ATW and Routes editors discuss how the world’s airlines are adapting to airspace and airport closures, record high oil prices, a fatal crash in the U.S. and chaos at airport security screening.
For more details on the TSA situation discussed in this episode, check out Aaron Karp's latest update.
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AI-Generated Transcript
Karen Walker (00:10): Hello everyone and thank you for joining us for Window Seat, our Aviation Week Air Transport podcast. I'm ATW and Aviation Week air transport editor-in-chief, Karen Walker. Welcome on board. So our topic this week this came to me because I was thinking in all my years covering this industry and through crises like crashes, SARS, 9/11, wars, the COVID pandemic, of course, I don't think I've ever seen such a convergence of events in a few short days that directly affect the industry as has happened in this past week. Of course, we had the ongoing war in Iran with the continued effects on air space availability, airline networks, and the price of oil. Then there was the tragic collision of an Air Canada regional jet with an emergency rescue truck at New York LaGuardia Airport on Sunday night, in which both pilots were killed and dozens of people were injured.
(01:06): This is a time when the US air management system is under heightened scrutiny. And then the US Department of Homeland Security, which includes the Transportation Security Administration, or TSA, was shut down in mid-February in a congressional dispute over the use of DHS immigration and customs agents. And as predicted, TSA officers who provide security screening at America's airports have been resigning or calling in sick in greater numbers the longer the shutdown has gone on because their pay is withheld. The shortage of officers has led to hours-long queues at some airports across the country this past week. It's a critical role, but TSA officers are also people who have to pay their bills, buy food and gas and take care of their kids. And no one so far seems to be indicating to them when and how this mess will be resolved. So quite a week in commercial aviation, sadly.
(02:03): The good news is that leaders at airlines, airports, and those in charge of the system's safety and security have learned the value of adaptability and flexibility, and they have new and more sophisticated tools they can use when things don't go to plan. So what are they doing to adjust and cope? To discuss that question, I am delighted to be joined by my colleagues and senior Aviation Week editors, David Casey, our Routes editor-in-chief, and Aaron Carp, our ATW and Routes Senior Editor. David, Aaron, welcome. Also, let me note that David is based in the UK while Aaron and I are based in Washington, DC, so we can approach this conversation from an international perspective. So let's start with the Iran war and the effects on airline networks, and David is a network expert. So David, looking at the Middle East and the major Gulf airlines of Emirates, Etihad and Qatar Airways, the percentage of flights being canceled of late has definitely reduced since the war began, but most of those carriers have also significantly reduced their number of flights compared to the year ago.
(03:10): So give us a snapshot of where things stand.
David Casey (03:13): Yeah, that's right, Karen. The cancellation percentages have come down quite a bit compared to the early days of the conflict, but that probably hides a little bit about what's really happening, which is that Gulf airlines are operating much smaller networks overall. So if you look at Emirates and Etihad, I think they're canceling between about one and 4% of flights on any given day, which on the surface doesn't sound too bad. Qatar Airways is higher, somewhere around 30 to 40% depending on the day, but I think the most important number is how many flights they're actually operating compared with what had been scheduled. So I was looking at some of the OAG data and Emirates has scheduled about 310 flights across its network for March 26th, which is the day that we're recording. But if you look back at what had originally been planned for this day before the war started, it was expecting to operate about 520 flights across its network.
(04:07): So even though those cancellations have fallen, Emirates is operating about 40% fewer flights than it had originally planned. Now, Qatar Airways has reduced its network even further. So before the war, it had planned about 550, 560 flights today across its network. That's fallen to around 110 flights a day now. So it's only operating about a fifth of its planned capacity and the number of destinations within that has also dropped dramatically. So it's down from about 150 destinations to fewer than 50. I think it's about 48 at the moment. And tied to that, it's moving some of the wide bodies. I think it's 20 wide bodies to Spain for maintenance and storage. So I think what we're really seeing is a shrinkage of the Gulf carrier networks, which is obviously significant from a global aviation perspective just because these airlines are just major connectors linking Europe, Asia, Africa, Australia.
