Skift Take
Airlines have seen profits and revenues boom this year, so does that mean all is well in the sector? Not quite – the industry’s recovery is far from complete. We explain why in this episode of the Skift Travel Podcast.
We’re continuing our discussion of Skift Research’s State of Travel 2024 report with a look at the aviation industry. It has shown enormous progress in its recovery from the pandemic. But ultra-low-cost carriers still face their share of challenges.
Editor-in-Chief Sarah Kopit and Head of Research Seth Borko discussed those topics and more with Airlines Reporter Meghna Maharishi and Research Analyst Ashab Rizvi in this episode of the Skift Travel Podcast.
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Key Points
Post-Pandemic Recovery: The airline industry has shown significant recovery since the pandemic, with revenue and profitability returning to pre-pandemic levels. In 2023, the industry is expected to reach $750 billion in revenues, which is 22% higher than pre-pandemic levels. Operating profits are projected to hit $60 billion, a new industry record.
Premium Demand Growth: There has been a notable increase in demand for premium travel classes, such as business and first class. This growth is driven not only by traditional business travelers but also by younger generations, like Gen Z and millennials, who are willing to pay more for better travel experiences.
Challenges for Low-Cost Carriers: Ultra-low-cost carriers like Spirit and Frontier are struggling due to rising operational costs and increased competition from legacy carriers offering competitive basic economy options. The cost advantages that low-cost carriers previously had have diminished, making it harder for them to maintain profitability.
Airline Disparities: There’s a growing disparity between different airline players. Major carriers like Delta and United are performing well, benefiting from strong demand for premium and international travel. In contrast, airlines like Southwest and Spirit are facing more challenges, particularly in the U.S. market.
Global Market Dynamics: The global airline industry is experiencing significant changes, particularly in regions like Asia-Pacific. In India, carriers like Air India and Indigo are expanding rapidly, with Air India undergoing a massive transformation under new ownership, and Indigo becoming one of the largest low-cost carriers globally.
Episode Summary
The airline industry has experienced significant recovery post-pandemic, with a notable surge in both revenue and profitability. Although airlines were among the hardest-hit sectors, they have shown resilience and adaptability. As of 2023, the global airline industry is expected to generate around $750 billion in revenue, with operating profits reaching record highs of approximately $60 billion.
However, the recovery is uneven, with legacy carriers like Delta and United thriving due to strong demand for premium and international travel, while low-cost carriers face challenges. The rise in operational costs, especially labor, has eroded the cost advantage of ultra-low-cost carriers like Spirit and Frontier.
Additionally, airlines are navigating changes in distribution strategies, as seen in American Airlines’ efforts to modernize its booking platform, which has met with mixed success. The Indian market is also undergoing transformation, with Air India working to consolidate and expand its operations under new ownership, while Indigo continues to dominate domestically. The industry is no longer defined solely by pre- or post-pandemic conditions but is evolving with new trends and challenges.
