As passengers return to the skies during a post-COVID era, the global airline industry is expected to experience a profit rebound in 2023. In fact, the International Air Transport Association (IATA) forecasts that the sector will see a profit of US$4.7 billion this year, the first annual profit since 2019. During the pandemic, the industry experienced several major losses, including a US$137.7 billion loss in 2020, a US$42 billion loss in 2021, and a projected loss of US$6.9 billion in 2022.

 

According to a 2023 credit rating agency report by DBRS Morningstar, the airline industry is still susceptible to economic disruptions and declining consumer purchasing power despite the positive projected rebound. The report also notes that staffing shortages that caused operational disruptions in late 2022 and early 2023 are expected to continue as the year progresses. Boeing estimates that an additional 602,000 new pilots, 610,000 new maintenance technicians, and 899,000 new cabin crew members will be required globally between 2022 and 2041. The need for pilots to be “type certified” on the proper aircraft further complicates the hiring process. “As airlines adjust their fleet mixes to meet demand, increasing numbers of pilots will be required to complete qualification or differences training,” said Boeing.

 

Canadian-based airline executives are feeling particularly hot under the collar as consumer demand has surged for traveling following the government’s COVID-19 ease on restrictions. Last year, Canadian airline Sunwing took a gamble to meet the increasing demand by hiring foreign pilots to increase staff levels. Unfortunately, the risk did not pay off due to opposition from its pilots and union leaders. As a result, Sunwing has suspended some of its routes to alleviate its “operational constraints.”

 

Another tactic smaller Canadian-based airlines use to deal with these challenges is by remapping flight destinations away from the more prominent hubs dominated by competition. Fitch Ratings Inc. reports that WestJet intends to shift its focus to its Western Canadian route network while placing less emphasis on other competitive parts of the country — such as in Toronto and Montreal, which Air Canada dominates. Big airlines such as Air Canada subtly are also adopting route changes to better stabilize their 2023 projected forecasts. In mid-January, Air Canada canceled its Calgary to Saskatoon route until further notice. However, as expected, not everyone is happy about the route changes. The Greater Saskatoon Chamber of Commerce is unhappy with what it views as an unsettling trend of recent route changes. It has asked Canada’s Competition Bureau to investigate Air Canada’s cancellation of its Calgary to Saskatoon route.

 

While there is pent-up demand for travel, there is also caution about the potential for a recession in Canada that could dampen demand and airfare operations in 2023. The industry is also facing the burden of increased fuel costs. In March 2002, fuel prices reached a 13-year high and are only now starting to fall back to acceptable levels. But until lower fuel prices become a norm again, it will be challenging for airlines to hedge against rising fuel prices. There are concerns that airlines may have limited ability to pass on fuel price increases if consumer demand falters in a recession.

 

That being said, the airline industry has a long history of adapting to changing market conditions and finding ways to remain profitable during difficult times. It’s important to note that any changes must be subtle and made with the benefit of mind for the consumer, even if it costs the airline companies a bit more in the short term because it will be well worth it by the time 2023 comes to a close.