Cowen Senior Research Analyst Helane Becker joins Yahoo Finance Live to discuss airlines feeling the effects of rising costs and worker shortages as well as the outlook for summer travel.
- There's was another holiday weekend travel nightmare for many as airlines/flights due to staffing shortages. This comes as airlines look to pass through even higher ticket prices as they feel the effects of rising costs. Cowen analyst Helane Becker joins us now. Helane, when are these just worker shortages going to stop or are they ever going to stop?
HELANE BECKER: Good morning. I think it's going to be a while before it stops. First of all, we don't have enough pilots. We've talked about that before. The industry saw that 10,000 pilots retire in '20 and '21 and another 2000-ish are set to retire this year. So in order to get back to 2000 or-- yeah, 2019 capacity levels, we need to hire a minimum of 12,000 or 13,000 pilots. And United CEO estimated recently, we would need to hire 15,000 plus at least another 4,000 to 5,000 a year for the foreseeable future. And we're not turning out that many. So that's one big issue.
And then the other big issue is vendor shortages. We don't have enough people working at the airports and catering and airport shops. For an example, I'm sure you've noticed in your own trips that airport shops are shuttered in some cases because they don't have enough people to work. And gate agents is another issue, air traffic controllers is another issue. So I think it'll be a couple of years yet before we have enough crew members to handle the demand that we're seeing now. And we're expecting the demand to continue to grow in the order of 2% or 3% a year for the foreseeable future, maybe even more than that.
- So fully acknowledging the worker issues or some of the employment situation that certainly is prevalent within the airline industry, airlines have different reason codes, we do know, for cancelations. And some of those reason codes help them alleviate their service from added financial considerations, looking for accommodations for customers when some of those flights are canceled or if there is what they would label of course, some of the inclement weather historically. And so with all of that in mind, what is the most commonly cited reason that you're seeing for some of these cancelations right now?
HELANE BECKER: Well, all of the above we're seeing. There were weather cancelations. That's always a good catch all for airlines to blame weather, especially if it's somewhere in the rooting, there's a storm, they can blame that. Air traffic control is another big issue, whether there are true delays or not. That's been a big one. That's been cited recently. And then the vendor shortages I've heard quite a lot. So this seemed to be the three rather than accept the blame themselves.
And I don't know if you've noticed, but not only is demand strong, there's not enough supply. The number of airlines, JetBlue and Delta come to mind specifically, United announced it previously canceled about 100 flights a day each over the summer months to try to keep some slack in the system because if you're always flying 80% or 90% full as many airlines are, and then you have pop-up thunderstorms, it's very hard to recover that and get everybody where they want to go in a timely fashion. But by eliminating some flights in advance, they can be better prepared hopefully to get people where they want to go in a timely fashion without upsetting too many people.
But it's going to be particularly bad this summer. We just don't have enough seats and we don't have enough people to handle that three years worth of demand. People are just tired of being home. They want to get out and about. And gasoline prices are significantly higher than they were a year ago. And yes, jet fuel prices are higher. And yes, ticket prices are as well. But on a relative basis, it's still pretty competitive and compelling to fly versus drive.
- Helane, I love that you track airfare prices. You have for some time. Have you been surprised by some of the price increases that the airlines have been heaping on consumers?
HELANE BECKER: Yes, yes. So we've seen, I think, a 34% increase so far this year. We forecast we would see 7% in April, May, and June. And we seem to be seeing that. Yes, I am surprised that the airlines were able to pass that along. But again, it comes back to the very strong demand. We are concerned, however, for, after Labor Day, what happens when people have taken their trip, and now we get back to some kind of reality, school's back in session. We'll see what happens. We think we'll see a big decline in leisure demand in September, October through kind of mid-November. And then we'll see a pickup for the holidays.
I'll just point out that in the numbers, we estimate that leisure demand is 30% or 40% higher than it was in 2019 excluding international and excluding business travel. We think leisure alone is 30% or 40% higher. We're within 5% or 10%, depending on the day of the week, of where we were in 2019 on a regular basis.
And that says to me that when you factor in the decline in business and the decline in international travel that we've seen so far, if we had those both back to year over three levels, so 2019, we'd be regularly seeing 2.9 or 3 million people a day traveling through TSA lines here in the US. And that compares to 2 and 1/2 million in 2018. So very, very strong demand.
And we're hopeful that after Labor Day, some business travel will pick up. And we are hoping the US eliminates their pre-departure testing so that international travel can pick up. So much uncertainty when you have to test to come back. It's one thing to test before you go, but to test when you come back is fraught with concern, especially when you add on flight cancelations and delays. It makes the whole travel experience a nightmare.