Rising demands from labor top the list of challenges for the airline industry as it heads into 2016.
A widespread view is that the industry has fundamentally changed, a result of consolidation, industrywide capacity discipline, lower labor costs and ancillary fees. Additionally, lower fuel prices have added billions of dollars in cost savings.
But as the industry sees record profit, workers who made concessions in the first decade of the 2000s will be seeking repayment.
"As benefits from post-bankruptcy restructuring diminish and contracts are becoming amendable, wage escalation is creating upward pressure on cost structures across the industry," Credit Suisse analyst Julie Yates wrote in a recent report.
"2016 will mark the seventh year of industry profitability, making this the longest up-cycle in the history of the industry," Yates said. "High-teens operating margins are twice those of the prior peak during the late '90s."
Lower labor costs have been contributed to a striking transformation. As American CEO Doug Parker said on the carrier's third-quarter earnings call, in 2005 the cost of Brent oil averaged about $55 a barrel, about the same as in 2015.
But "in 2005, this industry lost $28 billion," Parker said. "In 2015, we're going to make something close to $20 billion. This business is not the same. It's dramatically different. ... If you think this is the old business, you're just not paying attention."
Parker's point was that declining fares, as a response to declining fuel prices, are not something to worry about.