Experts in Flight

School of Business professors examine the changing state of travel and the airline industry

Commercial plane taking off in the morning from Boston Logan International Airport amid the 2020 global Coronavirus pandemic.

Commercial plane taking off in the morning from Boston Logan International Airport amid the 2020 global Coronavirus pandemic.

It would be easy to conclude from recent data that airlines and the travel industry are thriving. According to the U.S. Transportation Security Administration, the number of travelers passing through American airports has returned to normal levels, and a May 2023 industry report found that, on average, hotels expect revenue not only to increase as compared to the year before but to exceed 2019 levels by more than 100%.

At the same time, delays, cancellations, and other travel headaches have become all too common due to extreme weather and staffing shortages. According to FlightAware, a company that tracks flight data, an average of 30,000 flights across the globe are delayed daily, with about 9,000 of those representing U.S. domestic flights. When more than 4,000 flights are delayed in the U.S., travelers generally begin to feel the impact. On the ground, hotels are booked but short-staffed; a recent report found that nearly 80% of hotels are struggling to find workers.

“The U.S. airline industry is evolving,” said Ram Gopalan, associate professor of practice in the School of Business at Rutgers University in Camden. He has spent over a decade at blue-chip travel and tourism companies, using mathematical analyses to solve organizational and logistical challenges. “In 2020, tourism and the airline industry took a significant hit because of the pandemic—volume dropped nearly to zero as operating costs increased.”

While revenues have bounced back, post-COVID, to more robust levels in the past year, Gopalan noted that some of the weaknesses revealed during the pandemic, combined with challenges that already existed, have led to the industry's current state. Unfortunately, experts estimate that it may be years before those weaknesses and challenges can be addressed adequately, meaning the delays and cancellations may be here for the foreseeable future.

Ram Gopalan, associate professor of practice in the School of Business at Rutgers University in Camden

Ram Gopalan, associate professor of practice in the School of Business at Rutgers University in Camden

A Mix of Private Companies, Public Interest, and Government Regulation

While it is often referred to as the aviation industry, commercial air travel in the U.S. is managed and controlled by a mix of private companies (the airlines), public entities (the municipalities that operate the airports), and government regulatory bodies (the Federal Aviation Administration, among others). The current issues facing the industry are spread equally among them and will require a coordinated effort to address them correctly.

For the airlines, the primary concern is staffing. Over the past several years, airlines offered buyouts and retirement packages to manage costs. This happened even as the industry was facing an anticipated tsunami of retirements; it’s estimated that over the next 15 years, nearly 50% of the commercial airline workforce will be forced to retire under the mandatory retirement rule for pilots.

“Pilots are increasingly in short supply,” said Gopalan. “While it affects different airlines in different ways, the sheer volume of pilots that will retire in the next decade will be a significant problem for the industry.”

Gopalan noted that this will be harder for carriers with varied fleets because not all pilots are qualified to fly every type of airplane. The situation is made even more difficult because of the time it takes to train new pilots—about two years. The U.S. House of Representatives in July 2023 approved a bill raising the mandatory retirement age for pilots from 65 to 67; however, the measure has yet to be taken up by the Senate.

Airports, which are traditionally managed by their local government authorities, face an uphill battle as well. Many airport facilities are in desperate need of modernization. Airports Council International, a leading industry organization, estimates that nationally, U.S. airports face a $151 billion backlog of projects, including upgrades to runways and terminals, baggage handling systems, and ground transportation.

Gopalan sees this as an opportunity. “Technology has a role to play here, and the right investments now can pay dividends well into the future,” he said. "Modern construction can add Internet-connected sensors to warn of impending failure and other structural degradations, and airports should leverage this now as they renovate to allow for better maintenance, planning, and reliability in the future.”

The final piece of the puzzle is the federal government—specifically the Federal Aviation Administration. Like the airlines, the FAA is facing a shortage of workers—in fact, the Department of Transportation estimated about a 3,000-worker shortfall at the beginning of the 2023 summer travel season. By law, air traffic controllers must retire at the age of 56, and the agency will not hire anyone over the age of 31 so individuals can gain tenure and experience during their careers. On top of that, the primary system the FAA uses to manage air traffic was deployed in 1993, and some supporting systems are nearly 40 years old..

“The FAA has a very tough job and does well at managing the enormous volume of air traffic the U.S. sees on a daily basis, said Gopalan. “At the same time, I think there’s no question that more investment and additional resources for the agency and its air traffic controllers make sense.”

In testimony given to Congress in early 2023, an FAA representative did emphasize that a modernization project for the primary air traffic control system is underway and should be completed by mid-2025; and the agency is looking to hire 1,500 new air traffic controllers by the end of this year.

Minneapolis Saint Paul International Airport, opened in 1920 and is one of the oldest airports in the U.S.

Minneapolis Saint Paul International Airport, opened in 1920 and is one of the oldest airports in the U.S.

A team of air traffic controllers at work

A team of air traffic controllers at work

Thriving Through Changing Times

Despite the shifting landscape, airlines and the travel industry are seeing a notable increase in passengers.

“The pandemic severely restricted travel at best, and many people stopped traveling altogether,” said Briance Mascarenhas, professor of management at Rutgers School of Business–Camden. His research includes a focus on the international airline industry. “With most of the pandemic-era travel restrictions now lifted, people eager to travel have been unleashed.”

The data bear this out. In one recent survey, 49% of respondents expected to travel more in 2023 than they did the previous year, and 87% expect to travel at least as much as they did in summer 2022. While delays and disruptions still happen regularly, travelers seem prepared to face these challenges and take them as an inevitable part of the experience.

Briance Mascarenhas, professor of management

Briance Mascarenhas, professor of management

One effect of the increase in travel is that tourism-related businesses are now among the country’s fastest-growing employers. This hiring binge has helped keep the U.S. unemployment rate at a record low, even as other sectors, like tech, are experiencing cuts.

Aircraft manufacturers have also seen a spike in orders from airlines looking to expand capacity. According to a recent industry report, more than 1,400 commercial airliners were ordered in 2023, surpassing the number sold in 2019. This reflects the increased demand from the traveling public and the forecasting the airlines have done regarding expected growth.

The outlook isn’t entirely rosy: Inflation has affected consumers’ choices, with some opting for less extravagant locations or more moderate hotels and restaurants. “The number of people traveling will slow as interest rates rise to contain inflation, but when or how that might have a substantial impact remains to be seen,” said Mascarenhas. He added that disruptions were caused by extreme weather due to climate change and political instability around the globe.

For now, however, the traveling public is keeping calm and carrying on. It’s an attitude that the industry would be wise to adopt as they work to move forward and modernize, said Gopalan. “Everyone involved—from the federal government to the airlines, to the airports, and the cities and states they serve—needs to work together to manage changes we know will happen in the years to come.”

Design: Karaamat Abdullah