Collapses in the airline industry and how to fix them

key takeaways

  • The Federal Aviation Administration had to suspend flights on the morning of January 11 due to problems with the system that notified pilots of possible dangers in the air and on the ground. The suspension lasted from approximately 7:30 a.m. to 9 a.m. ET as the FAA scrambled to fix the issue by rebooting the system.
  • The government has increased scrutiny of airlines due to all the flight cancellations. Airlines are increasingly frustrated with the FAA over the lack of air traffic controller in-space personnel.
  • Passengers are becoming increasingly frustrated with aviation meltdowns, as cancellations almost feel like the new standard. We look at what can be done to fix an airline industry that is plagued by staffing problems and outdated technology.

There was another collapse in the airline industry not long after hundreds of flights were canceled over the holiday season. On January 11, the Federal Aviation Administration (FAA) had to reset the entire system that is responsible for notifying pilots about safety issues in the air and on the ground. This led to thousands of delays and cancellations across the country, as passengers were stranded at airports.

It’s worth mentioning that this was the first time since the 9/11 attacks that US airspace was shut down entirely. As you can imagine, this led to a lot of chaos and confusion.

We are going to look at the recent collapses in the airline industry and what could be done to fix them. Also, this is how Q.ai can help you invest in any industry, regardless of its ups and downs.

The collapse of the FAA

On January 11, the FAA had to suspend all US flight departures in the early hours of the morning due to an issue with the Notice to Air Mission system. This mechanism is designed to share safety information with pilots. Airlines had to cancel or delay flights due to continued congestion at airports.

Later that night, the FAA issued an official statement confirming that it was not a cyberattack:

“The FAA is continuing a comprehensive review to determine the root cause of the Notice to Air Missions (NOTAM) system outage. Our preliminary work has traced the outage to a corrupted database file. At this time, there is no evidence of a cyber attack. The FAA is working diligently to further identify the causes of this issue and take all necessary steps to prevent this type of outage from happening again.”

The NOTAM system was affected and this mechanism is crucial as it sends alerts to pilots about conditions that could possibly affect the safety of the flight. This system is different from the air traffic control mechanism that is used to keep planes at a safe distance from each other. Both are important tools for aviation safety.

The good news was that there was no evidence of a cyber attack and the issue was resolved within 90 minutes when the systems were rebooted.

As of 6 pm ET, 9,500 flights to, from and within the US were delayed and more than 1,300 flights canceled as airlines struggled to resolve the chaos. The 90-minute ground stoppage was due to an “abundance of caution.” Irregularities overnight in safety messages sent to pilots were reported to present cause for concern.

Reaction to the collapse of the FAA

Unsurprisingly, this outage caused a lot of outrage across the country. Here’s a quick look at some of the immediate reactions:

  • Airlines issued travel waivers. Airlines had to respond by offering travel waivers to passengers who had flight problems. The financial implications of this will not be identified until first quarter financial results are reported.
  • Passengers want answers. As you can imagine, it’s frustrating for airline passengers to deal with frequent delays and cancellations.
  • Airlines request system updates from the FAA. Last year, we saw government officials blame airlines for flight cancellations and mistreatment of passengers. This time, airline leaders blame the FAA for the archaic technology. Airline leaders expect an increase in funds invested in the FAA system.

When did the collapse start?

Southwest Airlines came under fire from the US government last month for the unacceptable cancellations, as more than 17,000 flights were canceled during the final days of the year. This was the first time that Transportation Secretary Pete Buttigieg introduced the term “wreck”. The flight problems sparked outrage across the country, with President Joe Biden tweeting that airlines must be held accountable moving forward.

Southwest CEO Bob Jordan has informed investors that this collapse could cost the company up to $825 million. Southwest also announced that it would allocate about $1 billion to upgrade IT systems that are in desperate need of an overhaul. The carrier also hired Oliver Wyman, a transportation consulting firm, to see what went wrong.

