A4A projects U.S. airlines and their employees will serve nearly 135 million passengers, the highest number in seven years, during the 2015 spring travel period
Airlines investing in the customer experience, adding capacity to accommodate higher demand
WASHINGTON, March 11, 2015 – Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today released its 2015 spring air travel forecast and 2014 results for U.S. passenger airlines, which delivered another year of strong operational performance and modest profitability.
A4A projects spring 2015 air travel to rise to its highest level in seven years, with passenger volumes expected to fall just below the 2007 peak. Approximately 134.8 million passengers (2.2 million per day) are expected to fly on U.S. airlines during March and April compared to 132.2 million passengers in 2014 – a 2 percent or 43,000 passengers a day increase. This includes a record 17.2 million travelers (283,000 per day) on international flights. To accommodate the expected growth in demand, airlines are increasing the number of seats by 3 percent or 64,000 seats per day during this period.
“A4A attributes the increase in spring air travel to rising U.S. employment and personal incomes, an improving economy, the highest consumer sentiment in a decade and the continued affordability of air travel, which remains one of the best bargains for consumers,” said John Heimlich, A4A Vice President and Chief Economist. “To meet the extra demand, airlines are adding seats to the marketplace, in part by deploying new and larger aircraft on many routes.”
As part of its spring air travel forecast, A4A also introduced an infographic that breaks down spring air travel by the numbers.
The 2014 results reflect the improving finances of 10 publicly traded U.S. airlines. They collectively reported a Generally Accepted Accounting Principles (GAAP) net profit of $7.3 billion or 4.6 percent of revenues, well below the Standard & Poor’s average of approximately 9 percent. At the same time, the airlines reduced debt, invested in their workforces, renewed their fleets and met customer demand by offering new and improved products and additional destinations and seats. These 10 airlines ended the year with $66 billion in debt, having paid down $16 billion in debt over the past two years.
“The U.S. airline industry continued its upward climb in 2014, recording a fifth consecutive year of modest profitability, despite incurring $48 billion in fuel costs as well as increases in employee wages and benefits, airport rents and landing fees, and several other non-fuel expenses,” said Heimlich. “After four years of $100-per-barrel oil, the recent dip in the price of jet fuel is finally giving the carriers some breathing room to reinvest in the product, reward employees and shareholders, and reduce debt, all while boosting capacity. Like other responsible businesses, airlines are focused on balanced allocation of capital to benefit all stakeholders.”
Along with enhancing their creditworthiness, airlines remain focused on transitioning from accounting profits to economic profits, in which they earn their cost of capital over an entire business cycle. Airlines are investing more than $1 billion per month in things customers value, including in-flight Wi-Fi, better airport facilities, newer aircraft and expanded route networks. And that trend is continuing as U.S. carriers are expected to take delivery of the equivalent of one new plane a day in 2015. Every U.S. carrier is growing, with schedules showing 2015 domestic seat supply at its highest level in seven years and international seat supply at an all-time high.
2014 Financial Summary
- Net profit: The 4.6 percent net profit margin reflects the results of 10 U.S. passenger airlines – Alaska Airlines, Allegiant Air, American Airlines (including US Airways), Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America.
- Operating Revenues and Expenses: Operating revenues rose 5 percent year over year, outpacing 3.3 percent higher costs. Jet fuel remained the U.S. airlines’ largest and most volatile expense, accounting for 33 percent of operating costs. The average price the airlines paid for jet fuel rose 255 percent from 2000 to 2014. Every penny increase per gallon annually cost airlines an additional $190 million.
- Capital Expenditures: U.S. airlines reinvested $13.9 billion in the product and customer experience in 2014, which equates to about $19 per enplaned passenger or 85 percent of cash flow from operations. Capital expenditures for these 10 carriers are expected to approach $16 billion in 2015. At the end of 2014, the airlines had more than 1,800 new aircraft on firm order valued at $94 billion.
- Employment: U.S. passenger airlines added workers to the payrolls in each month of 2014. The full-year average of 384,600 full-time equivalent employees (FTEs) constituted an increase of approximately 6,300 FTEs from 2010, standing in stark contrast to the previous decade in which massive financial deficits resulted in the loss of 142,300 jobs, or roughly 27 percent of the airline workforce.
2014 Operational Performance
The airlines posted another strong operational year amid severe winter weather in the first quarter, a stormy spring and summer, and the fire at the Federal Aviation Administration (FAA) En Route Center in Aurora, Ill., in the fall. The proactive and collaborative approach to prepare for and respond to these operational challenges has allowed the airlines to more quickly reset and accommodate customers.
- Customer Service: According to the Department of Transportation (DOT), 99.6 percent of passengers had their bags properly handled. U.S. airlines completed 98 percent of their flights and 76 percent arrived on time. For the fourth consecutive year, less than one passenger per 10,000 was involuntarily denied boarding. Consumer complaints to DOT were just 1.38 per 100,000 passengers.
- Record International Air Travel: International air travelers to/from the United States reached a record high of 197.3 million, an increase of 6.5 percent from 2013, with U.S. carriers transporting 52 percent of the total.
- Safety Record: The U.S. airline industry is in the safest period in aviation history due to the ongoing and strong collaboration among the airlines, labor, manufacturers and government.
Holding the Line on the Passenger Facility Charge (PFC) Tax
While competitive pressures continue domestically and internationally, the biggest financial risks may lie on the policy front and the outcome of FAA reauthorization. Sharon Pinkerton, A4A Senior Vice President of Legislative and Regulatory Policy, discussed A4A’s priority in protecting the traveling consumer from higher airport taxes like the PFC.
Currently customers may pay up to $4.50 for every departure on a trip. Airports are asking that the current cap on PFCs be raised to $8.50 per ticket to help fund airport improvements and infrastructure.
“Despite passengers already paying more than their fair share in federal taxes and fees, airports are pushing to nearly double the airport tax and allow it to automatically increase annually,” said Pinkerton. “Since 2008, over $70 billion of airport capital projects have been completed, are underway or are approved by U.S. airlines and their airport partners at the nation’s largest 30 airports alone, and development is robust at smaller airports across the country as well. Airports have plenty of resources and passengers are already taxed enough.”
For more information on the PFC and to voice opposition to this tax hike, visit www.StopAirTaxNow.com. For more information on how airlines and their airport partners are already investing in infrastructure and customer experience enhancements, visit www.airlines.org/invest.
Airlines for America (A4A) members are Alaska Airlines, American Airlines, Atlas Air, Delta Air Lines, FedEx, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, United Airlines and UPS. Air Canada is an associate member.
A4A advocates on behalf of the leading U.S. airlines, both passenger and cargo carriers. A4A works collaboratively with industry stakeholders, federal agencies, the Administration, Congress, labor and other groups to improve aviation for the traveling and shipping public.