(05:04): Some of the smaller Gulf airlines as well have had to really adjust and do some even more perhaps unusual things operationally. So if you look at Jazeera Airways, for example, it's moved some of its operations to Dammam in Saudi Arabia because Kuwaiti airspace has been closed. Likewise, Gulf Air has also been operating a temporary network from Dammam as well and transporting passengers by ground from Bahrain. We're seeing in Israel, there's a cap of around 50 departing passengers per flight from Tel Aviv, so that's forced Arkia Israeli Airlines to move much of its operations to Aqaba in Jordan and Taba in Egypt instead. So as you said at the start, although the cancellation rates are improving across a lot of the Middle Eastern carriers, I think the bigger story here is that airlines are really having to adapt their operations. In some cases, it's relocating to alternative airports, but it does mean that they are operating much smaller networks overall.
(06:03): And I think because the Gulf is obviously the center of East-West traffic flows, that reduction is having real ripple effects.
Karen Walker (06:10): So yes, what we're seeing, particularly with the Gulf carriers most affected, of course, is that, yes, as I said earlier, they are adapting, but it's still a crazy situation for them to be doing almost literally on the fly. And they're doing it, but they still can't operate anywhere near the numbers that they were operating. And I think that's an interesting point that you raised that I think if you look around for last year, for example, those three carriers alone carried around about 180 million passengers. Well, typically more than half of that is transit. So it's people from all around the world going to other places in the world. Even though other airlines outside the Gulf are saying, "Oh yeah, we're seeing an uptick in people who want to go with other airlines." They can't suddenly take up 180 million passengers even as a collective. So it's still a tough situation.
(07:07): And related to that are the important airspace corridors over Russia and the Middle East that are effectively closed to most operators at the moment. So what are airlines doing about
David Casey (07:21): that? Well, I think it's a really big operational issue for airlines at the moment because it's not just Middle East airspace that's affected. Airlines have already been avoiding Russian airspace since 2022. So what we're seeing now is that both northern and central corridors between Europe and Asia are restricted and obviously historically flights between Europe and Asia have either flown over Russia on the northern routes, which were the most efficient, or further south over the Middle East. Now, since the Russia airspace closure, most European and some Asian airlines have shifted south and started routing over Turkey, the Caucasus and the Middle East, but obviously with parts of the Middle East airspace now restricted, airlines have been squeezed into a much smaller number of available corridors, and that obviously has operational consequences. There's longer routings, and that means longer flight times, higher fuel burn, which obviously increases costs and affects crew duty limits and aircraft utilization.
(08:21): So we're seeing some examples of airlines having to be quite tactical about this, like Air India, for example, has rerouted some of its European and North American flights and had to add technical stops in places like Rome and Vienna, because the longer routings mean that some flights can't be operated nonstop. Qantas has also added a refueling stop in Singapore on its Perth to London flight, which normally operates nonstop, but it can't now because the rerouted flight path is longer. So airlines obviously first lost that Russian airspace in the North, now perhaps in the Middle East corridor to the South are restricted, and that combination is making long haul flying between Europe and Asia far more complex and more expensive than it was
Karen Walker (09:05): before. So Aaron, in that discussion there, we talked about, yes, there are some airlines outside of the Middle East that are reporting seeing an uptick in demand for long haul flying, either because they can't do the transit through the Gulf hubs or because they don't want to. So my question to you is, do you think there's a long-term risk for these major Gulf carriers and airports of that demand not returning in the same numbers and therefore a long-term benefit, if you like, to the other airlines? What's your thoughts on that, Aaron?
