Airlines Report Major Profits in Second Quarter


How do you make money in a business that’s seen so many bankruptcies? How do you survive mega-mergers? How do you generate cash to pay debt, buy planes and reward shareholders and employees?

The facts are in and that’s what’s happening. All three of the nation’s major legacy carriers – American Airlines, United Airlines and Delta Air Lines – posted record profits in the quarter that just ended. The food chain is working.

American Airlines said its second-quarter profit, excluding special charges related to taxes and bankruptcy and merger costs, of $1.5 billion was “its best quarterly earnings performance ever,” reported The New York Times. Its net income in the second quarter was $864 million.

Shareholders receive a quarterly dividend for the first time in 34 years. The carrier also expanded routes including nonstop service between Dallas and Hong Kong and Shanghai. They also acquired 21 new aircraft in the quarter.

CEO Douglas Parker of American Airlines sent a memo to all 100,000 employees reminding everyone: “It is hard to believe that less than eight months ago, American was in bankruptcy.”

Delta reported a net income of $801 million for the second quarter, up 17 percent from the year-earlier period.

But the big surprise is United Airlines. They lost money in the first quarter and often seem to be fumbling the Continental Airlines handoff, mostly because of reservation glitches. Yet the airline posted a $919 million second-quarter profit, largely because the ancillary revenue per passenger increased 7.9 percent in the quarter to $21 per passenger.

United and American also announced $1 billion programs to buy back shares, a strategy to boost the value of those remaining, which Delta began doing last year.

The wining formula for the big three carriers is hardly rocket science. All you do is keep capacity in check by squeezing passengers into fuel-efficient aircraft. Then transit through hubs, while upping fares and posting new fees. Alliances with foreign carriers mean global connections and the demand for flying is greater than ever.

Southwest, the nation’s largest domestic carrier, and Alaska Airlines and JetBlue also made money.

Southwest had a net income of $485 million in the second quarter, setting records for full planes while revenue rose 8 percent. They’ve been paying a dividend for more than 37 years and just raised it by half.

The Tarmac’s View:  How do you make money? Use bankruptcies to squeeze money from employees, suppliers and governments. Use mega-mergers to eliminate competition, keeping prices high and imposing ancillary fees that make billions of dollars. Stable fuel prices have helped, too.


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