Travelers arrive at Hartsfield-Jackson Atlanta International Airport in Atlanta, Ga., ahead of the Fourth of July holiday weekend, June 30, 2023.
Elijah Novelage | Elijah Novelage AFP | Getty Images
Airline investors have largely shrugged off flight disruptions at airports across the country ahead of the National Day weekend.
More than 63,000 flights operated by American Airlines, or 30% of its schedule, were delayed between June 24 and July 2. More than 9,000 flights (4.2% of the flight schedule) were cancelled. Both percentages are higher than the year-to-date disruption average, according to flight-tracking site FlightAware.
The delays were largely caused by a series of incessant thunderstorms and other issues including a shortage of air traffic controllers in congested airspace around New York and elsewhere, derailing the travel plans of thousands of passengers. It subverts the original peaceful spring of travelers.
But sky-high travel demand continues to drive airline stocks higher, Several hit multi-year highs.
The TSA said nearly 2.9 million people were screened on Sunday, a single-day record. It’s the clearest sign yet of buoyant demand for air travel, as passengers book flights or redeem reward points to make up for time lost after travel was disrupted by the coronavirus pandemic.
American airlines and Delta Airlines It recently raised its profit forecast on the back of strong bookings. Lower fuel prices last year also continued to be a driver for the industry.
Airlines are due to release second-quarter results and will begin providing outlooks for the entire summer in mid-July, with reports likely to include the financial impact of the disruption in late June and early July.
Airline stocks rise
Shares of major U.S. airlines have far outpaced the broader market this year.
united airlines Shares of Delta Air Lines and Delta Air Lines are both up 46% so far this year through Monday, while American Airlines is up 42%.For comparison, the S&P 500 Index It is up 16% over the same period. Delta and United recently hit their highest levels since June 2021.
Southwest AirlinesThe collapse in late 2022 led to a first-quarter loss, and the company’s shares are up 10% this year.
The NYSE Arca Airlines Index, which tracks U.S. airlines, has risen 51% so far this year through Monday, outperforming the S&P 500’s 16% gain.
Even in the past week, many airline stocks have topped the S&P 500 as travel disruptions have impacted operations. United Airlines is an exception. Shares fell 1.7 percent as the airline struggled to stabilize operations at Newark Liberty International Airport as the storm hit its hub.
United had the highest rate of delays among U.S. airlines, accounting for 42% of its mainline flight schedule from June 24 to July 2, according to FlightAware.
Chief Executive Scott Kirby said the Federal Aviation Administration slashed departures at Newark Airport early last week, leading to a spate of delays. When planes can’t take off, arriving flights have nowhere to park, so disruptions can easily snowball.
“Airlines, including United, are simply not designed to allow their largest hubs to operate smoothly despite four days of severely constrained capacity,” Kirby said in a note to staff this weekend.
Unless the airport has more capacity, the airline will have to reduce its flights at Newark, especially during the spring and summer thunderstorm season, to avoid crashes, he said.
Thunderstorms can be difficult for airlines because they can appear suddenly with little warning and are less predictable than other types of weather such as hurricanes or winter storms.
Typically, airlines delay flights to wait for thunderstorms to pass and airspace to open up rather than cancel, but flight crews could be hitting federally mandated workday limits, exacerbating disruptions.
David Neeleman, founder and former CEO JetBlue Airways Breeze Air CEO says there’s not much airlines can do when arrivals plummet.
Airlines will only voluntarily cancel flights if the weather is clear, he said.