Travelers can be seen ahead of the fourth of July holiday weekend at Hartsfield-Jackson Atlanta International Airport on June 30, 2023, in Atlanta, Georgia. Flight disruptions accumulated at airports across the country in anticipation of the July Fourth weekend, but investors in the airline industry have largely disregarded them. Between June 24 and July 2, more than 63,000 flights operated by U.S. airlines, accounting for 30% of their schedules, experienced delays. Additionally, over 9,000 flights, or 4.2%, were canceled. These percentages exceed the disruption averages observed this year, according to the flight-tracking site FlightAware.
Disruptions decreased on Tuesday, with nearly 2,500 U.S. flights experiencing delays, half the number delayed on Monday. However, thunderstorms continued to impact flights at major airports such as Newark and Denver. The recent delays were primarily caused by severe storms and a shortage of air traffic controllers in congested airspace around New York and other regions, resulting in travel disruptions for thousands of passengers. This disrupted what had been a relatively tranquil spring for travelers.
Despite these challenges, the high demand for travel has kept airline stocks strong, with several reaching multi-year highs. On Sunday, the Transportation Security Administration reported screening nearly 2.9 million people, setting a new record for a single day. This is a clear indication of the persistent demand for air travel as passengers book flights, utilize rewards points, and make up for lost time after the COVID-19 pandemic halted travel. American Airlines and Delta Air Lines have recently increased their profit outlooks due to robust bookings, while lower fuel prices from last year continue to benefit the industry.
Major U.S. carriers’ stocks have outperformed the broader market this year. United Airlines and Delta are up 46% and American Airlines is up 42%, compared to the S&P 500’s 16% gain during the same period. Delta and United recently reached their highest levels since June 2021. Southwest Airlines, which experienced significant disruptions at the end of 2022, resulting in a first-quarter loss, has seen a 10% increase in its stock value this year.
Despite the recent travel chaos, many airline stocks have outperformed the S&P 500 over the past week. The NYSE Arca Airline Index, which primarily tracks U.S. airlines, has gained 51% year-to-date, surpassing the S&P 500’s 16% gain. However, United Airlines’ stock dropped 1.7% as the carrier struggled to stabilize operations amidst ongoing storms at Newark Liberty International Airport.
United had the highest share of delays among U.S. carriers between June 24 and July 2, accounting for 42% of its mainline schedule, according to FlightAware. The Federal Aviation Administration reduced the departure rate at Newark, leading to a buildup of delays. When planes cannot depart, arriving flights lack parking space, causing disruptions to escalate. United CEO Scott Kirby explained that the airline will need to reduce its schedule in Newark, particularly during the spring and summer thunderstorm season, to avoid these pileups unless the airport increases its capacity. Thunderstorms pose challenges for airlines as they can occur suddenly and are harder to predict compared to other weather phenomena. Airlines often choose to delay flights rather than cancel them, awaiting clearer weather and airspace availability. However, this can contribute to disruptions as crews reach their federally-mandated workday limits.
David Neeleman, founder and former CEO of JetBlue Airways and current CEO of Breeze Airways, noted that airlines have limited options when faced with significant cuts to arrival rates. Proactive cancellations could be made, only for the weather to improve later on.