How long until US shutdown flight chaos returns back to normal?

00:00 Speaker A

Now let’s turn to the impact we’re seeing on airlines from the government shutdown, which led the Federal Aviation Administration to reduce air traffic by 10% at 40 airports across the country. Transportation Secretary Sean Duffy says commercial air travel in the U.S. will nearly decrease ahead of Thanksgiving. Joining us for more is George Ferguson, Senior Aerospace Defense and Airline Industry Analyst, Bloomberg Intelligence. George, it’s great to see you.

00:28 Speaker A

Looks like we’re getting to the end of this, hopefully. So how long will it take for schedules to return to normal?

00:37 george ferguson

So, I think you can do this in a few days. So there hasn’t been much outage right now, right? I think we’re still well under 10% of the cuts in operations. So there isn’t much to restore. I think airlines will sort of continue with their old schedules. I think the challenge is to pay the controllers and get them back to work immediately.

01:05 Speaker A

How much do you think this will cost the airlines when all is said and done?

01:10 george ferguson

Yeah, so we’re not too excited about it right now, are we? I think you see that in some stock prices today as well. Look, I think if you’re an airline right now and you’re asked to shut down some of your operations, you’re going to go pick some of the least profitable operations. You will choose the smaller plane and again they are not even 10%. You know, what I heard on Friday was around four or five percent.

01:40 george ferguson

So if you cut 4 or 5% of your worst performing flights, I think you might even see a slight margin increase and maybe on an absolute level profits are a little bit lower, cash flows are a little bit lower.

01:54 george ferguson

So we’re not excited about it yet. Now look, if this continues, I think controllers will be at a point where they’re missing enough paychecks that some of them won’t be willing to take on additional shifts, and that will create problems in the air traffic control system. I don’t think they’ll shirk their duties and be completely absent from work, but I still think some sort of extra shift helps keep things going in US airspace.

02:14 george ferguson

And I think then you’ll start to have more impact on operations and as we get into Thanksgiving, which is kind of peak travel, this is a big crisis travel period, then I think it starts to worry about profits for 4Q because those are generally high ticket prices, a lot of demand and that’s what’s going to help drive a lot of the airline profitability for 4Q.