Airlines Adopt Unique Ways to Survive Pilot Shortage
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Airlines Adopt Unique Ways to Survive Pilot Shortage

A shortage of pilots has hit airlines across the U.S., dealing a blow to their pandemic recovery plans. With no immediate end to the crisis in sight, many airlines have adopted various survival measures. According to a Bloomberg report, United Airlines (UAL) has replaced planes with buses on some short routes where it needs to get passengers from the city to the airport. American Airlines (AAL) is also ferrying customers on buses on short routes where pilots are not available.

Airlines are also cutting flights as they struggle with the pilot shortage. According to the report, United may be forced to group as many as 150 regional planes. Although air travel demand is rebounding, the pilot crisis is making it difficult to get back to pre-pandemic flight schedules. For example, United expects its flights in Q2 2022 to stay 13% below the level in the same quarter in 2019. Delta Air Lines (DAL) and AAL project their Q2 flights to decline 16% and 8% from the 2019 levels, respectively.

Another survival measure airlines have adopted in these desperate times is boosting pilot pay. They hope offering sweetened compensation would enable them to attract and retain pilots. However, that means increasing operating costs at a time when airlines are already grappling with surging jet fuel prices

What Is Causing the Pilot Shortage?

A variety of factors have contributed to the pilot shortage. Many pilots retired during the pandemic as travel demand evaporated and airlines grounded their planes. The pilot demand has also outstripped supply. According to Bloomberg, until 2030, U.S. airlines need to hire 14,500 pilots each year. However, the country only produces 5,000 to 7,000 pilots annually, according to an ABC News report.

Wall Street’s Take

On April 22, Bank of America Securities analyst Andrew Didora reiterated a Sell rating on United Airlines stock, but raised the price target to $47 from $40. Didora’s new price target indicates 8.7% downside potential.

The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 10 Buys, six Holds, and two Sells. At the time of writing, the average United Airlines price target was $58.81, which implies 14.28% upside potential to current levels. Shares have increased 13% year-to-date.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 80% Bullish on UAL, compared to a sector average of 68%.

Key Takeaway for Investors

A pilot shortage may result in lost business opportunities for many airlines for many years. However, United Airlines could minimize the blow to its business as it has opened its own pilot training school and expects to train 5,000 new pilots by the end of the decade.

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