Economic news of April 21, 2022

Air travel is back. Can the industry keep up? Airlines are increasingly convinced that they have reached a turning point in their financ...

Air travel is back. Can the industry keep up?

Airlines are increasingly convinced that they have reached a turning point in their financial recovery, with healthy profits in their future. But the lack of staff threatens to stifle the rebound and curb ambitions. The threat is greater for smaller operators and third-party providers, but, in an interconnected industry, no one is immune to these challenges.

“The whole infrastructure is not set up to return to these rapid growth rates,” United Airlines chief executive Scott Kirby said Thursday in a call with investor analysts and reporters. Beyond airline staff, this infrastructure requires a sufficient number of air traffic controllers, security guards and fuel vendors. “All of these constraints get in the way of a reliable schedule,” he said.

Mr. Kirby and his counterparts at American Airlines and Delta Air Lines say they see strong demand for spring and summer travel. But the three airlines also said they were taking a measured approach to flight scheduling to avoid the frustrations that have arisen over the past two years as limited problems turned into major disruptions affecting some airline networks for years. days.

The holdback comes as the industry shakes off first-quarter losses – The American was 1.6 billion, he said Thursday – and knows the beginnings of a fiery comeback. Alaska Airlines, American and Delta each set sales records in March. United say they expect record revenue in the second trimester. And United, American and Delta are all forecasting profits in this quarter. Based on this outlook, carrier shares have increased 16-19% since Delta launched the latest results announcements Last week.

“The demand is as strong as we’ve ever seen it,” Robert Isom, chief executive of American, told analysts and reporters on Thursday.

Fulfilling this request may not be easy. The country’s three largest airlines say they have hired tens of thousands of workers, which they say is enough to handle their resurgent business. But shortages elsewhere threaten to slow the industry’s recovery.

This month, Alaska said it was cut about 2% of flights until June after a pilot training backlog forced a number of last-minute cancellations, echoing the action taken across the industry after a disastrous start to the year. And smaller carriers that operate regional flights for the nation’s largest airlines are struggling to replace pilots hired by those larger carriers.

“There are some industry constraints on near-term growth, particularly related to the supply of pilots and aircraft,” Mr. Isom said.

American said it has hired 600 of the 2,000 pilots it hopes to take on this year. The airline is rapidly training them in hopes of returning all of its planes to service by the end of the year.

In total, American has increased its workforce by 12,000 employees, or 10%, since last summer. Delta said last week it had added about 15,000 workers since the start of last year. United have hired 6,000 this year.

But by February, none of the major carriers had returned to pre-pandemic employment levels, according to federal data. Industry-wide, airlines employed more than 739,000 part-time or full-time workers in February, down about 2% from the same month in 2020. And airlines may struggle to recruit more.

“It’s a competitive market there,” said Peter McNally, vice president who oversees industries, materials and energy research at Third Bridge, a consulting firm. “Airlines are forced to compete in the wider economy.”

Airlines also face other challenges, including rising fuel prices.

American expects fuel prices in the second quarter to be about 30% higher than in the first, while United and Delta said prices could rise by up to 20%. Last week, the price of jet fuel in North America was 20% higher than a month earlier and 141% higher than a year ago, according to the Platts Jet Fuel Price Index.

Despite the challenges, the industry remains broadly optimistic, largely because skyrocketing fares don’t appear to have dampened the appetite for travel.

For the second quarter of this year, American expects revenue to be about 6-8% higher than the same quarter of 2019, although it expects capacity to be down by 6 to 8% compared to the 2019 quarter.

Airlines say customers aren’t just willing to pay higher fares – many are also shelling out even more money for premium upgrades like seats with more legroom.

Airlines are particularly optimistic about recent improvements in business travel, a lucrative part of the business. Businesses have been slow to send employees on work trips throughout the pandemic, but that appears to be changing quickly as offices reopen and companies lift those restrictions. Carriers said business travel was up to 70-80% of its 2019 level.

Credit…Dustin Chambers for The New York Times

According to a survey of travel professionals conducted this month by the Global Business Travel Association, about 86% of companies now allow their employees to travel domestically for non-essential business, an increase of 13 percentage points from to February. The share of businesses allowing non-essential international travel reached 74%, a jump of 26 points from February.

“There are high levels of employee optimism and willingness to travel for business,” Suzanne Neufang, the association’s chief executive, said in a statement Thursday.

American said the way people travel has also changed, perhaps for good. In the past, about 20-25% of the airline’s trips involved trips that combined business and leisure. That share has increased over the past six months, with about 50-55% of trips being for “mixed” reasons, said Vasu Raja, chief commercial officer of American.

“We see different sale days becoming big sale days, different travel days becoming big travel days,” he said. “The nature of what we call leisure demand and business demand is changing.”

The industry reached a new milestone this week: the end of the federal mask requirement In public transports. American and United said they saw no noticeable change in bookings after dropping mask mandates on Monday, though several recent surveys suggest passengers generally supported the requirements.

Of adults polled over the past weekend, around 56% said they favored requiring masks on public transport, according to an Associated Press-NORC Center for Public Affairs Research pollwith 24% opposed.

International travel, another profit driver for airlines, has also shown promising signs of recovery. Consumers are traveling overseas in greater numbers, particularly between Europe and the United States, as travel restrictions are lifted and virus infection rates remain low, airlines have said.

American said on Thursday that international travel revenue reached about 60% of pre-pandemic levels in March. The airline said it was seeing customers booking more travel in South America and across the Atlantic, with many willing to purchase premium seats, somewhat compensating for the lack of international business travel. Travel to Asia, however, continues to be delayed due to health restrictions. United and Delta reported similar trends.

But it is hoped that the international rebound will be rapid as countries reopen. Delta President Glen Hauenstein said last week that the airline expects flights to South Korea to reach more than 90% by June, up from about 50% in March, after the country eased travel restrictions this month.

“When countries reopen, we see a rapid restoration of demand,” he said.

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Newsrust - US Top News: Economic news of April 21, 2022
Economic news of April 21, 2022
Newsrust - US Top News
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