A4A: U.S. Airlines Investing in Passengers, Employees, Investors at Rate of $1 Billion a Month
December 14, 2014
Lower oil prices benefiting customers every day as airlines invest in new products and planes, pay down debt, reward employees and investors
“Declining fuel prices are good news for everyone as they lower personal costs and enable industries such as airlines that rely heavily on fuel to reinvest in their business and their customers. Carriers continue to use improving finances to pay down the nearly $72 billion they are carrying in debt, acquire new aircraft, improve the onboard product, enhance airport facilities and amenities, reward employees through profit sharing and provide dividends to investors.
“Customers also are benefiting from additional air service options and airlines are adding nearly 4 percent more seats to the marketplace for the coming spring period (more than 100,000 seats year over year) to accommodate growing demand for travel. This growth directly enables airlines to increase the more than 11 million jobs they enable and the $1.5 trillion in economic activity (5 percent of gross domestic product (GDP)) they drive. Airlines are reinvesting more than $1 billion a month back into the business, while only keeping 6 cents of profit for every dollar of revenue, well below the Standard & Poor’s average profit margin.
“While fuel prices have abated from their historic highs, fuel is just one cost, and it’s important to note that for the first nine months for the nine publicly traded U.S. passenger carriers, operating expenses rose 3.1 percent in 2014. This is a capital-intensive business, and airlines are making significant investments, including taking delivery of 317 new planes this year alone.
“Air travel remains one of the best consumer bargains, given its superior speed and price compared with other modes of transportation. From 2000-2013, U.S. Consumer Price Index rose 35 percent, whereas average domestic airfare rose 15 percent. Thus, adjusted for inflation, the average round-trip domestic fare fell 15 percent.
“When the airline industry is financially healthy, everyone wins. Airlines should be treated like every other business. When the price of coffee beans falls, no one asks Starbucks why his or her latte does not cost less. You want Starbucks to expand its stores and products, give back to its baristas and reward investors. Airlines are no different.”