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All nine major airlines expected to post third-quarter profits

At least someone is enjoying packed planes, rising fares and fees for services that used to be free. Three major airlines reported healthy profits Wednesday for the peak summer travel season: Delta Air Lines ($363 million), American Airlines parent AMR Corp. ($143 million) and US Airways ($240 million). All nine major carriers are expected to post third-quarter profits this week, something that hasn't happened since 2007. Not long ago, all but a handful of airlines were swimming in red ink. So, what happened to an industry that seemed to lurch from crisis to crisis?

Fewer seats

Airlines parked planes and cut flights first to counter spiking oil prices in 2008 and then to help weather the travel slump sparked by the recession. That put carriers in the driver's seat when demand for travel perked up this year. Airlines could raise fares and didn't need to sell off empty seats at deep discounts.

Fees

The upswing in travelers helped airlines collect more from service fees. For the three months ended in June, carriers collected $893 million in checked baggage fees, up 33 percent from a year earlier. They also pocketed $594 million in reservation change fees (down 2 percent) and $618 million in other kinds of fees like carrying pets onboard (up 14 percent).

Better discipline

In previous years, airlines rushed to add flights and grab market share when business got better. That resulted in lots of empty seats and cut-throat fare wars to fill them. Good for consumers but a disaster for airlines, especially high-cost carriers. Airlines have only modestly increased flights this time.

More business travel

Grounded during the recession in 2009, business travelers returned to the road this year. Companies are sending them in coach and not buying pricey last-minute tickets. But an American Express business travel survey released Wednesday said domestic air fares in 2011 will go up 2 to 6 percent, while international fares will increase 3 to 7 percent.

All nine major airlines expected to post third-quarter profits 10/20/10 [Last modified: Thursday, October 21, 2010 7:06am]
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