Profits Slip On -- You Guessed It -- High Fuel Prices

A group of 20 selected passenger airlines reported a system operating loss margin of 0.02 percent in the fourth quarter of 2007, the first loss after six consecutive profitable quarters, the Bureau of Transportation Statistics (BTS) of the US Department of Transportation reported Monday in a release of preliminary data. The 20-carrier group consists of the largest network, low-cost and regional carriers based on operating revenue.

BTS, a part of the Research and Innovative Technology Administration, reported the profit margin in the October-to-December period was the first loss since the first quarter of 2006. Network carriers alone reported an operating loss margin of 1.1 percent, while low-cost and regional carriers posted

If you were wondering what would lead those airlines to lose money... well, you haven't been paying attention lately. BTS notes the 20 reporting carriers spent a whopping 29.0 percent of their operating expenses in the fourth quarter of 2007 on fuel... compared to 13.5 percent five years earlier in the fourth quarter of 2002.

The network group’s operating loss margin of 1.1 percent in the fourth quarter was a 2.8 percentage point decline from the 1.7 percent profit margin in the fourth quarter of 2006. The seven network carriers reported a combined operating loss of $274 million in the fourth quarter for the group’s first loss after six consecutive quarterly profits. In the fourth quarter of 2006, the seven network carriers’ operating profit was $392 million.

Regional carriers reported a 3.6 percent operating profit, down from a 7.5 percent profit margin in the fourth quarter of 2006. The seven reporting regional carriers reported a $93 million operating profit in the fourth quarter of 2007.

The top three operating profit margins were all reported by regional carriers Atlantic Southeast Airlines, SkyWest Airlines and American Eagle Airlines, with ExpressJet Airlines and low-cost carriers Spirit Airlines and Frontier Airlines reported the worst operating loss margins. Alaska Airlines reported the worst margin of the network airlines.

Detailed information is available at the FMI link below.

FMI: www.dot.gov/affairs/bts2408.htm