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.

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

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

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

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

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

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

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

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

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