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The government shutdown creates headwinds for airlines

FILE: Southwest Airlines Earnings Up Southwest Airlines Finds Five Planes In Its 737 Fleet In Need Of Repair
A Southwest Airlines Boeing 737-700 passenger jet taxis on the tarmac after arriving at Los Angeles International Airport. The airline says the partial government shutdown is delaying the start of service to Hawaii.
(Kevork Djansezian / Getty Images)

The nation’s airlines are blaming the partial federal government shutdown for putting another dark cloud in their path, with few federal workers and contractors taking to the skies and stalled federal agency approvals causing delays in expansion plans, including Southwest Airlines’ much-anticipated service to Hawaii.

The Washington impasse comes at a time when the travel and hospitality industries have been reporting healthy profits but face strong headwinds from higher jet fuel prices and increasing costs for employee salaries and benefits.

The airline industry echoed the complaints of other business leaders in the U.S., who are saying the federal deadlock threatens to weigh down an otherwise thriving economy.

Airlines for America, an industry trade group, and the U.S. Chamber were among 645 national state and local business groups that sent a letter Thursday to President Trump and members of Congress urging them to reopen the government.

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“The time to act, the time to end this shutdown is now so that we can keep the economy moving forward,” the groups said.

The airlines’ concern also was voiced during earnings reports in the last few days.

“We have seen some impact, but there is a lot of uncertainty with what is going to happen going forward,” Donald B. Casey, senior vice president for revenue management at American Airlines, said of the shutdown during an earnings conference call with analysts Thursday. “So, we have not yet put a dollar value on it.”

Other airlines have been more specific about revenue lost because federal workers and contractors have canceled trips to attend conferences and meetings.

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Southwest Airlines, the nation’s largest domestic carrier, estimated Thursday that the shutdown has cost it $10 million to $15 million in revenue so far in January. Delta Air Lines forecast last week that the shutdown would cost the Atlanta-based carrier $25 million in revenue in January.

“We need to get the business moving again,” said Ed Bastain, chief executive of Delta Air Lines, during an interview on CNBC.

The shutdown, which began more than a month ago, has left about 800,000 federal workers furloughed or working without pay. For airlines, that also means federal regulators have stopped inspecting new planes to put into service.

Southwest Airlines had been expected to begin service to Hawaii early this year, a development that many travel experts predicted would push down air fares charged by all carriers flying to the Aloha state.

But in discussing earnings Thursday, Southwest executives said the plans to begin flying to Hawaii were held up because a federal procedure to certify the airlines’ planes to make the trek across the Pacific Ocean has been halted because of the government shutdown.

“Our remaining work is currently suspended until the government reopens and the FAA is allowed to resume normal certification activities,” Chief Executive Gary C. Kelly said in a statement. “We are anxious for the government to resolve this shutdown so we can bring low fares and a boost to Hawaii’s travel and tourism industry.”

Southwest Airlines has been planning to fly to four airports in the state of Hawaii from Oakland Metropolitan Airport, San Diego International Airport, Mineta San Jose International Airport and Sacramento International Airport.

Meanwhile, a coalition of unions representing pilots, flight attendants and other airline workers issued a statement Thursday, calling for an end to the impasse, saying it is threatening the safety of the industry.

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“The longer the shutdown goes on, the greater that threat becomes,” the coalition, dubbed the Transportation Trades Department, AFL-CIO, said. “Lawmakers have a responsibility to preserve the safety and integrity of our nation’s aviation system by re-opening the federal government.”

The FAA has repeatedly said that the nation’s airspace is “fully safe and operational.”

The U.S. Chamber of Commerce said Thursday that the partial shutdown could have a major effect on about 41,000 small businesses across the country that do contract work for the shuttered federal agencies, including the Department of Homeland Security, the Agriculture Department and NASA.

Those businesses have about $2.4 billion in contract funding at risk based on an analysis of last year’s spending data from the agencies. In California, 5,185 firms have about $183 million in federal government contracts at risk, the U.S. Chamber said.

“During the government shutdown, affected agencies are not procuring goods and services from these small businesses,” the U.S. Chamber said. “This not only impacts the cash flow of small businesses during the shutdown, in some instances small businesses will be unable to make up the lost contract work or sales.”

In addition, companies awaiting payment from agencies closed by the shutdown might not get checks processed because federal employees who do the work are not on the job, said David J. Berteau, president of the Professional Services Council, which represents government contractors providing various services.

“We have companies that have invoices back to October and November and they have not been paid for that,” Berteau told reporters on a conference call. “Many companies don’t have cash reserves or credit lines to sustain it.”

hugo.martin@latimes.com

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To read more about the travel and tourism industries, follow @hugomartin on Twitter.


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