Labor and fuel costs both surge
Aircraft shortage due to Boeing issues
As the United States' largest holiday, the Independence Day weekend, approaches, the number of passengers visiting airports is expected to reach record highs, but airline performance forecasts are rather bleak, CNN reported on the 3rd (local time).
JP Morgan estimated in a report last month that around 71 million Americans will travel starting from the Independence Day holiday (July 4), and overseas travel by Asians will also increase. The U.S. Transportation Security Administration announced on the 23rd of last month that the number of air travelers in one day reached 3 million, marking an all-time high.
However, airline earnings declined in the second quarter. Airline industry analysts forecast that airline profits will decrease by 33% (about $2 billion) in the second quarter of this year, CNN reported. In the first quarter, there was already a loss of $800 million.
This is because both major cost factors for airlines, labor costs and fuel costs, surged sharply this year. On this day, the Alaska Airlines union agreed to increase flight attendants' wages by 32% over three years. Southwest Airlines reached a negotiation with the union at the end of last year to raise wages by 50% over five years.
Fuel costs are also rising due to increased summer demand. According to the International Air Transport Association, jet fuel prices rose 1.4% last week and 4% last month.
On top of this, problems with the two major aircraft manufacturers have compounded the situation. In January, an incident occurred on an Alaska Airlines Boeing 737 Max where the door plug (emergency exit cover) was torn off shortly after takeoff. Subsequently, the U.S. Federal Aviation Administration has limited the production volume of Boeing aircraft due to quality concerns. This has disrupted airlines' plans to increase the number of aircraft or replace aging planes. Due to the shortage of aircraft, some airlines have requested unpaid leave for pilots, and Southwest Airlines and United Airlines announced hiring freezes for pilots.
Worldwide, hundreds of Airbus A220 and A320 series aircraft have been grounded for over a month due to engine problems. Additionally, supply chain issues have reduced the number of aircraft Airbus plans to deliver this year.
Airfares also appear to have slightly decreased. According to airline analytics company Cirium, the number of available seats this month increased by 6% compared to July last year. CNN said, "This is good news for passengers but bad news for airline revenues."
CNN stated, "Airlines face numerous issues such as fuel costs, wages, and interest rates. Also, due to Boeing's problems, there is a shortage of aircraft to expand routes for a record number of passengers. Even if bookings surge, it cannot fully offset the financial pressures."
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