Lingering US shutdown could have knock on effects for aviation and aerospace

The partial government shutdown in the US is creating havoc across many industries from the financial sector to small businesses operating near the country’s National Parks. The aviation industry is also facing pressure from the shutdown on numerous fronts – ranging from the high profile “blue flu” sick-ins from TSA workers to FAA safety inspectors suspending their oversight functions.


Summary:

  • The aviation industry is also facing pressure from the partial government shutdown in the US on numerous fronts;
  • The overall effects of the shutdown on the airline business are tough to predict; but the economic effects will no doubt trickle down to many facets of the industry;
  • American Airlines has already delayed putting new aircraft into service, while Southwest could face delays in launching its highly anticipated service to Hawaii.

Anecdotes from airlines are already emerging, including uncertainty in achieving ETOPS certification to delays in putting aircraft into service. The overall effects of the shutdown on the airline business are tough to predict; but the economic effects of a prolonged partial closure of the government will no doubt trickle down to many facets of the US’ aviation and aerospace industries.

As the shutdown ensued, Transport Security Administration (TSA) officers and staff were deemed essential, and notified to keep reporting for work without receiving pay. As the time period for the first missed paycheck for individuals affected by the shutdown draws near, there were numerous reports of TSA screeners calling in sick. The sick outs appeared to spur longer wait times for screening at New York LaGuardia airport, and the challenge of ensuring ample TSA staffing at airports will only grow as the shutdown continue.

US air traffic controllers are also working without pay, and the National Air Traffic Controllers Association (NATCA) has stated the US FAA has closed its controller training academy in Oklahoma city.

NATCA has warned the closure of the controller training academy could complicate plans to add more than 1,400 controllers to the workforce in fiscal 2019 as training courses could be delayed, and if staffing shortages worsen, flight delays could become a possibility.

FAA inspectors are part of the workforce furloughed during the shutdown. The agency’s inspectors fall under the nonessential employee category, and their inability to work results in a pause in inspecting plane repairs and pilot training programmes.

Some airlines have already offered insights into immediate effects of the shutdown. The Dallas Morning News reported American Airlines has said it was unable to put two recently delivered aircraft into service while awaiting FAA approvals.

The publication stated Southwest Airlines could face delays in launching its highly anticipated service to Hawaii. The company is in the midst of working to gain approval for Extended-range Twin-engine Operational Performance Standards (ETOPs), which allows for extended operations over water.

Citing an internal staff memo from Southwest CEO Gary Kelly, the publication stated Mr Kelly told employees that while Southwest was close to its goal of attaining ETOPs certification, the shutdown was one factor beyond its control.

Instead of making huge additions to its Latin America and Caribbean network in 2019, Southwest’s major focus adding service to Hawaii. Passengers are waiting for a detailed schedule of Southwest’s Hawaiian operations, and delays in a launch could create challenges for the airline.

Prior to the shutdown, a growing number of economists were warning of a potential economic slowdown this year before a full blown recession occurring in 2020.

The shutdown will have knock-on effects for consumer confidence as workers that are not receiving paychecks will curb their spending, possibly intensifying an already slowing economy.

It could take some time for the ripple effects of the government shutdown to potentially affect demand for air travel, but shaky consumer confidence and uneasiness over the duration of the shutdown could eventually pressure demand in the US market, which could affect pricing traction.

Before the shutdown, Delta Air Lines slightly lowered its 4Q2018 unit revenue forecast from 3.5% to 3% growth year-on-year, noting the the pace of improvement in close-in yield momentum in late Dec-2018 was slower than expected.

A softening economy will no doubt eventually have ripple effects on numerous industries, including aviation and aerospace. However, so far, the economic risks stemming from the shutdown are doing little to end what is likely to become the longest government shutdown in US history.