In This Article:
The airline industry is facing continued turbulence from the mid-air incident involving a Boeing 737 Max 9 plane (BA) during an Alaska Air flight (ALK). The line of particular jets is still grounded as the FAA and Alaska Air continue their investigations, hundreds of flights have been canceled, and United Airlines (UAL) claims this will cause a hit to its earnings.
Steve Trent, Citi Managing Director and Equity Analyst, joins Yahoo Finance to discuss the impacts the incident continues to instill on airlines and how it will affect the sector at large.
"In terms of the bookings, probably that's still way too early to tell when we think about what's been booked close in and the pipeline looks good," Trent explains. "I think in terms of the potential earnings exposure, roughly speaking, kind of rule of thumb, we kind of think about every 1% reduction in available seat mile growth translates into roughly a 2% reduction in pre-tax earnings. So there can be some nuances around that with respect to where we happen to be with jet fuel prices and what have you."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
JOSH LIPTON: Airlines hitting some turbulence so far this year, as we've been discussing. United forecasting a first quarter loss due to the grounding of the Boeing 737 Max9 planes. JetBlue's Robin Hayes gearing up to step down as CEO. And meanwhile, Delta Airlines gets more cautious as it trims its 2024 earnings outlook. That's only scratching the surface as investors now await quarterly results from a slew of airlines.
Here to discuss the journey ahead, we have Stephen Trent, Citi Managing Director and Equity Analyst. Stephen, it is always good to see you.
STEPHEN TRENT: Pleasure to see you. And thank you for having me on.
JOSH LIPTON: Maybe we'll start just what we were just discussing. You know, so Boeing's CEO David Calhoun is on Capitol Hill today. He's answering these questions. You know, beyond what it just means for United Alaska, Stephen, maybe just talk to us about what are the ripple effects of this, for the broader industry, for the broader sector.
STEPHEN TRENT: Absolutely. So I think as we look through the next several quarters at least, it's hard to believe that this is going to be the very last thing we hear about supply chain. So we've been through the pandemic, a lot of these companies, not just the OEMs, but the dozens of companies that supply them, it's been tough to find employees. It's been tough to find equipment.