Airlines’ Challenge Is Cutting Costs, Not Filling Seats

Demand for air travel is still high despite higher fares and worries about the economy. The nation's airlines are having a hard time taking advantage of the rebound due to higher expenses and staffing shortages.

Delta Air Lines is one of the airlines that is reining in its plans. Ed Bastian, Delta's chief executive, said on Wednesday that the airline would fly the rest of the year at the same level as in June. Delays and cancellations have been a problem recently.

While the demand and revenue landscape is the best we have seen, the operational environment for the entire industry is unique.

Delta said Wednesday that it had a profit of $735 million in the three months that ended in June and that it expected steady demand into the winter. Investments in improving operations drove the high costs.

Most of the big carriers' share prices fell on Wednesday due to cost concerns. The shares were down.

Staffing shortfalls compounded the turmoil from bad weather and other disruptions in the aviation industry over the past year. American canceled 5 percent of its flights last month, second only to Delta, which canceled 3 percent.

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The issues aren't limited to the carriers. Long lines, delays, lost luggage, and last-minute flight cancelations have been caused by shortages at the airport. The number of passengers who cycle through the airport will be limited.

In order to better meet demand, airlines and airports are hiring workers as soon as possible. In the United States, airlines have hired more pilots this year than in any full year in the last three decades, according to a career consulting firm for pilots.

Since the beginning of the year, Delta has hired more than 18,000 employees, restoring its work force to 95 percent of its previous size. Airlines can't put hires to work immediately because of training problems. Dan Janki, Delta's chief financial officer, said on the call that thousands of people are in the process of being hired.

One of the busiest times for travel in years has been challenged by such problems. Since the beginning of June, 2.3 million people have been screened at the airport security checkpoint. The figure is down from a year ago but up from a year ago.

Dan Akins, an aviation economist with Flightpath Economics, said that capacity has been constrained in the way it is today.

To avoid a lot of delays and cancelations, airlines have cut back on resources and workers. In May, carriers slashed about 2.5 percent of their domestic flights.

Delta is offering fewer flights and seats from July through September than any other major U.S. airline, according to a new report.

Delta expects to report a "meaningful" profit this year according to its leadership.

Mr. Bastian said that people have not had access to the product for two years. In the midst of a busy summer period, we won't quench that thirst. There are a lot of things that are still to come.

It is hard to forecast too far ahead because most customers buy tickets within a few months of when they want to travel. Even though it expects capacity to be down 15 to 17 percent, Delta expects to collect as much as 5 percent more revenue from July through September than it did last year.

Delta said it was optimistic that the decline in leisure travel would be offset by increased corporate and international travel.

American Airlines offered a preview of its second-quarter results this week, saying it expected revenue to be up about 12 percent from the same quarter last year. Delta's operating revenue in the quarter was up 10 percent from a year ago. Southwest Airlines will report results later this month.

Consumers have been left frustrated by the industry's recent troubles. Air travel was one of the goods and services that saw their prices decline in June.

Hopper says the average price for a domestic flight is $310 after falling from a May peak. The average airfare for an international flight is up 26 percent from the previous year.

It's not clear how much airlines can lower fares. The industry has benefited from higher ticket prices, but airlines are not making as much money as they could. In the second quarter of this year, Delta's operating margin was 11 percent, down from 17 percent in the same period last year. The operating margin is expected to be between 11 and 13 percent for the third quarter.

Helane Becker is a managing director and senior analyst at the investment bank. Higher fuel costs, higher labor costs, and higher everything costs are what they have.

Jet fuel has fallen from a record high this spring but is still above historical levels. Increased spending on operational troubles is one of the reasons why the industry is trying to recruit, hire and train new staff.

Delta expects to pay more than $700 million in premium and overtime this year, a 50 percent increase from 2019. Huge raises are being offered by airlines to attract and keep pilots. American has offered its pilots a 17 percent raise while United has reached a tentative agreement to raise pilot pay more than 14 percent.