Airlines for America, a trade group that includes Alaska Airlines, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United, and US Airways, says that its members made on average only 21 cents per passenger in 2012 as profits were impacted by high fuel costs. Now, the data is obviously presented in a way that benefits the group’s interest of securing additional tax and regulatory relief from congress, but the figures are interesting as they show a steep decline in average profits from 2011 and 2010. Members also hope to illustrate that the DL, UA, & WN mergers were necessary in order to sustain viability within the industry. The AP has the rest of the story, though I’m still confused as to where the $152 million in profit number across all airlines comes from (take a look at just the 2012 US Airways numbers):
That profit was down from 77 cents per passenger in 2011 and $3.18 in 2010, Washington-basedAirlines for America said Thursday. Meanwhile the airlines’ fuel tab crept up to $3.06 per gallon last year from $3.00 in 2011 and $2.17 from 2006 through 2010. The trade group based its figures on information from the 10 biggest airlines that have reported 2012 financial results. The airline industry is trying to combat the perception that carriers are constantly raising fares and fees, and that mergers — last week American Airlines and US Airways announced plans to merge — will lead to more price increases. Airlines for America said the fare increases were modest. It said that the cost of air travel — including fees for checking luggage and other services — has risen just 20 percent since 2000, less than the rate of inflation. Consumer advocates worry that prices will rise as mergers leave fewer airlines controlling more of the market, but the trade group’s chief economist, John Heimlich, disputed that. “There is no credible evidence that (merger-and-acquisition) activity has led to increases in fares,” Heimlich told reporters on a conference call. Airlines for America said the 10 big airlines earned $152 million in 2012 despite a jump in fuel costs to $50.4 billion from $38.8 billion just two years earlier. Fuel usually accounts for about a third of an airline’s costs.
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6 comments
Assuming this number is as dire as they make it look (and I doubt that) what this looks like to me is an unsustainable model in the long run. Something will eventually have to give – either higher fares or lower costs. This will likely continue to have an effect on the loyalty programs as well, as they continually reduce the costs of the program.
I’ve heard from a few pricing experts that the airlines actually only make money on the overbookings. The first overbooking engine was put into place in the 80’s (maybe 70’s) and they have become pretty awesome at figuring out exactly how much they can oversell. However, beyond these overbookings, the airlines operate largely flat.
I’m not opposed to fare increases. If people truly need to fly somewhere, they will pay a little more to do it.
Perhaps airlines could standardize/simplify their fares, to the point of releasing quarterly fare schedules. Fares fluctuate so frequently that there must be a fairly significant cost for airlines to maintain frequent price changes.
This number looks subject to major caveats:
Does this include accelerrated depreciation of new aircraft, one time merger costs, hedging, etc…
Without contxt the number is close to meaningless.
Gee, a “trade group” submitting a number that seems self-serving? Stunning.
Could someone please explain how all ten airlines combined made $152 million, but Spirit made $108.5 million on their own…I hope their business model is not the right one…
Does this number factor in all the fees charged by airlines? Change fee, checked-bag fee, any award booking fees?
How is it possible that fuel charges are affecting their profits when there is a fuel surcharge in the ticket price?