For Pilots Only: July 28, 2024

Connecting the Dots

This week has been a tough one for our industry. CrowdStrike caused massive chaos, Delta had a system meltdown, American reported a near 50% drop in profits, and Southwest is having to make adjustments to its business model. All this, while Delta and United continue to aggressively pursue their business objectives and leverage every strength they have. 

Bottom Line Up Front, the majors are feeling the pressure and two stories tell this best.

Delta's CEO, Ed Bastian, said it clearly in some recent interviews.  In his words, if you're at the "lower end of the industry's food chain" and still posting losses in this high-demand environment, you're in for a rough ride." Some will look at this with skepticism, noting Delta's strong Q2 performance that still fell short of analyst expectations. 

Having said that, some really telling news stories came out later on in the week that bolstered Ed's comments. 

Here's what happened:

1. American reported a massive drop in profits after having to reverse a booking strategy misfire. 

American's recent attempt to bypass third-party book software massively backfired, leading to a 46% drop in profits. While American reports taking aggressive action to undo their mistake, a massive glut in domestic oversupply will likely make their recovery from this setback difficult. They don't have as many levers to pull right now as they did a year or two ago. CEO Robert Isom acknowledged that their current revenue performance isn't where they want it to be, citing an imbalance in domestic supply and demand.

This means, that if you're waiting for a class date at American, it may be a bit more delayed than you wish. It is still too early to tell how this will all shake out, but it is time to start looking for a plan B just in case that class doesn't come as quickly as you need it.

2. Southwest makes substantial changes to its business model. 

With the recent activist action taken by Elliott, paired with financial impacts due to domestic oversupply, Southwest took a big step this week to position itself to improve revenue pocket share. 

For over 50 years, Southwest has been known for its unique open seating model. Now, they're moving to assigned seating and introducing premium, extended legroom options. It also appears as though they're also going to be adding red-eye flights. On face value, this could look like a minor tweak. In reality, it's a fundamental change to their entire business model which shows how big the changes are in industry financials.

The Bigger Picture: Industry Overcapacity and Profitability Challenges

Right now it's a watch-and-wait game and we'll keep updating you weekly.  Here's where it gets interesting for pilots. The industry is facing headwinds which means there will be winners and losers. With the right strategy, you can be on the right side of that aisle. It takes creativity, thoughtfulness, watching market trends closely, and in our case, talking to decision-makers behind closed doors to identify trends and create strategies accordingly. My suggestion, if you're in the market for a new job, it's time to fire up your network, keep your ears open, and don't believe everything your eyes tell you. There will be a lot of misdirection out there, so navigating these waters well means you have to have multiple information sources to guide your decision-making. 

Good luck and fly safe. 

James

2024 Job Fair/Industry Expos