How should airlines spend their record profits?
Thanks to low fuel costs, high demand and a series of airline mergers, the nation’s largest carriers have been reporting record profits for a few years now.
But instead of paying out more dividends to shareholders or raises to managers, it might be time to invest money in ways that will make passengers happy in the long run.
That is the conclusion of a report by the corporate consulting firm PwC, also known as PricewaterhouseCoopers.
The report released this week noted that the 10 largest carriers had an average operating margin of 17.4% in 2015, a stark turnaround from the heavy losses suffered by the carriers during the economic recession and the razor-thin margins in the following few years.
Airlines have returned some of those profits to shareholders in the form of dividends and stock buybacks, and a few have approved pay raises for pilots, flight attendants and other workers.
But the PwC report suggests investing in “logistics, data analytics, information systems and processes” to improve reliability, on-time performance and ways to reduce lost luggage and missed connections.
“They are making good money now and it’s a good time to pay back shareholders but it’s also a good time to make investments,” said Jonathan Kletzel, U.S. transportation and logistics leader for PwC and an author of the study.
Among other ideas offered in the report are investments in innovations that improve passenger convenience, such as smartphone apps that warn about traffic conditions and long security checkpoint wait times and allow fliers to automatically check luggage.
“If all you are doing is paying back shareholders you are not adapting your business for future growth,” Kletzel said.
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