U.S. Airlines Report Improved Financial Results In 2014 To The Benefit Of Customers, Employees And Shareholders

Industry trade organization Airlines for America (A4A) has released its 2015 spring air travel forecast and 2014 results for U.S. passenger airlines, which delivered another year of strong operational performance and modest profitability.

A4A projects spring 2015 air travel to rise to its highest level in seven years, with passenger volumes expected to fall just below the 2007 peak. Approximately 134.8 million passengers (2.2 million per day) are expected to fly on U.S. airlines during March and April compared to 132.2 million passengers in 2014 – a 2 percent or 43,000 passengers a day increase. This includes a record 17.2 million travelers (283,000 per day) on international flights. To accommodate the expected growth in demand, airlines are increasing the number of seats by 3 percent or 64,000 seats per day during this period.

“A4A attributes the increase in spring air travel to rising U.S. employment and personal incomes, an improving economy, the highest consumer sentiment in a decade and the continued affordability of air travel, which remains one of the best bargains for consumers,” said John Heimlich, A4A Vice President and Chief Economist. “To meet the extra demand, airlines are adding seats to the marketplace, in part by deploying new and larger aircraft on many routes.”

As part of its spring air travel forecast, A4A also introduced an infographic that breaks down spring air travel by the numbers.

The 2014 results reflect the improving finances of 10 publicly traded U.S. airlines. They collectively reported a Generally Accepted Accounting Principles (GAAP) net profit of $7.3 billion or 4.6 percent of revenues, well below the Standard & Poor's average of approximately 9 percent. At the same time, the airlines reduced debt, invested in their workforces, renewed their fleets and met customer demand by offering new and improved products and additional destinations and seats. These 10 airlines ended the year with $66 billion in debt, having paid down $16 billion in debt over the past two years.

“The U.S. airline industry continued its upward climb in 2014, recording a fifth consecutive year of modest profitability, despite incurring $48 billion in fuel costs as well as increases in employee wages and benefits, airport rents and landing fees, and several other non-fuel expenses,” said Heimlich (pictured). “After four years of $100-per-barrel oil, the recent dip in the price of jet fuel is finally giving the carriers some breathing room to reinvest in the product, reward employees and shareholders, and reduce debt, all while boosting capacity. Like other responsible businesses, airlines are focused on balanced allocation of capital to benefit all stakeholders.”

Along with enhancing their creditworthiness, airlines remain focused on transitioning from accounting profits to economic profits, in which they earn their cost of capital over an entire business cycle. Airlines are investing more than $1 billion per month in things customers value, including in-flight Wi-Fi, better airport facilities, newer aircraft and expanded route networks. And that trend is continuing as U.S. carriers are expected to take delivery of the equivalent of one new plane a day in 2015. Every U.S. carrier is growing, with schedules showing 2015 domestic seat supply at its highest level in seven years and international seat supply at an all-time high.

While competitive pressures continue domestically and internationally, the biggest financial risks may lie on the policy front and the outcome of FAA reauthorization. Sharon Pinkerton, A4A Senior Vice President of Legislative and Regulatory Policy, discussed A4A’s priority in protecting the traveling consumer from higher airport taxes like the PFC.

Currently customers may pay up to $4.50 for every departure on a trip. Airports are asking that the current cap on PFCs be raised to $8.50 per ticket to help fund airport improvements and infrastructure.

“Despite passengers already paying more than their fair share in federal taxes and fees, airports are pushing to nearly double the airport tax and allow it to automatically increase annually,” said Pinkerton. “Since 2008, over $70 billion of airport capital projects have been completed, are underway or are approved by U.S. airlines and their airport partners at the nation’s largest 30 airports alone, and development is robust at smaller airports across the country as well. Airports have plenty of resources and passengers are already taxed enough.”

FMI: www.StopAirTaxNow.com, www.airlines.org