• Wed. Oct 5th, 2022

Planet Money: The Planet Money Indicator: NPR

ByKimberly A. Brochu

Apr 25, 2022


SYLVIE DOUGLIS, BYLINE: NPR.

(SOUNDBITE FROM DROP ELECTRIC SONG, “WAKING UP TO THE FIRE”)

ADRIEN MA, HOST:

This is THE PLANET MONEY INDICATOR. I am Adrian Ma.

PADDY HIRSCH, HOST:

And I’m Paddy Hirsch. This summer should be a good time for American airlines. Americans strive on a leash to get back into the air – without a mask, if they feel like it. The TSA says passenger volume is nearly back to pre-pandemic levels, and analysts say demand could increase further in the coming months. But there is a catch.

MA: Are you, like, a baseball game? Because you’re always full of catches.

HIRSCH: Oh. I am a cricketer myself.

The fact is, while we expect huge demand for air travel this year, we also potentially face supply issues – the supply of crew, air connections, fuel and, perhaps most important of all, in airline pilots.

(SOUNDTRACK FROM THE FILM, “AIRPLANE!”)

LESLIE NIELSEN: (As Dr. Rumack) Can you fly that plane and land it?

ROBERT HAYS: (As Ted Striker) Surely you can’t be serious.

NIELSEN: (As Dr. Rumack) I’m serious. And don’t call me Shirley.

MA: It’s “Airplane!”

HIRSCH: I love this movie so much. Things aren’t as bad as they were in that movie, sure, but it’s still pretty bad. The pilots are not happy. In some cases, they are picketing, and that adds to the problems airlines are already having trying to meet an increase in consumer demand.

MA: Today’s show – the mismatch of supply and demand in the airline industry. Where are the gaps, what airlines are doing about them, and what it means for Americans hoping to fly this summer after the break.

(MUSIC SOUND EXTRACTION)

MA: Air travel is back in the US American Airlines, Delta, United — all are predicting a return to profits this summer, and that’s after a pretty brutal few years in the pandemic.

HIRSCH: Hayley Berg is an economist at the travel app Hopper. She says demand is around 90% of what it was in 2020.

HAYLEY BERG: The main difference we’re seeing this year is that most requests from Americans are still for domestic travel. And those looking internationally are looking at more regional destinations – Mexico, Central America, South America, the Caribbean – rather than the long-haul trips that are usually very popular at this time of year.

MA: It’s an environment full of promise for airlines, but the profits announced by CEOs are not guaranteed. There are a few things that could get in the way, and one of the first is staffing. Airlines have laid off thousands of people during the pandemic. And while they’ve been hiring like crazy trying to get ready for this summer, in many cases they’re not even close to where they need to be.

HIRSCH: Yes. Federal data from February revealed that airline workforces were down 2% from the same month in 2020. Now 2% may not seem like much, but if demand is to be the highest, it’s been in 30 years. , as the CEO of United Airlines recently predicted, airlines will have to rush to hire if they want to reap the benefits. That means more flight attendants, more ground staff, more mechanics – all of whom need to be hired in one of the tightest job markets in decades.

MA: And maybe the biggest challenge is in the nose of the plane. Pilots are very scarce and airlines are struggling to fill the left and right seats in their cockpits. Casey Murray is a captain at Southwest and he is also president of the Southwest Airlines Pilots Association. He says this shortage has been on his radar for years.

CASEY MURRAY: It was planned for the last decade. But really, 2017, 2018, 2019 – everybody started seeing a drop in the number of pilots that were in the pipeline or even thinking about the pipeline.

HIRSCH: Yes. Airline pilot was one of those dream jobs in the 80s when the economy was booming. But a lot changed when the airline industry experienced severe turbulence in the 1990s.

MURRAY: It was a tough time for airlines. We have seen many bankruptcies. We saw 9/11, which created other problems. And then the Great Recession – we saw more bankruptcies. So, all that being said, it’s not been the most attractive career choice, as far as longevity goes, for many years.

MA: And Casey says the pandemic just made a bad situation worse.

MURRAY: All the airlines lost through various voluntary programs, early retirements. And now that we’re back on the other side and the industry is recovering, it’s really exacerbated and accelerated that pilot shortage. And that’s going to be a problem for the rest of the decade.

HIRSCH: Now, with consumer demand picking up, it looks like it might be a good time to become a pilot. But Casey says the road to the cockpit, or the bridge, if you prefer, is a long one.

