As airlines in the US begin reporting results, longer delays started to occur across the board at US airports since 10% of the air traffic controller staff in the US were furloughed for two days a month as part of the so-called sequester mandatory budget cuts to save $600 million.
For the second day in a row, average delays at Los Angeles International Airport were 77 minutes last night. However some 400 delays nationwide were reported yesterday that averaged 85 minutes at New York's LaGuardia airport and 70 minutes at JFK. Sporadic delays were reported yesterday at the US Airlines hub at Charlotte.
Nick Calio, president and CEO of Airlines for America, said: "The FAA has a budget of $15.6 billion dollars. A budget that big, surely they can find the money to not furlough the air traffic controllers and have this kind of rolling impact on the US economy -- it's gonna cost a lot more." That of course is a bit harsh, $15.6bn might be a big number but you only have to think for a moment about how far this has to stretch to get an idea of the shortfalls.
Some 400 flights were cancelled yesterday with 6,997 delays and 207 flights cancelled on Sunday with 4,842 delays with LGA, FLL and MCO the worst affected airports where just under half of all flights were delayed.
Meanwhile, airlines are starting to report their first quarter earnings and all the signs are that this be the most profitable first quarter ever for the airline industry even though this quarter is usually the slowest three months of the year. Delta is expected to report earnings per share of 6 cents on revenues of $8.51 billion, while US Airways earnings are expected to reach 28 cents per share on $3.37 billion in revenues. Hawaiian Holdings is expected to post earnings per share loss of 23 cents on revenues of $494 million.
Investors need to be aware of the potential impact at airlines with hubs particularly at risk from sequester delays if yesterday is anything to go by. The fact that LGA is the worst affected is bad news. NYC has three major airports and thus there is a choice, if LGA continues to be worst affected then there could be an impact on bookings for flights leaving from LGA. That in turn would affect Delta and JetBlue more than most. Keep an eye on this as the last thing the FAA wants to do is cause an impact on some airlines more than others and it might be that some airfields can handle more cuts than others and the FAA should act. There is no easy fix here.
Airlines, especially in the US, remain bullish but oil and the FAA might well peg that back in 2013. Maybe the US should think about (I am getting my flak jacket on right about now) some sort of temporary passenger tax to plug the FAA budget shortfall? If well-advertised as a benefit to passengers then the US public might just let it go through.
Delays start in the US; impact assumed on airline earnings in the future but today is all about the past
