Six years post recession, U.S. airlines finally achieve average U.S. profitability
WASHINGTON, August 18, 2015 – Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today projected 14.2 million people will fly over the Labor Day holiday period, a 3 percent increase from last year. A4A reported that airlines are ready for the uptick in passengers, adding capacity and reporting average U.S. profitability that has enabled them to invest in new planes, service and technology at the highest rate in 15 years.
During the seven-day Labor Day travel period (from Wednesday, Sept. 2, through Tuesday, Sept. 8), A4A expects 14.2 million (2 million per day) air travelers will take to the skies, up approximately 59,000 passengers per day from the same period in 2014, when 13.8 million passengers were estimated to have flown. Friday, Sept. 4, is expected to be the busiest day of the period. The projection includes 1.6 million travelers on international flights. To accommodate the expected growth in passenger volumes, airlines have boosted schedules by a comparable number of available seats.
“A4A projected an all-time high for summer travel this year and year-over-year increases continue,” said John Heimlich, A4A Vice President and Chief Economist. “With capacity increasing and airfares trending downward, air travel continues to be more accessible and a bargain for cost-conscience consumers.”
First Half 2015 Financial Performance
Ten U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and Virgin America – collectively reported a net profit of approximately $8.7 billion, up from $3.9 billion during the same period last year. This translated to a net margin of 11.2 percent, or roughly 11 cents on every dollar of revenue, up from the 4.9 percent margin reported in the first half of 2014.
The year-over-year improvement was driven almost entirely by lower fuel costs, which fell 34 percent, outpacing a substantial 10 percent increase in wages and benefits. Total operating revenues for the group were essentially flat as a 3 percent decline in fares offset a 3 percent increase in passenger traffic. The price to fly a mile domestically fell 1.9 percent in the first six months, including 4.2 percent and 5.5 percent in May and June alone. Airline seating capacity slightly outpaced traffic during the period, pushing the average load factor down from 83.2 percent to 82.8 percent.
“Six years post-recession, airlines are finally realizing profit margins that are on par with the S&P 500 average, a barometer of U.S. corporate performance,” said Heimlich. “Airlines are key drivers of jobs and economic growth, and improving finances have further accelerated their investments in people, products and technology to enhance the travel experience for customers.”
In the first half of 2015, these 10 airlines collectively reinvested $8.5 billion – more than $1.4 billion per month or half of their entire operating cash flow – to benefit customers. New and refurbished aircraft are being delivered at a rate of nearly one per day, with a total of 367 taken into delivery by the end of the year. Additional investments include route expansion, development of mobile technology, and enhanced airport check-in areas, lounges and gates. Published schedules for the coming fourth quarter show increases in daily departures and seats, along with the deployment of larger aircraft, to domestic and international destinations. Additionally, from the first half of 2014 to the first five months of 2015, U.S. passenger airlines collectively added 7,300 employees to their payrolls, marking the 18th consecutive month of year-over-year employment gains.
During this period, the 10 airlines retired an additional $3.5 billion in debt, on top of the $46.3 billion in debt they retired in the preceding five years. And they returned $4.7 billion to shareholders in the form of stock buybacks and dividends.
First Half 2015 Operational Performance
U.S. airlines improved operational performance in the first half of the year to post a completion factor of 97.8 percent and an on-time arrival rate of 77.7 percent. According to the Department of Transportation, 99.6 percent of passengers had their bags properly handled and complaints remained low at 1.89 per 100,000 passengers. On the international front, the Commerce Department noted that U.S.-international air traffic rose 5 percent year-over-year to reach an all-time first-half high of 100.7 million passengers. Data from the department show increases to and from Canada, Mexico and overseas by U.S. citizens and foreign nationals.
“Because of investments in systems, procedures and employees, airlines are delivering what customers expect: flights that arrive safely and on time, with their bags properly handled,” said Heimlich. “As airlines continue to invest in the passenger experience, customers will continue to benefit.”
Setting the Record Straight
Commenting on the state of the airline industry and the recent government attempts to re-regulate the industry, A4A President & CEO Nick Calio said:
“Just as we are finally starting to realize Congress’ vision of an innovative airline industry, built on deregulation and driven by competition to deliver a variety of service options and prices, and just as we are starting to achieve sustainable earnings on par with other industrial sectors – the government is attempting to take a step backward and re-regulate the industry. Presented as consumer protections, these actions are anything but helpful to the customer. The government must embrace the importance of the airline industry to the U.S. economy and the economic well-being of U.S. companies competing in the global economy, and must accept that the industry can, and should, be treated just like any other industrial sector, including being allowed the freedom to be profitable, to the benefit of customers, employees and investors.”
Airlines for America (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.