Summer’s ending with a thud for US airline stocks, as a litany of problems from rising oil costs to flagging domestic-travel demand threaten earnings. The 10-member S&P Supercomposite Airlines Index fell 9.5% in August, for its worst monthly decline since December. The slump coincides with a souring mood on Wall Street toward the sector: Analysts have cut their earnings-per-share estimates for 2023 by an average of about 15% in the past month for the index members, according to data compiled by Bloomberg. The index is well off its year-to-date peak after surging almost 29% through July, with fewer potential positive catalysts between now and the year-end holiday season. “With the airlines, particularly in the domestic market, we are well past the peak,” said Conor Cunningham, an analyst at Melius Research. “You look out to 2024 and the pricing environment’s worse and now you have fuel higher.” This week, Cunningham reduced 2024 targets for every US airline he covers — outside of Hawaiian Holdings Inc. — as costlier fuel compounds the hit from lower fares. Earlier in the month, Goldman Sachs Group Inc.’s Catherine O’Brien lowered price targets across her airlines coverage, citing higher jet fuel prices as one factor. Many of the smaller carriers such as Spirit Airlines and Alaska Air Group suffered from a shift in demand to international destinations at the expense of US cities. That was good news for legacy carriers Delta and United, which have robust overseas routes and capacity that is tracking higher, according to Evercore. The firm estimates that international capacity for the third quarter is up 20%, with domestic capacity up 10%.<br/>
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US airlines are gearing up for one of the busiest weekends of the Northern hemisphere’s summer travel season. The US Labour Day holiday, which falls on the first Monday of September – this year that’s 4 September – marks the final long travel weekend of the season. Most schools and universities will have begun their new sessions by the first week of the month. Chicago-based United Airlines said on 24 August that it’s preparing for “a record-breaking Labour Day holiday” with about 2.8m guests expected to fly on the carrier’s aircraft. Travel demand is up 13%, the company adds, and will surpass pre-pandemic levels. “The biggest trend we’re seeing this year is that more people are sneaking in an international trip before the end of summer: bookings for international travel over the Labour Day holiday period are up 35% versus 2019 and up 29% compared to last year,” United says. “And – like other long holiday weekends post-pandemic – more people are flying to their vacation destination earlier and leaving later.” The number of people flying on the Friday before Labour Day is down “slightly” compared to 2019 – but demand is up on both the Thursday before the holiday and the Tuesday after, the airline adds. American Airlines, meanwhile, says it is expecting to welcome “nearly 3.5m customers across nearly 32,000 scheduled flights — a schedule that’s about 20% larger than our closest competitor”. The busiest travel days are forecast to be 31 August and 1 September, the Fort Worth-based carrier says. The airline has in excess of 5,800 flights scheduled for each of those days. Atlanta-based Delta Air Lines says it estimates it will fly between 3.3 and 3.4m passengers over the five-day holiday period. That would be an average of about 550,000 per day. During the same period last year the carrier transported nearly 2.9m customers, and about 3.1m in 2019. Alaska Airlines adds that it expects to transport 700,000 passengers, up 8% from last year. <br/>
The Mexican government ordered Mexico City’s old airport to cut flights by 17% Thursday, sparking warnings by airlines of possible mass flight cancellations. The new rules scheduled to take effect by Oct. 29 would require the terminal to reduce the number of flights per hour at the airport from 52 to 43. The airport has a design capacity of around 61 flights per hour, but that has already been cut to 52 previously. The airport has maintenance problems, including flooding or sewage smells in some areas. But the country’s airline industry chamber says that’s because the government took away the terminal’s revenues to pay for an airport project elsewhere that was later cancelled. The National Air Transport Chamber said the new rules for the Mexico City International Airport, or AICM, would hurt passengers, airlines and industry workers. “This unexpected reduction planned to start on Oct. 29 will imply the need to massively cancel flights, including for passengers who have already bought tickets,” the chamber said in a statement. “The real problem of the AICM is that the revenue it generates is not invested in its infrastructure.” When President Andrés Manuel López Obrador took office in late 2018, he immediately cancelled his predecessor’s partly-built project of a new, larger terminal in the nearby township of Texcoco. Instead, López Obrador built another new terminal at an army airbase much further to the north, but passengers and airlines have been loathe to switch to the Felipe Angeles airport, because it’s farther away.<br/>
