Monday, July 19, 2010
After Years of Losses, Airlines Now See Profits
The nine largest U.S. airlines will report about $1.77 billion in profits on $31.5 billion in revenues for the second quarter, Robert Herbst, of AirlineFinancials.com, estimates.
Airlines have begun announcing second-quarter results. Delta today reported a $467 million profit for the quarter, for example. That compares with a $257 million loss for Delta in the second quarter of last year.
Much of the new airline prosperity is being driven by a rebound in business travel.
According to Herbst: "Every major airline, excluding American, should be reporting significant profits for the recent 2nd quarter. American is estimated to be at or near break-even. ... "If these second-quarter 2010 estimates hold true, excluding 2007, they will be the highest second-quarter profits in the last ten years. Further, 2010 industry revenues are estimated to be the second highest in the history of the airlines, topped only by 2008."
He added, "Excluding American, and assuming fuel prices remain in the $75-$85 per barrel price range, the airline industry should see significant profits for the current third quarter."
Delta, meanwhile, crowed about its results.
"Delta's profit this quarter is our best result in a decade and proof that our plan has positioned us well as the economy begins its recovery," said Richard Anderson, the airline's chief executive officer.
Aside from relatively stable fuel prices, airlines are benefiting from record load factors, the percentage of seats filled by paying customers. In general, domestic flights are taking off 85 percent or more full on average -- meaning that most flights are full. To keep planes full, airlines have been carefully reducing seat capacity to try to keep it in sync with growing demand. For passengers, that means crowded flights and less comfort, of course.
Oh, and they've been raising fares, too.
Airlines are also raking in unprecedented piles of dough on unbundled fees. In the first quarter of this year, U.S. carriers nailed passengers for $768.5 million in charges for checked bags and another $553.9 million in penalty fees for changing itineraries on so-called nonrefundable tickets, according to the Transportation Department's Bureau of Transportation Statistics. (The BTS doesn't break out revenue from things like selling meals, priority seating and boarding, etc.)
Internationally, things are also improving for airlines. International premium travel -- that is, people flying in first class and business class -- rebounded sharply in May to a level 18.7 percent above May of 2009, the International Air Transport Association (IATA) said. Coach travel was 10.2 percent higher; total passenger numbers were 10.9 percent up in May.
For the first five months of 2010, premium travel was up 10.8 percent.
"This strong post-recession rebound is being driven in large part by business travel, as business confidence and world trade rebound sharply," IATA said.