Why Airlines are Profitable Again


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Scouring today’s business headlines, I came across headlines like British Airways Logs Biggest Gain Since Lehmann Collapse and US Airways Sees Profit for Year.

It’s not like Americans have more disposable income for travel, so what gives?

Fees, for one. Like banks before them, airlines have become learned in the art of pilfering crumbs from your payment, one small upcharge at a time. If you’ve ever tried to get a “$9 fare” on Spirit or Allegiant, you’ve witnessed the masters at work. If you’re someone with a bag to check who happens to need in-flight food and leg room, prepare to sprinkle an extra $75 on top of that rock-bottom fare. Delta’s baggage fee collections alone went up 116% this year, according to this government report.

The clincher? Airlines don’t have to pay federal taxes on most of the fees they charge. They’re making a killing on what are essentially mandatory under-the-table tips.

If you’ve noticed longer lines for your flight, that’s also part of the airlines’ strategy. They’re offering fewer flights, suppressing flight supply. The same number of people want to travel, so airlines both fill flights and are able to charge more per flight. According to this Reuters report on US Airways:

The airline said passenger revenue per available seat mile, an important measure, rose about 12 percent in the month of September from a year earlier, including feeder aircraft. Load factor, or the percentage of seats filled on planes, rose to 81.8 percent in the month from 78.8 percent a year before.

Deliberately decreasing flight supply works wonders on the ol’ bottom line. Speaking of artificial supply, fuel prices have also stayed moderate, keeping gas costs for airplanes manageable.

There are also more tasteful business reasons for the increase in profit. Keeping an entire fleet to one model, the way Southwest does with Boeing 737s, means that pilots and crew only need to be trained for that airplane. It “also lowers inventory, record keeping and maintenance costs, and it minimizes the number of technical manuals, tools and spare parts. Also, fleet management is greatly simplified,” according to Boeing, which proudly makes the point on its website. Focusing on more profitable routes, outsourcing flights to fellow network carriers, and even good customer service are proven paths to profitability for airlines.

It’s too bad that airlines, after 2001’s $15 billion airline bailout, are also resorting to more shady measures to boost their bottom lines.

  • The airlines have dropped fares but then their service quality has also decreased. Though, they are working to improve on it.