Travelers are seen ahead of the fourth of July holiday weekend at Hartsfield-Jackson Atlanta International Airport on June 30, 2023, in Atlanta, Georgia.
Elijah Nouvelage | AFP | Getty Images
Flight disruptions piled up at airports across the country ahead of the July Fourth weekend, but airline investors have largely shrugged them off.
Greater than 63,000 flights operated by U.S. airlines, or 30% of their schedules, were delayed between June 24 through July 2. Greater than 9,000, or 4.2%, were canceled. Each of those percentages are above disruption averages to date this 12 months, in keeping with flight-tracking site FlightAware.
On Tuesday, disruptions lessened with nearly 2,500 U.S. flight delays, half the number that were delayed on Monday, though thunderstorms continued to disrupt flights at major airports like Newark and Denver.
The recent delays were driven mostly by a series of rolling storms coupled with other issues like a shortage of air traffic controllers in congested airspace around Latest York and other areas, derailing travel plans of 1000’s of shoppers. It upended what has been a mostly calm spring for travelers.
But sky-high travel demand continues to maintain airline stocks aloft, with several reaching multi-year highs.
The Transportation Security Administration said it screened nearly 2.9 million people on Sunday, a record for a single day. It is the clearest sign yet of unrelenting demand for air travel, as passengers book flights or money in on rewards points and make up for lost time after the Covid pandemic halted trips.
American Airlines and Delta Air Lines have recently raised their profit outlooks due to strong bookings. Lower fuel prices from last 12 months proceed to be a tailwind for the industry, too.
Airlines release second-quarter results and can offer a full-summer outlook starting in mid-July, reports that may likely include the financial impact of the late June and early July disruptions.
Airline stocks rise
Major U.S. carriers’ stock gains this 12 months are far outpacing the broader market.
United Airlines and Delta are each up 46% to date this 12 months through Monday, while American Airlines is up 42%. For comparison, the S&P 500 has gained 16% over the identical period. Delta and United recently touched their highest levels since June 2021.
Southwest Airlines, whose 2022 year-end meltdown drove it to a first-quarter loss, is up 10% this 12 months.
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The NYSE Arca Airline Index, which tracks mostly U.S. airlines, is up 51% 12 months thus far through Monday, outpacing the S&P 500’s 16% gain.
Even over the past week as travel chaos hit operations, many airline stocks topped the S&P 500. United Airlines was an exception. Its stock dropped 1.7% because the carrier struggled to stabilize its operation while storms kept rolling through its hub at Newark Liberty International Airport.
From June 24 through July 2, United had the most important share of delays of U.S. carriers, accounting for 42% of its mainline schedule, in keeping with FlightAware.
Snowball effect
The Federal Aviation Administration at first of last week slashed the departure rate at Newark, which led to pileups of delays, CEO Scott Kirby said. When planes cannot depart, arriving flights haven’t got a spot to park so disruptions can easily snowball.
“Airlines, including United, simply aren’t designed to have their largest hub have its capability severely limited for 4 straight days and still operate successfully,” Kirby said in a note to staff this weekend.
He said the airline could have to scale back its schedule in Newark, particularly in the course of the spring and summer thunderstorm season to avoid pileups unless there may be more capability on the airport.
Thunderstorms are difficult for airlines because they will pop up with little warning and are harder to predict than other sorts of weather like hurricanes or winter storms.
Often, airlines will delay flights to attend for thunderstorms to clear and airspace to open up, reasonably than cancel, but crews can reach federally-mandated workday limits, adding to disruptions.
David Neeleman, founder and former CEO of JetBlue Airways and CEO of Breeze Airways, said there’s not lots an airline can do when there are such sharp cuts to airline arrival rates.
Airlines could cancel proactively only to have the weather to clear up, he said.
