US airlines choose different strategies to combat tough operational challenges

Summary

• Airlines call for more support of the FAA after the NOTAM failure.
• Delta Air Lines, United Airlines and JetBlue Airways are adjusting expectations to a new operational reality.
• Southwest Airlines is taking a different approach to restoring operational order.
• Southwest Airlines concludes that its historical meltdown was largely driven by its being unprepared for severe winter weather.

US airline CEOs press for more support for the FAA after NOTAM outage

(NOTAM outage: on January 11, 2023, US flights were grounded or delayed as the (FAA) attempted to fix a system outage. FAA paused all flight departures until 9 a.m. ET. Flights already in the air were allowed to continue to their destinations. Around 8:30 am. ET flights were beginning to resume departures.)

The FAA's NOTAM outage in early Jan-2023, which grounded departures for a number of hours, along with Southwest's operational chaos at the end of 2022, were just the latest episodes of airlines battling internal and external constraints that continue to create headwinds in meeting the demand for air travel.

"In my opinion, 2022 was the most difficult operational year in our history, and was capped off by a severe winter storm over the holidays", said Delta Air Lines CEO Ed Bastian during a recent earnings discussion with analysts and investors.

Even before the latest high-profile operational snafus Mr Bastian had declared that the US aviation system was fragile.

Mr Bastian and other US airline CEOs have used the NOTAM outage as a rallying cry to push for more support for the FAA.

There's long been discussion about modernising the US air traffic control system, and the NOTAM failure was a crystal clear example of the challenges the agency faces in working with systems "that aren't as resilient as they need to be", Delta's CEO said.

He believes that the FAA is "doing the very best they can with what they have, but we need to stand behind the FAA, and we need to take them off the kind of year-by-year funding it seems like they go through that's caught up in political negotiations, and realise the importance of having a strong aviation infrastructure", Mr Bastian said.

United Airlines' CEO Scott Kirby echoed Mr Bastian's comments in the company's 1Q2023 earnings call, adding that "many of us in aviation have been saying for a long time that the FAA needs more resources".

The hard facts, said Mr Kirby, are that the FAA's budget, in real terms, is lower than it was 20 years ago - but the agency's workload is significantly higher.

He explained that huge resources had been dedicated to space launches, drones and thousands of individuals working on aircraft certification programs in the aftermath of the "[Boeing 737] MAX disaster."

The FAA "has been asked to more, and they're doing it with less money," Mr Kirby said.

Some US airlines adjust their 2023 growth plans to a new reality

But the FAA's challenges, which are significant, are just one of many factors that are fundamentally changing the US aviation system.

Mr Kirby (United) cited pilot constraints and supply chain bottlenecks that were limiting the ability of airlines to grow. Given those limiting factors, Mr Kirby said that the industry's capacity aspirations for 2023 were simply unachievable.

United has determined that it needs to "carry about 5% more pilots per block hour than pre-pandemic", Mr Kirby said.

Air traffic control challenges are also resulting in the airline's taxi and en-route flight times becoming elevated and growing, he added.

"So the same number of block hours probably produces 4% to 5% fewer ASMs [available seat miles]", Mr Kirby stated. "Put it together, you need 10% more pilots and 5% more aircraft to produce the same number of pre-pandemic ASMs."

Another change United has instituted is having approximately 25% more spare aircraft than before the pandemic.

"One lesson learned during the pandemic recovery is that it is both economical and profit-maximising to provide cushion in our aircraft utilisation", said United's CFO Gerald Laderman.

"Instead of pushing utilisation to its theoretical limit, we are focused on protecting our reliable operation."

Mr Laderman explained that United has focussed on minimising delays and cancellations that would otherwise drive higher costs, such as overtime and accommodation expense.

Airlines are also approaching their operations this year with a certain level of caution

Other airlines are also approaching their operations this year with a certain level of caution.

"I think we all in the industry owe it to our customers to make sure we don't fly in excess of our capabilities", Mr Bastian of Delta concluded.

JetBlue is also working to plan more conservatively, said the company's President Joanna Geraghty.

Some of the measures the company is taking include a higher percentage of out and back flights.

"That's a really important part of how we plan the schedule, particularly with the airspace we fly into, so that if we do get into trouble we can cleanly cancel a flight", Ms Geraghty explained.

