Even with all the flight cancellations, airline stocks are having a surprisingly good week

By Claudia Assis

For Wall Street, flight cancellations may not be the worst thing.

Bad weather and computer glitches have been worse for those hoping their flight isn't canceled.

As thousands of would-be air-travel passengers scramble to find alternatives to their canceled or delayed flights this week, Wall Street cheered all the way to the bank.

Maybe not exactly cheering, as the risk to U.S. airlines' bottom lines is real. If the U.S. government shutdown continues into Thanksgiving week, historically the busiest for travel, "disaster" awaits. And the stakes are higher this year: Thanksgiving bookings are up about 2% relative to Thanksgiving 2024, according to aviation analytics company Cirium.

So far, however, calmer heads prevail, and U.S. airline stocks are ending the week with gains. It's low season, and the industry has become adept at fine-tuning capacity with an eye on maintaining profits. Apps and websites do the work once accomplished by an army of customer-service employees and their phones. Bad weather and computer glitches have done far worse damage in the past.

There's "only modest earnings risk" for U.S. airlines' fourth quarter, provided the shutdown does not extend to the Thanksgiving travel period, Raymond James analyst Savanthi Syth said.

U.S. airlines have made "substantial investments" in their "irregularoperation" systems, or tech platforms meant to manage delays and cancellations, analysts at Deutsche Bank said. The shutdown-related cuts will put that to test, they said.

Southwest Airlines Co. (LUV) gained 7% this week, and JetBlue Airways Corp. (JBLU) about 5%. United Airlines Holdings Inc. (UAL) advanced nearly 4%, roughly the same as American Airlines Group Inc. (AAL). Delta Air Lines Inc. (DAL) rose 2.6% for the week, about the same weekly gains as the U.S. Global JETS ETF JETS.

Business travel, which sustains airlines between the end of the summer and the holidays, has died off this close to Thanksgiving. Airlines have lighter load factors during the low season and are better able to reshuffle flights and passengers.

Plus, airlines spent months fine-tuning and cutting capacity to maintain profitability, setting themselves well for the holiday season. And, because of the concentration of a few profitable airport slots, most U.S. airlines have multiple flights to the largest cities. There's also a fair amount of overlap between those prime destinations from some of the budget airlines.

The three major U.S. airlines, American, Delta and United, are preserving international and nonstop domestic flights during the cuts. These are their moneymakers; especially Delta and United have bet that, after a postpandemic era of pent-up demand and "revenge travel," well-heeled Americans would no longer fly just to get to Point A from Point B.

Airlines are also leaning much more on apps and their websites for the heavier lifting of rebookings and refunds. Without those tools, customer-service expenses could have become a bigger problem.

For passengers, it all depends on where they are traveling to and from, said Henry Harteveldt, president of Atmosphere Research Group. Say someone has a flight from Sacramento, Calif., to San Francisco and on to Honolulu. The airline may be able to reshuffle the passenger on the San Francisco leg, but by then, the flight to Honolulu might be full.

Cancellations hit about 3% on Friday, and expected to be around 3% as well for Saturday. Friday was the 72nd-worst day for flight cancellations overall in the U.S. airline market since Jan. 1, 2024, Cirium said.

"Today's cancellations are not nearly as high as cancellations in the past years due to weather and IT malfunctions," a Cirium spokesman said.

The worst days? July 19, 2024, when a faulty software update involving cybersecurity company CrowdStrike Holdings Inc. (CRWD) rattled Windows machines and the global information-technology system, affecting airlines, airport operations, and other businesses - leading to more than 3,000 flight cancellations. And Jan. 10, when a powerful winter storm led to the cancellation of nearly 3,000 flights as snow blanketed the southeast U.S. On those days, 14% and 15% of flights, respectively, were canceled.

Transportation Secretary Sean Duffy broke the news of this weekend's cancellations at a press briefing late Wednesday, saying that the administration was acting to keep air travel safe.

Air-traffic controllers missed their first paycheck last week and received only a partial paycheck in mid-October. Along with airport screeners, they are among the federal workers classified as essential and expected to work through the shutdown.

They may increasingly be calling out of work, however. "Staffing triggers," indicating a shortage of controllers, have driven some flight cancellations and delays in recent days, in addition to the more usual halts triggered by bad weather or construction at U.S. airports.

The shutdown is already the longest on record, eclipsing the 2018-19 shutdown, which lasted 35 days. A ground stop to and from New York City's LaGuardia Airport in January 2019 was one of the key moments leading to that shutdown's end.

The shutdown began Oct. 1, mostly because President Donald Trump and his Republicans were in a standoff with Democratic lawmakers over including an extension for Obamacare subsidies in a bill to fund the federal government through Nov. 21.

See also: What to do if you have to travel this weekend as up to 40% of flights could be delayed from FAA cuts

-Claudia Assis

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11-07-25 1635ET