The state of the aviation industry

Air travel has been in a unique position in its post-pandemic life. During COVID-19, airlines had to reduce their activity due to travel restrictions being imposed. Then, when travel restrictions were lifted, there was an unprecedented surge in demand for travel.

Since we already discussed outdated technology in place, here are some of the major issues with the airline industry that need to be addressed to prevent further collapse.

Flight cancellations have become more common

Flight delays and cancellations must be addressed first. A report came out last summer revealing that airline cancellations had surpassed pre-pandemic levels. FlightAware’s flight tracking website revealed that US-based airliners canceled 128,934 flights from January to July. This figure is up about 11% from pre-pandemic levels.

With the collapse of the Southwest in December and the recent FAA debacle, the numbers for flight cancellations in the last month alone will be staggering.

Staffing problems continue to plague the airline industry

We heard about the pilot shortage crisis last year and general concerns about staffing. The pilot shortage in 2022 became a serious concern when it was revealed that the industry had a shortage of about 8,000 pilots and airlines even opened training schools to help increase the shortage.

During the pandemic, many airlines have offered early retirement packages to employees to encourage them to leave the workforce. By May 2020, about 100,000 American Airlines, Delta Air Lines and United Airlines employees had accepted offers to leave. Airlines were struggling to stay afloat due to travel restrictions and felt they had to cut staff budgets to match the decline in demand.

How can these airline collapses be fixed?

What can be done about these airline collapses? While many passengers are growing increasingly frustrated with this industry, it is important that we look at what can be done to fix these issues and prevent further airline collapses in the future.

Revise the old IT system

Many critics are quick to point out that the IT system needs to be modernized. According to comments from government officials, the FAA system that led to the collapse is over 30 years old, with a possible upgrade six years away. This is completely unacceptable as technology is always changing and many of the largest global tech companies have embraced the power of artificial intelligence. While Transportation Secretary Pete Buttigieg agreed that updates are necessary, as far as we know, there are no immediate plans to overhaul the system.

It is time for the government to invest heavily in the airline industry to prevent these problems from happening again. In Southwest’s case, the December problems could likely have been avoided if the company had upgraded its systems. The outdated scheduling system was reported to be unable to switch automatically when weather conditions caused problems.

Regulatory scrutiny

The industry needs some sort of scrutiny and accountability measures to ensure flights don’t get cancelled. Many people expressed their frustration with the airlines after the $54 billion taxpayer bailout failed to lead to increased infrastructure investment spending. While President Biden hinted at the responsibility of the airlines to avoid more problems down the road, we desperately need to see some government intervention.

staff increase

While it is difficult to turn the tide on early retirement, as many former employees are likely to be unenthusiastic about the potential of returning to work, immediate action needs to be taken when it comes to staffing.

For example, last summer, the president of the air traffic controllers union criticized the FAA for not keeping up with the hiring of air traffic controllers. Union president Rich Santa noted that the FAA had 1,500 fewer controllers on board in total in 2022 compared to 2011. The airline industry needs to hire more pilots and staff, while the FAA needs to bring in more air traffic controllers. to avoid staffing concerns.

We understand these airline changes won’t happen overnight, but something must be done to improve the process so passengers aren’t left stranded.

How should you be investing?

With the return of travel in the post-pandemic world, it can be tempting to invest in this sector. However, broader macroeconomic issues and the disconnect between airlines and government bodies may make this a bad time to invest in this space.

The good news is that if you’re looking to invest your money, Q.ai can help. Our artificial intelligence scours the markets for the best investments for all types of risk tolerances and economic situations. Then he bundles them into handy investment kits that make investing simple and strategic. Best of all, you can activate Portfolio Protection at any time to protect your profits and reduce your losses, no matter what industry you invest in.

The bottom line

We will be keeping an eye on earnings reports from the major airlines as last year’s struggles could prove quite costly. For airline collapses to become a thing of the past, it’s clear that concerns about staffing need to be addressed along with an update in the systems used by the FAA and the airlines.

Download Q.ai today to access AI-powered investment strategies.

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