The airline industry is constantly changing. The proven strategies of the 1980s didn’t work in the 1990s, and what worked then would fail today. Airlines that have survived have done so in part because they have learned to adapt to a changing landscape. Today’s industry is struggling with labor shortages and wage pressures, uncertain business demand and rising sustainability demands from investors.
What is certain is that US airlines will be different in a decade or 2035 than they are today. Some things are easier to predict than others, but here are five likely changes we’ll see:
More consolidation and smaller regional fleets
Greatness is rewarded in a number of ways for airlines. Fixed administration costs do not grow at the same rate as production, making them a smaller and smaller percentage of costs. Buying planes by the hundreds gets a better price than buying dozens, and this buying efficiency extends to many things the airline buys. On the revenue side, scaling often increases consumer relevance, makes the airline more attractive to more customers, and gives some degree of price control.
That’s why the consolidation of US airlines is an ongoing issue. Today, four airlines – American, Delta, Southwest and United – carry about 80% of all domestic travelers. Competing with these four for a much smaller airline is challenging in many ways. Therefore, consolidation among non-Big Four airlines is likely. Additionally, three of the big four rely on service flown by regional airlines. This allows them to serve smaller and medium-sized cities more efficiently, and these flights often serve major hubs that can create global connections.
Regional industry is feeling the brunt of the pilot shortage, and that pressure will continue. Regional pilot salary increases are already taking place and this reduces the efficiency of using regional suppliers over time. These effects mean that consolidation in the regional space is likely, especially as it would give regional companies more leverage as the major airlines buy their services. So by 2035 we will likely see fewer airlines overall, particularly in the regional segment, and fewer regional services as a percentage of all domestic flights.
More congestion in big cities caused by eVtols and drones
The largest cities in the US tend to have the most congested airspace. Flight delays can affect any flight, but disproportionately hit places like New York and Southern California. These busy areas are also the most likely areas for drone deliveries and eVtol vertiports. Busy places are only getting busier, increasing operational challenges as the decade progresses.
These new technologies have many benefits and can ultimately help make the busiest places more efficient. But by 2035, these technologies will still be in their infancy, meaning things will only get worse before they get better. Expect air congestion to increase as the world works through the adoption of these exciting technologies.
More efficient hydrogen fleets to order
Airbus has published a benchmark on how airlines can meet a net-zero commitment by 2050. An important part of this plan is to bring all current fleets up to date with the latest technology. Aircraft like the Airbus A320NEO, the Boeing 737MAX and the latest widebody aircraft are significantly improved machines in terms of production and fuel consumption. Over the next decade, we will see many of these currently available aircraft replace older, more fuel-inefficient fleets flying around the world. This will move the industry towards a stronger sustainability position and support the achievement of the 2050 net zero target.
Hydrogen-powered aircraft promise to be even more sustainable while also generating the energy needed for flight. There are two ways to achieve this: building airplanes that can safely and reliably use hydrogen as a fuel source, and learning how to produce, store and deliver hydrogen in a safe and reliable way. By 2035, both initiatives are expected to make significant headway, meaning while we may not be flying hydrogen-powered aircraft yet, airlines will be ordering them. Today are the exciting orders for small, electrically powered aircraft and new supersonic aircraft. But as these aircraft are delivered, the prospects and opportunities of hydrogen-powered aircraft will become a reality.
These two improvements will allow the airline industry to carry passengers while reducing its dependence on fossil fuels.
Technology replacing most people in airports
As airlines have to pay more for pilot, flight attendant and mechanic services, they will look to automate the airport experience more and more. Baggage self-checking is an early start, as is the ability to do more on smartphones. Biometrics promise to simplify the security and perhaps customer parsing processes. But from now to 2035, the changes could be even bigger.
“Above Wing”, i.e. inside the airport terminal, the processes are becoming more and more technology-driven and require fewer and fewer people. Think how nice it is today to rent a car and not see anyone until you drive off. This is where the airport terminal experience is headed and will be much further by 2035. “Below wing” or ramp area processes today are very person dependent. These will evolve into more efficient airports, bringing baggage directly to the plane, and the use of robots on the ramp. Modern robots can be engineered to service airplanes, deliver food, load bags, and more. Looking out the window while parking at the gate increasingly shows an automated world.
This is not a doomsday forecast for jobs. As in the past half-century, automatable jobs allow workers to be shifted to higher-value, higher-paying jobs. Airlines will continue to employ many people in 2035, but the percentage of people trained for higher-level jobs will increase.
Even lower rates
Travel is a price-sensitive activity. Yes, there are people who pay high prices to travel comfortably and stay in the nicest accommodations. But most travelers come from those who decide to fly or maybe even where to travel based on what they consider a good deal. This will still be the case in 2035, so US airlines will offer even more cheap fares and deals to keep volume high. Increases in fuel efficiency and increased automation will more than offset the required wage increase. Consolidation makes airlines more relevant to more people, and most of those people are motivated by price. For this reason, tariffs will continue to fall in real terms, even if the industry ends up with fewer players.
There are other changes that will undoubtedly occur in this dynamic industry over the next 13 years. The ideas here are logical projections of current thinking and based on the US aviation industry in 2022. What do you think are the most likely changes to take place soon?