Many sectors of the economy are beginning to see a slowdown due to inflation, prompting recession fears. However, the airline industry is booming. Usually, this would be a good thing, but as we head into the busiest part of the travel season, airlines seem woefully behind in dealing with the unrelenting passenger demand for travel.
How Airlines Fell Behind
Airlines are grappling with early pandemic decisions—that now look like missteps—to aggressively trim their pilot workforce through retirements and furloughs. It’s clear that they overcorrected, and now, there are not enough pilots to meet the full force of this year’s summer travel—even though ticket prices have skyrocketed, and capacity is still above pre-pandemic levels.
With pandemic restrictions no longer in place, staffing shortages mean that airlines can’t keep up. The lack of pilots has caused airlines to park airplanes, trim their summer flying schedules by as much as 15 percent, and cancel flights. That’s not to mention weather cancellations that are precipitated by the summer thunderstorm and hurricane seasons.
Why are there delays at your airport when the weather is clear, blue and 72? Most likely because bad weather in other parts of the country is affecting flights into and out of your area. To learn more, listen to our podcast at https://t.co/X171ci0DLo. pic.twitter.com/3XIHDHHeBG
— The FAA ✈️ (@FAANews) June 29, 2022
Department of Transportation Secretary Pete Buttigieg chimed in to encourage airlines to do all they can going into the July 4th holiday to mitigate travel disruption—and not to repeat the Memorial Day weekend debacle in which airlines canceled 2,800 flights and stranded passengers. Increasing public frustration has led to much finger-pointing about why airlines are in this position, as the FAA and carriers blame each other for chaotic flight operations.
Airlines: FAA Is Partly at Fault
In a letter sent to Buttigieg and acting FAA administrator Billy Nolen, the trade association and lobby group Airlines for America (A4A), which represents the major airlines in the U.S., said if there were to be any disruptions, it wasn’t for lack of trying. On the other hand, it said the FAA’s air traffic control network played a more significant role in fomenting disruptions.
“One of our A4A member carriers estimates that air traffic control (ATC)-related issues were a factor in at least one-third of recent cancellations,” said A4A president and CEO Nicholas Calio. He also added that “FAA ATC staffing challenges have led to traffic restrictions under blue-sky conditions,” before requesting a meeting and suggesting that the FAA share its staffing plans ahead of the July 4th weekend “with airlines so we can plan accordingly.”
For its part, the FAA has ramped up the hiring of air traffic controllers, but, similar to criticism from the largest pilot union, ALPA, it says airlines benefited from $54 billion in government funding throughout the pandemic to protect their workforce, but mismanaged that money.
Has Delta Conceded?
Amid the back and forth, getting through the July 4th weekend remains the immediate challenge for airlines. Wanting to stay ahead of the curve and possibly admitting that it wouldn’t be able to keep up, Delta Air Lines [NYSE: DAL] announced that it would give customers the option to change their flights to another time that isn’t the “potentially challenging” July 4th weekend.
“Delta is expected to carry customer volumes from Friday, July 1, through Monday, July 4, not seen since before the pandemic,” the airline said in the statement. Delta apparently has conceded that its operation is not up to the task. “Delta people are working around the clock to rebuild Delta’s operation while making it as resilient as possible to minimize the ripple effect of disruptions.”
Big Issues: Pilot Training and Pay
In May, Delta CEO Ed Bastian told investors at a conference that the problem his airline was primarily dealing with was a backlog in pilot training that could take months to unwind. Bastian said, “pilots are a constraint in the system right now, and I think they’ll be a constraint for some time. There are constraints around pilots—we’re hiring 2,000 pilots this year; getting them all through training is a real task.” This echoes the training chokepoint that United [NASDAQ: UAL] and JetBlue [NASDAQ: JBLU] CEOs also said they felt and were trying to address.
To make things worse, pilots are going head to head with their respective management to bargain for better contracts. Recently, 1,300 Southwest Airlines [NYSE: LUV] pilots lined up outside Love Field (KDAL) in Dallas to demand a pay raise.
Also, off-duty Delta pilots were expected to picket Thursday at Hartsfield-Jackson Atlanta International Airport, and elsewhere around the country, as they look to negotiate a new contract. While the airline doesn’t expect this to disrupt flights directly, no doubt it’ll require Delta’s management team to widen their focus to include labor relations in addition to daily operations.
Today, the @Delta_Pilots are picketing systemwide. For those pilots who can't make it, please use our virtual toolkit to show your solidarity with your fellow Delta pilots https://t.co/cCCRweq89M#DeltaPilots #ALPAPilots #DeltaPilotContractNow #DeltaPilotsReadyToStrike #HatsOff pic.twitter.com/94my6p5mNe
— Delta Air Lines Pilots (@Delta_Pilots) June 30, 2022
American Airlines [NASDAQ: AAL], the largest carrier—and the most likely to experience disruptions—preemptively raised pay for its regional pilots at Piedmont, PSA, and Envoy by 50 percent to keep its pilots in place. Envoy then said it would pay pilots who flew on their days off in July an additional 300 percent in the hopeof limiting the number of flights it would have to cancel.
So, the stage is set for a busy summer period for the airlines. All things considered, the good thing is that travel is back, and the airline industry is on a robust march to profitability again. On the other hand, the perks of tapping into general and business aviation travel for more convenient travel couldn’t be more clear.