Transparency from the Mexican government on flight operations in Mexico City is a concern, US carrier Allegiant Air argued in a presentation made public Wednesday, appearing to confirm the US government's worries over a federal order moving cargo flights out of the capital's main airport. US regulators suspended review of a proposed joint venture between Allegiant and Mexican airline Viva Aerobus earlier this month, citing concerns over recent actions by the Mexican government affecting the Mexico City International Airport (AICM). Regulators did not specify what those actions were, but Mexican officials had speculated that a government decree requiring cargo flights be moved out of the hub was behind the friction. Mexico earlier this year ordered that cargo lines stop operating at the AICM, instead pushing them to move operations to the military-run Felipe Angeles International Airport (AIFA) north of Mexico City. Mexico extended the deadline for carriers to make the move to September after a request from U.S. Transportation Secretary Pete Buttigieg on behalf of concerned U.S. airlines, according to Mexican officials. In a presentation given to the U.S. Department of Transportation and the State Department on Aug. 17 and published Wednesday, Allegiant argued that while "transparency is a concern," the cargo move does not harm American interests and that suspending its proposed tie-up with Viva was "based entirely on speculation." Instead, the Mexican government seemed intent on promoting a to-be-launched military-run commercial airline, Mexicana, and the AIFA, at Mexican carriers' expense, Allegiant argued.<br/>
European aviation regulators have determined that an obscure London-based company supplied bogus parts for repairs of jet engines that power many older-generation Airbus A320 and Boeing 737 planes. Manufacturing partners General Electric and Safran have been assisting in the probe of allegedly faked certification documents and unapproved parts for CFM56 engines that were distributed by London-based AOG Technics, according to the companies, public regulatory filings and letters to operators viewed by Bloomberg. “Numerous Authorised Release Certificates for parts supplied via AOG Technics have been forged,” the European Union Aviation Safety Agency said in a statement in response to Bloomberg queries. In each case, the organization identified as the manufacturer “confirmed that they did not produce the certificate, and that they were not the originator of the part,” EASA said. The spread of undocumented or potentially faked parts into the engine supply chain is rare and treated with utmost urgency in an industry where every component requires verified provenance to ensure aircraft safety — it’s impossible to know whether uncertified parts will be as durable under stress. Manufacturers and regulators sounded the alarm weeks ago, triggering a global scramble to trace parts supplied by AOG Technics and identify affected aircraft. It’s unclear how many fake parts may have been installed or how many aircraft might be affected. The CFM56, the world’s best-selling jet engine, is installed on thousands of narrow-body planes that are a staple of the global fleet. EASA told operators this month to quarantine parts that are backed by false documentation. It said Thursday that to date, AOG Technics had failed to provide detail on the actual origin of the questionable parts. <br/>
European Union Aviation Safety Agency strategy director Luc Tytgat will oversee the regulator from the beginning of September, as the authority seeks a permanent successor to executive director Patrick Ky. Ky steps down as the head of EASA on 1 September having served a second five-year term in the role. He sought to simplify the authority’s procedures in order to establish more efficient rulemaking processes, and led the organisation as it dealt with the impact of the pandemic and the proliferation of electric VTOL programmes. But he was also tasked with steering EASA through the safety crises which emerged in relation to the Boeing 737 Max, the shooting-down of Malaysia Airlines flight MH17, and the deliberate crash of a Germanwings Airbus A320. “I am proud of my legacy,” says Ky. “EASA is now a worldwide reference point for aviation safety. We have been consistently on the forefront of innovation and have simplified and adapted our rules to meet the needs of the entire aviation industry.” Tytgat joined EASA in early 2015 having held responsibility for air transport and space domains in the European Commission. His career has included serving with Eurocontrol and he has held senior positions in relation to the Single Sky initiative and Galileo satellite-navigation programme. He has assisted with developing a more “agile” regulatory framework, says the authority, and has re-aligned EASA’s strategy with respect to environmental, safety and security concerns. As acting executive director, Tytgat says his aim is to ensure that EASA “continues to deliver on its many projects” and make certain that its “operational and reputational position remains intact”. UK regulatory consultancy CAA International’s former managing director, Maria Rueda, will succeed Tytgat as EASA director of strategy and safety management in October.<br/>
More than 40 flights were delayed on Thursday morning at Moscow’s Vnukovo and Domodedovo airports, the Kommersant daily reported, citing a flight tracking website, with no reason given for the delays. Airports in the Russian capital have in the past weeks suspended flights repeatedly due to what Russian authorities said were Ukrainian drone attacks on the city.<br/>
