The Government Shutdown Brings a New Kind of Flight Delay
Airlines passengers experiencing flight delays may see them for many reasons. Anything from poor scheduling to inclement weather can leave passengers waiting for their flight. But major airlines are experiencing a different kind of flight delay and it is being directly caused by the government shutdown.
As major airlines look to modernize their fleets, many are choosing jets from the two largest commercial aircraft manufacturers, Airbus and Boeing. But it is the Airbus deliveries that are really causing headaches for three major carriers, and Airbus is not even the party at fault.
Due to laws regarding commercial aircraft, airlines must register these new jets with the Federal Aviation Administration (FAA). It should be noted that both Airbus and Boeing jets require this registration, but Airbus jets just happen to currently be posing a larger issue. But like so many other parts of the government, many of the FAA workers who would handle these registrations are on furlough and the Oklahoma City office that manages this procedure is closed.
As a result American Airlines, a subsidiary of AMR , US Airways , and JetBlue all have planes stranded in Europe.
The airlines would much prefer to have these planes stateside as soon as possible but this current delay is not do or die. Existing planes can fill these purposes at least for the next few months and JetBlue has said that its Airbus A321 is not due to enter service until December.
So far the delay is becoming at least an inconvenience for the airlines. US Airways wanted to fly its new Airbus A330 from France to its Charlotte maintenance facility but the shutdown held up this flight since registration could not be completed. The 30 US Airways employees scheduled to fly the plane back had to take regularly scheduled flights.
American Airlines is looking to continue to renew its fleet as it rebrands and sets itself up for a potential merger with US Airways. However, while the delay in aircraft delivery is slowing this effort, if the government shutdown is lifted around the debt ceiling deadline, this delay should not materially impact operations.
Right now, the government shutdown is being seen as a temporary thing that will get solved along with whatever debt ceiling deal is reached. However, it is possible that Congress could raise the debt ceiling while leaving the government shutdown alone. In this case, the shutdown could last far longer as it would not be tied to the financial armageddon that comes with refusing to raise the debt ceiling.
If the government were to remain shut down for several months, aircraft deliveries from both Airbus and Boeing could back up to far greater numbers. Airline fleet renewal programs would be delayed further as not only would deliveries be backed up initially but the backlog may take a while to clear depending on the length of the shutdown.
The government shutdown has caused ripple effects across the American economy. While it has not caused as great a sting as some pre-shutdown reports expected, its effects are being felt in the airline industry in the form of delayed deliveries. Investors should continue to monitor the political situation in Washington. After all, the debt ceiling issue needs to be resolved in less than two weeks and its effects are expected to be far larger than those of the government shutdown.
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The article The Government Shutdown Brings a New Kind of Flight Delay originally appeared on Fool.com.Alexander MacLennan owns shares of Air Canada, AMR, Delta Air Lines, and Gol Linhas. He is also long the following options: $22 January 2015 Delta calls, $25 January 2015 Delta calls, $30 January 2015 Delta calls, $17 January 2015 US Airways calls. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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