Major Airlines Change Strategy, Charge Fees and Boost Profits

Airline companies retired older aircraft during 2020-2022. For example, British Airways, Qantas and Virgin Atlantic retired their fleets of Boeing 747s due to age as well as engines that are not fuel efficient. Delta retired its fleet of 18 Boeing 777s. Meanwhile, many airlines were reporting continuing staff shortages in the busiest 2022 and 2023 travel periods, such as summers and holidays.

It is worthwhile to look back at recent changes within the airline sector, prior to the pandemic. Some of the greatest growth among major airlines in recent years had been in the Middle East and Asia. The Middle Eastern market is dominated by Emirates, followed by Etihad Airlines and Qatar Airways. Emirates, now one of the world’s largest international airlines by passenger capacity, led the way with a business model that builds routes to developing countries that are often overlooked by U.S. and European carriers, and providing an alternative to local airlines. Emirates connects almost all of the world’s continents through its Dubai hub. The Asian market is dominated by Singapore Airlines, Air China, Cathay Pacific and Qantas, among others.

Internet Research Tip:

The U.S. Department of Transportation operates a web site with complete information regarding U.S. airlines, their on-time ratings, consumer satisfaction ratings and much more. Visit the Aviation Consumer Protection and Enforcement Division at www.dot.gov/airconsumer.

TranStats offers in depth statistics on all types of U.S. transportation, including airlines and rail, with frequent releases of the latest data. www.transtats.bts.gov.

Another shift in airline business operations has been the growth in revenue from additional fees such as charges for checked bags, priority seating and food and beverages on board. These fees have been a big boost to annual airline revenues. Checked bag fees make up about 20% and onboard sales (food, drink, retail goods, Wi-Fi and inflight entertainment) account for about 30%.

Airlines including Delta and JetBlue have been bundling fees into “upgrade packages” to make them more palatable to fliers. Delta’s Comfort+ ticket, for example, offers additional leg room in the coach cabin, early boarding and access to overhead bin space and free drinks.

A number of airlines are charging fees of $30 or more for reserving seats in the first few rows of coach cabins (elite passengers who have achieved high status with the airlines because they travel frequently typically find many of these additional fees waived). Today, various passenger fees and charges, along with revenue-generating programs such as selling mileage awards to credit card companies, add up to an increasingly vital part of the airline business.

More and more, airlines are managing their fuel costs aggressively. Many airlines rely on expert market analysts for advice on when and how to purchase fuel. Results from fuel efficiency initiatives have been impressive. Airlines have made tremendous improvements in operating methods, while aircraft and engine manufacturers have greatly enhanced their technologies. The result is a significant drop in fuel consumption.

Like their U.S. counterparts, many global carriers have slashed costs and undertaken massive restructurings. Their efforts paid off to some extent. Global airlines are increasing their reliance on partnerships such as the Star Alliance and Oneworld Alliance. The partnerships share flight codes, frequent flyer programs and airport lounge facilities, helping long distance travelers to cover thousands of miles as seamlessly as possible.

Over the mid- to long-term, many airlines have plans for significant growth. They have been ordering large quantities of new aircraft well in advance, as they know that receiving delivery of the latest models can take several years. Etihad, for example, hopes to grow its fleet from about 80 aircraft at the end of 2023 to 150 by 2030, and to grow its passenger enplanements by about 10 million over that period, to about 30 million total.

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