A new terminal is set to open at Abu Dhabi International Airport in early November after six years of delays, state-owned operator Abu Dhabi Airports said on Thursday. Known as Midfield Terminal building during its construction phase, where key parts of Tom Cruise’ latest “Mission: Impossible” movie were shot, will accommodate up to 45m passengers per year. “The opening will mark a significant milestone for the emirate that has the potential to transform the local aviation ecosystem, strengthen Abu Dhabi’s growing reputation as a destination of choice for travellers,” Abu Dhabi Airports said. The Midfield Terminal, which was originally due for completion in 2017, was designed to complement the growth of Abu Dhabi’s Etihad Airways as it competes with neighbouring global carriers Emirates and Qatar Airways. It was 97.6% completed in 2019, Abu Dhabi Airport’s CEO Bryan Thompson said at the time. That was followed by a year of funding disputes between Abu Dhabi Airports and contractors over who should foot the bill towards a testing, two sources told Reuters in 2021. <br/>
The country is likely to ease visa rules for Chinese and Indian travellers and allow longer stays for visitors from all nations as new Prime Minister Srettha Thavisin looks for ways to boost tourism revenue to nearly US$100b (RM464.5b) next year. Chinese – the largest group of visitors before the pandemic – face a costly and cumbersome visa-application process, which has been a drag on the tally this year, according to the premier. Meanwhile, travellers from India must pay 2,000 baht (RM265) for a 15-day visa on arrival. Srettha said he wants the list of visa-exempt countries expanded as well as increased stay limits for most international travellers, with caps of 15 days or 30 days for many nationalities. Srettha discussed options with executives of Airports of Thailand Pcl and several airlines on Monday, with the near-term aim of attracting more foreigners in Q4, typically the peak season for tourism. The airport operator agreed to reduce bottlenecks to augment flights capacity by 20% and find ways to speed up immigration clearances, Srettha said on X. The new government aims to lift revenue from foreign tourists to 3.3t baht next year, with the travel industry offering “the best short-term economic stimulus,” Srettha said.<br/>
The Auckland Council is selling a NZ$800m ($476.88m) block of shares in Auckland International Airport on Thursday, according to a source with direct knowledge of the matter. The trade is made up of two portions with about NZ$300m worth of stock allocated to some pension fund investors at NZ$8.12 a share, a premium to its closing price on Thursday, according to the source, who could not be named as they were not permitted to speak to media. Auckland Council and Auckland International Airport did not immediately respond to a request for comment sent outside of business hours. The remainder of the stock is being sold to investors who have been told to bid between NZ$7.82 to $NZ8.20 each in increments of 2 cents, a term sheet seen by Reuters said. UBS is the sole bookrunner on the deal and bids close at 1030 GMT, the term sheet said. Auckland Council voted in June to reduce its stake in Auckland International Airport from 18% to 11%.<br/>
Whenever you’re traveling somewhere by plane, you have to pack, get to the airport, go through security, find your gate and — in the last step before you can finally relax while being taken to your destination —board the aircraft. “Boarding is one of the most difficult parts of air travel and frustrating to a lot of passengers,” said Leslie Josephs, CNBC’s airline reporter. In the 1970s, Southwest Airlines’ average turn time, from the moment a plane arrives at the gate to the time it leaves, was only 10 minutes. Today, it’s more like 45 to 55 minutes. “We had smaller aircraft, only 122 seats on those original 737-200s,” said Chris Parks, Southwest’s director of innovation. “Southwest has grown and become more popular.” Flight delays cost airlines and passengers about $33b each year, according to government data. But experts say speeding up the boarding process is not really a priority for airlines — they’ve monetized everything about it. “The major airlines have raised billions of dollars off of their loyalty programs, so it is very important that they keep them appealing enough for customers,” said Josephs. “The different boarding groups that we see today have emerged because people value their priority in boarding,” said Kerry Philipovitch, former senior vice president of customer service at American Airlines. “So airlines are using that to generate more revenue and reward their best customers. “Does that slow the process down?” Kerry added. “Maybe.” Since the end of 2022, Southwest has been testing new concepts to improve its turn times. The company’s goal is to shave off two minutes.<br/>
United Parcel Service Inc. is offering a voluntary severance package for 167 pilots amid a slump in air freight volume. “As part of our effort to efficiently manage our airline, we are offering a voluntary separation benefit to eligible UPS pilots,” UPS said in a statement. The company is seeking to convince 157 captains and 10 first officers to accept the offer, said a spokesman for the Independent Pilots Association, the union that represents the 3,400 UPS pilots. The offer was first reported by WDRB in Louisville, Kentucky. Air freight demand has dropped as consumers shifted spending to services and away from the goods that fueled a boom of package delivery during the pandemic. Volume at UPS’s international segment fell 6.6% in the second quarter from a year ago and international flight hours dropped 9.4%. The offer will include cash and health-care benefits for the pilots who accept, the company said in the statement. UPS announced earlier this month it had reduced management positions by 2,500 during Q2 from a year ago. <br/>