Deliver Solid Operational Performance Despite Challenging Weather And Economic Conditions

At Thursday's Quarterly Media Briefing, Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, reported the airlines achieved a 2 percent profit margin during the first half of 2013, invested in the travel experience for customers and delivered strong operational results despite challenging weather and economic conditions. A4A also recapped the industry’s environmental progress and commitments going forward.

Ten U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways – collectively reported a net profit of approximately $1.6 billion, up from $1.2 billion during the same period last year. This translates to a net margin of 2.1 percent, also improved from the 1.6 percent margin reported in the first half of 2012.

For the first half of 2013, airlines continued to reinvest this modest profitability at a rate not seen since 2001, spending approximately $6 billion. Those investments included new fuel-efficient aircraft, state-of the-art seats and interiors, modern airport terminals and customer lounges, expanded in-flight entertainment, mobile technology, Wi-Fi and gourmet meal offerings.

“While the airline industry is making the transition from razor-thin to paper-thin margins, keeping just 2.1 pennies per dollar of revenue generated in the first half of 2013, it is reinvesting in the product and travel experience for customers at a rate not seen in 12 years – to the tune of $1 billion per month,” said John Heimlich, Vice President and Chief Economist for A4A. “Airline customers, employees, investors and the U.S. economy are all vastly better off with a financially strong industry that can cover its costs over an entire business cycle and compete effectively on the global stage, while expanding air service and creating even more American jobs.”

Heimlich added that U.S. airlines have built a solid foundation for the future amid a challenging economic backdrop, led first and foremost by high fuel costs. He noted that an increase of just 20 cents per gallon in the price of jet fuel would have completely wiped out the airlines’ first-half profits.

Despite a slight fuel-price relief during this six-month period, jet fuel remains the airline industry’s single-largest and most volatile expense, having already risen 26 cents per gallon since the end of June. Every penny increase in the price of a gallon per year costs the industry $180 million annually.

“The fact that airlines are still able to post a modest profit at jet fuel prices north of $3 per gallon is nothing short of remarkable,” Heimlich said. “It speaks to the work the airlines have done to transform their businesses over the past 13 years. The good news for customers is that air travel remains a great bargain with 2012 domestic round-trip airfares actually 15 percent below 2000 levels when adjusted for inflation.”

U.S. passenger airlines’ operational performance remained strong in the first half of 2013, showing substantial improvement from the past decade despite numerous thunderstorm and weather events, as well as air traffic control delays resulting from federal budget sequestration. According to the Department of Transportation, 99.6 percent of passengers had their bags properly handled. Also, U.S. airlines completed 98.3 percent of their flights, of which 78.1 percent arrived on time. Consumer complaints fell to just 1.13 per 100,000 passengers.

A4A also reported on the significant advancements airlines have made in their environmental and emissions reduction efforts. Carriers continue to reduce emissions even further through ongoing investments in new aircraft and engines, winglets and operational procedures in-flight and on the ground, among many other initiatives. And they are working to deploy commercially viable, environmentally preferred alternative aviation fuels that will bring additional emissions reductions in the future.

“The U.S. airlines are proud that their business models align with environmental interests – airlines are a green engine of the economy and we’re only getting greener,” said Nancy Young, Vice President of Environmental Affairs. “While aviation contributes less than 2 percent of the total U.S. greenhouse gas emissions, we are committed to doing even more to reduce our environmental footprint.”

FMI: www.airlines.org