Aaron Karp (09:46): Well, I think there's a major perception issue. Dubai and Doha have built up a very strong reputation as safe places to do business, and in particular, very safe places to transfer flights. And so a person making a decision about whether they're going to transfer through Dubai, for example, three months ago, wouldn't have thought at all that it was an unsafe thing to do. And now I think that the perception's out there that if you're transferring in Dubai, airspace could be closed, a missile or a drone could be crashing into the airport. And I think a lot of the flights happening now, David said there's already a reduction, but a lot of the flights happening now are people that booked their tickets before the war started and people are starting to make summer plans. And if you're in North America now and you're thinking, "I'm flying from North America to Asia sometime in July or August, and I'm looking at whether I'm going to buy the ticket," I think you would really think twice about whether you're going to connect through Dubai and look at those other airlines from other possibilities.
(10:52): And so I think that's the real long-term issue here for the Gulf carriers is that they built up this really strong reputation of having these quality products, these quality airports, and in particular, very safe places. You would never think that it's an unsafe place to transfer or to fly into or to do business there. And now I think there is a perception problem that it just isn't safe to fly through Dubai or isn't safe to go do business in Dubai or Doha. And so if the war continues to drag on, if Iran continues to shoot missiles and militarized drones into the UAE and into Qatar, I do think there's a real long-term issue that these carriers are going to have to figure out how to get through.
Karen Walker (11:40): Definitely good points there. What I would just say is I think first of all, it depends on the length of the war. I think that will make a big difference in terms of how quickly people forget or don't the longer this goes on. And then I'd also say a couple of things. First of all, particularly with those three places, Abu Dhabi, Dubai, and Qatar, their governments have very, very strongly behind their airports and airlines and they totally believe in aviation as the center of their economies and their global reach, et cetera. So I would expect them to get strong support once things open up. And if nothing else, I would expect lots of incentives, lots of really low airfares, especially reaching out with loyalty points and perks and all sorts of things. I think they'll do everything they can to just bring people back. Whether that works or not is a different question, but I think that's what will happen when they're able to.
(12:49): And finally, I'll also say that if you look backwards, people have pretty short memories on some of these things. I mean, when everything happened with the Boeing Max, two fatal crashes and that plane grounded, et cetera, I was one of the ones that said people will not fly on the Max again. Well, they fly all over on the Max and nobody seems to be questioning it at all. There are other things like that where you think, okay, people are not going to go back to where they were before, and they have. So it will be interesting. Let's just turn to the oil prices as well. And well, not just the big hikes, but what we're seeing is a lot of fluctuations day-to-day. But for all the fluctuations, the overall pattern is that Brent crude is at or over $100 per barrel. That's incredibly more expensive than one had been predicted even in December.
(13:46): And also what we call the crack spread in the aviation industry, that's the difference between the price of Brent crude and jet fuel, which is much more expensive anyway, but that's widened even more. So jet fuel's become even more expensive relative to Brent. And of course, that's a huge cost for the airlines that most of them were not anticipating last year. David, again, talking about adaptability and tools, what sort of things do airlines have in their toolbox to deal with the oil price increase?
David Casey (14:20): Well, I think one of the first reactions we're seeing is that airlines are really reviewing capacity and route profitability. So obviously when fuel prices rise sharply, airlines very quickly have to start looking at which routes are the most profitable and which ones can be cut from the network. And I think we're seeing examples of that. United Airlines have said it'll cut capacity by about 5% as New Zealand is also cutting about 5% of capacity. And we reported this week that Cebu Pacific has suspended several international routes across its network and it's cutting frequencies because it says that its jet fuel prices have more than doubled compared with this time last year. And I think what else we're seeing and we'll continue to see as this war continues is raising fares and adding fuel surcharges. So Cathay Pacific has just announced increases to fuel surcharges across its short, medium and long haul flights because of the fuel price rising so sharply.
(15:22): So I think the fuel surcharge on long haul flights will increase by about 50 US dollars, and that takes the total surcharge to about 200 US dollars per ticket. Well, many of the European airlines are in a slightly better position at the minute because they hedge on their fuel prices, which obviously means they buy in advance at fixed prices, but that only provides a more short-term protection. Now we heard EasyJet CEO Kenton Jarvis say recently that the airline has hedged much of its fuel into next year, but fares are going to start to rise by the end of the peak summer period. So I think overall we're seeing airlines reacting by cutting some capacity. They're raising fares, they're relying on hedging where they can and they're shifting aircraft towards the more profitable routes. But I think ultimately if prices stay high for long enough, those costs are always going to feed into higher ticket prices and that could lead to more permanent changes in airline networks.
