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Travelers are seen ahead of the Fourth of July weekend at Hartsfield-Jackson Atlanta International Airport on June 30, 2023 in Atlanta, Georgia.
Elia Novelg | AFP | Getty Images
Flight disruptions piled up at airports across the country ahead of the Fourth of July weekend, but airline investors have largely ignored it.
More than 63,000 flights operated by US airlines, or 30% of their schedules, have been delayed between June 24 through July 2. More than 9,000 flights have been cancelled, or 4.2%. Both percentages are above the averages for turbulence so far this year, according to flight-tracking website FlightAware.
The delays were mostly driven by a series of rolling thunderstorms along with other issues such as a shortage of air traffic controllers in the crowded airspace around New York and other regions, which derailed the travel plans of thousands of customers. It upended what was mostly a quiet spring for travellers.
But very high travel demand continues to keep airline stocks higher, With many 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 the continued demand for air travel, as passengers book flights or collect rewards points and make up for lost time after the Covid pandemic halted flights.
American Airlines And Delta Airlines It recently raised its earnings forecast thanks to strong bookings. Lower fuel prices than a year ago continue to be a tailwind for the industry, too.
The airlines release second-quarter results and will provide a full outlook for the summer starting in mid-July, reports that are likely to include the financial impact of the late June and early July disruptions.
Airline stocks soared
The gains in stocks of major US airlines this year have far outpaced the broader market.
United Airlines Both Delta are up 46% so far this year through Monday, while American Airlines is up 42%. For comparison, the Standard & Poor’s 500 It gained 16% over the same period. Delta and United recently touched their highest levels since June 2021.
Southwest Airlineswhose collapse at the end of 2022 led to a first-quarter loss, it’s up 10% this year.
The NYSE Arca Airline Index, which tracks most US airlines, is up 51% year-to-date through Monday, outpacing the S&P 500’s 16% gain.
Even during the past week, as travel chaos hit operations, several airlines topped the S&P 500. United Airlines was an exception. Its stock fell 1.7% as the carrier struggled to stabilize its business while storms continued to pass through its hub at Newark Liberty International Airport.
From June 24 to July 2, United had the largest share of delays for US airlines, accounting for 42% of its major airlines’ schedule, according to FlightAware.
At the beginning of last week, the FAA lowered the departure rate in Newark, CEO Scott Kirby said, leading to a backlog of delays. When planes can’t leave, there’s nowhere to wait for incoming flights, so turbulence can easily multiply.
“Airlines, including United, are simply not designed to have their largest hub and capacity severely limited for four consecutive days and still operate successfully,” Kirby said in a note to employees this weekend.
He said the airline would have to reduce its schedule in Newark, especially during the spring and summer thunderstorm season to avoid crowds unless there was more capacity at the airport.
Thunderstorms are difficult for airlines because they can appear with little warning and are more difficult to predict than other types of weather such as hurricanes or winter storms.
More often than not, airlines will delay flights waiting for thunderstorms to clear and airspace to open, but crews can hit federally mandated workday limits, adding to the disruptions.
David Neilman, Founder and Former CEO, Inc JetBlue Airways And the chief executive of Breeze Airways, said there’s not much an airline can do when there are such steep cuts in airline access fares.
He said airlines could cancel preemptively just for the weather to improve.
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