The big U.S. airlines do some things very well.
Their safety records are remarkable. They've leveraged technology to streamline the airport experience. (Remember what it was like before online check-in?) You can even argue that they move millions of bags a day without all that many hiccups.
But there's one area where the industry failed consistently: It can't make money. Through the decade just ended, U.S. airlines combined turned an annual profit only twice, a measly $2 million in 2000 and $3 billion in 2006, a fraction of recent losses in the tens of billions. That's why people took notice in recent weeks when airline CEOs sounded optimistic, with a few caveats, about their prospects for 2010. If they're right, you might be paying more for that next flight.
Last year was tough for everyone. The economy put a dent in air travel, particularly by high-paying business fliers. Cargo shipments were off. Fuel prices remained higher than normal. Fees for checked bags and packed planes had travelers grumbling.
But four of the largest nine U.S. passenger carriers ran in the black for 2009: AirTran, Alaska, Southwest and JetBlue. The rest — American, United, Delta, Continental and US Airways — posted manageable losses. The nine together lost $3.4 billion, a lot less than 2008's $19.5 billion loss.
They lost less by slashing capacity, both cutting out unprofitable flights and replacing large planes with smaller ones on some routes. The U.S. airline industry started 2009 flying 10 percent fewer seats and trimmed more as the year went on, according to UBS Securities.
Overall passenger revenue last year fell 18 percent, the biggest decline on record. Six percent fewer people flew on U.S. carriers.
Travelers paid an average fare of $306 — down 14 percent from a year earlier — from July through September, the Department of Transportation said. Tampa International's average of $253 was $35 less, or 12 percent, than in 2008. The U.S. and local fares were the lowest since 2005.
So why the optimism among airline executives for 2010? They're reporting signs that passenger traffic and "unit revenue," the amount airlines earn for flying one seat 1 mile, are ticking up.
Southwest CEO Gary Kelly was just short of giddy last week at the annual Raymond James conference on low-cost airlines in New York. Southwest set a record for passenger loads in January despite a 6.7 percent reduction in capacity and had strong bookings for February and March.
Delta president Ed Bastain told analysts last month that business travelers were coming back, citing a 10 percent jump in corporate bookings in January.
But the skies haven't cleared yet. Delta subsequently reported January passenger traffic was down 7 percent from a year earlier. Continental CEO Jeff Smisek warned in a Jan. 21 conference call that "everyone should curb their enthusiasm" because any improvement in 2010 is coming off sharp revenue declines last year.
Two big wild cards could dash the airlines hopes of returning to profitability: a slower-than-expected economic recovery or a sudden spike in oil prices.
But if the economy improves enough so more business travelers return to flying — and airlines don't expand their fleets — carriers should be able to make fare increases stick.