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“The very first symptom of the general collapse was old: nothing helped. The sentiment is old – it comes from Doris Lessing’s 1969 novel, The city with four doors— but it’s hard to think of a better epitaph for 2022’s economic vibes. From oil markets to baby formula markets to a general sense of security and disorder, the United States seems to be suffering from chronic Nothing Syndrome. Works.
The latest casualty of acute NWS is air travel. Around the world, security lines are getting brutally long and cancellations and delays are on the rise. Major carriers JetBlue, American Airlines and Delta canceled almost 10% of their flights last weekend, creating chaos at major airports.
In an interview for my podcast pure english, I spoke with Scott Keyes, the founder of Scott’s Cheap Flights newsletter, about why air travel has been such a mess this summer. This transcript has been edited and condensed.
Derek Thompson: Scott, what’s going on and why?
Scott Keyes: The amount of turmoil in the airline industry over the past two years is unlike anything we’ve ever seen in travel. The September 11 attacks led to a 7% drop in the total number of trips. But travel in 2020 is down 70%. Airlines feared to survive. This meant laying off staff, laying off pilots, selling planes and retiring planes. Now, as travel resumes, we are paying the price.
Delta laid off 30% of its employees, or nearly 30,000 people cut from its workforce. American Airlines has laid off 30% of its staff, through buyouts, early retirements or otherwise. Airlines were trying to get as lean as possible to reduce those operating expenses in anticipation that they weren’t going to make a lot of money. They also retired older aircraft.
These decisions have certainly helped to improve the balance sheet throughout 2020. But would they have made the same call if they had known how quickly travel demand would rebound? Almost certainly not. They assumed it would be a six-year recovery period, not an 18-month recovery period. So when travel demand started to rebound much faster than expected, airlines were caught off guard.
Thompson: Why does it take so long to adapt? Why is it so hard to hire pilots or bring in more planes?
Keys: Being a pilot is not an entry-level job. It takes years of training. There are many regulatory requirements, such as a mandatory retirement age for pilots: 65. There are mandatory training requirements for US-based pilots. They must fly 1,500 hours before being allowed to fly these commercial aircraft.
Likewise, Boeing doesn’t have tons of 787s or 737s sitting in a warehouse waiting for airlines to pick them up. There is a years-long delay in a manufacturing process plagued by supply chain disruptions, much like so many other parts of the economy.
Thompson: The industry is so understaffed that every time there’s a storm or a pilot calls in sick, there’s no redundancy or resilience in the system, and you get these cascading cancellations. But wasn’t it obvious 18 months ago that we would have vaccines? Wasn’t it obvious six months ago that Americans wanted to get out of their homes? Why is all this chaos happening now?
Keys: There is a labor supply problem, not only for the airlines, but also for the TSA. If you live in Milwaukee and are looking for an entry-level job, you could become a transportation security guard for $19.41 an hour, or you can go to the Amazon website and see that there has a job in the area for $19.50. Would you rather help load and unload bags outdoors in the dead of winter in Milwaukee, or work in an air-conditioned environment in a warehouse for Amazon? This is the compromise that many people make. Labor shortages lead to delays and cancellations. Normally, airlines may have a reserve crew of pilots or flight attendants that they can call on. But now there is no reserve in place to fill the gap. The result is a huge amount of delays and cancellations.
Thompson: Laurie Garrow, a professor at Georgia Tech, directed me to FlightAware, a website that tracks airline industry statistics. Every day, it seems normal to have a cancellation rate of around 1%, or one cancellation for every 100 scheduled flights. Last Thursday, JetBlue canceled 14% of its flights. Last Thursday and Friday, American canceled 10% of its flights. Friday, Saturday, Sunday, Delta canceled 8% of its flights. Meanwhile, Frontier and Spirit canceled only 1% of their flights during this period. Why are the major carriers having these major issues right now?
Keys: The airline of today that rejoices in having no cancellations is the airline of tomorrow that experiences a collapse. I don’t want to pretend that Spirit and Frontier are crisis free. They absolutely do. That said, a few factors may explain why we see higher cancellation rates among older full-service airlines. First, many low-cost airlines like Spirit have already cut their summer schedules when they realized they didn’t have enough pilots and crew to operate the schedule they had planned. Older full-service airlines can sometimes suffer from hubris.
Second, many traditional airlines have hubs in crowded corridors like New York, Chicago and Boston, which can suffer from aggravated cancellations in the event of a thunderstorm. [which are more common in the summer]. These cancellations lead to other cancellations. A flight from JFK to Miami that is canceled results in a new cancellation for that flight from Miami.
Thompson: Has anything changed for air travellers? Are we do something different in 2022 that contributes to these delays?
Keys: Leisure travel has fully rebounded, while business travel is still down 30%. Now why is this important? Because vacationers tend to be more inexperienced when it comes to travel. They need more support from airlines who manage their itinerary in advance. They might need more time to get through security. They don’t remember to take their shoes off or get out their laptops. When each person takes an extra 20 seconds, you multiply by 3,000 passengers, and those little micro-events count on a grand scale.
Similarly, the two airports with the strongest growth since the summer of 2019 are Miami, up 17%, and Las Vegas, up 10%. San Francisco is down 26%. Detroit is down 25%. Chicago O’Hare is down 18%. Business destinations are down and leisure destinations up.
These changes have greater implications for some airlines than others. Historically, budget airlines have had the leisure traveler like bread and butter. Spirit Airlines does not have a significant amount of business travel in its portfolio. Conversely, American Airlines and Delta make the most money from business travelers, who are up to seven times more profitable per person. And they’re gearing all of their operations toward serving those business travelers and flying more to Chicago, San Francisco, and New York.
Because a pandemic arose that crushed business travel, Delta and American and United are now playing games outdoors. Low-cost airlines have home advantage. And low-cost airlines have basically absorbed all the growth of the past three years. alleviating [fights] are up 17% since 2019. Spirit is 7%. Frontier is up 6%. While Delta, United, American are down.
Thompson: To what extent do you think regulatory policy makes US airlines particularly vulnerable to the type of problems we are currently experiencing?
Keys: The issue of pilot training is one of the major issues being debated in the airline industry today. Is 1,500 hours the flight time we should expect from pilots before certifying them to fly commercial jets? On the one hand, it’s easy to say, “You can’t be too careful. Just imagine the attack ads if someone votes to lower the training requirement, and then all of a sudden there’s a crash. The optics are horrible. On the other hand, the United States is a little on the sidelines. Most other countries do not require this level of training before being certified. United States historically did not require this level of training. And we let foreign pilots fly to JFK and SFO and LAX without this requirement. That said, there’s still no quick overnight fix that will immediately get you more flights, more pilots, and more air travel supply. Certainly not for this summer.
Thompson: So when does it end? When can we expect traveling to feel more normal?
Keys: Cheap flights are not lost forever. They just left for this summer. The continued delays and cancellations you are seeing are mostly a side effect of travel demand right now. So many people are compensating for trips they haven’t been able to take in the past couple of years, and summer is still the most popular time of year to travel. In mid-September and beyond, you have fewer people traveling. We will have more pilots and planes in reserve to be able to intervene in the event of a storm or computer failure. We will have more reserves to help prevent a catastrophic wave of cancellations and delays. So bad news in the short term. Good news for fall and beyond.