Airlines temper flying ambitions after chaotic travel revival

An American Airlines Boeing 737-800, equipped with radar altimeters that may interfere with 5G communications technology, can be seen flying 500 feet above the ground during its final approach to landing at LaGuardia Airport in New York City, New York, United States, January 6, 2022.

Brian Woolston | Reuters

The leaders of the nation’s largest airlines learned a hard lesson this summer: It’s easier to make plans than to keep them.

The three largest US airlines – Delta, United and American – are restoring their ambitions for the growth of their flights, trying to fly more reliably after chomping on more than they can chew this year while chasing an unprecedented boom in travel, despite a host of logistics. and supply chain constraints as well as staff shortages.

The cuts come as airlines face high costs they don’t expect to ease significantly yet, along with the potential for an economic slowdown and questions about spending by some of the country’s biggest corporate travelers.

Shares of the Big Three US airlines fell on Thursday, while the broader market was higher.

warehouse building

United Airlines estimated it would restore 89% of its 2019 capacity levels in the third quarter, and about 90% in the fourth. In 2023, it will increase its schedule to no more than 8% above 2019, down from a previous forecast that it will fly 20% more than it did in 2019, before the Covid-19 pandemic hampered travel.

“We will continue to essentially fly the same amount we fly today, which is less than we were aiming for, but will not grow the airline until we see evidence that the entire system can support it,” United CEO Scott Kirby said in a statement. An interview with CNBC’s “Fast Money” after the results were announced Wednesday. “We’re just building more buffer into the system so we have more opportunities to accommodate these customers.”

American Airlines CEO Robert Isom also spoke of “buffer” after reporting record revenue on Thursday. The airline has been more aggressive than Delta and United in regaining capacity, but said it will fly 90% to 92% of its 2019 capacity in the third quarter.

“We continue to invest in our operations to ensure we meet our reliability goals and deliver them to our customers,” Isom wrote in a memo to employees discussing the airline’s performance. “As we look into the rest of the year, we have taken proactive steps to build an additional barrier into our schedule and will continue to limit capacity to the resources we have and the operating conditions we face.”

For its part, Delta has apologized to customers for a series of flight cancellations and disruptions and said last week it would limit growth this year. And she announced earlier that she would be reducing her summer schedule.

On Wednesday, Delta deposited 10,000 miles into the accounts of SkyMiles members who canceled or were more than three hours late between May 1 through the first week of July.

“While we cannot recover lost time or the anxiety it caused, we automatically deposit 10,000 Miles into your SkyMiles account as a commitment to providing you with your best performance going forward and reclaiming the Delta Teams you know we can handle,” the email to customers said, and may CNBC has seen a copy of it.

By shrinking schedules, airlines can keep their prices steady at high levels, an important factor in their bottom line as costs remain high, despite the bad news for travelers.

“The more airlines that limit their capacity, the more they fare,” said Henry Hartfeldt, founder of the Atmosphere research group and former CEO of the airline.

Preserving the bottom line is key with future economic uncertainty.

“They’re not going to get another bailout,” Hartfeldt said. “They squandered a lot of their goodwill.”

More disruptions, more revenue

Since May 27, the Memorial Day weekend, 2.2% of US-based airline flights have been canceled and nearly 22% delayed, according to flight-tracking program FlightAware. This is up from 1.9% of canceled flights and 18.2% in a similar period in 2019.

The staffing shortage has exacerbated routine problems airlines already faced, such as thunderstorms in the spring and summer, leaving thousands of travelers in limbo as carriers lack a cushion of backup staff.

Airlines have received $54 billion in federal payroll aid that prohibits layoffs, but many of them are unemployed pilots and have urged employees to make cost-cutting purchases during the depths of the pandemic.

Likewise, airport staff shortages in major European hubs have resulted in flight cancellations and capacity limits. London Heathrow officials told airlines last week they needed to limit departing passenger capacity, forcing some airlines to cut flights.

“Heathrow told us how many passengers we’re going to take. Basically Heathrow told us: ‘You guys are smoking something,'” United CEO Kirby said on Wednesday.

A Heathrow representative did not immediately comment.

However, the big three US airlines reported second-quarter earnings and were optimistic about strong passenger demand throughout the summer.

For America and United, their first quarter has been in the black since before Covid, without federal payroll support. Revenues for both companies are above 2019 levels.

Each carrier projected a profit in the third quarter as consumers continued to fill seats at prices well above 2019 prices.

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