The Wright Brothers Never Imagined This. High Fuel Prices, Pilot Shortages and Terminal Shutdowns Threaten Aviation Margins

By: | May 31, 2022

Les Williams, CRM, is Co-Founder and Chief Revenue Officer of Risk Cooperative. He holds a B.S. in Mechanical Engineering from the University of Virginia and an MBA from Harvard Business School. Prior to joining Risk Cooperative, Les served in various institutional sales positions at SoHookd, JLL, and IBM.

Air travel has seen an uptick throughout 2022, as the nation emerges from COVID-19 lockdowns.

With the recent U.S. District Court ruling overturning the mask mandate issued by the Centers for Disease Control and Prevention for planes and other forms of public transportation, the Transportation Security Administration will no longer enforce mask mandates at airports or on planes.

This ruling is a clarion call that “America is officially open for business,” sending a message that COVID-19 is moving further into the nation’s rearview mirror and providing more confidence to those wishing to travel by air.

The ruling comes at a precarious time. While more travelers are expected to return to the sky as the busy summer travel season kicks off, the airline industry is still experiencing a drastic shortage of approximately 8,000-12,000 pilots.

Airlines across the board have cut destinations and curtailed the number of daily flights to adjust to this new reality for the foreseeable future, and a surge in jet fuel prices has further eroded profit margins.

As more travelers fight to book seats on a dwindling number of flights, airlines cannot afford any additional disruptions. And yet, a greater number of incidences like the one that occurred earlier this month at Boston’s Logan Airport are expected.

The Boston security gate incident resulted in the evacuation of terminal A due to a video game console that created a suspicious image as it passed through the x-ray machine.

This caused massive travel delays throughout the busy Easter Sunday travel day. Many passengers missed flights as the terminal re-opened due to the lengthy security lines, and in some cases, flight crews “timed out” and were unable to fly for safety precautions.

As innocuous as the gaming console was, in the future months many travelers, unaccustomed to air travel given the lengthy pandemic, may unintentionally bring contraband through security, causing a repeat of the chaos.

Last year alone saw countless terminal evacuations at airports including Fort Lauderdale-Hollywood International, Indiana’s Fort Wayne International, and Los Angeles International to name a few.

As airline profitability remains elusive and traveler numbers unpredictable, airports and airlines alike must look at ways to mitigate the business interruption risk these types of incidents can cause.

Exploring ways to leverage existing classes of insurance like business interruption and travel curtailment coverages could be one solution. Airports could offer this type of coverage to airlines, helping them to reimburse stranded travelers and blunt lost revenues.

This insurance could even provide impacted travelers with a free one-way domestic voucher to further assuage frayed nerves. For an industry that has grown accustomed to passing nominal fees on to customers, offsetting the costs for this solution could be seamless.

Travelers would gladly pay a nominal fee per ticket if it meant peace of mind in the aftermath of yet another terminal evacuation. &

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