Karen Walker (16:23): Yeah. Aaron, in the United States or North America, most airlines here no longer hedge, which is basically like insurance, a firm price for your oil at an advanced stage. Most of them stopped doing that. They just didn't think it was worth it. What are you hearing? Do you think they're going to change that stance? There's still very strong demand for flying in the United States. Do you think they will raise airfares here?
Aaron Karp (16:57): Well, I think airfares are already going up. Just to give as a table-setter, just to give a quick snapshot, Airlines for America tracks jet fuel prices on a daily basis. And as of March 26th, it's $3.98 a gallon. That's actually down from March 20th when it was $4.56 a gallon, but up from $2.42 a month ago. There was a financial conference 10 days ago and United CFO, Michael Leskinen, said that right now there is quote unquote a natural hedge. And that means a natural hedge of passing on prices to passengers with higher fares. Delta CEO, Ed Bastian said that Delta is seeing very strong demand and right now passengers are willing to pay the higher airfares and that they're able to raise the ticket prices and not see a demand going down. And the question is, how long does that last? Just to give one example, Alaska Airlines said that they use about a hundred million gallons of fuel per month, which means that for every dollar increase in jet fuel, it's a hundred million dollars in increased costs a month, which means they have to raise fares $20 on average to cover that.
(18:11): And right now they're being able to do that. But I think the question is, how long are they going to be able to do that? And particularly if the TSA situation starts to dampen demand, how long can they continue to raise prices? How long can they add $10, $20 to an airfare and have passengers say, "Well, we're willing to continue to pay that." I think that's a big question. And you ask about fuel hedging, the people who are in charge of US airlines right now are really against fuel hedging. Scott Kirby of United Airlines famously for years said it was gambling and risky and he was opposed and that attitude is now widespread, even with Southwest Airlines, which used to be the airline that really hedged a lot. So I don't see them going back to fuel hedging. I think right now they feel confident that they can pass through these extra costs, particularly if the fuel prices stabilize, which they have a bit over the last week.
(19:09): But I think it's a real question how long you can keep raising fares and keep raising fares if fuel prices continue to go up.
Karen Walker (19:15): Good points. And interesting on the hedging, as I said, you said the US carriers are typically not hedged. And so this term natural hedging has come in, but you can't just keep putting up the airfares. So it will depend on how long. I'm just looking at some of the transatlantic fares these days, and they've already made a big jump. And it's interesting. So I was at the International Aviation Club of DC, one of their luncheons in DC yesterday, and the guest speaker was Lufthansa, the CEO and chairman, Carsten Spohr. And one of the things he said, because most of the European airlines, of course, are hedged and Lufthansa is well hedged, but he did make the point that they're not infinite, they all have a time limit. And so I think it's going to be interesting because you know what will happen when that comes to an end and they go to renew the hedge, well, the premium's going to be a lot more, particularly if things are going on.
(20:18): So at some point, even hedging isn't going to be as much of a protection as it is now. Just looking a little bit more other things that have been going on this week, and especially here in North America, I made mention of the Air Canada accident, which of course was absolutely awful. And it is very early in the investigation, but enough is known about the minutes in the lead up to the crash that, of course, questions are being asked about what happened in that air traffic control tower at LaGuardia. That incident has come barely 14 months after the fatal collision between an American Airlines regional jet and a US Army helicopter close to Reagan National Airport. Frankly, this is the nightmare everyone prayed wouldn't happen as DOT and FAA work to modernize the US air traffic management system. Aaron, what are your biggest takes so far, even though it's early days of the impact of the Air Canada crash?
(21:17): I'm thinking particularly in terms of people's faith in the safety of the US air traffic system.
