United Airlines Shows Recession-Era Troubles Are Fading
Determining which industry suffered the most during the Great Recession is a matter of speculation, but when ABC News’s Tim Winship wrote in April 2010 that “Perhaps no group has suffered more than the airlines,” he had a point.
As a group, five of the nine largest airline operators in the United States reported losses in 2009 totaling nearly $4 billion. In particular, AMR Corp.’s (AAMRQ.PK) American Airlines, which lost $1.5 billion in 2009 and $2.1 billion the year before, noted in its 2009 annual report that “it will be very difficult for the Company to continue to fund its obligations on an ongoing basis and to return to profitability if the overall industry revenue environment does not improve substantially.”
Of course, American had other problems — in 2012, it was struggling with high labor costs and the fact that it had been left behind by the current trend toward consolidation in the airline industry. Even a Federal Aviation Administration report found that the sharp drop in commercial passenger travel during the recession years had resulted in a large loss of investor capital for the industry as a whole and profits.
The recession forced many airlines to shrink, and the vestiges of those 18 months of economic contraction left a mark on the industry that is still being washed away more than four years after the recession officially came to an end, in June 2009.
On Thursday, United Continental (NYSE:UAL) announced it would recall the nearly 600 pilots the company put on furlough due to the ravaging effects of the recession and fuel price spikes, which forced the company to cut back on flights and staff in 2008 and 2009. As the Air Line Pilots Association told the Associated Press, these returning pilots are the last of the 1,437 United pilots that were temporarily laid off in 2008 and 2009. United now has approximately 12,000 pilots.
As the recall of United’s furloughed pilots suggests, the demand for commercial airline pilots has started to recover after economic problems and airline bankruptcies forced carriers to keep hiring low and use furloughs to kept employment costs down for about 10 years. Commercial air traffic has rebounded, and the 10 largest U.S. passenger airlines — including Delta (NYSE:DAL), US Airways (NYSE:LCC), American, and United — reported a collective net profit of $1.6 billion for the first six months of 2013, a modest improvement from the $1.2 billion reported during the same period last year.
New regulations also played a role in keeping pilot demand soft. In 2007, the United States increased the mandatory retirement age to 65, from 60, which kept senior pilots in the cockpit rather than allowing them to retire. More than five years have now passed, and in late 2012, the pilots that had pushed back retirement began leaving, freeing up room for new aviators.
“We look forward to welcoming back our co-workers as we complete work to integrate all of our pilots into a single work group,” Howard Attarian, United’s senior vice president of flight operations, said in the press release announcing the return of the last furloughed pilots. “We are pleased to have this group of talented aviators back on our team. They are among the most experienced and most accomplished in the industry.” Training for the recalled pilots will begin next month and run through the end of the year, according to the airline.
Some airlines are contemplating hiring new pilots, and many others are also recalling their furloughed pilots. US Airways said last month that it would recall the last 66 furloughed America West pilots, and American has offered to recall all of its furloughed pilots, while Delta has said it plans to hire 300 pilots beginning in November.
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