It may be the case that one of our favorite and longest running newsletter themes - high US inflation - is receding from center stage, at least for now.

While this is surely cause for celebration, another multi-year (and also truly terrible) theme seems to be only going from strength to strength.

We are speaking, of course, about air travel.

You have probably noticed that - once again - American air travel is a serious mess. This seems to happen nearly every holiday period. In fact, the question might be not:

When will we have a holiday that isn't full of chaos?

But rather:

Is the holiday chaos not simply bleeding out and becoming the new normal travel experience?!

Not fun.

Regardless of whether that does occur, one thing was very clear: the July 4th holiday was no exception to the prevailing trend.

• There were nearly 4000 flights delayed (and several hundred canceled) on Monday July 3rd.

• That was actually a better record than Saturday's and Sunday's performance which had well over 8000 flights delayed each day.

8000 flights is roughly 10% of the flights in the US, give or take. The repercussions of each one are significant as well.

Incredibly this was actually an improvement over the previous week which had seen over 42,000 flights delayed and over 7000 canceled in a 6 day span from Saturday to Thursday before the holiday weekend.

Chaos indeed.

As always, thanks to the excellent Flight Aware site for all the data.

More interesting still is why these delays and cancellations are occurring. Rather than some one-off issue there are some worrying signs that these disruptions will be with us for some time.

To start of with though, there are lots of aspiring contenders:

• A bad run of tough-to-forecast summer thunderstorms over the holiday weekend was both unfortunate and also the way it goes. The summer will have stormy weather and this will play havoc with travel schedules is to be expected. Amusingly as we write this there is a tornado warning being broadcast out on the emergency signal.

• Further, a deadline for planes to be retrofitted with new equipment because of a long planned boost in signal strength to 5G. For reasons that are still a bit unclear but probably has to do with a lack of mechanical staff, hundreds of planes are not yet updated and so cannot fly and/or land in low visibility conditions.

• Less discussed but perhaps more important was a problematic shortage of FAA-certified air traffic controllers. A lack of training - partially because of a pandemic related-pause - has left the FAA with 10%+ less staff than a decade ago.​

The problem isn't necessarily the 10% figure but rather how uneven this shortage is distributed.

The problem particularly acute in the crucial New York area. Here a critical facility for air traffic controllers (TRACON) is somehow under staffed by 54% at the moment. Miami isn't much better at a terrible 66%. The national average is only at ~81% which is both far better than 54% but also suggests that this shortage is widespread and will be difficult to resolve quickly.

We were fascinated to learn from some digging that that these staffing challenges are harder to overcome because of the FAA's own rather ornate and even bizarre rules. For instance, the FAA currently only accepts applications once a year in a three-day window. Further, to apply, you must be younger than 31 years old and, if you're hired, the FAA requires you to either retire at 56 to prevent burnout or apply for a waiver. ​

No wonder we are down ~1200 air traffic controllers compared to the early 2010s....

The most significant aspect of this situation is that, no matter what happens, the lack of FAA controllers may get worse before it gets better. It takes 3-5 YEARS for an air traffic controller to become fully trained and we are currently around 3000 short of the 14,500 DOT target. Therefore, a more poignant question is whether the rate of new hires - even if it is accelerated significantly - will do anything more than replace retiring, over work and burned out controllers?

Unfortunately, it doesn't look good.

This isn't just the opinion of humble newsletter writers, surly airline executives or online travel "influencers" either. The Department of Transportation Inspector General recently published a report that can only be called scathing.​

It points out that over 77% of critical FAA facilities presently do not reach the 85% threshold of staff considered essential. Further, it goes to argue that the agency seems to "lack a plan" to do anything about the problem.

Here is the inspector general:

The FAA has made limited efforts to ensure adequate controller staffing at critical air traffic control facilities. The Agency also has yet to implement a standardized scheduling tool to optimize controller scheduling practices at these facilities, and FAA officials disagree on how to account for trainees when determining staffing numbers. As a result, FAA continues to face staffing challenges and lacks a plan to address them, which in turn poses a risk to the continuity of air traffic operations.

The fascinating question is what this means for airline companies themselves? You might think that constant delays and cancellations would hit airline profits and, in turn, those companies' share prices.

You would be wrong however.

Airline employees and executives are not having a great time whatsoever but that is not the case for airline investors.

Here is a Pebble theme of all the major US airlines this year:

As you can see, they are doing great. Perhaps not Nvidia-level great but close!

Why?

Pretty simple really: consumer demand for airline tickets is incredibly high. This is allowing airlines of all stripes - from majors to budgets to regionals - to increase tickets and make a lot of money.

As we are finding out in industry after industry, Americans are simply desperate to travel and experience the world after years of a pandemic-enforced pause. Prices may be high but they are still traveling, at least for now.

So, despite the endless headaches, terrible customer experiences and hundreds of flights that never happen US airlines are actually having a banner year.

File that under the category of: be careful of extrapolating from negative headlines about a company to its share price. The irony is that the only people enjoying air travel right now might be those sitting at home enjoying their summer and holding airline stocks.

They might prove Richard Branson long over the long term but, for now, life is good for airline investors.

If you are not one of those, perhaps it is a year for the Great American road trip? Gas prices are still pretty cheap. At the very least be careful thinking you can fly easily from or through the stormy and short staffed New York region.....

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