Aviation Industry Updates: Nov 21, 2023

Pilot Hiring In The US Is Starting To Level Off

KEY POINTS:

• Pilot hiring in the US airline industry has slowed down in recent months, with a decline of 11% in September and October compared to last year.
• Cargo airlines like FedEx and UPS, which experienced high demand during the pandemic, have also not hired new pilots in the last several months.
• While US carriers will still hire more pilots this year than last, there is a need for more captains specifically, as airlines struggle to find experienced pilots for the role.
• The COVID-19 pandemic was particularly challenging for airline pilots, whose jobs were threatened significantly during its peak. While it was assumed that re-hiring would take place once the pandemic subsided, airlines actually went all out to hire new pilots in a post-pandemic network and fleet expansion program.
• US airlines, in particular, saw a great demand for cockpit crew and handed out new offer letters and contracts to attract the best talents in the industry. And while pilot hiring continues, the latest trends show that it has leveled off in the last couple of months.
• Data from the pilot advisory group Future and Active Pilot Advisors (FAPA) shows that pilot hiring dipped by 11% in September and October this year compared to last. However, the decline in pilot hiring is a trend that has been persisting for longer than just this year.
• June saw the fewest pilots being hired among all major US airlines at 958. In September, 1,001 pilots were hired, while October saw a marginal increase of 114 pilots. As the dust begins to settle on the post-pandemic aviation boom, some airlines are also evaluating the current situation. For instance, Spirit Airlines recently said it is pausing pilot and cabin crew training due to disappointing third-quarter results.

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Behind The Tailspin At American Airlines

KEY POINTS:

• It’s hard to think of any big, important enterprise—now or ever—more reviled by investors than American Airlines. At present, its stock is languishing at around the same, super-depressed levels as when the world’s fleets sat grounded during the depths of the COVID crisis. Since peaking in early 2018, American’s shares have dropped roughly 90%, crushing its market capitalization to a puny $7.1 billion as of October 27, a figure so shrunken that this iconic name now sputters as only as America’s 478th most valuable public enterprise. Put simply, the funds and folks that drive the equity markets hold an incredibly grave view of American’s future, a take so dour that it gives new meaning to the term “diminished expectations.”
• To be sure, investors are now far more pessimistic on the future for all the major airlines than before COVID lowered the hammer. Starting in March of this year, stocks of the Big Four—American, Delta, United and Southwest—staged a strong comeback, raising hopes that at long last, they’d durably break from their three year funk. The lever: A spring and summer surge in “revenge” travel swelled bookings to numbers even exceeding the excellent 2019 volumes.
• The bounce proved short-lived. By July, share prices started a synchronized swoon that’s barely abated. Hardest hit in the recent downturn are American and Southwest. As of the market close on October 27, both have dropped around 38% since the start of July. Delta and United have suffered slightly lesser declines, and are still hovering more than 10% above their lows when the outbreak struck, while Southwest, hurt by outdated systems that undermined its traditional reliability, is selling even farther below its pandemic bottoms than American. For all of the Big Four, shares are now trading at 2012 to 2013 prices.

Fortune

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Spirit Airlines: If Merger Fails, What's Next?

KEY POINTS:

• Spirit Airlines' stock price has fallen to where it may be a value opportunity even without JetBlue merger.
• The stock trades around tangible book of ~$12 per share, versus closest competitor Frontier priced at +60% premium to tangible book.
• Spirit's right-of-use assets for terminal gates and runways at the nation's busiest airports may be even more valuable than its planes.
• ~$2 billion in debt principal payments due 2025 and 2026 the biggest threat to Spirit's existence as a going concern.
• Including merger upside, striving for a margin of safety, Spirit rates a Hold in the $12-$18 range, a strong Buy below $9, and a strong sell above $21.

Seeking Alpha

Record Crowds Are Expected To Take To The Air And Roads For Thanksgiving

KEY POINTS:

• Despite inflation and memories of past holiday travel meltdowns, millions of people are expected to hit airports and highways in record numbers over the Thanksgiving break.
• The busiest days to fly will be Tuesday and Wednesday as well as the Sunday after Thanksgiving.
• The Transportation Security Administration expects to screen 2.6 million passengers on Tuesday and 2.7 million passengers on Wednesday. Sunday will draw the largest crowds with an estimated 2.9 million passengers, which would narrowly eclipse a record set on June 30.
• Meanwhile, AAA forecasts that 55.4 million Americans will travel at least 50 miles from home between next Wednesday and the Sunday after Thanksgiving, with roads likely to be the most clogged on Wednesday.
• The weather could snarl air and road traffic. A storm system was expected to move from the southern Plains to the Northeast on Tuesday and Wednesday, bringing severe thunderstorms, gusty wind and possible snow.
• U.S. Transportation Secretary Pete Buttigieg said during a news conference Monday that the government has tried to better prepare for holiday travel over the last year by hiring more air traffic controllers, opening new air routes along the East Coast and providing grants to airports for snowplows and deicing equipment. But he warned travelers to check road conditions and flight times before leaving home.

AP News

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