Airlines Delay New Flights Due to Cost Pressures

Airlines that were once clamoring for new aircraft are now changing their tune, pushing back orders and cutting back on spending.

• The move comes as airlines face a challenging financial environment, with increased costs and a decline in profitability.
• Low-cost carriers like Spirit Airlines and JetBlue Airways are particularly affected by these factors, as they are more focused on the domestic market where fares have been particularly low.
• The airlines are also dealing with the impact of engine repairs, which have grounded some of their planes.

The Impact of Increased Flights and Low Fares

Airlines have flooded the U.S. with flights this year, resulting in lower fares, particularly in the domestic market where low-cost carriers concentrate.

• This surge in flights has impacted airlines' revenue, as costs have risen while fares have fallen.
• Fare-tracker Hopper estimates that "good deal" airfare in September is going for $240 for roundtrip U.S. domestic flights, down 8% from last year.

Airlines Defer New Aircraft Deliveries

In response to these pressures, several airlines are scaling back their growth plans and deferring deliveries of new aircraft.

• JetBlue Airways is estimating it will save about $3 billion by deferring 44 Airbus A321 airplanes through 2029.
• Frontier Airlines is deferring 54 Airbus aircraft to at least 2029.
• Spirit Airlines has also deferred aircraft deliveries as it works to turn around its deep losses.

JetBlue's Cost-Cutting Measures

JetBlue is taking several steps to reduce its costs, including deferring aircraft deliveries and exiting unprofitable routes.

• The airline is also dealing with grounded jets from a Pratt & Whitney engine recall.
• Deferring so many aircraft while facing a shortage of planes due to the engine recall is a challenge for JetBlue, as it needs planes to grow but cannot afford to buy too many.

Spirit Airlines Faces Challenges

Spirit Airlines, which had planned to merge with JetBlue until a judge blocked the deal in January, is also facing significant financial challenges.

• The airline recently reported an 11% drop in revenue and a $192 million loss.
• Spirit has been particularly hard hit by the Pratt & Whitney engine recall and has been forced to furlough some pilots.

Aircraft Leasing Market

The aircraft leasing market is thriving, with high demand for new fuel-efficient planes.

• Lease rates for new Airbus A320s and A321s hit record highs in July.
• Leases for new Boeing 737 Max 8 aircraft are also near record levels.
• Airlines can buy aircraft directly from suppliers or lease them from companies like Air Lease or AerCap.

Boeing and Airbus Production Challenges

Boeing and Airbus, the world's two main suppliers of commercial aircraft, are struggling to increase output due to worker shortages and supply chain issues.

• Airbus recently cut its delivery target for the year, while Boeing is limited from ramping up production as it works through a safety crisis.
• Despite the deferrals from budget airlines, Airbus and Boeing are still seeing strong demand for their planes.

Airlines Face Staffing Challenges

Delayed deliveries of new planes have forced airlines to slow or halt hiring and other growth plans.

• Southwest Airlines, which relies entirely on Boeing 737 aircraft, has offered some staff voluntary leave programs to manage staffing levels.
• Airlines are facing a tight labor market, making it difficult to hire and retain skilled workers.