Most of the USA's top 10 airlines showed strong profits in 1998, but there were enough negative indications by the end of the year among the ranks of the major carriers to cause even the best performers to sound a note of caution for 1999.
Of the big airlines, two - American and Delta - produced significant leaps in income compared to 1997, as did United when an exceptional gain from that year is taken out of the equation. Two others, US Airways and Continental, reported disappointing results, while strike-hit Northwest suffered a serious loss.
Further down the league, Southwest, America West and Alaska Air produced the healthiest results of all, with all three showing profit growth at least one-third up on the previous year.
Despite some impressive performances in terms of profitability, however, passenger growth remained relatively modest, averaging 1.9% across the 10 airlines. Load factors followed a similar trend, rising by a little over half a percentage point on average.
Passenger yields also gave cause for concern, declining by an average of 1.2% across nine of the 10 airlines, TWA having yet to report its financial figures for last year. More encouragingly, traffic grew by an average of 3% across the board when expressed as revenue passenger kilometres.
Leading the way among the US carriers was American, which saw a 33% rise in net income, to more than $1.3 billion. Like its rivals, the carrier saw profits dip in the final quarter, when parent AMR generated $182 million net - 13% down on the same period a year earlier.
American chairman and chief executive Donald Carty says: "The ferocity of airline competition is plainly evident in the deteriorating profitability" reflected in the results. He adds that heading off that decline is one of the "real challenges awaiting us in 1999".
Analysts agree the US majors are flying into severe economic headwinds, and that the recent run of record quarterly earnings may now have come to an end. Carty adds that while the weakness in Asian markets is a challenge, there may also be a struggle on the domestic front, where capacity is growing significantly faster than demand.
With Northwest Airlines desperate to recoup some of the losses incurred in last year's crippling pilot strike, there is also little prospect of an across-the-board price hike which might otherwise go some way towards compensating for this disparity and boosting load factors and yields.
The Northwest strike saw the Minneapolis-based carrier slump to a $286 million loss for the year, and was the single most important factor in depressing average traffic and financial indicators.
United would have shown an 18% increase in net profits had it not been for 1997's exceptional gain, but like its main rivals reported fourth quarter softness and "very gloomy" yields in December, adding that the prospects for 1999 "are difficult to predict". Delta's net profit rose 15.4% and it set a world record for passengers carried, with more than 105 million.
Continental's income growth remained stubbornly flat, while US Airways' performance was hit by the now-profitable airline's new tax status. The carrier's $1,014 billion operating profit represented an increase of 73.6% over 1997, but its net profit of $538 million equates to a drop of 47.5%.
Top performer was the Alaska Air Group - its 72% rise in net profits partly attributable to the improved health of restructured Horizon Air - and America West, for which United is in takeover talks. A merger would consolidate United's handsome lead in terms of revenue passenger kilometres.
Source: Flight International