American’s Q1: Labor Costs Up, Profit Down
American Airlines lost $312 million in the first three months of the year as it saw labor costs rise 18%, or nearly $600 million from a year ago. American expects to return to the black in Q2, to the tune of between $1.15 and $1.45 per share.
The carrier earned a cool $12.6 billion in gross revenue, including $11.5 billion in passenger revenue. It’s two biggest expenses were labor at nearly $4 billion and fuel at $3 billion, with the pair accounting for more than half the carrier’s costs for the quarter. Its domestic load factor was up 2.2 points but its yield dropped over 5% compared to 2023, while international load stayed almost flat, with the yield dropping by more than 6%.
AA ended the quarter with $703 million in cash, which if you believe the internet these days, most of which is due to CEO Robert Isom as a bonus.
American reported weakness in its managed corporate business. Look for more on that Monday right here on crankyflier.com.
Southwest Loses Money, Four Destinations
Southwest’s Q1 loss was $231 million and four airports, announcing in its Q1 earnings that it is ending service to Bellingham, Cozumel, Houston/IAH, and Syracuse. It’s a market exit for three of the four cities, but Southwest’s large presence across Houston at Houston/Hobby will still allow those who prefer salty death mix to stroopwafels to trudge across town to get it.
The loss came on a first quarter record figure of $6.3 billion gross revenues, most of which came in the form of EarlyBird sales that still ended up with customers in the B boarding group. Despite the first quarter loss, Southwest did have a profitable March, and like everyone else, it expects the remainder of the year to be better. As it looks to readjust future schedules and operations due to delivery delays from an unnamed U.S.-based aircraft manufacturer. The airline expects to retire just 35 airplanes this year instead of 49, and for rest-of-the-year growth to be below current economic trends.
In another effort to control costs, Southwest expects to end 2024 with about 2,000 fewer employees than at the end of 2023. This will come from not backfilling some positions that will leave their roles voluntarily this year while also forcing approximately five employees per station to have a Festivus-style Feats of Strength battle where the only way to keep your job is to pin the other four before one of them pins you.
Southwest FAs Ratify New Labor Agreement
Southwest Airlines flight attendants are the highest paid in the industry — for now — as they ratified their new agreement with the carrier, and it calls for immediate raises and some back pay.
Cabin crew at Southwest will see a 22% increase in salary effective May 1 and another $364 million in back pay to be paid out based on seniority at the carrier. The new contract also includes annual 3% raises on May 1 through 2027. The union also achieved paid parental leave, a first in the industry. Parents wishing to take advantage of this must sign up exactly 24 hours before the birth of their child and will be granted leave in the order in which they sign up.
Other items earned by FAs in this round of negotation include premium pay for extended duty days; additional holiday pay for Memorial Day, July 4th, and Labor Day; a provision allowing for hazard pay when working a flight between any NYC-area airport and South Florida; and a fine system for FAs caught telling terrible jokes over an aircraft’s PA system.
Delta Raises Pay for Most Employees
Delta Air Lines on Monday announced raises for many of its frontline staff. The simple child might claim the carrier is working to take care and reward its employees, but the wise child might say it’s another effort at staving off unionization efforts at the airline.
This is the third across-the-board raise for Delta since 2022, and it includes a 5% bump for flight attendants and ground staff plus an increase in starting salaries for most employees to at least $19 per hour. The pay bumps will go into effect on June 1 and will ultimately cost the carrier about $500 million per year — or roughly the cash equivalent to redeem SkyMiles for two round trips in Delta One between the U.S. and Europe.
In addition to those at the airport, employees at Delta headquarters will receive raises from a merit pool consisting of 5% of current salaries, with actual payouts ranging between 3% and 7% per employee.
United, Boeing Reach Compensation Agreement
United Airlines entered into an agreement with Boeing to compensate the carrier for money lost during the grounding of the B737-9 MAX grounding and the delay in the certification of the MAX 10.
United ended up posting a small loss during Q1 which it attributed directly to losses due to the MAX 9 grounding — now that it’s come to an agreement with Boeing, it is expected raise a banner in the United Center to retroactively acknowledge a profit for the first three months of the year. Despite Alaska receiving about $160 million cash from the manufacturer, United is not expected to receive cash, but store credit instead.
United will be able to use the credit for future airplane purchases or at the gift shop in Boeing’s corporate headquarters that comes at the end of the factory tour.
- Air Canada added a 4% increase of seats for domestic and transborder service this summer.
- AirAsia Cambodia has an airplane now.
- Alaska is adding 4x weekly service on a gaping hole in our nation’s air travel, as more service between Las Vegas and Southern California is exactly what we all needed.
- American blinked in its showdown with travel agents, delaying its announcement of its “preferred agencies” to the summer.
