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Fuel costs fall, U.S. airlines profits rise

 
In this April 23, 2013 file photo, a United Airlines jet departs Seattle-Tacoma International Airport in Seattle. United Continental Holdings Inc. reports quarterly financial results on Thursday. [Associated Press]
In this April 23, 2013 file photo, a United Airlines jet departs Seattle-Tacoma International Airport in Seattle. United Continental Holdings Inc. reports quarterly financial results on Thursday. [Associated Press]
Published Oct. 23, 2014

DALLAS — Profits are soaring at the biggest U.S. airlines as fuel prices drop — but don't expect fares to fall too.

Heading into the busy holiday travel period, the airlines expect even cheaper fuel, thanks to the nosedive in crude oil prices. The price of jet fuel, an airline's biggest single expense, has dropped by about one-fifth since mid June.

Airlines are also benefiting from continued strong travel demand that allows them to push fares higher. Executives report strong bookings for holiday travel and say that Ebola headlines don't seem to be scaring away travelers.

Here's a look at how some major airlines did in the last quarter, as reported Thursday:

• American Airlines, the world's biggest airline operator, earned an all-time best $942 million profit in the June-through-September quarter, nearly double the amount that American and US Airways earned separately last year before their December 2013 merger. CEO Doug Parker predicted more records for the fourth quarter.

• United Continental Holdings posted net income of $924 million, up from $379 million a year earlier.

• Southwest Airlines said profit rose 27 percent to $329 million, and executives said November and December bookings looked good.

All three companies beat Wall Street expectations for earnings.

United cut its fuel bill by $135 million compared with last year, and Southwest saved $64 million — about 4 percent in each case.

And that is just the beginning. Those savings are based on what fuel cost in 2013 and don't include the big decline in prices since June. Southwest paid $2.94 per gallon in the third quarter but predicts it will spend between $2.70 and $2.75 per gallon in the fourth quarter.

Airlines for America, a trade group for the biggest carriers, estimates that every penny decline in fuel prices saves the industry $190 million. That suggests the carriers could save more than $10 billion if fuel stays at current prices.

Airlines could share that windfall with passengers in the form of cheaper tickets, but that doesn't look likely, at least not yet. The big airlines just pushed through a modest fare increase — $4 for U.S. round-trip tickets.

American Airlines president Scott Kirby said fuel savings will go straight to profit and won't be spent to add flights or cut fares.

"Air travel remains a great bargain," Kirby said. "In a strong demand environment, we don't have plans to go out and just proactively cut fares."