Brooke when you look at the airline industry, what
would you say is issue number one right now?
Is it those fuel costs? Is it demand?
Is it some sort of combination? I don't think
the issue is demand. I think we've seen a
really strong resurgence, particularly in the leisure market in
the U. S. People are eager to get
out and travel. We saw this last summer.
But certainly as we head into this summer as all
of those covid restrictions are starting to fade away and
people feel more comfortable getting out of their house,
they are certainly taking every opportunity to do so even
as you see those ticket prices increasing fairly materially.
I do think for the airlines they are worried about
costs and it is labor, it is fuel,
it's also just sort of ancillary things that go into
managing an airline. And I think a lot of
these companies have had a very difficult time in terms
of right sizing their capacity to meet that strong demand
that they're seeing because it is tough to get workers
. It's tough to get planes where they need to
be And there's just not a lot of slack in
the system. So you've seen the number of airlines
in recent weeks actually dialing back their capacity plans for
the summer, not because they can't sell the tickets
, but because they don't necessarily have the staff to
get everybody where they need to be and not have
those big travel blowups that we've heard all too much
about recently broke. It was particularly surprising to see
last week the news that Delta was actually scale back
some of its trips this summer and pull back on
some of those flights. Given the fact that demand
is so high. When you say employees is the
problem mostly when it comes to supply of pilots or
is it other crew? Is it people on the
ground who are needed to make sure that Delta and
other companies can fly safely? Who is it out
there? It's all of the above really. I
mean, so the airline industry is that a pilot
shortage looming for years now? This is not necessarily
a covid problem although it was likely exacerbated by the
pandemic and some of the shifts in staffing that occurred
as a result of that. But the pilot shortage
has been a very real problem for the airlines for
a while now and it is not going away.
It is not a problem that's easily fixed. We
like to have our pilots do a lot of training
for very obvious reasons. But that does all take
time. But as you said, it's also you
know, shortages of ground crew or you know,
do you have enough catering staff? You know,
remember that the airlines got a significant amount of money
from the U. S. Government to keep people
on the payroll during the pandemic. But that did
not prevent them from doing sort of voluntary separations which
many carriers did take advantage of. It just takes
time to bring those people back, even if they're
still interested in working for the airline. And so
I think you're seeing the carrier's work through all of
that. And you know, to be fair to
them, nobody has ever had to try to bring
an airline back from the kind of slump that we
saw after the pandemic. So it's a learning curve
, but it's certainly complicated on the labor front Brooke
, it's, it's interesting you bring up this aspect
of pilots and having trouble attracting and retaining pilots.
Just anecdotal family friend works, worked for a major
carrier, but he just turned 65 and he was
forced to retire because he was 65 years old.
This is a guy who's had an incredible career as
a pilot for a major carrier and also before that
for the Air Force, he flies his own plans
, he still definitely fit to fly. Is there
any pushback on changing the mandatory retirement age of pilots
to try to keep them for longer? There is
a question about that and whether it's worth revisiting that
just because there is an aging problem in the pilot
workforce. Exactly as you reference, one thing I
think that's interesting is that this is not exclusive to
the airline industry. The manufacturing sector also has a
problem with aging, that workforce tends to skew older
. There's not a lot of people jumping at the
bit to get into the manufacturing workforce. And so
it's a question that a lot of companies are going
to have to answer and think about how do you
appeal to that younger worker, especially somebody who these
days is probably looking for more flexibility in terms of
working from home, looking for flexible hours. These
are not always industries that lend themselves to those kinds
of lifestyles. And so I do think this is
a moment where a lot of industries need to dig
deep and think about how they want to advertise themselves
to the up and coming workforce. So Brooke how
do airlines manage past these immediate problems that are here
right now? These labor force issues the fuel costs
. I mean, I've read a little bit about
airlines canceling flights. I mean it feels like that's
a band aid solution that would come with some drawbacks
. It is a band aid solution, but you
know, it's sort of a necessary banded. I
mean, I think sort of the longer term solution
is that they're raising prices and that's how you offset
some of these higher labor costs that they're facing and
the higher fuel costs and you're certainly seeing that in
ticket prices in the US. I think the question
is at what point does that start to eat into
demand? We were talking about just how robust demand
is this summer. I think that likely holds up
for the time being just because you have so much
pent up desire to travel, but at a certain
point, those prices will force the consumer to rethink
their plans and they may not want to take that
trip? They may get back out on the road
and then they stay closer to their own backyard.
And then the question of course is how much does
business travel step up to fill some of that void
? You already tend not to have a lot of
leisure travel once we get into the fall, some
of that may change given our post pandemic habits if
we're all working from home or maybe we go work
from the beach or whatever it might be. But
it's going to be really interesting to see how much
those trends hold as we all get back to some
sort of semblance of normal. Okay, The three
of us not working from the beach at least today
Brooke we're all here in the office. Unfortunately,
You know, it's funny you bring up the idea
of demand destruction because right where you're standing on Friday
Olivia Rockman stood and she spoke to us again anecdotally
about one trip that she actually canceled this summer because
airline prices were so high. She was choosing to
go on two trips, one to Oregon and one
to Europe flights to Oregon though we're$800 round trip
for coach. She said, Okay, that's enough
. I'm not going to do the European trip as
well. When will we start to see those anecdotal
stories of Olivia Rockman start to hit the data.
Where do we need to look when it comes to
demand destruction here? I think it's more around the
edges right now because you are also seeing people really
paying up for premium options for traveling. So people
who never would have previously considered taking first class are
now saying, you know what, I haven't traveled
for three years, I'm going to pay up for
that ticket or pay up for premium economy or whatever
it is. You're seeing that in the hotel industry
as well where people are choosing more luxury options and
so we're still in this phase where people are looking
to travel and there is that pent up demand.
But I think these anecdotes become more common, the
more that you see prices rise and quite frankly looking
at where fuel prices are headed, most US airlines
are not hedged so they're going to have to figure
out a way to pass on those costs. And
so the more that you see those oil prices rise
, the more ticket prices rise and this all starts
to catch up, Bloomberg opinion's Brooke Sutherland Brooke.
Next time we do this, we are all going
to be working from so many holiday locations