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Aviation Industry Updates: January 24, 2023

By January 24, 2023January 28th, 2023Industry News

Airline Earnings Coming In Strong | Despite Rising Fares & Economic Slowdown

  • After Delta Air Lines and United Airlines kicked off the sector’s earnings last week with better-than-expected quarterly earnings per share, revenues, and estimates, shareholders at American Airlines, JetBlue and Southwest are now homing in on the latest quarterly reports due out on Thursday.
  • Edward Moya, a senior market analyst at OANDA in New York, told FOX Business on Monday, “Last week’s airline earnings emphasized that consumer demand remains resilient regardless of how high fares have risen.”
  • “This week, American Airlines, JetBlue and Southwest will either confirm a strong consumer is not going away or highlight a potential turning point that confirms large parts of the economy are in slowdown mode,” he continued. “The airlines’ earnings might give us some insight into consumer discretionary trends.”

Yahoo Finance

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Southwest Pays Pilots $45M In ‘Gratitude Pay

KEY POINTS:

  • Southwest Airlines has agreed to pay its pilots an estimated $45 million in bonus “gratitude pay” for working through the company’s service meltdown during the holiday travel period at the end of last year.
  • The airline said it will also compensate other employee groups who worked through the period, although it did not immediately identify which employees or how much they’ll receive, CNN reported.
  • Southwest has about 9,400 pilots. The estimated cost of their bonus pay was disclosed in a message from the Southwest Airlines Pilots Association to its membership saying the “gratitude pay” will be equal 50% of the pilots’ regular pay, excluding holiday pay, sick pay or vacation time.
  • Earlier this month Southwest disclosed the cost of the service problems, which resulted in more 16,700 canceled flights between December 21 and 29, would cost the company between $725 million and $825 million. About half of that cost was the result of lost ticket revenue, with the rest allocated to customers’ compensation, higher operating costs and increased pay to employees. Southwest said the “gratitude” pay to employees is included in that estimate.

ABC

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United Airlines CEO Warns Travelers More Disruptions Ahead

KEY POINTS:

  • The CEO of United Airlines said Wednesday that other airlines won’t be able to handle all the flights they plan to operate this year, leading to more disruptions for travelers.
  • Scott Kirby said airlines that operate as if this is still 2019, before the pandemic, are bound to struggle. He said the industry is dealing with a shortage of pilots and other workers, outdated technology and strain on the Federal Aviation Administration, which manages the nation’s airspace.
  • “The system simply can’t handle the volume today, much less the anticipated growth,” Kirby said. “There are a number of airlines who cannot fly their schedules. The customers are paying the price.”
  • As an example of what can go wrong, Kirby referred to massive cancellations in late December. Southwest Airlines – which Kirby did not mention by name – scrubbed nearly 17,000 flights in late December after a winter storm upset the schedule and overwhelmed the airline’s crew-scheduling system.
  • “What happened over the holidays wasn’t a one-time event caused by the weather, and it wasn’t just at one airline,” he said. Alaska, Spirit and Frontier also had double-digit percentages of canceled flights in late December.
  • Kirby made the remarks during a call with analysts and reporters that was billed as a discussion of his company’s fourth-quarter financial results. He struck a contrarian tone. Most airline executives rarely take public shots at their competitors. And they are unfailingly optimistic, often treating massive flight disruptions and other setbacks as freak events caused by Mother Nature or some other factor beyond their control.

AP News

American Cutting 3 Short-Haul International Markets | The Regional Shortage Saga Continues

KEY POINTS:

  • American Airlines filed plans over the weekend to exit three markets in Latin America. The cities that American is cutting include:
  • Culiacan, Mexico (CUL), effective Feb. 28, 2023.
  • Samana, Dominican Republic (AZS), effective May 3, 2023.
  • San Andrés Island, Colombia (ADZ), effective May 3, 2023.
  • All three markets were previously served by American’s regional affiliates operated on behalf of American Eagle. SkyWest Airlines flew from Phoenix to Culiacan, while wholly-owned regional subsidiary Envoy Air operated flights from Miami to Samana and San Andres Island.
  • Interestingly, all three markets were new to American’s network and launched during the pandemic with twice-weekly service. The carrier added flights to Culiacan in March 2021, followed by Samana in June 2021 and rounded out by San Andres Island in December 2021.
  • In a statement confirming the cuts, the airline blamed weak demand and the pilot shortage as the reason for the exits.
  • “Due to soft demand in these markets and the regional pilot shortage affecting the airline industry, American Airlines has made the difficult decision to end service in San Andrés, Colombia; Samana, Dominican Republic and Culiacan, Mexico, this spring. We’ll proactively reach out to customers scheduled to travel to offer alternate arrangements.”

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