Labor shortage impacting airlines’ summer travel

Mike Boyd, Boyd Group International President, joins Yahoo Finance to discuss the labor shortage impact on airlines amid pandemic recovery and outlook on summer travel.

Video Transcript

ALEXIS CHRISTOFOROUS: All right, I want to switch industries now and talk about the airlines. Because the restaurant industry is not the only one experiencing a labor shortage. It is also impacting the airline industry. And over the weekend, American Airlines said it would cancel around 1% of its flights in July to serve what it says is a surprise uptick in travel demand.

Now, all of this is coming as the airline industry struggles with some unprecedented weather in parts of the country and also a labor shortage at some of its hubs. I want to bring in Mike Boyd now to talk about this. He is president at Boyd Group International. Mike, good to see you, and thanks for joining us. Before we get into the labor shortage, I'm just wondering if we can expect other airlines to make some similar announcements the way American did this weekend.

MIKE BOYD: Well, let's remember, 1% is not a huge cut in any case. The reality is here, for airlines, you just don't go out and hire somebody. If you're going to have them work at a ticket counter, they have to have training in hazardous materials and security. You just don't bring people on real quick. The real issue is they had to let somebody go. Bringing them back is becoming a problem. But it's not a huge problem. I think it's going to be very temporary.

KRISTIN MYERS: So to that point then, do you think we're going to start seeing a lot of these airlines, in the attempt to kind of lure some of these workers back, start offering big bonuses, higher salaries? Because this labor shortage isn't just existing within the airline industry. We've heard so many companies say that they, frankly, can't find workers. So how long is it going to take for some of these airlines to really get some of these workers back to working?

MIKE BOYD: Probably a couple of weeks. You can't just go out there and say we're going to raise-- a lot of these are union jobs. That's number one. You just don't raise a union rate, per se. But it's not that severe. It is something to get airplanes out on time. But it's not something where people are lined up, like, at the drive-thru at McDonald's. It's going to be an issue. But they're going to deal with it. But they have to deal with it in the confines of their current compensation program.

ALEXIS CHRISTOFOROUS: You know, it sounds to me like some of the airlines were sort of caught flat-footed. And I'm trying to understand why because I mean, we keep talking about the reopening and that people are going to have all this pent-up demand, and travel is coming back. Were you surprised that they didn't have the workers on hand they needed to keep their flight schedule the same?

MIKE BOYD: Not really, because they've been-- like, for example, American Airlines just adjusted its September schedule down by about 25%. But guess what? That puts them right about where they were at 2019. They've been trying to adjust as best they can to maintain revenues. But it's very hard to do when you're not really sure how many people were going to book. Remember, load factors overall are not up to where they were prior to this pandemic. So it's a very hard thing to project. Remember, the airline industry, a couple percentage points one way or the other can be profit or loss. They're taking the cautious path, which they should.

KRISTIN MYERS: So it seems, Mike, you're saying this is a fairly small speed bump, at least for American Airlines. Just curious to know how long that bump is going to really last, especially as the demand right now, as so many states and cities and even countries now-- the EU opening up their borders to vaccinated Americans-- we're only going to see this demand continue to increase throughout the summer. Do you think the shortages are going to continue that long? Or do you think that perhaps they will be able to build up their staffing in time for all of the summer holidays and vacations?

MIKE BOYD: Well, right now, they're having problems. They're not having a major meltdown. And let's remember, international travel, the EU can open up all they want to open up. But not many people are going to take their family to visit the lake country of Italy this summer because of all the nonsense going on over there. Same with business travel. Everybody's meeting electronically. So it's going to be down. It's not going to be up to 2019 levels. It'll be close, but this is not a crisis at airlines. It's a problem.

ALEXIS CHRISTOFOROUS: What can travelers expect, though, Mike, as some of the fully vaccinated folks head back into the air to travel? I mean, are there going to be hit with long lines and lots of delays this summer as they start to travel again, do you think?

MIKE BOYD: Well, remember this. Long lines at airlines don't delay flights. The flight leaves without you. It's real simple. But one really thing that concerns me is you hear that the Transportation and Security Administration might be understaffed. Understaffed and TSA has never been put in the same sentence, so I don't know what's going on there. But I would suspect you're going have to get to the airport early, depending upon where you are. But overall, I think it's going to flatten out by September. And it's going to get back to a fairly normal--

ALEXIS CHRISTOFOROUS: All right, I think we may have-- OK, Mike, thank you so much. Mike Boyd, president of Boyd Group, thanks so much for being with us today. We appreciate--