US airline profits marked by declining margins

New York
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Airlines for America (A4A) presented a negative view of US airline profits in 2012 on 21 February.

John Heimlich, chief economist of the industry body, says that net profit margins are down to just 0.1% of revenues in 2012 from 2.2% in 2010, in Washington DC today. He adds that fuel prices were up 2% year-on-year to an average of $3.06 per gallon while combined airfare and ancillary fee revenues grew slower than US consumer price inflation.

"US airlines eked out another year of meagre profitability as expenses grew faster than revenues with record-setting fuel prices serving as a primary driver," he says.

The 10 largest airlines in the USA combined reported a $152 million profit in 2012, according to A4A. This is down 64% from $418 million in 2011.

"Three years ago I got to unstuck the plus sign on my computer," says Heimlich, in response to questions on why the negative view. "That's progress."

A4A maintains that the US needs a national airline policy in order to improve financial state of the sector.

The group also says that the industry is shrinking. The number of scheduled departures will be down 0.3% during the second quarter compared to a year earlier, while the number of seats will increase by 0.6% and available seat miles (ASMs) will be up by 1.4%. However, departures will be down 13.2%, seats 9.3% and ASMs 5.7% compared to the second quarter of 2007.

"To quote the airport director at Memphis, the only way we're going to get more flights is if the airlines make more money," says Heimlich.