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Travel delays to continue as airlines remain understaffed: Analyst

Cowen Senior Research Analyst Helane Becker joins Yahoo Finance Live to discuss airline staffing issues, travel delays and cancellations, inflation, and the outlook for the travel sector.

Video transcript


BRIAN CHEUNG: Delays, cancellations, and high prices. If you flew this holiday weekend, you probably experienced the combination of all three. Let's bring in Cowen senior research analyst Helane Becker for more on this. Helane, it's great to have you on the program. Look, anecdotally, people experienced this last weekend. You just end up sitting in the LaGuardia terminal while your flight gets delayed hour after hour after hour after hour. What's going on in the industry? Should we expect more cancelations through this busy summer season?


HELANE BECKER: Yes, more cancellations. Patience is going to be the watchword for the summer. What's going on is a combination of a lot of things, kind of the culmination, too, of a lot of things. First of all, we've had a huge amount of turnover in the industry. Airlines were in survival mode two years ago. And I guess, even though we told them it would take two to three years for the industry to get back to normal, they still are understaffed. So that's one thing to think about.

Airports are understaffed. That's another thing to think about. The air traffic control system is understaffed. People don't know this because it hasn't been widely reported, but the US government stopped training air traffic controllers for the past two years. And it takes two to four years to train a controller. And the pay isn't very high. And the hours are long and stressful. And so we don't have enough air traffic controllers. And that's another issue.

So when there is a weather event, either there's a thunderstorm-- I don't know. It seems lately, even within 10 hours of an airport or 1,000 miles, they shut down to the airspace. And they go to ground stop programs. It's just gotten over-- I think it's just gotten crazy. But the reality is that's where we are. And whenever there's weather, especially pop-up thunderstorms in the summer months, it causes the ground stop programs, especially on the East Coast, which is very congested, to begin with. And the next thing you know is you're on an extended delay.

BRIAN CHEUNG: So there's a lot of, I guess, reasons based off of all those things you just outlined for thinking that this is only going to get worse through a busy travel season. I guess what's alarming about all of this is that it's not like demand is well above 2019 levels. I think your recent note noted that capacity is still 15% below 2019 levels. And it seems like what you outlined are things that can't be resolved in the short-term. So how are airlines managing it? Do you think there are some airlines that are managing it better than others?

HELANE BECKER: Yeah, so a couple of things there. The reason that-- well, capacity is down for two major reasons. The first is not enough staffing, not enough pilots, not enough crew members, and so on. And then the second reason is they did take a lot of aircraft out during the pandemic, and they haven't brought them back.

And some of them are over 19 or 20 years old at this point. And they're never coming back. So there's not-- and there have been delivery delays from the manufacturer. So the airlines haven't been able to replace some of those aircraft that maybe they thought they would. And to bring retired aircraft back sometimes may not be worth the cost.

And then, for the other part of your question on issues with respect to the pricing part, right, airline ticket prices were going up because fuel costs are going up. And then you have other inflationary pressures. And so that's putting pressure on the industry as well. And the hope was that it would tamp down demand. But leisure travel is actually up about 35% or 40% over where it was in 2019.

And the reason you don't see PSA numbers equal to where we were then is because the international business is still down. International estimate's down about 50%. And business is down about 50%. Managed travel's probably a little bit better than that. But the large corporate travel hasn't come back yet. So if we were actually back to where we were on international and business this summer, we'd be regularly seeing 2.93 million people passing through TSA checkpoints. And that's not sustainable for the industry to handle. Airports can't handle it. There aren't enough TSA agents, and the other things that I just talked about.

BRIAN CHEUNG: So what about the international angle of things? We've seen, broadly speaking, kind of taking down of some of the stringency in terms of requirements for testing as you go from one country to the other, specifically here in the United States. We know that we've seen a lot of international ticket prices a lot-- it's a lot cheaper to fly from New York to London right now than it is to fly from New York to Portland, say. So is there going to be some sort of-- is there an imbalance that you see there then as this international travel comes back online? Is that actually going to make prices even go higher?

HELANE BECKER: Yeah, so Brian, that's what we thought would happen for the summer. We're fully expecting a very strong trans-Atlantic. Asia-Pacific is not going to come back for a while because the restrictions are still mostly in place there. But we definitely expect a very strong trans-Atlantic time.

But think about the problems that are plaguing US airports are also plaguing airports in Europe. There was a big meltdown with the baggage system at Heathrow over the weekend in London. Amsterdam regularly has delays. There have been industrial actions around other airports in Europe. I think the UK rail system was on strike earlier this week. There are issues in Ecuador I saw recently with political unrest there. That's not Europe. That's South America, which is a very strong market, South America, Latin America. Very strong last summer, remains strong.

But the same issues of understaffing that exist in the US exist elsewhere in the world. So, yes, we expect very strong demand, but everybody has to bring patience. I mean, I'm being told to get to the airport three or four hours in advance. And we are hearing that in some international markets, people are getting to the airport three hours in advance and still missing their flights, which I think is-- I think it's unconscionable. I think that the industry needs to do a better job of stepping up. And it's not just airlines. I mean, the airlines get the worst of it. But it's the whole-- it's all the infrastructure that goes along with that. And there are also issues within that arena.

BRIAN CHEUNG: Yeah, I was--

HELANE BECKER: Uber drivers, hence-- patience, Brian! Patience!

BRIAN CHEUNG: No, I was going to say, at least for JFK, I always try to get there at least half a day beforehand. Lastly, I want to ask here just in terms of the oil situation, we know that's a big pressure for ticket prices. But let's just say, for example's sake, that the war in Ukraine, you know, abates, and gas prices come back down. It sounds like because of all the shortage issues, we still shouldn't expect to see ticket prices get back to low levels that we were experiencing in the beginning parts of 2021. Is that right?

HELANE BECKER: Yes, it is. You said it well. So we think that we'll get lower airfares, but not as low as people were hoping maybe. If oil prices come back down to 100 or under-- back to 90, wherever, I don't-- I'm not the oil person here, so I'm the wrong one to ask. All I know is that we're at $4 a gallon. We're up 100% over where we were in January.

And the airlines have no choice, but to recover that-- try and recover as much of that cost as they can. Typically, ticket prices go down after Labor Day. So when you were thinking about travel, if you can wait and travel in the fall, you'll probably do a little bit better than those who go in July.

And the other thing is traveling Tuesday, Wednesday, and Saturday. That's sort of the three lowest travel days. So you might be able to do a little better there, again, if you have flexibility. But not everybody has that flexibility. Everybody wanted to travel Memorial Day. Everybody wanted to do Juneteenth, which is a new three-day holiday for us. People want to do 4th of July, which is another holiday and a big vacation week, anyway, in the United States. So, yeah, I don't know how to think about it anymore. I know it's very frustrating for everybody, including those of us who travel a lot.

BRIAN CHEUNG: Yeah, I was going say, I'm flying out July 4th weekend to Portland. So I should probably head to the airport right now. Cowen senior research analyst Helane Becker, thanks so much. Appreciate it. Have a good Wednesday.