes

Wide-body aircraft, like the Airbus A330 and A350, or the Boeing 777 or 787, are used around the world to fly the longest routes. Their range makes them uniquely capable for certain routes, and their size supports the ability for airlines to offer many business class seats but also generously-sized economy cabins. Yet, these aircraft are significantly more expensive to own and operate, and as such create a great risk for the airlines that operate them. A large-body aircraft can make more money than a smaller narrow-body in good times, but lose huge multiples of that in weaker times.

Because of this, and the greater range now available in the Airbus A321 and Boeing 737 models, airlines are increasingly choosing to use these smaller aircraft on many transatlantic routes. Delta Airlines has used the Boeing 757 in this same way for many years, and some airlines have used specially configured narrow-bodies for select routes. The pandemic has accelerated this trend as well, since the wide-body jets need business traffic to be profitable and this long-haul business traffic is the slowest to return. In summer of 2022, narrow-bodies will dominate the departures, if not the seats, on shorter-haul U.S. to Europe travel.

Airline Loyalty Programs Will Embrace Less-Frequent Travelers

The pandemic has threatened the economics of traditional airline loyalty programs. With fewer business travelers flying with regularity, airlines have had to rely more on credit card spend to keep their revenue up. In addition, rather than risk alienating the people who had been most engaged in the programs, airlines have continued to maintain status levels for customers even if they haven’t been traveling. This can’t last forever, so at some point the implicit prices in these programs will have to be recalibrated for a new rate of points earning.

The likelihood of leisure traffic making up a larger percentage of all flyers going forward also creates an opportunity for the largest U.S. airlines. Defining what loyalty can mean for a less frequent traveler, and how to reward that loyalty, will grow these programs that have traditionally relied only on frequent-traveling business travelers. Expect that sometime in 2022, at least one forward-thinking U.S. airline will launch an initiative within their program to reward the less-frequent traveler. As the demographics of the flyers change, so must the loyalty program.

Airline Execs Will Stop Saying All Business Traffic Will Return

One year ago, a study was released that predicted that 19% to 36% of business traffic would not return. This was based on looking at why people flew for business, and making estimates of how changes in technology, views of work-at-home, and personal risk would make some business traffic less likely going forward. Despite this, the big airline CEOs continue to talk about a full return of the business traveler. They also quote statistics of business travel growing to 60% of 2019 levels with an implication that it will get back to 100%.

In 2022, the reality of fewer corporate conventions and trade shows, the cost of intra-company travel, and increased comfort with video for some meetings will finally be accepted and at least some airline executives will say publicly that all categories of business traveler are not likely to return fully. Instead, they will focus on growing the business base of the travel that is still happening to get back to some prior benchmark. This acceptance will also allow them to make decisions about their fleet, aircraft configuration, and loyalty programs that naturally follow from a structural change in the amount of business travel flying.

One thing known about every forecast is that it will be be wrong in some ways. These five predictions all seem likely in late 2021, and 2022 will be a challenging year for many airlines as a result. As has been true for the last few years, those with the lowest costs that can make money on the price-sensitive leisure traveler will continue to outpace the largest airlines that are dependent on business travel returning.