“20,000 Flights CANCELLED” - Jet Fuel Prices SKYROCKET Forcing Airlines To Cut Routes
Episode Stats
Summary
United Airlines slashes its profit forecast for the year, as jet fuel costs surge. Lufthansa cancels 20,000 short-haul flights to save on jet fuel. Jet fuel prices have hit record highs and are on track to keep going higher.
Transcript
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And there's three stories I'm going to read at the same time, and then, Tom, I'm going to come to you.
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Number one, Deutsche Lufthansa canceled 20,000 short-haul flights to save on jet fuel.
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Lufthansa has canceled 20,000 flights between May and October to save on fuel in one of the largest cuts by a global airline.
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The cuts will save around 40,000 tons of jet fuel and will amount to 1% of available seat kilometers.
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The carrier is trying to boost profitability with a plan to cut 4,000 administrative jobs by 2030.
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So you may say, well, Pat, that's, you know, that's Germany.
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United Airlines slashes 2026 forecast as fuel cost surge.
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So United said it could earn between $7 and $11 a share on an adjusted basis this year,
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down from its previous forecast, $12 to $14 a share,
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The carrier, like others, is trimming down of its planned flying this year to reduce costs.
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Wall Street had already been adjusting its expectation for the year.
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As a result, analysts like polled by LSEG had forecast that United's adjust full-year earnings could be 9.58 a share for the second quarter.
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United forecast adjusted earnings between $1 to $2 a share.
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Analyst had expected $2.08 a share for the quarter.
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The carrier has said it's expected its revenue to cover between 40% to 50% of the fuel price increase in the second quarter as much as 80% in the third and between 85% to 100% by the end of the year.
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Revenue overall rose more than 10% from $14.61 to $14.61 from $13.21 billion from last year.
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Tom, what's going on over here with travel and jet fuel?
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Well, it's a little bit of a complex situation.
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All of the airlines out there, I should say almost all, I believe 90% of the airlines out there have one of the most important persons in the executive suite is the economist that's responsible for their fuel hedging strategies.
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They hedge fuel, and they try to plan for things.
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And what's happening right now, the cost of fuel unexpectedly popping up, they're looking for cost reduction.
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And the way they're looking for cost reduction, in the case every airline, some of the shorter flights are not profitable, believe it or not.
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And it operates small flights that get to Atlanta.
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And some of those are marginally like break-even, Pat, or maybe they lose a little bit.
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Because they make a lot of profit once you get to Atlanta and then you fly to New York or you fly to L.A.
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or you fly to South America on the long flights with the large wide-body aircraft,
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And so what Lufthansa said is they have a small regional division called CityLine.
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And so CityLine, they say, hey, we can't afford to run CityLine,
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which means that some of those people will drive two hours to get to a more major airport
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rather than having the convenience of a small airport, you know,
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where they can get to the major airport to fly.
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and this is all around fuel and i can give you some perspectives on it as well now you're going
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to have people that say well maybe i just won't fly this year um kim had to go rather urgently
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to see her dad in idaho and so the coach ticket was 750 bucks just to go from fort lauderdale
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to idaho and that's on delta go to atlanta switch planes go to salt lake and then they're crazy
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right well she already has to go back there again because he has another appointment she has to go
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to six weeks from now in june do you know what the price of that one is 1600 bucks the same coach
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ticket tom a coach ticket 1600 bucks yeah because it's it's it's also because it's three flights
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and twin falls is a very small airport but you take a look at what's happening this is crazy
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By the way, and the question she's asking, what if Delta decides they're not going to operate SkyWest later this summer?
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She's going to have to go to Salt Lake City and then drive three and a half hours to get to her dad's place in southern Utah.
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And so what's happening now is the airlines were carrying the initial cost.
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And now the airlines are saying, look, I wanted to keep my market share.
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So I got to get rid of my short haul flights that are just marginally profitable or not profitable.
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While you're saying that, there's five other airlines that are going through this as well.
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Cathay Pacific Airways, a Hong Kong-based airline,
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said it will cancel about 2% of its scheduled passenger flights from May 16 to June 30.
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HK Express, a budget carrier, said it would cut about 6% starting May 11.
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And then we already talked about Lufthansa, what they're going to be cutting.
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And then Dutchess Airline KLM said it would cut 160 flights in Europe next month,
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amounting to less than 1% of its flight schedule.
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And as some companies have already signaled larger reductions,
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Vietnam Airlines in March said that it may cut up to 18% of its international flights
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and 26 percent of its domestic flight so that's big we're seeing the stories it's not yet
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fully scaled to everybody but you're feeling the impact so far right now brandon yeah and i think
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this is just kind of the beginning of this if it keeps going in that direction because we just got
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to the point where the the last fuel shipments from before the um the war started were arriving
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so i mean like that that lag effect is finally starting to hit but um that's why i think that
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oil's actually got a lot like interest rates going up and counterintuitively it could kind of knock
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the price down a lot of things like people are saying this is going to cause inflation but i
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think it's just going to devour disposable income because of what you know what people have to spend
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on energy people have to spend on travel um and yeah i mean uh airlines it's not surprising that
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one of the first ones to go there they've always had like razor thin margins i think it's like
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well like two to five percent and that's why they always have to get government subsidies but
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But, yeah, one bright spot out of this, I think it could bring down inflation in a lot of other areas
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because of how much more people are spending on energy.
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Yeah, you know, there's a great article by CNBC.
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Every airline has its own policies about what it owes to passengers who face delays and cancellations.
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Federal rules require airlines to pay a prompt refund to a ticketed passenger,
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even those with non-refunded tickets if they cancel a flight or make a significant change to the itinerary.
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Make sure the airline has your contact information on the file in case it needs to get in touch with you.
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If an airline contacts you about a canceled flight or change to your itinerary, set in NERD wallets,
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the sooner you act in contact in the airline, the more options you're going to have.
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Flying nonstop to a destination is generally more expensive than booking a flight with a layover.
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However, it's a good strategy for travelers who can afford it and want to minimize disruptions
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and consider travel insurance while you're going through it.
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So it's an interesting time where you're traveling right now.
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Of course, we'll follow the story closer to see how much bigger this gets.