If you had taken a plane ride from big cities like New York, Dallas, or Los Angeles in the past few days, you most likely had to endure an excruciatingly long delay, thanks to the sequestration-linked furlough of air traffic controllers.
Because the Federal Aviation Administration has been forced to trim its 2013 budget after sequestration came into effect, the agency has decided to furlough some 1,500 (about 10%) controllers per day, with the manpower shortage causing a massive gridlock at the nation’s busiest airports. The Associated Press noted on Tuesday that an 8 a.m. EDT New York-bound US Airways
(NYSE:LCC) flight was stuck on the runway in Washington, DC, for two hours, which meant that an Amtrak Acela train that took off at the same time actually arrived earlier.
New York's John F. Kennedy International Airport. Source: Wikipedia
Who should we blame for the misery wrought on travelers? It depends on who you ask. Republicans say that the FAA could have enacted its mandated budget cut of $637 million without furloughing controllers. The FAA administrator, Michael Huerta, in response, asserts that he had no choice but to idle staff as a large portion of the agency’s budget went to payroll.
The New York Times
appears to side with the FAA. An op-ed in the Times
on Wednesday read:
As it happens, the sequester law is clear in requiring the FAA and most other agencies to cut their programs by an even amount. That law was foisted on the public after Republicans demanded spending cuts in exchange for raising the debt ceiling in 2011. Since then, the party has rejected every offer to replace the sequester with a more sensible mix of cuts and revenue increases. Mr. Boehner is so proud of that strategy that he recently congratulated his party
for sticking with the sequester and standing up to the president’s demands for tax increases.
But drastic cuts in spending carry a heavy price. Republicans certainly don’t want voters they care about — including business travelers and those who can afford to fly on vacation — to feel it. They continue to claim that the $85 billion in this year’s sequester can be covered by eliminating waste, fraud, consultants, and the inevitable grant to some obscure science or art project. And, of course, to programs for the poor.
Clearly, the Times
is of the opinion that the FAA could not have avoided the staff furloughs because of how sweeping the sequester budget cuts are. However, the Wall Street Journal
has a contrasting view. Its own op-ed on the topic argues that the Obama administration chose to inflict budget cuts in a way that would result in flight delays in order to make the sequester as unpopular as possible:
The White House claims the sequester applies to the budget category known as "projects, programs, and activities" and thus it lacks flexibility. Not so: This is a political pose to make the sequester more disruptive. Legally speaking, the sequester applies at a more general level known as "accounts." The air traffic account includes 15,000 controllers out of 31,000 employees. The White House could keep the controllers on duty simply by allocating more furlough days to these other non-essential workers.
Instead, the FAA is even imposing the controller furlough on every airport equally, not prioritizing among the largest and busiest airports. San Francisco's Napa Valley airport with no commercial service will absorb the same proportion of the cuts as the central New York radar terminal, which covers La Guardia, JFK, and Newark International, as well as MacArthur, Teterboro, New Haven, Republic, and other regional fields.
Huerta spoke to the specific claim about not furloughing more of controllers at quieter airports today at a Senate hearing. According to Bloomberg
, he said that he would be picking “winners and losers” if he did so because airlines that operated from busier hubs would benefit at the expense of those operating at less congested airports.
Huerta also said that his agency did not receive any guidance on how to implement budget cuts from the White House’s Office of Management and Budget.
While it seems to still be unclear if the White House or the Republicans should be blamed for the flight delays, what’s certain is that as airlines will feel the pain as badly as passengers.
Earlier this week, Delta Air Lines
(NYSE:DAL) reported that the sequester would hurt its income this month.
“We are taking actions to mitigate the decline in close-in demand we saw in the last part of March, and we expect the impact of the sequester, combined with a softening of leisure demand, to result in a 2% - 3% decline in April’s unit revenues,” Delta President Ed Bastian said in a statement.
Given that busy airports have been hit the hardest by the furloughs, airlines like United Continental
(NYSE:UAL) and American Airlines
(PINK:AAMRQ), which have hubs in the most popular markets in the country, will be hurt much more than small regional companies.
Airlines might also be liable to pay fines of up to $27,500 per passenger, because under current Department of Transportation rules, passenger-carrying planes are not allowed to be delayed on the tarmac for three or more hours.
The industry is seeking a suspension of this law, arguing that current flight furlough-caused delays are out of its hands.
“We believe granting this exemption serves the best interests of the flying public by providing airlines with the operating flexibility necessary to focus on responding to the FAA’s projected delays in ways that minimize and avoid worsening the disruption and inconvenience to our passengers,” said Katie Connell, a spokesperson for Airlines for America, an industry trade group, to NBC News
So far, shares of publicly traded airline companies have not been greatly affected by the flight delays. United Continental, US Airways, and Southwest Airlines
(NYSE:LUV) all closed in the green yesterday, while JetBlue
(NASDAQ:JBLU) inched down 0.14%. Delta was the worst hit, dipping 1.56%, thanks to sluggish revenue guidance for the second quarter.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.