Contract renewals with pilots and other unionized workers, inflationary pay increases for non-unionized employees, and delays in rebuilding staffing levels since travel began its sustained recovery in mid-2021 have all led to rising labor costs for U.S. airlines, according to a report published Thursday by Moody’s Investors Service. The credit rating and research agency sees aggregate labor expense for the eight U.S. airlines it rates increasing by 19 percent in 2023 and another 8 percent in 2024, as the low U.S. unemployment rate continues to create staffing and labor cost headwinds—as will the mandatory retirement age of 65 for pilots if Congress does not pass legislation to raise the limit to age 67.
Moody’s projects combined revenue for the eight airlines—namely, United, Delta, American, Southwest, JetBlue, Spirit, Hawaiian, and Allegiant—to reach $212 billion this year, or 13 percent higher than the $187 billion they generated in 2022. While the companies continue to experience strong demand through the summer, capacity shortfalls brought on by shortages of aircraft, spare parts, maintenance capacity, and labor will help support ticket prices well into 2024, even if a recession takes hold and slows demand, said the report’s author, Moody’s Investors Service senior v-p Jonathan Root. Still, the price elasticity of demand over economic cycles will prove what he called the ultimate arbiter of the industry's ability to cover increasing costs.
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