US airlines profit by flying less
By David Koenig |
January 26, 2011, Wednesday
|
Print Edition
Print Edition
AFTER a decade of multibillion-dollar losses, United States airlines appear to be on course to prosper for years to come for a simple reason: They are flying less.
By grounding planes and eliminating flights, airlines have cut costs and pushed fares higher. As the global economy rebounds, travel demand is rising and planes are as full as they've been in years.
Profit margins at big airlines are the highest in at least a decade, according to the government. The eight largest US airlines are forecast to earn more than US$5 billion this year and US$5.6 billion in 2012.
US airlines are in the midst of reporting fourth-quarter results that should cap the industry's first moneymaking year since 2007.
"The industry is in the best position - certainly in a decade - to post profitability," says Southwest Airlines CEO Gary Kelly. "The industry is much better prepared today than it was a decade ago."
The airlines' turnaround has benefited investors - the Arca airlines stock index has nearly quadrupled since March 2009 - but it's been tough on travelers.
Fares in the US have risen 14 percent from a year ago, according to travel consultant Bob Harrell. Flights are more crowded than they've been in decades. On domestic flights, fewer than one in five seats are empty. Space is even tighter over the summer and holidays. That's why it took a week to rebook all the travelers who were stranded by a snowstorm that hit the northeast of the country over Christmas weekend.
By grounding planes and eliminating flights, airlines have cut costs and pushed fares higher. As the global economy rebounds, travel demand is rising and planes are as full as they've been in years.
Profit margins at big airlines are the highest in at least a decade, according to the government. The eight largest US airlines are forecast to earn more than US$5 billion this year and US$5.6 billion in 2012.
US airlines are in the midst of reporting fourth-quarter results that should cap the industry's first moneymaking year since 2007.
"The industry is in the best position - certainly in a decade - to post profitability," says Southwest Airlines CEO Gary Kelly. "The industry is much better prepared today than it was a decade ago."
The airlines' turnaround has benefited investors - the Arca airlines stock index has nearly quadrupled since March 2009 - but it's been tough on travelers.
Fares in the US have risen 14 percent from a year ago, according to travel consultant Bob Harrell. Flights are more crowded than they've been in decades. On domestic flights, fewer than one in five seats are empty. Space is even tighter over the summer and holidays. That's why it took a week to rebook all the travelers who were stranded by a snowstorm that hit the northeast of the country over Christmas weekend.
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