Aaron Karp (21:24): Well, my biggest takeaway so far is that the airports have what's called an airport surface detection equipment model X system, ASDE-X, and air traffic control uses this. And what this provides is a very granular picture of everything moving down the airfield, ground vehicles, aircraft, aircraft coming in for landing, and it puts up alerts if there's going to be a collision. What has come to light is that the rescue and fire truck vehicle and all the vehicles coming in behind it were not equipped with a vehicle movement area transponder, which sends the data to the ASDE-X system. FAA quote unquote encourages these vehicles to have those on them, but does not require it. And so these vehicles' positions were not showing up on that system. And I think that that's going to be perhaps the biggest thing that comes out of this and the biggest focus of the investigation is that it seems so obvious after the Reagan incident that why should helicopters be flying that close to flight paths, particularly a military training flight.
(22:37): And it seems so obvious to me now that those transponders should be on those vehicles, particularly the rescue and firefighting vehicles that typically move on to airfields. So I think that's the biggest thing I've taken away. One thing also is being looked at is the air traffic controller situation. There was an air traffic controller because the late night hours was managing both the ground traffic and air traffic coming in. And once the firetrucks were moving to deal with this separate incident with the odor on another aircraft, he was in a situation where he had to manage a lot at one time. And I think staffing issues as they were with the Reagan incident will come up. And as you mentioned about the faith in the system, I think it's just something else that people see, well, this doesn't seem to be as safe as it used to be.
(23:32): And there was this obvious problem, and we found out more and more that it was known that there were all these near misses and incidents with helicopters flying near the Reagan and the lack of appropriate separation. And I think people are going to say, how is it possible that you have this technology, this really good technology, and these vehicles didn't have these transponders on them, and therefore their positions didn't go to this system. And so I think there's definitely going to be a further erosion of faith in the safety of the system.
Karen Walker (24:13): Yeah, absolutely. The transponder situation, I mean, we all know no two crashes are exactly the same. No two crashes have the same cause. And most typically whatever happens, there were multiple causes, but technology is definitely part of it. Transponders are known and available technology. And I think if you could draw any sort of parallel between the crash at Reagan National and then what's just happened at LaGuardia, transponders missing on the ground vehicles in one case and in the military helicopters and the others. And we're also hearing the pilot unions here, really demanding, absolute demanding bills that would make that mandatory for military aircraft. And I'm assuming they're probably going to take the same tack with ground vehicles. But yeah, that is, as you say, in retrospect, it seems so sensible and so shocking that it's not already been addressed. David, did you have any thoughts?
(25:17): You are looking at this from outside of the US, but did you have any sort of reaction like, "Gosh, another crash in America? How did that happen?"
David Casey (25:27): Yeah, I think as Aaron said, I think it's just a further erosion of faith in the system. And I think it certainly raises some uncomfortable questions for the US. It's probably important to keep some perspective. US is still the largest and safest aviation system in the world, but it shows that when the system is under strain in several different areas at the same time, be it air traffic control, security, with what we're seeing with some of the queues in airports and whatnot, and the infrastructure constraints, that when several things go wrong at once, the system really struggles because there isn't the necessarily resilience that it needs. And I think, as Aaron said, staffing is a real concern as many facilities have been understaffed for some time. Controllers, as we saw last year had been working significant overtime and the government shutdown, added more stress and uncertainty.
(26:23): So I don't think the US has necessarily lost its leadership position in aviation overall, but I think the week's events highlights that parts of the system are under real pressure, and it probably raises some broader questions about whether staffing, funding, infrastructure investment are keeping pace with the growth and the complexity of the US aviation system.
Karen Walker (26:47): Yeah. And then just linking that back to the war right now, my concern is we've now got this campaign. It's been launched by the DOT Secretary Sean Duffy, literally widespread support for this to invest billions and to improving and modernizing the air traffic management system. But with a war going on, will funds and attention be distracted? And that would be an absolute crime in my belief. I think it's even more important that we make sure that that continues. The last thing that's of course also been getting the headlines this week in the US is these huge lines that have developed at some of the airports and lengthy waits at screening checkpoints. I saw, I think it was Tuesday, Houston Bush. Wait times were around five hours. I think they were reduced to three hours yesterday, but people are missing their flights. It's another bad situation.
