Airline CEOs clash with lawmakers over travel recovery, pilot shortage

Yahoo Finance’s Adam Shapiro explains what happened in the Congressional hearing in which airline CEOs testified about the travel recovery, alcohol use among passengers, worker shortage, and vaccine mandates.

Video Transcript

JULIE HYMAN: Everybody was paying attention to the Federal Reserve yesterday, but just a few blocks away, on Capitol Hill, airline CEOs were testifying at a Senate hearing about the effectiveness of COVID-19 payroll relief funds that were extended to those carriers. And there were some fireworks. Adam Shapiro has the details. You were covering the Fed as well. But of course, you also cover the airlines for us. And indeed, it got a little spicy at that hearing.

ADAM SHAPIRO: It did get spicy, and there were so many different topics. I mean, you had Sarah Nelson from the Flight Attendants Association calling on the Committee to actually ban alcohol on all aircraft because it's led to all of those violent incidents that we keep reporting upon where passengers, unruly passengers fighting over their masks, whatever issue you wish to pick, are lashing out on the flight attendants. But you had Ed Markey, the senator from Massachusetts, saying he's open to maybe approaching the Department of Transportation to ban adult beverages on all flights. We'll see if that really flies-- no pun intended.

But then there was the issue of the pilot shortage. United Airlines before the pandemic drill, you may recall, launched a program to train pilots. They then in 2019 said they would need 10,000 pilots going forward. That's still an issue. But it's a shortage of pilots that Scott Kirby, the CEO of United, said has 100 flights grounded every day that could be in the air. And then there was Senator Ted Cruz, never at a loss for words. Senator Cruz went after Scott Kirby at United because United has fired about 200 of its employees for refusing to get a COVID-19 vaccination. Here's how Kirby responded.

SCOTT KIRBY: Well, Senator Cruz, again, we did this for safety. We believe it saved lives. I think that's my number one obligation, is safety, particularly running an airline. And--

TED CRUZ: You have an obligation to your customers?

SCOTT KIRBY: My number one obligation is safety, including to our country.

TED CRUZ: Are your competitors unsafe?

SCOTT KIRBY: I think that the world is safer for us. I made the decision for United. I'll let my competitors speak for themselves. I made the decision for United that getting everyone vaccinated would save lives.

ADAM SHAPIRO: So remember, that decision was also made right after President Biden had instituted the first of the mandates for private employers to require vaccinations before the legal challenges that would try to prevent that.

You had Delta Airlines. They took a totally different route on this. They said, look, to their employees, if you choose not to get vaccinated, you're going to incur an extra $200 a month in medical expenses because that's how much more the premiums would cost to cover people who don't get vaccinated. And Southwest originally had said that they would fire employees. But then they dropped that, so neither Delta neither Southwest has fired anybody.

So that was basically how the hearing went. Remember, the hearing was supposed to be about how did the airlines use the $54 billion collectively-- that's every airline in the United States. How did they use that money to support their employees? Because they did not lay anyone off. That's what the Payroll Support Program did. But they lost a lot of employees through attrition through early retirements and people taking early buyouts like the pilots, which contributed to the pilot shortage, which brings us back to the beginning. Julie.

BRIAN SOZZI: Adam, you follow Delta super closely for us here. What did you make of that guidance they came out with this morning?

ADAM SHAPIRO: Ed Bastian has always been optimistic. He had warned that they might not be profitable in the fourth quarter. Keep in mind that this is what they're reporting as part of their investor day, is an adjusted pre-tax profit for the fourth quarter. They say that things will improve in 2022, but there's the issue of omicron. And he's acknowledged that that's starting to have an impact on bookings.

Keep in mind that the most lucrative route for any of the airlines is London to New York, New York to London, London to New York. And we see cases of omicron COVID-19 spiking in the UK. That could put a damper on all of this. But when you take a look at where the airline stocks are today, only Delta is trading higher. And it's been-- it's up about $0.07 right now.

But the others are trading down. American Airlines, United, LUV-- they are both Southwest-- they are trading down today. And Delta at one point, despite the optimistic outlook and the improved guidance for 2022 and going as far as real profitability by 2024, you know, not up tremendously today, and it's flirting with flat lining.

JULIE HYMAN: Yeah, really interesting what we've seen lately from the airlines. And we'll see what happens with some of those new requirements in Europe in particular. Thanks, Adam. Appreciate it.