Will Air Traffic Controllers Control Airline Stocks?
Boeing’s (NYSE:BA) battery problems aren’t the only thing complicating air travel these days.
The Federal Aviation Administration was slammed with a $637 million budget cut as part of the sequestration, which went into effect earlier this year. As a result, all 47,000 of the agency’s employees will be subjected to furloughs, and as many as 149 federally-contracted air traffic control towers will lose funding beginning on June 15.
“This has been a complex process and we need to get this right,” said U.S. Transportation Secretary Ray LaHood in a statement at the beginning of April. The FAA employs nearly 15,000 air-traffic controllers, all of which will lose one work day every other week. Unsurprisingly, with fewer people to manage air traffic, long delays at the nation’s top airports are expected.
“While we hope the impact of these FAA furloughs does not cause massive flight delays across the country,” said Ben Minicucci, chief operating officer at Alaska Airlines (NYSE:ALK), in a statement this weekend, “it is with an abundance of care for our customers that we caution them—especially travelers flying to or from Los Angeles, San Diego and San Francisco where we have several daily flights”…
The airports indicated by Minicucci are a few of several major hubs that the FAA expects will experience delays as a result of reduced staffing. “The Federal Aviation Administration plans to furlough air traffic controllers starting Sunday, which the agency predicts could cause extensive ground delays ranging from 50 minutes to two hours and a reduction in flight arrivals of 30 to 40 percent at certain airports,” commented the airline.
A number of major airlines woke up on Monday morning to some negative investor attention as a result of the news. Delta (NYSE:DAL) was off as much as 1.6 percent at the open of the markets. United Continental (NYSE:UAL) was off 1.4 percent, while US Airways (NYSE:LCC) stock was off about 1 percent. Southwest (NYSE:LUV) was off about 1.1 percent.
US Airways and Delta are scheduled to report earnings on Tuesday, while Alaska Air, JetBlue (NASDAQ:JBLU) are on deck for Thursday. United Continental will report on Friday.
On Tuesday, analysts are expecting Delta to report earnings of $0.06 per share, up from a loss of $0.05 per share in the year-ago period. Revenue is expected to climb 1.2 percent to $8.51 billion. For US Airways, analysts are expecting earnings of $0.28 per share, up from a loss of $0.13 in the year-ago period. Revenue is expected to climb 3.1 percent to $3.37 billion.
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