U.S. Government Shutdown Impact on Airlines

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U.S. Government Shutdown Impact on Airlines

The U.S. Government shutdown is starting to have an effect on the airline industry in the United States.

It should come as no surprise that the aviation sector is not immune from government woe.

Airlines based in the United States are feeling the effects from the government shutdown in a range of ways. It’s extending to everything from passenger flow to fleet plans.

We are seeing hundreds of flights grounded or delayed on the east coast. Air traffic controllers have stopped coming to work because they have been working without pay.

On 22 January, the airlines took a major hit on the stock market as Delta, Southwest, United and American Airlines fell to historical lows. The shutdown has also caused Delta Airlines to postpone its new A220 aircraft fleet.

Brad Tilden, the CEO of Alaska Airlines, highlighted that 48,000 Transportation Security Administration agents and 15,000 air traffic controllers are federal employees currently working for free. This is not surprising given the shutdown is currently affecting up to 800,000 federal workers.

What is the U.S. Government shutdown about?

To put it simply, the shutdown occurred after U.S. President Donald Trump vowed not to sign a particular spending bill. The President had been hoping for $5 billion to finance his proposed Mexican-U.S. border wall and indicated he would not sign a bill that did not include that. This is that bill.

It is only a partial government shutdown, because 75 per cent of funds have already been approved by Congress.

However, it is currently the longest government shutdown in U.S. history.

Airline delays

Air traffic has been substantially delayed at a range of airports along the U.S. east coast. This has included major airports such as LaGuardia Airport (New York), Philadelphia International Airport and Newark Liberty International Airport (New Jersey).

Delays have extended over an hour in many cases, largely due to staff taking extended sick days. The increased amount of stress imposed on these workers have caused them to make “routine mistakes” according to the president of the National Air Traffic Controllers Association.

One employee of the Transport Safety Administration said that staff had no idea when they would be paid next. It has caused longer lines waiting at airports as more employees are simply calling in sick. Compounding this is the fact that lines are already usually very long during the holiday period.

The Federal Aviation Administration tried to cope by rotating staff, rerouting traffic and creating more space in aircraft.

Stock market hits

The industry has also faced some pitfalls on the stock exchange.

Forbes reported last week that Delta Airlines fell 2.1 per cent to a year low of $45.08 a share, whilst American Airlines fell 3.62% to a 52-week low of $28.81 per share.

Delta has unfortunately been doing it tough. The airline admitted during their annual investor call that the induction of seven aircraft, including A220-100s and A330-900s, will be delayed because of the government shutdown. They also indicated that the release of the A330-900neo fleet may be impacted because of certification issues affected by the shutdown.

The CEO of United Airlines announced on 16 January that the shutdown had not had a significant financial impact on the airline but it potentially could if the shutdown lasts. The airline had enjoyed success on the stock market, before falling by 2.63 per cent on 22 January.

Nevertheless, the damage is not likely to be permanent. The shutdown is also not the only concern causing some slow growth, with fuel price volatility also causing some concern.

Our airline experts at AvLaw Consulting have a wealth of experiencing consulting airlines dealing with tricky government policy. Contact us today to speak to one of our specialists.

2019-01-27T10:17:29+00:00