Airlines

2023 seen as ‘Goldilocks’ year for airlines, United Airlines

Flying in 2023? Expect ‘goldilocks conditions’ for air travel

"Flight Chaos Unleashed: Unprecedented Storms and Airline Disruptions Sweep Across the United States"

The Morgan Stanley rating for United Airlines Holdings has been upgraded to overweight from equal weight, saying 2023 could be a “goldilocks” year for the airline stock.

The carrier exploiting the international recovery, the new CASMxF trajectory with the pilot contract, and a promising fleet renewal path exiting 2023 are key catalysts predicted for UAL in 2023.

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“The pandemic-related earnings recovery has stayed up with, if not outpaced, peers, and messaging has been proactive and highly confident. Most importantly, there were investor worries about a growth-at-all-costs mentality emerging from the pandemic, a long-standing bear concern, especially with UAL leading the industry in phasing out charge fees in 2020 and shocking the street with alluring aggressive long-term capacity growth plans in the United Next plan unveiled in June 2021. These concerns have not only been held thus far, but UAL appears to be on track to surpass its 2023 guiding and to meet its 2026 guide, which even the most ardent UAL bulls may have thought difficult at the time.”

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With the benefits of the late pandemic recovery and the early advantages from the shift to the capacity phase of United NEXT, Morgan Stanley believes that 2023 will be UAL’s “Goldilocks” year. Although the market has acknowledged UAL’s post-pandemic show-me story because the airline company is the only one that has gained ground this year, the stock’s starting point was so low that it is reportedly still trading at an appealing valuation.

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Airlines

DOT Proposes New Passenger Compensation Rules for Flight Disruptions

The U.S. Department of Transportation (DOT) has unveiled a major initiative to enhance protections for air travelers affected by flight cancellations or significant delays caused by airlines.

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This Advance Notice of Proposed Rulemaking (ANPRM) seeks public feedback on new measures that could require airlines to compensate passengers and provide necessary services automatically.

Key Proposals by the DOT:

Cash Compensation for Airline-Caused Disruptions
- Airlines may be required to pay passengers at least $200 in cash for flight disruptions caused by circumstances under their control, such as mechanical issues or IT failures.
- A tiered compensation system is being considered:
  - $200–$300 for domestic delays of 3–6 hours.
  - $375–$525 for delays lasting 6–9 hours.
  - $750–$775 for delays exceeding 9 hours.
- The DOT is exploring whether smaller airlines should have different compensation thresholds and whether compensation is needed if passengers are notified weeks in advance of a disruption.
Free Rebooking on the Next Available Flight
- Airlines may be obligated to rebook passengers at no extra cost if a flight is canceled or delayed by at least 3 hours domestically or 6 hours internationally.
- Rebooking options may include:
  - Flights operated by the airline or its codeshare partners.
  - Flights on other carriers with which the airline has a commercial agreement if no suitable options are available within 24 hours.
Provision of Meals, Lodging, and Transportation
- Airlines may need to cover meals, overnight accommodations, and transportation for stranded passengers.
- Minimum reimbursements could be established when services aren’t provided upfront, ensuring passengers can recoup costs even without submitting receipts, up to a defined limit.

The DOT’s proposals draw inspiration from consumer protection frameworks in countries like Canada, Brazil, the UK, and the European Union. Research suggests that EU compensation requirements have successfully reduced the frequency and length of delays, demonstrating the effectiveness of such measures.

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Passengers currently face numerous hurdles when seeking compensation or services, including vague policies, lack of upfront communication, and reliance on in-person requests at airports. The new rulemaking aims to close these gaps by establishing clear, enforceable standards for airlines.

Public input on the proposed measures will shape the final rules. The DOT hopes these changes will create a more accountable and passenger-friendly system, ensuring travelers are better supported during disruptions.

With these proposed rules, the DOT seeks to make airline travel more reliable and fair, setting a new standard for passenger rights in the United States.