New pilot contracts to drive up costs at US airlines

U.S. airline profitability will fall in 2023 as airlines spend more to retain pilots despite travel demand concerns from a recession.

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United, American, Delta, and Southwest have hastened to hire after a faster-than-expected U.S. travel market comeback.

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Some airlines have had to give pilots big contracts, raising fears about rising expenses as they recover from the epidemic and massive debt.

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Last month, Cowen analyst Helane Becker said "margins are set to take a hit in 2023 as airlines ratify new contracts with labor groups."

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BofA Global Research estimates the industry will need 5,200 pilots per year from 2024-2030.

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"If ratified, Delta's recent tentative pilot agreement could drive incremental unit costs higher by 2%, and 2%-3% higher for American, Southwest

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Travel demand, driven by a pent-up desire to travel and epidemic savings, may bring some respite while costs dominate.

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Texas-based American Airlines anticipated a higher fourth-quarter profit on Thursday due to robust Christmas travel demand.

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American, Delta, United, and Southwest shares plunged 14%–30% in 2022 due to huge cancellations and economic concerns.

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