If industry observers were asked to name the airlines that were setting the global standards during this year’s northern hemisphere summer peak season, Delta Air Lines and Ryanair would surely have been among those named – up until a little over a week ago, anyway.
But for very different reasons, a four-day period beginning 19 July has reminded both carriers of the airline industry’s uncanny ability to rain on a parade.
“I’m confident we’ll see an even-more constructive industry backdrop through the back half of the year into 2025,” said Delta chief executive Ed Bastian on 11 July, as the airline outlined a profitable second quarter.
Just over a week later, however, a global IT outage thrust the airline sector into the spotlight as carriers worldwide grappled with associated challenges.
But while most of that grappling lasted only a day or two, Delta was still cancelling flights well into the middle of this week, after it lost track of crew locations and was forced to implement manual solutions.
That left it exposed as the major airline that took the longest to overcome the impact of the Crowdstrike-related issues.
Cue the airline PR nightmare of luggage piled high and angry passengers as Delta worked to restore order amid the cancellation of almost 7,000 flights.
The carrier said its operations were largely back on track by Wednesday, but the impact on the business will likely only become clear in the coming weeks and months.
Analysts suggest it could face a financial hit in the hundreds or millions of dollars, based on their experience with similar incidents.
And the Department of Transportation (DOT) has launched an investigation into whether the SkyTeam carrier was complying with passenger-protection laws, meaning fines could be on the horizon.
Delta will also face pressure to reassure staff, customers and investors that its IT systems are up to scratch – pressure that might entail an unplanned round of technology investment.
Bastian himself has plenty of goodwill in the bank – the IT challenges emerged just as he was being recognised at the Airline Strategy Awards as an “innovative and inspirational leader” – but this is an unexpected test of his crisis-management capabilities, albeit for a crisis that was not of Delta’s making.
In Ryanair’s case, the challenges were more ‘business as usual’ in nature, but were no less noteworthy given what has come since.
When the pan-European low-cost carrier announced on 22 July much softer-than-expected fares during the summer peak travel period, airline stocks tumbled on the assumption that more negative news was on the way from other carriers. There was particular concern that Ryanair said it was needing to stimulate demand across its network.
And only in May it had been guiding for yields to be “flat to modestly up”.
Might this herald an urgent move to moderate capacity across the European short-haul sector in an attempt to arrest the yield declines as consumers cut back on spending?
Not so fast.
Since Ryanair’s commentary, EasyJet has been joined by Air France-KLM in outlining much more benign views on yields and demand, suggesting a dichotomy of experience between Europe’s biggest airline groups – and one where Ryanair seems more exposed to negative factors than others.
This is unusual and it may be some time before the narrative has clarity.
Explanations might come from Ryanair’s relatively strong capacity growth versus peers during the Covid era, its relatively high yields versus pre-pandemic times, which left it with further to fall, or its focus on secondary airports where there is less potential for uplift from consumers “trading down” from network carriers.
It could also be that other airlines begin to see similar yield and demand softness after a short delay (commentary from Finnair and Norwegian suggests Ryanair was not alone with its challenges in the April-June period, and Lufthansa Group has so far cut its full-year guidance twice).
But until there is more clarity, Ryanair looks to be on the back foot versus some competitors – an unfamiliar position for what is usually Europe’s airline to beat.