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Will O’Hare Airport Strike Impact Thanksgiving Travel?

Zacks

According to a report in the Wall Street Journal, on Nov 29, workers (non-unionized) at Chicago’s O’Hare International airport will go on strike in an attempt to raise their wages and secure union rights. Apparently, around 500 workers at one of the country’s busiest airports which include wheelchair attendants, baggage handlers, airplane cabin cleaners and janitors will go on strike on the day as they strive to persuade the authorities for a $15/hour wage. The workers had voted last week in favor of the strike. However, workers like air traffic controllers and security screeners will not be part of the strike.

Even though not unionized, the workers are supported by the Service Employees International Union (SEIU). The labor union represents almost 2 million workers across various fields in the U.S. and Canada. According to SEIU, Nov 29 will also see demonstrations and protests at 18 other major airports in the country including Los Angeles International Airport and Newark International Airport.

The concerned workers serve major carriers like American Airlines Group AAL and United Continental Holdings UAL. We note that United Continental is the largest operator at the airport, followed by American Airlines Group. Other carriers operating at the airport include the likes of Delta Airlines DAL and Spirit Airlines SAVE.

Additionally, Nov 29 marks the fourth anniversary of the strikes by fast-food workers. The strikes had launched the Fight for $15 campaign.


Strike Timing – A Major Relief

The timing of the impending strike, however, provides relief to the passengers as it is on the last day of the Thanksgiving holiday travel period. According to Airlines for America (‘A4A’), a leading trade group, estimates approximately 27.3 million passengers to opt for air travel in the Thanksgiving holiday period (Nov 18–Nov 29). The projection reflects a 2.5% increase from the 2015 figure.

A4A has predicted that 2.27 million fliers per day will be transported by carriers during the period, representing an increase of 55,000 from the comparable figure last year. Passenger volumes (on a daily basis) is projected to be in the range of 1.51 million to 2.81 million. The busiest day for the holiday period is expected to be Sunday, Nov 27. The lightest travel day is anticipated to be the Thanksgiving Day or Nov 24, 2016. With the strike scheduled to take place after the busiest travel day, travel during the Thanksgiving holiday period is unlikely to suffer substantially.

Apparently, Nov 29 was selected for the day of strike so that the travel plans are not jeopardized. The passenger friendly move is likely to garner support from the public as the workers strive to improve their pay and working conditions.

Transportation – Airline Industry Price Index

Transportation – Airline Industry Price Index

Strike Threat Looms at Lufthansa

We note that pay related strikes are not uncommon in the airline space across the world. Germany’s Lufthansa DLAKY has been facing work disruptions due to frequent strikes for quite some time. The latest update in this regard has come from the carrier’s pilots. They are scheduled to go on strike on Nov 23 in a bid to improve their pay.

The strike is likely to hurt short and long-haul flights of the carrier which are scheduled for departure from various airports in Germany. Apparently, the carrier has offered pay raises to the tune of 2.5% to its pilots. However, the offer is unacceptable to the pilots’ union leading to the breakdown of talks between the parties and the impending strike. Notably, Lufthansa currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

We expect investor focus to remain on these impending strikes and their impact on travel in the coming days.

Improved Financial Health Leads to Pay Hike Demands

With carriers in favorable financial health, courtesy low oil prices, it is natural for workers to ask for higher pay and better working conditions. However, this has resulted in frequent pay-related labor deals and associated issues across the airline industry. This has resulted in escalating labor costs which have impacted third-quarter earnings for major carriers like American Airlines and JetBlue Airways JBLU.

The fourth-quarter projections by many carriers for operating expense per available seat mile (CASM) – excluding fuel and profit sharing – indicate that the costs are likely to continue rising. For example, JetBlue anticipates the metric to grow in the band of 4.5–6.5% (including negative impact to the tune of 0.5% due to Hurricane Mathew). Southwest Airlines LUV expects CASM – excluding special items and profit sharing – to increase in the band of 4–5% in the final quarter of 2016, which is much more than the 2.6% increase witnessed in the third quarter.


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