Airline All Star Break: How Are They Doing?
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Baseball’s All Star Game is coming up. This is traditionally the time when teams take a step back from the daily Major League grind, assess their performance and make alterations for the second half of the season. Given the record-breaking 2015 and tumultuous first half of 2016, it could be time for airlines to take a similar break so that they can assess their performance and make changes.
If the air travel industry had a All Star Break, here is what commentators would say about 2016.
Failing when it comes to revenue
The airline industry as a whole has struggled with seat revenue numbers in 2016. Revenue numbers have not been able to keep up with expanding capacity. This has worried investors and caused airline stocks to fall even as carriers were announcing record profits for 2015. Last year’s attacks in Paris and this year’s tragedies in Brussels, Orlando and Istanbul have certainly not helped matters.
Airlines are making mid-year adjustments. Virtually every carrier has scaled back on its plans to expand capacity going forward. This has not had much of a short-term effect on revenue, but projections suggest that, by next year, fares will start rising as demand increases. The balance of supply and demand should, ideally, take care of the current revenue issues.
Employees back in executives’ corner
The year began with some major disputes between airlines and their employees. CEOs of the Big Three have made it a point to try to improve employee relations. For American and United, both of which are lagging behind Delta in key areas, improving employee relations has been a key part of building themselves back up to a competitive level. Both Oscar Munoz and Doug Parker have tried to back up talk about better employee relations by negotiating contracts with their pilots, flight attendants and ground crews. Most of these deals included significant pay increases and profit sharing agreements.
What remains to be seen is whether these new contracts, which will add to operating costs, really lead to better performance for the airlines.
Putting a premium on premium class
Legacy carriers have started to focus on appeasing their highest paying customers. American Airlines has been adding and updating premium class lounges, while United recently announced a new business class cabin upgrade. These will, ideally, make these airlines more competitive in the business travel market on their longest and most lucrative routes.
The other thing that the Big Three are doing is segmenting their cabins. All three either already offer no-frills economy fares and premium economy fares or they are in the process of adding these options. This should help them appeal to an increased number of demographics and compete for a larger share in both the high-paying and especially-frugal markets.
Upgrades, including United’s new Polaris business class, should take place by the end of this year.
A better in-flight experience
Airlines have taken baby steps to improve the in-flight experience. Earlier this year, both United and American started offering free snacks on domestic flights again. JetBlue began a major upgrade to its in-flight entertainment system, which offers some of the largest screens and best connectivity in the industry.
On international flights, airlines have begun to improve food quality, especially for fliers in premium class. Also, they are working with airport service companies to improve the in-terminal experience. Airport restaurant firm OTG has worked with all three airlines to improve the airport terminals in hub cities with things like iPad ordering systems, quality locally-produced food options and a more relaxed atmosphere. Fliers still have plenty to complain about when it comes to seat size and IFE systems that still lag behind those of international competitors, but, overall, things have improved for fliers recently.
In all, the industry seems to have plans to deal with some of the major problems that are plaguing it. This year might not be a “championship season,” but major carriers seem to be on track to improve so that they can better compete in 2017 and beyond.
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