(27:52): And ever since nine eleven, there has not been a successful terrorist attack on US airlines and airports. And here we are in uncertain times and we've got this big crunch going on. So Aaron, again, your thoughts on this. How bad does this look for Congress and the White House who don't seem to be able to do a deal to get, at the very least, to get TSA agents who are having to work, let them be paid, but even better would be to actually come to a deal and let's move on. Let's open things up again.
Aaron Karp (28:26): I think Congress's reputation in the US is already very low right now. And I think this only reaffirms what a lot of Americans think of how dysfunctional Congress is. And it does appear of all the reports from Capitol Hill is that the talks are completely stalled, that the talked about compromises this week have not been able to come to fruition, and the talks are stalled. Congress is set to go on a two-week recess tomorrow, and spring break is really just starting. I live in Maryland, and spring break here is starting really tomorrow. And so we're going into a very busy period. The TSA acting administrator, Ha McNeill, was on Capitol Hill yesterday testifying, and she described this as a quote unquote dire situation, and talked about real hardships, real financial hardships that the TSA security screeners are going through, just not being able to afford rent, not being able to pay for gas to drive to work so they sleep in their cars.
(29:37): Just in one situation, I'm not sure if it's hyperbole or not, but saying that TSA agents were selling blood and plasma to get money. And you can just see these are people that are generally working paycheck to paycheck, very difficult jobs. And as you said, they have families to take care of. And She said that she's hearing from her people that they believe this is nothing short of cruel to what's going on to them. It's just leading to these tremendously long lines in airports, which are disrupting airport operations, disrupting airline operations. One thing she pointed out is that we've had about 480 TSA officers have left since this began in mid-February. The call-out rates at a lot of the major airports are sometimes known in the 40 to 50% range. She says that smaller airports may have to suspend operations. Just a really bad situation.
(30:40): The World Cup is coming to the United States in June. She says there's expected to be an influx of about six to 10 million passengers coming in already on top of the busiest season of the year. And as you can imagine, no one's signing up right now to be a TSA security officer. And when you do sign up, it takes four to six months for you to get trained. And so she said, "We're already at the point where we can't get new officers trained for this summer." And so she said, even if this is resolved, this looks like a perfect storm of understaffing and influx of passengers and that this could be a real nightmare summer in terms of security. And so Donald Trump, the president, has deployed ICE agents into airports. And by the way, the ICE agents, they're part of DHS, but they are getting paid because there is a lot of money sent to ICE by Congress last year.
(31:33): But it's unclear what they're doing and how they can help. McNeill said they're conducting non-specialized security operations and are helping to alleviate some of the pressure on the TSA screeners. And it did appear that Wednesday was a better day, but Wednesday's the slowest day of the week and the spring break hasn't really kicked in yet. So it's a bad situation. It doesn't seem like it's getting better. And even once the shutdown is completed, as it inevitably will be, it looks like a bad situation for the summer. And at a time when TSA had really started to make changes that were moving the lines along, and there were these people were moving through faster than ever. And now, as McNeill said, these are the longest wait times in the 25-year history of the agency. And it is, she said, undermining security and particularly in a heightened situation where the US is in a war and security should be at its top and it is not right now.
Karen Walker (32:41): It's shameful. As I said, it's a mess, but it's also shameful. So yeah, it's been quite a week and not in a good way for aviation, but what I also know is that this is an incredibly resilient industry and full of very determined people, but they're going through a lot right now. Thank you, Aaron and David for joining me and having this discussion. Thank you also to our producer, Cory Hitt. And of course, a huge thank you to our listeners. Make sure you don't miss us by subscribing to Window Seat on Apple Podcasts or wherever you like to listen. This is Karen Walker disembarking from Window Seat.
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