U.S. airlines are expected to report highest annual profits in more than 10 years
Continuing a recovery from one of the worst economic slumps in airline industry history, the nation’s air carriers in the weeks ahead are expected to report robust profits for 2010.
Financial reports for the last few months have pointed to a strong industrywide recovery as ticket demand increased and air carriers continued to collect huge revenue from extra fees, such as charges to check luggage.
The International Air Transport Assn., the trade group for the world’s airline industry, projected last month that North America’s airlines would collect a combined $5.1 billion in profits in 2010.
The National Business Travel Assn., the trade group for business travel managers, estimated last week that business travel spending jumped 2.3% in 2010 compared with 2009 and should grow 5% more in 2011.
Robert Herbst, an industry consultant and founder of Airlinefinancials.com, released a forecast Sunday predicting that the eight largest U.S.-based airlines would collectively report $3.95 billion in profits and $122.2 billion in revenue for 2010. Only American Airlines’ parent company, AMR Corp., is expected to show a loss for the year.
The nation’s top airlines will release their financial reports for the last three months of 2010 over the next two weeks, starting Tuesday when Delta Air Lines, the nation’s largest carrier based on passenger traffic, is scheduled to unveil its fourth-quarter report. AMR Corp., the parent company for American Airlines, is expected to release its financial numbers Wednesday, followed by Southwest Airlines on Thursday.
If Herbst’s projections prove true, it would mean that the airlines collected the highest annual profits in more than 10 years and the second-highest annual revenues ever. Financial reports for the third quarter showed strong profits for the airlines.
The improving financial reports would reflect a dramatic turnaround for the industry, which lost $58 billion between the Sept. 11, 2001, terrorist attacks and 2009, according to the International Air Transport Assn.
Herbst, who worked as a commercial airline pilot for 35 years, attributed the rising revenue and profit numbers to growing demand as the economy recovers from the recession. Although airline ticket sales have increased, most air carriers have resisted adding new planes or routes, opting instead to fill the cabins to the highest capacity levels in years, he noted.
The airlines have also generated extra revenue from ancillary fees, such as charges for checked bags and meals on the planes. Between July and September last year, the nation’s top 10 airlines collected more than $2 billion in ancillary fees, according to the U.S. Bureau of Transportation Statistics.
But the industry’s profit margins could vanish this year if fuel prices soar, Herbst cautioned. “It doesn’t take much of an increase in oil prices to turn things around,” he said.
