A Blog by Jonathan Low


Jun 21, 2021

Why American Air's Inability To Manage Post-Covid Surge Cancels 100s of Flights

There's both a supply and demand problem. As vaccinations have increased and the threat eased, passenger desire to fly increased faster than airlines anticipated. 

But the bigger problem is on the supply side. Hundreds of pilots and other airlines crew retired early during the pandemic and took their retirement benefits rather than face uncertain time furloughed. In addition, airlines, and especially American, accelerated the retirement of aging aircraft. Now the airline is paying for the shortage of planes and personnel. JL

Yahoo Finance interviews airlines analyst Helane Becker:

The increased demand for travel is resulting in American Airlines canceling flights to avoid strains on operations as the workforce is spread thin. American confirmed it canceled 450 flights and expects to cancel an additional 120 due to crew availability. Because of the pandemic, a lot of pilots accelerated their retirement last year. It takes a year to get a furloughed pilot ready to fly again. And then, flight attendants, mechanics, airport personnel. And then for supply, which is seats available, you know, last year, airlines, especially American, accelerated retirement of a lot of aircraft.

Cowen Sr. Research Analyst, Helane Becker, joins Yahoo Finance to discuss American Airlines labor shortage issues and how the increased demand for travel is resulting in American Airlines canceling flights to avoid potential strains on operations as the workforce is spread thin.

Video Transcript

- All right, welcome back to Yahoo Finance Live on this Monday morning. Well, the summer travel season is getting underway, and people are certainly taking to the friendly skies. For the second straight Sunday, we saw TSA passenger throughput top 2 million as the recovery in air travel continues. And then a story over the weekend, American Airlines confirming that it canceled some 450 flights and is expecting to cancel an additional 120 flights due to crew availability.

Joining us now to talk about the state of the airline recovery is Helane Becker, senior analyst with Cowen. Helane, great to speak with you once again. So let's start with this news from American. It sounds to me like we're getting to the good problems to have phase here, when there's not enough crew to fill out the planes that passengers are demanding right now.

HELANE BECKER: Yes. Well, thank you for having me again on your show. I really appreciate the time. Yes, and it is a sort of good problem to have. I think one of the things to think about is, remember, there are still fairly restrictive rules. There is what I call the 16-13-10-hour rule, which basically says pilots can work 16 hours during the day, 13 hours overnight, and need 10 hours of rest between shifts. So when you throw weather into that equation, you wind up having crew members who run out of time.

And because of the pandemic, a lot of pilots that may not have retired until 2021 or 2022 or three, retired-- accelerated their retirement until last year. So you do have some staffing shortages. It takes about a year to bring a pilot up from a furlough and get him or her ready to fly again. So there's that to think about. And then, of course, flight attendants, mechanics, airport personnel. You just need everybody back to work.

And that's just taking a while to-- to happen, to get everybody back, because-- I'm not sure the airlines should be so surprised at this strength. I mean, maybe it's a week or two sooner than we thought. We thought we'd regularly see 2 million people a day travel around-- beginning around late June, early July through the summer months. We're not really that far off of where we were in 2019. Where we're off is in international and corporate business travel. But international starting to come back, so the airlines really have to think about staffing up again.

- But Helane, it seems like that this issue is, from what you're saying, is going to persist for a little bit, right? And that maybe travelers should be expecting these kinds of potential schedule changes and delays because of staffing shortages, because not only does it take time to, you know, get people back into the workforce if they've been furloughed, you know, in other industries, we talk about upskilling and retraining. Like, you can't train a pilot very quickly if they are new to the business. So it seems like there are some obstacles here.

HELANE BECKER: Yes. Well, there are capacity constraints for sure. That's-- you hit the nail on the head with that. Number one. Number two, I think in terms of demand, it should be very strong, actually, through the summer. We're really thinking that we're going to have a great summer. And then for supply, which is seats available, you know, last year, remember-- you may remember, airlines accelerated retirement of a lot of aircraft. From 2000 around, let's say, '13, '14 to 2019, the airlines really didn't retire that many aircraft because demand was so strong. Normally, they would retire about 4% of the fleet in the year.

So now you head into 2020, and the industry took that-- especially American-- they took that opportunity to accelerate retirement of a lot of aircraft that they may have decided doesn't fit the profile anymore. They had announced roughly 156 aircraft being retired in 2020. Those are not coming back, and they're not-- they're done, for the most part, with their fleet replacement program. They're getting 787s here and there, but, you know, in general, they just have a lack of capacity to hit the amount of demand they have, which is a good problem because we're seeing very strong airfares, which of course people are starting to complain about, that airfares are too high. But that'll sort itself out because airlines are notorious for adding capacity when airfares get really high.

- And so again, just to sort of put a fine point on this, what should travelers expect for the summer months, for example both in terms of scheduling, delays, and airfares?

HELANE BECKER: OK. So first of all, patience. Not that I'm a patient person. I'm for sure not. I think in the airport, we have to be patient because getting through TSA-- remember, earlier this year, you and I talked about the fact that TSA was hiring 6,000 more people for the summer months to speed travelers through the airport. So there's that to think about. They were not 100% successful. So that's one thing.

And then the other thing travelers can expect is weather. In the summer-- I always felt summer weather is worse than winter weather, because you know when the storm is-- the snowstorm is coming, and you can prepare by changing the day of your flight or whatever. But pop-up thunderstorms wreck havoc with the industry, and you don't know when they're coming. And that's really what is going to cause a lot of delays this summer. So I think passengers have to bring their patience with them to the airport.

They have to be prepared on hot summer afternoons to be delayed, and think about connections and building in some extra connect time between when they get to a hub airport and when their next flight is leaving. I wouldn't necessarily do a short, you know, 60-minute connection. I might think about doing a two-hour connection. Even though you don't want to hang around the airport necessarily, you might want to do that because if you miss your connection and, you know, seats are full and demand is so strong, it may be a little while before you can get out again. So that's how I would be thinking about it if I were a passenger right now.

- Helane, speaking of passengers, passengers have gotten a lot heavier over the year plus of the pandemic. How much-- how costly will that prove to the airlines? Will the airlines have to use more fuel? Will they have to redesign their seats, redesign their cabins? How do you see it?

HELANE BECKER: Yeah, that's a funny question, but it's true. People over the years, not only last year, but people over the years have been getting heavier. And so the airlines have to rethink their weight and balance. I'm not sure 100% how that's going to work. I think there's maybe some cargo that might not make it on the aircraft while they think about, you know, those passengers.

I don't think people are going to be weighed at the gate. I can't-- I know that was talked about a few weeks ago, but I can't imagine that they're going to do that. It just might be yet another question that you have to answer when you fill out your form that you're-- when you log in to get your boarding pass, how much do you weigh. And then, will people be honest about it? That's the other question. I know I'm laughing because I find the whole thing amusing, but to your point, airlines have to recalibrate the weight and balance. They have to think about how much more fuel they have to load on board to handle it, and then maybe a little less cargo to offset it.

- Well, Helane, I think everyone out there knows the feeling when the captain stands in front of everybody and says we're overweight, we need three people to take the next flight, which I've seen happen over the Christmas holiday. And boy, you want to hear some silence, you can go for that one. All right, Helane Becker, senior analyst over at Cowen, covering the airline and transportation industry. Helane, always appreciate the time. Thanks so much for jumping on this morning.


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