MURRAY: It takes a lot. It takes a lot of time and a lot of education to get here. I mean, it’s very difficult, and it takes a lot of economic and time commitments to take the time to become an airline pilot.

MA: Some airlines, like Delta and Alaska, try to be proactive. So they create their own training programs. And that way they can have their own pipeline. But Casey says all that’s done is create another shortage.

MURRAY: Southwest is having issues getting people through the pipeline right now due to some issues with even hiring instructors to train.

HIRSCH: And all of this is a problem for the airlines, because although they have this golden opportunity to make a profit after years of losses, they may not have the resources they need to take advantage of this opportunity. I mean, if they don’t have pilots, they can’t fly the planes. If they can’t fly the planes, they can’t sell the seats.

MA: And the airlines seem to be dealing with this problem in a number of ways. First, they rush their pilots – pushing them to work more shifts and longer hours. And the pilots are obviously not happy about that. Alaska Airlines pilots picket. At Southwest, Casey Murray says his union just wrote to the airline saying it wants systemic changes to be made to prevent pilot fatigue.

HIRSCH: Pilot Fatigue – I don’t want a tired pilot flying my plane or a grumpy pilot, for that matter. Hopper’s Hayley Berg says the second way airlines are responding to this pilot shortage is to take a very flexible approach to the market, reduce traffic on certain routes and perhaps even cut routes altogether.

BERG: They will determine dynamically, where is the most demand? Where should we offer a few services a day rather than just one service a day? Where do we need a big widebody plane versus where can we just service a smaller plane?

HIRSCH: And over the years, airlines have developed this almost magical ability to adjust their services to meet consumer demand and adjust prices by the minute to fill planes and maximize their profits. But the magic of dynamic pricing only works when the conditions are perfect, and all sorts of factors can spoil the conditions.

MA: Like sickness – during the holidays, for example, a third of United Airlines employees at Newark airport called in sick in a single day, stranding hundreds of angry passengers. And there is the weather. In early December, more than a thousand flights were canceled due to heavy snowfall in the Pacific Northwest – with more angry passengers all demanding refunds on hotel rooms and meals.

HIRSCH: And then, of course, there’s the biggest spoiler of all – oil prices. As the price of oil increases, the cost of jet fuel also increases.

BERG: When kerosene prices rise, it affects the consumer. Typically, about 30% of a jet fuel price increase will be passed on to consumers. So we see a 10% increase in the price of kerosene, or an increase of about 3% in the price of your ticket. Clearly, we are seeing huge increases in jet fuel on the order of 52% compared to January. So if this continues, yes, airlines will have to adjust prices to counter this cost increase.

MA: Fuel prices could really end up raining down on airlines in the summer. And that’s because, you know, demand can increase, but it doesn’t increase equally in all areas. Business class, which is, you know, usually a cash cow for airlines, is actually recovering more slowly than coach class.

HIRSCH: And coach passengers, of course, are notoriously money conscious. Demand in the economy is very elastic…

MA: Economic vocabulary.

HIRSCH: …which means it can spin in the blink of an eye. If economy class seat prices increase too much, demand could suddenly collapse. That’s the theory, at least.

MA: But so far we don’t seem to have reached that point, even though prices are rising right now. In fact, the average cost of a domestic economy class airfare is up 7% from 2019, and it’s growing 7% per month, according to Hopper.

HIRSCH: There are a lot of issues for the airlines here. If things go wrong – another COVID spike or a massive increase in fuel prices – demand could evaporate and put airlines back on life support. But if things go well this summer, it could put airlines back in the dark. So they will be praying for clear skies and a strong tailwind.

MA: Hi. And, you know, maybe if things go well, they’ll even repay the $25 billion in loans they got in the COVID bailout. What?

HIRSCH: (Laughs).

MA: What did I say?

HIRSCH: Oh, Adrian, you’re hilarious.

MA: This episode was produced by Nicky Ouellet with engineering from Gilly Moon. It has been verified by Corey Bridges. Viet Le is our main producer. Kate Concannon edits the show. And THE INDICATOR is an NPR production.

(SOUNDTRACK FROM THE FILM, “AIRPLANE!”)

HAYS: (As Ted Striker) How are the passengers?

NIELSEN: (As Dr. Rumack) I won’t fool you, Mr. Striker. We are run out of time.

HAYS: (As Ted Striker) Surely there must be something you can do.

NIELSEN: (As Dr. Rumack) I’m doing everything I can. And stop calling me Shirley.

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