Advertising
  • News
  • Airlines
  • Business strategy
  • American sees close-in demand hit from government shutdown

American sees close-in demand hit from government shutdown

American Airlines sees an impact on close-in bookings from the continuing partial US government shutdown, now in its 34th day, but is holding off on estimating the cost of the closure until a resolution is reached.

"We would just encourage the government to get open," says Doug Parker, chairman and chief executive of Fort Worth, Texas-based American, speaking to analysts during its fourth quarter earnings call today.

When asked about the cost of what executives describe as "softness in 0-14 day travel" from the shutdown, they emphasise that the airline will wait until after the government reopens to determine the full cost.

Both Delta Air Lines and Southwest Airlines have estimated the cost of the shutdown on their businesses, with the former saying it costs them roughly $25 million a month and the latter roughly $10-15 million monthly.

However, American operates a hub at Washington DC's close-in Ronald Reagan Washington National airport, which is popular for government travel.

Cowen analyst Helane Becker said American was among the US carriers likely the "most impacted" but the government shut down, citing its hub at Washington National, in a report on 18 January.

American is bullish for the first quarter, all things considered. It anticipates a flat to up 2% improvement in total unit revenues (TRASM), and sees continuing strength in corporate demand.

More than 800,000 federal employees have been furloughed since 22 December 2018 as the result of a standoff between President Donald Trump and Congressional Democrats over funding for a wall on the US border with Mexico.

Airline revenues are not the only casualty of the shutdown. Alaska Airlines has postponed its new service to Paine Field north of Seattle by nearly a month to March as a result of furloughed Federal Aviation Administration staff, while airport security wait times have increased across the USA as increasing numbers of furloughed Transportation Security Administration screeners have not shown up for work.

The leaders of the Air Line Pilots Association (ALPA), Association of Flight Attendants-CWA (AFA) and National Air Traffic Controllers Association (NATCA) expressed concern that the shutdown, which also has air traffic controllers working without pay, could have a negative impact on aviation security, according to a joint statement on 23 January.

"We don't need distractions," says Robert Isom, president of American, on the safety implications of furlough TSA staff and air traffic controllers. "We need people to be at work and confident and taken care of."

The impact of the TSA and FAA furloughs, to date, has only been longer waits for passengers at airports and increased aircraft spacing at busy airports, says Parker.

However, Parker admits that airport waits are only likely to get longer, and increased aircraft spacing at airports to result in more operational issues if the shutdown continues.

Advertising
Related Content
Advertising
What's Happening Around "American Airlines"