This summer, millions of travelers have the classic John Denver tune in their heads, “Leaving on a Jet Plane.” Now that most Americans have been jabbed with a member of the vaccine quartet, economies are reopening, and the world is going back to some semblance of normalcy, the second half of 2021 could be the time that consumers scratch their travel itch, and the airline industry soars to the heavens. But not everyone will take to the skies and make up for their lost frequent flyer miles. American Airlines is warning that it is stopping hundreds of flights next month, unable to take advantage of the renewed vacation demand, citing a mix of staffing setbacks and unfavorable weather conditions.
Is American Airlines Ascending or Descending?
Over the weekend, American Airlines canceled more than 300 flights amid staffing shortages, maintenance issues, and weather disruptions. But it was not the only company to put the kibosh on trips. During the weekend, the entire industry canceled more than 500 flights, and close to 10,000 journeys in the sky were delayed.
That said, an internal company list, viewed by CNBC, highlighted that the cancellations resulted from unavailable flight crews. This is ostensibly only the beginning.
The company confirmed that it is reducing its overall schedule by 1% until the middle of next month to ease some of the challenges impacting the carrier's operations. While the dearth of labor is a significant issue for the sector, American Airlines noted that the bad weather affected flight crews to arrive at their assigned flights, causing a notable portion of personnel to fall outside the hours they are federally permitted to work.
American Airlines also has been scrambling to train its pilots who were furloughed between the two federal assistance packages and retrain aviators scheduled for recurrent training.
Corporate spokeswoman Sarah Jantz said in a statement that the country’s largest airline is doing everything it can to satisfy increased bookings:
"The bad weather, combined with the labor shortages some of our vendors are contending with and the incredibly quick ramp up of customer demand, has led us to build in additional resilience and certainty to our operation by adjusting a fraction of our scheduled flying through mid-July.
“We made targeted changes with the goal of impacting the fewest number of customers by adjusting flights in markets where we have multiple options for re-accommodation."
Dennis Tajer, a spokesman for the Allied Pilots Association (APA), suggested American Airlines should hand out more overtime and flexibility in pilots' schedules. "They’re trying to put a Band-Aid on something that needs stitches,” he told the business news network.
During the June 21 trading session, shares were down as much as 1.22% to around $22. The stock is up about 40% year-to-date, but it has tumbled around 7% since March. The average Wall Street analyst rating stands at “Underperform” (sell or don’t buy).
Is the Industry’s Future Up in the Air?
It was a devastating 2020 for the global airline industry. According to the International Air Transport Association (IATA), the sector lost approximately $84 billion as revenues collapsed 50%, marking the year as the worst in aviation history. Despite governments bailing out airlines with taxpayer-funded funds and loans, these companies are burning through cash. Will the industry ever recover?
Some analysts are predicting airlines will be resuscitated during 2022. McKinsey writes that business travel will lag for a couple of more years, weighing on companies’ return to pre-pandemic levels. Bain Capital notes that air traffic to and from India and Latin America has yet to recuperate. Overall, airlines have many hurdles to overcome, from soaring energy prices to remote work to skyrocketing debt obligations. For now, leisure travelers seeking to escape from their 16-month pandemic imprisonment will need to drive growth if businesses wish to survive in a post-COVID economy.
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Read more from Andrew Moran.
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