US airlines may see weaker holiday traffic amid shutdown fallout

[NEW YORK] Fewer US travellers are due to fly over the upcoming Thanksgiving holidays later this month, with Christmas demand also looking shaky, as a record US government shutdown and concerns about the economy weigh on would-be flyers.

Consumers’ appetite for air travel during the usually busy Thanksgiving week, slowed down significantly as the budgetary impasse lingered on and are now down 3.3 per cent compared with a year ago, according to data released on Monday (Nov 17) by Cirium, an aviation analytics firm. That contrasts with the 2 per cent increase seen at the end of October.

The gloomy outlook comes as travel was rebounding from a slowdown earlier this year, when consumers skipped flying amid concerns over the economy. Bookings for Christmas travel are also below expectations. They are down 0.4 per cent compared to last year, according to Cirium.

The firm collected the data, which reflects almost half a million bookings, on Nov 14, two days after the end of the 43-day shutdown. Cirium said that the data was indicative of a trend as it was “based on a sample of data from online travel agencies and not the airlines themselves”.

Airlines cancelled more than 11,000 flights over the past week, when the Federal Aviation Administration (FAA) ordered carriers to shave off schedules to keep air travel safe. The dropped flights added to delays from fatigued air traffic controllers working without pay.

Delta Air Lines said that the shutdown will have a significant impact on earnings amid cancellations and a slowdown in holiday bookings from wary customers worried about getting stranded during Thanksgiving.

“We had a little over 2,000 cancellations. You can’t make that up within the quarter. So, yes, there was an impact,” Delta’s chief executive officer Ed Bastian said on Wednesday.

The shutdown-related disruptions will slash about US$400 million from airlines’ operating income, the amount of sales left after expenses, according to Conor Cunningham, an analyst with Melius Research.

Airlines responded to the FAA-mandated cuts with the same playbook they use for snowstorms. They re-accommodated passengers on same-day alternative flights, issued refunds and adjusted their schedules. Other cost-inflating decisions were made, including flying aircrafts with some extra fuel in the tank, in case of diversions or longer wait times to land, as seen in previous shutdowns.

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United Airlines Holdings and Delta selectively preserved hub-to-hub flights while scrubbing regional service.

“The regional airlines bore the brunt of the cancellations as their major airline partners sought to minimise passenger inconvenience and revenue impact from the flight cuts,” Michael Linenberg, an analyst with Deutsche Bank, said in a Thursday report.

Regional carrier SkyWest, which partners with United, Delta, American Airlines Group and Alaska Air Group had about 11 per cent of its flights cancelled, compared with an average 6.5 per cent for the industry in the past week, Linenberg said. BLOOMBERG