An Estimated 140 Million Passengers Will Take to the Skies on U.S. Airlines during March and April
Continued Profitability Allowed Airlines to Reinvest More in 2015, Benefiting Customers, Employees, Investors and U.S. Economy
With Record Numbers Traveling, A4A Renews Opposition to Increased Air Taxes for Passengers, Calls on TSA to Manage Staffing to Meet Higher Demands
WASHINGTON, March 9, 2016 – Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today reviewed 2015 results for U.S. passenger airlines and released its travel forecast, which projects spring 2016 air travel to rise to the highest level ever, with passenger volumes exceeding 2015’s peak by 3 percent. Approximately 140 million passengers (2.3 million per day) are expected to fly on U.S. airlines during March and April compared to 136.2 million passengers in 2015 – a 63,000 passengers-per-day increase. This includes more than 17 million travelers (285,000 per day) on international flights. To accommodate the record volumes, airlines are increasing the supply of seats commensurately with the expected increase in demand.
“The continued growth in passenger volumes can be attributed to the accessibility and affordability of air travel today,” said John Heimlich, A4A Vice President and Chief Economist. “To meet the extra demand, airlines are deploying new and larger aircraft on many routes.”
The 2015 results reflect the improving finances of 10 publicly traded U.S. airlines (Alaska Airlines, Allegiant Airlines, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America). They collectively reported pre-tax earnings of $23.2 billion, resulting in a margin of 14.6 percent – up from 6 percent in 2014. While operating revenues in 2015 were flat, as 5.1 percent lower fares offset 4.4 percent traffic growth, airline operating expenses fell $14 billion or 9.5 percent, as lower fuel costs offset higher employee wages and benefits, which rose 12.2 percent to more than $40 billion – approximately $800 million more per month than in 2010.
Airlines continue to strive for solid profitability over a full business cycle. Over the past five years, the airline industry’s pre-tax margin of 5 percent trailed the S&P 500 average of 13.8 percent. Notably, however, in 2015 alone, U.S. passenger airlines reinvested more than half of operating cash flow in the product, with capital expenditures of $17 billion or more than $1.4 billion per month. From 2010 through 2015, U.S. airlines reinvested $65 billion into the customer experience, primarily through the acquisition of new aircraft, onboard Wi-Fi and entertainment, ground equipment, IT systems and mobile technology.
“Like all responsible businesses, U.S. airlines serve multiple stakeholders,” said Heimlich. “They are reinvesting improving cash flows to benefit customers, employees and investors. With more reliable operations, lower airfares, more seats in the marketplace and a steady stream of new and larger aircraft – airlines are seeing a record number of travelers, exceeding 790 million last year.”
Along with enhancing the customer experience, airlines retired $8 billion of expensive debt in 2015, boosted employee staffing by more than 10,000 over 2014, returned $10.5 billion to shareholders through stock buybacks and dividends and offered domestic flyers the largest number of seats since the Great Recession. From 2010 through 2015, airlines retired $54.3 billion in debt and returned $17.4 billion in cash to shareholders. Thanks to a concerted effort to improve creditworthiness, combined debt for these 10 carriers now constitutes less than one-third of operating revenues, down from 45 percent in 2010.
2015 Financial Summary
- Net profit: The 14.6 percent net profit margin reflects the results of 10 U.S. passenger airlines – Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America.
- Operating Revenues and Expenses: Operating revenues were flat year over year, as lower airfares offset traffic gains. Operating expenses fell by $14 billion or 9.5 percent as 38.3 percent lower fuel costs offset 12.2 percent higher labor costs. Airlines also saw an increase in airport terminal rents and landing fees as well as aircraft ownership costs.
- Capital Expenditures: U.S. airlines reinvested $17 billion in the product and customer experience in 2015, equating to about $22 per enplaned passenger or 60 percent of cash flow from operations. Over the course of the year, the airlines took receipt of 388 new aircraft. At the end of 2015, these 10 airlines had $86 billion in firm orders for new aircraft to be delivered in 2016 and beyond, including an average of a plane a day in 2016.
- Employment: U.S. passenger airlines added workers to the payrolls in each month of 2015. The full-year average of 395,237 full-time equivalent employees (FTEs) constituted an increase of approximately 16,900 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.
2015 Operational Performance
U.S. airlines saw improvements in Department of Transportation (DOT) core operational metrics in 2015 due in part to investments made in aircraft, IT systems, procedures and staffing.
- Customer Service: According to the DOT, 99.68 percent of passengers had their bags properly handled. U.S. airlines completed 98.46 percent of their flights and 79.92 percent arrived on time. For the fifth consecutive year, less than one passenger per 10,000 was involuntarily denied boarding.
- Record International Air Travel: International air travelers to/from the United States reached a record high of 209 million, an increase of 6 percent from 2014, with U.S. carriers transporting 50 percent of the total.
- Safety Record: The U.S. airline industry is in the safest period in its history due to the ongoing and strong collaboration among the airlines, labor, manufacturers and government.
Airports Collect Record Fees in 2015, No Need to Raise Passenger Tax
With record numbers of passengers flying in 2015, U.S. airports collected a record amount of revenue from air travelers. While airports are trying to raise the Passenger Facility Charge (PFC) on airline customers, the facts don’t support the need to increase the tax burden on passengers.
In 2015, PFC collections climbed to more than $3 billion, the highest level in the history of the PFC program. U.S. airports are also holding more than $12.4 billion of unrestricted cash and investments, as well as having an uncommitted balance of nearly $6 billion in the Airport and Airway Trust Fund, which is the highest level since 2001.
“Airlines strongly support infrastructure investment throughout the country,” said Sharon Pinkerton, A4A Senior Vice President of Legislative and Regulatory Policy. “U.S. airlines have supported more than $70 billion in capital projects since 2008. With these investments and the historically high levels of airport revenues, there’s no justification for increasing passenger taxes.”
In 2012, Congress considered and rejected a proposed PFC increase that would have added an additional $2 billion cost to passengers annually, recognizing that passengers did not need higher taxes and fees.
Pinkerton also noted that with a record number of people expected to travel this spring and summer, A4A is urging Transportation Security Administration (TSA) to both effectively and efficiently screen passengers and bags to avoid excessive wait times.
Since TSA can anticipate increases in travel during the spring and summer, A4A urges the organization to manage staffing, scheduling and equipment maintenance to avoid unnecessary delays.
“We remain committed to working with TSA on risk-based security and other initiatives to build on safety and security while improving the passenger experience,” Pinkerton said. “We believe current funding is adequate to address TSA needs, particularly given that $13 billion of the most recent TSA increase is being diverted to offset the deficit over the next 10 years.”
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.