The collective six-month net income, which includes earnings results from 10 publicly traded mainline US passenger airlines, was a significant improvement over a net profit of $3.9 billion recorded by the carriers in the first half of 2014.
A4A said the 10 airlines (Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America) reported an after-tax net margin of 11.2% for the six months. That more than doubled the 4.9% margin reported in the first half of 2014 and, according to A4A VP and chief economist John Heimlich, means US airlines are “finally realizing profit margins that are on par with the S&P 500 average, a barometer of US corporate performance.”
Heimlich noted the average net profit margin of an S&P 500 company was 8.9% in the first half of 2015. US airlines’ 2015 first-half net profit margin was “just shy of Chipotle and well behind McDonald’s,” Heimlich told reporters in a conference call. Chipotle’s first-half 2015 net profit margin was 11.5% while McDonald’s was 16.2%.
A4A stated that the “year-over-year improvement [in net profit and profit margin] was driven almost entirely by lower fuel costs, which fell 34%, outpacing a substantial 10% increase in wages and benefits.”
The 10 airlines’ first-half operating revenue was “essentially flat,” A4A said, noting that average fares fell 3% year-over-year in the six-month period while passenger traffic increased 3%. Falling expenses “saved the day,” Heimlich said. According to A4A, first-half operating expenses for the 10 carriers decreased 8.1% year-over-year.
“The threats [to US airlines’ strong profitability] that would be paramount of course would be a slowdown in the US economy … or a reversal of fuel prices,” Heimlich said. “The first six months’ results were not the result of higher revenues, but of lower costs driven by lower fuel prices … [Fuel prices rising] is a constant threat and no question [low fuel prices] were a significant driver of this six-month period of improved profits.”
(Aaron Karp - ATWOnline News)