The first and second quarters of 2023 should resemble a continuation of trends observed in the third and fourth quarters of 2022. Strong leisure demand will continue to drive total demand. January and February will show their usual weakness in demand. Look for a strong spring break travel surge, followed by a good summer season.
The recovery of business travel will continue but likely at a slower pace due to businesses reducing costs in anticipation of a recession in 2023. While employment remains high, some sectors (such as housing) are showing slowdowns due to interest rates and other cost increases. Rates of inflation appear to have peaked but will remain higher than those observed in the run-up to the pandemic. Higher prices will likely reduce demand and as a result may reduce business revenues.
Airline pilot shortages will persist thus giving current airline networks an air of permanence. Small-hub and non-hub cities will struggle to regain the diversity and frequency of air service they previously had. The large airline connecting hubs, such as Dallas-Ft. Worth (DFW), Chicago O’Hare (ORD) and Atlanta (ATL) will continue to have fewer flights in 2023 than they had in 2019.
Working from home will lead to fewer but longer trips as passengers continue combining vacation trips with work trips. Such habits will benefit business travel to vacation destinations such as south Florida, Denver, and New York, but will likely not benefit business travel to destinations such as Houston, Detroit, and Atlanta. Airlines will continue to benefit from the spreading of demand from peak seasons to shoulder seasons and peak weekdays to non-peak days.
The earliest return of trans-Pacific travel is expected to be in the 2nd or 3rd Quarter of 2023. While many forecasters expected the Chinese government to end their zero-COVID policy after the Communist Party Congress of October 2022, the Chinese have chosen only to relax their prior policies. These relaxations focused on travel within China and enabling quarantining at home. Foreign travel restrictions remained largely unchanged. Foreign travel restrictions should eventually ease as their vaccination (with booster shots) rates continue to increase and they gain more experience in their new procedures for managing COVID outbreaks. When that happens, expect a strong surge of leisure-oriented travel to China, especially from the west coast gateways.
Fuel supplies have largely adjusted to the avoidance of using Russian oil. However, supplies remain tight and more vulnerable to changes in availability from remaining suppliers. While prices have moderated from early 2022 highs, they remain vulnerable to short-term increases. Expect air travel prices to remain relatively high during peak travel seasons.