Reduced Fleets, Employee Concessions, Rising Fares May Help

It seems an impossible dream -- given the intense competition for passengers, still-high fuel prices, and that one airline has already folded two days into the new year -- but we might just see more domestic airlines turn a profit in 2006, according to industry analysts.

Citing such examples as American Airline's assertion the airline would have turned a profit had it not been for astronomical fuel prices, many believe 2006 could be the year fortunes turn around for many American carriers... and not a moment too soon.

"The economy is continuing to grow at a healthy rate, business travel is continuing to pick up, and industry capacity (measured in seats times miles flown) has moderated and even shrunk in some areas," said Southwest Airlines CEO Gary Kelly to the Associated Press. "If all those underlying conditions continue, we ought to have robust revenue production for the industry next year."

Kelly (above) is standing on firmer ground than most in his assertions -- Southwest is one of the few carriers that has turned a consistent profit as others have struggled. The Dallas-based airline expects to boost its profits by 15 percent in 2006 -- although analysts have said it could be as high as 25 percent.

Faced with mounting losses, airlines have cut back in other areas... including reducing fleet sizes, and wringing wage concessions out of workers. And, finally, carriers have began to raise fares to offset some costs.

If operating profits increase, it could spell the reversal of (lack of) fortunes for many carriers, according to Merrill Lynch's Michael Linenberg.

The recent loss of Independance Air from the Washington, DC market will also likely boost business -- and fares -- for airlines that had been competing with the low-cost carrier, including Southwest, JetBlue and AirTran.

American Airlines, Continental Airlines, Alaska Airlines, JetBlue, and AirTran are all expected to post profits in 2006, according to the AP; of those, only Alaska was expected to be profitable in 2005.

Analysts also expect nine of the 10 largest US carriers to increase their revenue next year, including bankrupt Delta Air Lines; only similarly-troubled Northwest Airlines, dealing with ongoing labor issues, is expected to see its sales decline further.

FMI: www.aa.com, www.continental.com, www.alaskaair.com, www.nwa.com, www.southwest.com, www.jetblue.com, www.airtran.com, www.delta.com