Chris Jasper/LONDON
Falling ticket prices in the USA are beginning to squeeze the profits of the country's major airlines. Figures for the first six months of this year show that few carriers were able to increase profits and that most saw income fall compared with the same period last year.
Most US majors beat analysts' expectations in the first quarter, although several still posted poorer results than in the first three months of 1998.
A variety of factors meant that the quarter which ended on 30 June also produced mixed results - leaving the picture for the first half looking patchy.
Of the top 10 US airline groups, five saw a decline in operating profits, a sixth - Trans World Airlines - lost money, and one more registered only very modest increases. Two groups enjoyed big improvements, with Alaska Air seeing operating profits rise by more than 10% and Southwest Airlines reporting an impressive 31% increase.
Alaska senior vice-president finance Harry Lehr acknowledges that the airline "offset recent trends in the industry with strong revenue growth", while Southwest reports continued strong demand for its low fares product.
AMR cites falling ticket prices in the second quarter, along with weather delays, for its big drop in profits, with UAL also hurt by discounting, but boosted by receipts from asset sales. Strike threats at TWA led to passengers staying away and stopped the airline from reversing last year's decline.
US demand nevertheless remains strong, with Asian demand picking up, so that if capacity can be cut and fares raised, full-year figures may remain healthy.
Source: Flight International