JetBlue's largest base, measured by departing frequencies, is New York's JFK airport, according to data from CAPA and OAG.

The New York airspace corridor is one of the busiest in the US.

JetBlue: top ten bases measured by departing frequencies, as of early Feb-2023

Source: CAPA - Centre for Aviation and OAG

JetBlue has also introduced new technology "which enables us to repair cancelled flights and broken crew pairings more quickly, which ultimately means that we can recover faster and take advantage of the resources that we do have without having those resources time out, or lose track of them", said Ms Geraghty.

The US ULCC Spirit Airlines is being forced to curtail its 2023 capacity growth. Its projected increase is 19% to 22% growth year-on-year, which is a 450 to 550 basis point decrease compared to the company's previous plans.

Engine issues with its Pratt & Whitney geared turbofans powering its fleet of 71 Airbus A320neos have been a major contributor to the capacity reduction, accounting for approximately 40%, Spirit executives recently stated. Broadly 30% is attributable to Airbus delivery delays, and 20% is driven by the early retirement of Spirit's A319 aircraft.

Spirit said that the remaining reduction is related to continuing buffers the airline has in place to support its operation - due to continued industry infrastructure constraints.

For United's CEO Mr Kirby the new reality is simple.

"Our industry has been changed profoundly by the pandemic, and you can't run your airline like it's 2019 or you will fail", he said.

Southwest believes sticking to growth plans is a prudent decision

Not all US airlines appear to be taking a judicious approach to capacity deployment in 2023 though.

Projections by CAPA and OAG show that US system ASKs are projected to reach pre-pandemic levels by midyear 2023.

United States: weekly system ASKs, from early 2019 to early Jul-2023 (projected)

Source: CAPA - Centre for Aviation and OAG

Southwest Airlines, which was forced to cancel 16,700 flights during the Dec-2022 US holiday period, believes that sticking to its 2023 growth plans will fortify its operational reliability.

See related CAPA report: Will Southwest Airlines' holiday meltdown spur regulatory action?

The airline expects its capacity in 2023 to increase 16% to 17% year-on-year, compared with original growth estimates of 15%.

The increase is attributable to the high number of flights Southwest was forced to cancel at the end of last year (2022).

Southwest CEO Robert Jordan has recently explained that nearly almost all of the airline's planned capacity growth "is going into restoring the network. It's going into existing city pairs, adding depth and breadth."

That network restoration "should help fortify the operation with better itineraries, depth and re-accommodation options, for customers, crews and aircraft", said the airline's Chief Operating Officer Andrew Watterson.

Recent winter storms were too much for Southwest to handle

Of course, Southwest's work to ensure another operational meltdown of the magnitude that occurred at the end of 2022 never happens again continues.

The airline has launched several internal initiatives and hired an outside firm to assess the event and make recommendations to prevent future disruptions.

Southwest is also working to address what it deems as a "functional gap" that was revealed in its crew scheduling software during the wave of cancellations, said Mr Watterson.

The large number of close-in cancellations Southwest experienced disrupted the automation used for crew rescheduling, "and when we lost the automation, there's just not enough hours in the day for crew schedules to catch up manually", Mr Watterson stated.

In recent testimony before a US Congressional committee, Mr Watterson said that the root cause of the meltdown was a failure in the resiliency of the airline's operations during the winter.

Mr Watterson said that sub-zero temperatures, high winds, and frozen participation were worse than forecast, which resulted in Southwest struggling to keep its operation moving at Denver International Airport and Chicago Midway. Approximately 25% of Southwest's crews are based at those airports.

Southwest's procedure for winter operations is examining throughout how many aircraft per hour it can effectively de-ice at different levels of storms, said Mr Watterson.

Its initial plan was based on previous modelling of "how much we could, per hour, handle on our de-icing pads in Denver and Midway[,] based on history. Those proved to be incorrect for this storm," Mr Watterson explained.

"The winter operations were too much for us", Mr Watterson added.

US operators adopt different approaches to meeting market challenges

Even as robust demand shows no signs of slowing down, US airlines face significant challenges from a both a fragile aviation system and other dynamics, including staffing and supply chain constraints.

US airline operators are taking different approaches to those challenges, and time will tell which strategy will ultimately be successful.