DALLAS — Both North Texas-based airlines have been on a turbulent financial ride as American and Southwest continue to search for ways to bring in the big profits of their pasts.
Both carriers released their most recent earnings Thursday. While United and Delta each posted almost $1 billion dollar gains for the third quarter, American posted a net loss of nearly $149 million despite record revenue.
“Americans got a lot of work ahead of them. They kind of dug themselves into a hole and they need to find a shovel,” said Dynamic Travel and Cruises CEO Steve Cosgrove.
Cosgrove says on top of the pandemic, he blames bad business moves.
“They're heavily in debt, and that gives them less room,” he said. “And it was a huge mistake and misstep by getting rid of their own sales department and trying to bypass travel agents and the corporate travel departments and they just can't make massive mistakes like that.”
Over at Southwest, the airline posted a net profit of $67 million, but the bigger news is the deal they reached with Elliott Management. The activist investor has pushed for major changes in the company in recent months. The deal – for now - helps avoid a proxy fight.
“Elliott got pretty much what they wanted,” said Mike Boyd, an aviation expert and CEO of the Boyd Group. “They were able to put people on the board.”
The terms of the deal include six new board members and the Nov, 1 departure of Board Chair and former CEO Gary Kelly.
“if Elliott gets in there and screws up with the culture, it's gonna backfire and hurt them even more," Boyd said.
Since Elliott came in the picture, the airline has already start rolling out major shifts to Southwest’s long standing legacy like adding red eye flights, and ditching the open seating policy.
“The challenge that Southwest has today is not due to bad management. It's due to the situation they're flying in has changed dramatically. It's no longer special, it's no longer something that's lower cost,” Boyd said.
Boyd says new lucrative labor contracts are also a factor. And as airlines navigate the changing industry, travelers should brace themselves and their wallets.
“It ain't gonna be as cheap as it has been in the past,” Boyd said. “Only because labor is asking for its share of the pie.”
And looming over all of these moves is the turmoil at Boeing – which could lead to an even bumpier ride.
“There's a lot of uncertainty because Boeing has screwed things up so badly, the reliability and the trust factor is down,” Cosgrove said.
Boeing factory workers voted Wednesday to reject the company’s latest contract offer and to continue a six-week strike that has halted production of the aerospace giant’s bestselling jetliners.
Southwest only uses Boeing jets so they're being impacted the most. It's why the airline is launching red eye overnight flights to get more use out of its current fleet. But across the industry, airlines have had to cut routes and adjust schedules because aircraft it thought it would have are still on the production lines and there's no timeline on when those jets will actually be delivered. And the Boeing strike just adds to that.