- ANA is beginning a new codeshare agreement with Air India effective May 23.
- Asiana‘s flight between Seoul/ICN and Osaka is a dream.
- Avelo is adding service on the criminally underserved market between Orlando and Miami.
- British Airways resumed flying to Abu Dhabi this week for the first time since the pandemic.
- Condor‘s first new A320 earned its stripes. Literally.
- Delta is bringing back a popular credit card design. It is also bringing back service between New York/JFK and Lagos on December 1, along with other aircraft changes on its service to Africa.
- Etihad has resumed daily A380 service to New York/JFK.
- Hawaiian expects to have its entire A321neo fleet back in service soon.
- Icelandair‘s cargo division is back in the black, just as we all predicted.
- JetBlue looks to improve the IFE experience.
- Korean is considering a purchase of as many as 10 B777x aircraft.
- Lufthansa has a new lounge concept coming, and it’ll debut the first one in Newark this summer.
- Lufthansa City Airlines, the 83rd brand developed by Lufthansa, began selling tickets this week and will begin revenue flights in June.
- Mexicana wants new airplanes, but it needs $1.2 billion first.
- MYAirline is no longer an airline.
- Qantas is retrofitting a first airplane with international Wi-Fi capability.
- SAA needs money.
- Transavia might leave Amsterdam. It also might not.
- T’way is t’wying to join Star Alliance, as is Air Premia.
- United will resume flying to Tel Aviv next week.
- WestJet is expanding its codeshare agreement with Korean.
- Wizz Air expects 2024 to be a good one.
When you get a bigger bed, you get more bed room, but less bedroom, all at the same time.
11 comments on “Cranky Weekly Review Presented by Oakland International Airport: AA, Southwest Lose Money, Southwest FAs Make Money”
On the one hand, I give Condor points for creative simplicity when it comes to its liveries, even if the basic design isn’t my personal favorite. The “softer” colors (like the blues/greens/yellows) in Condor’s vertical stripe liveries are one thing, but that “safety red” color livery from Condor is another thing altogether, and very harsh on the eyes. At least no one will have an excuse for hitting that plane, I guess; the colors remind me of the colors used on airport outbuildings and on large antennas, only with stripes.
The newly announced Alaska Airlines SoCal (San Diego) to Las Vegas service is 4x daily, not 4x weekly.
The huge labor gains are doomed to be hit hard in the future. Their will be a recession sooner or later. Companies will not be able to maintain fare levels. They will have to beg, furlough or chapter 11 their way back to a workable labor agreement and then the workforce will be mad that they had to make concessions.
I don’t know why they just won’t agree to modest pay raises tied into profit sharing as a bonus to protect themselves during inevitable downturns.
Note Dave C’s prediction for the end of the year assessment. “The huge labor gains are doomed to be hit hard in the future. … They will have to beg, furlough or chapter 11 their way back to a workable labor agreement and then the workforce will be mad that they had to make concessions.”
This assessment ties in well to blaming AA’s loss on labor and fuel costs that Delta has no problem covering profitably.
Inflation has been +25% since March of 2020. If you look at how food and other costs have risen, FAs should be compensated accordingly. SWA made a strategic calculation on what it needs to pay to retain FAs, create a satisfied workforce, and what it can afford. As Delta knows, little differentiates economy flying besides being ontime and the interaction with staff.
Agreed on the labor gains likely to be hit hard in the future, but I don’t really see another option for the unions, given inflation & other factors. Unions want more of the pie when the pie is growing (and want to take credit for the success), but will blame management when the pie shrinks, while still trying their best to preserve what they had won in the boom years. Even with more modest pay increases, I think management would still need to trim labor in the bust years.
Absent a LOT of trust between labor and management (and an almost parochial view of management, which isn’t the reality these days, especially in publicly traded companies), I’m not sure that I see much of an alternative for either side.
These jokes are on absolute fire.
There’s no way SWA can afford these new contracts.
Oh and AAL disappoints as always. That earnings script is damning and says a lot about American…
Besides Delta, no US airline made a profit in Q1. The money with airlines is made in the summer months.
19$ per hour for Delta staff? That’s one dollar an hour less than the minimum wage for employees of fast food establishments in California.
Starting minimum pay of $19 goes further in Detroit and Atlanta. In CA, NYC, BOS,… Delta has to pay wages that are market rate.
In much of the country (such as in the Midwest & Southeast, where 2-3 bedroom homes can be had for well under $200k), $20-25/hour is a decent blue collar wage, doubly so with a dual income family.
Except for those in VERY specialized occupations, it rarely pays to live in high cost of living areas, as one gets a much better standard of living by making a little less but paying a lot less while working in areas with lower costs of living (again, such as the Midwest & Southeast).