There’s a famous scene from “Seinfeld” in which the lead character has a reservation for a rental car but the agency says it has run out of the kind of vehicle he booked. “You know how to take the reservation, you just don’t know how to hold the reservation,” Jerry Seinfeld laments. “That’s really the most important part of the reservation: the holding. Anybody can just take them.” There’s a similar dynamic playing out across the US transportation sector today. 

Passengers have proved more than willing to pay high fares for air travel, but the industry is cutting flights to improve reliability amid widespread complaints about delays and cancellations. United Airlines Holdings Inc. said late Wednesday that it would increase capacity next year to no more than 8% above 2019 levels, a significant adjustment relative to earlier forecasts for as much as 20% growth. The airline will offer 13% fewer seats this year than it did pre-pandemic. “We’re still probably in the sixth or seventh inning of the Covid recovery,” United Chief Executive Officer Scott Kirby said on an earnings call on Thursday. For now “the Covid recovery trend is at least canceling out — arguably exceeding — the economic headwinds.” But despite that strong demand, 8% growth next year is the most that it’s “physically possible for us to fly” because of limitations at regional partners, a slower recovery for long-haul travel out of Asia, delays in aircraft deliveries and broad infrastructure problems across the industry, Kirby said. Pilot recruitment, retention and training challenges are other “real constraints,” Chief Commercial Officer Andrew Nocella said. 

Read more: Airline Chaos Makes High Fares Harder to Bear: Brooke SutherlandAt CSX Corp., labor — not terminals or train cars or shipping demand — is the biggest limitation on its ability to offer customers the kind of service that they enjoyed before the pandemic and grow its business. The railroad has hired 2,000 employees over the past two years but its transportation and engineering headcount actually went backward in the most recent quarter after adjusting for acquisitions, CSX CEO James Foote said on the company’s earnings call on Wednesday. Measurements of train velocity and the amount of time locomotives spend lingering in terminals are also moving in the wrong direction. The issue isn’t getting people to apply for jobs and go through the training process; it’s getting them to stick around afterward. “Unfortunately, after we get them through the classroom training part and the on-the-job training part, and they actually go to work in the outdoor operating environment, we’ve seen a significantly higher attrition rate than what we had ever normally experienced or than what we had anticipated,” Foote said.

To some extent, these are good problems to have when financial markets are particularly concerned about the risk of an economic downturn. Whether it’s airlines, railroads or the manufacturing industry, demand isn’t yet a problem. Elsewhere in earnings updates this week, Dover Corp. CEO Rich Tobin took umbrage with Wall Street’s obsession with the trajectory of order rates and the idea that a decline after a record 2021 spells trouble for the underlying health of the industrial economy. Backlogs are still hovering near record highs after bookings outpaced revenue growth. “Make no mistake, we remain concerned with the inflation trajectory and general macro backdrop,” Tobin said. While heady growth rates can’t continue forever, and the pace of orders should ease as supply chains get healthier and lead times return to normal, “we’ve got a significant portion of the portfolio that’s sold out for the year,” he said. 

Read more: Industrial Slowdown Doesn’t Look Too Scary: Brooke Sutherland

But stubborn supply constraints are crimping profitability and service quality across the industrial sector. United’s capacity cuts mean it has fewer seats across which to spread increased labor and fuel costs. The reduced schedule also increases the likelihood that customers will have to pay up to get a flight to their desired destination. Dover’s margins were weighed down by input shortages and Covid-related lockdowns in China, while stockpiles of work-in-progress inventory waiting on final components and assembly ate into cash flow. At CSX, only 59% of its carloads are showing up on time, down from 69% in the second quarter of last year. “You don’t think that this starts to affect your ability to win business onto the railroad with the service levels here?” Bank of America Corp. analyst Ken Hoexter asked CSX executives on the company’s earnings call. 

“It’s clearly not like everybody else in the world is doing fantastic,” Foote said in response. “This is an issue that affects everybody in the logistics chain: It affects the truckers, it affects the steamship companies, it affects the terminal operators. This affects everybody. Everybody’s slowed down, everybody’s struggling, and it’s not just the railroad industry.” 

CSX is trying to develop better psychological evaluation tools to make sure it’s hiring the kinds of people who actually want to work in railroading and not wasting money on training those who don’t plan to stick around. It’s also considering different compensation packages that might better incentivize new hires to build careers at the company, although executives say the railroad’s ability to offer pay increases is limited by union negotiations that have dragged on for years. President Joe Biden last week established an emergency labor board to attempt to resolve the standoff between the largest US carriers and some 115,000 rail workers.

CSX still thinks it can hit its goal of building a headcount of 7,000 active transportation employees by the end of the current quarter, but the company is also losing 80 to 90 employees a day to the recent spike in Covid cases, and a greater percentage than normal are taking vacations this summer. Only about 80% of the workforce has been available to work in recent months, compared with about 85% typically on a seasonal basis, CSX’s head of operations, Jamie Boychuk, said on the earnings call. 

“We don’t have any silver bullets,” Foote said. “We’re making it up to a large degree as we go along because these are all uncertain times and experiences that we’ve never had before.”

More From Other Writers at Bloomberg Opinion:

• Biden’s Covid Diagnosis Is Wake-Up Call for the US: Tyler Cowen 

• Labor Market Will Help, Not Hinder, Inflation Fight: Conor Sen

• Americans Are Talking Themselves Into a Recession: Jared Dillian

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. A former M&A reporter for Bloomberg News, she writes the Industrial Strength newsletter.

More stories like this are available on

Leave a Reply

Your email address will not be published. Required fields are marked *