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This is a great time for airlines and a bad time for passengers.

This is a great time for airlines and a bad time for passengers.

US airlines had one of the most profitable quarters in history. And the passengers suffered because of it.

The record revenue that many airlines reported in April, May and June came from very high airfares and crowded planes. A series of service interruptions caused by staff shortages made the flying experience even worse.

In the second quarter, American Airlines, United, Delta and Southwest, which account for 80% of US air travel, earned a total of $2.8 billion. Sales rose 10% from the pre-pandemic quarter in 2019 to $46 billion as demand for leisure travel increased.

Airlines reported record bookings in June for travel through the rest of the summer. But they are flying with fewer seats available than they did before the pandemic: Capacity on the four biggest airlines is down about 13% from three years ago.

This combination of very strong demand and limited availability has sent rates soaring.

High fares, canceled flights

The amount paid by passengers per mile on the big four carriers increased 19.3% in the second quarter compared to 2019. Another fare measure that compares passenger revenue to capacity increased 22%.

But these increases don’t tell the whole story. Business and international travel have not returned to pre-pandemic levels. These tickets usually cost much more than domestic air tickets.

Unlike in previous years, when airlines were able to avoid some rate increases for leisure travelers by increasing fares for business and international passengers, this year most of the rate increases are hitting domestic passengers.

“The leisure traveler is struggling with it, and yet they’re willing to do it,” said Jim Corridore, senior insights manager at research firm Similarweb.

Service has become a big issue too. About 134,000 U.S. flights have been canceled so far this year, according to tracking service Flight Aware, more than double what was canceled in the same period last year. This represents 2.6% of all flights scheduled so far this year.

Staff shortages also affect passengers.

Airlines don’t have enough personnel to recover when events like bad weather cause delays or when flight crews reach the maximum hours they can work under federal safety regulations.

Pilot shortages have also led airlines to halt or reduce service to dozens of smaller markets, greatly limiting or even ending air service for many communities.

During the pandemic, operators have offered early retirement and other purchase packages to make voluntary staff reductions. All of them are still struggling to get operations back to normal as they struggle to hire and train the staff needed to restore capacity.

“Many pilots have retired. It’s not easy to replace them,” said Corridore. “It’s a long process, it will still take a year or more for airlines to have a full schedule that this level of demand will dictate.”

Complaints also increase

Passenger complaints to the Department of Transportation have risen to more than triple pre-pandemic levels.

Senators Elizabeth Warren and Alex Padilla urged Transportation Secretary Pete Buttigieg last month to crack down on the airline industry.

The Department of Transportation on Wednesday announced new rules that would require refunds if a flight is canceled or interrupted, including delays of three hours or more on domestic flights, delays of six hours on international flights, a change in aircraft type or an increase in the number of connections on a trip.

But in a deregulated industry, there’s little Buttigieg can do about the tariffs themselves.

Mergers mean fewer options

Many blame the industry’s consolidation over the past 20 years on the current state of travel. Today’s four dominant carriers were created from 10 airlines through a series of mergers. And another merger was announced last week that many fear will once again lead to higher prices.

Spirit, a pioneer in offering very low base fares that are supplemented by fees for all sorts of extras, has pushed big airlines to offer similar no-frills seats at a lower price.

But Spirit recently agreed to be bought by JetBlue Airways for $3.8 billion in cash. The combination will form the country’s fifth-largest airline, which JetBlue says will create more competition between its four biggest rivals. But other experts say the loss of Spirit, if the merger goes through, can only mean higher tariffs in the future.

“Rates are likely to increase if a price-disruptive competitor leaves,” said Corridore.

Source: CNN Brasil



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