U.S. Airlines Are Packing Planes and Rolling in Record Profits

Passengers wait in long lines at the Raleigh-Durham International Airport Photograph by Sara D. Davis/Getty Images

Curious how U.S. airlines just managed to boost domestic fares by $10 even as Ebola threatened to scare off travelers and declining oil prices seemed to undercut the rationale for higher fares? Take a closer look at the big carriers’ financial reports from the summer travel period.

Planes are packed and will likely get even fuller, while higher fares haven’t put a dent in demand for plane tickets. In other words: We really like to fly, and it shows. This is especially true in the U.S., where airlines have been able to align seat supply with demand much more closely than in the international market. American Airlines, United Continental, Southwest Airlines, and JetBlue Airways all reported record quarterly profits on Thursday, a week after Delta Air Lines said it cleared $1 billion in the third quarter. “The overall theme is that demand was strong, the revenue environment was good, and that costs are declining,” Standard & Poor’s analyst Jim Corridore said in an e-mail.

The profits come as the airlines take the strong demand for air travel and translate it into higher fares. Delta last week raised most of its round-trip fares by $10, which Southwest, United, and American rapidly matched, according to FareCompare.com, a Dallas-based ticket-tracking site.

One of the last quarter’s more intriguing statistics came from Southwest, the carrier most closely tied to the domestic market. Its load factor surged to 84.4 percent over the summer, up from 80.8 percent a year earlier. By nature of its network, which features shorter stage lengths and more flights per day, Southwest has historically lagged behind the three larger network carriers in terms of how full its 737s are on any given flight. That gap may be closing.

In the same period in 2009, a Southwest load factor just less than 75 percent was considered an incredible feat given the weak U.S. economy and the airline’s different network. On its 22 new flights from Dallas Love Field, Southwest Chief Executive Officer Gary Kelly said on Thursday, load factors are running above 90 percent. “We are thrilled,” Southwest’s chief financial officer, Tammy Romo, said of the airline’s financial performance.

Delta’s load factor this summer topped 86 percent, 0.4 percentage points more than last summer, as did the same figure at JetBlue, which saw a 1.2 percentage point increase. United’s passenger loads rose almost 1 percentage point, to 83.9 percent.

American, the world’s largest carrier, posted a record profit of $942 million for the summer and said it would probably achieve another record in the fourth quarter and for the entire year. United took in $1.1 billion, beating analysts’ forecasts. Southwest’s $329 million profit was likewise a record, as was the $200 million profit at Alaska Air Group, the parent of Alaska Airlines and Horizon Air.

Even JetBlue, an airline that Wall Street analysts generally loathe for its high growth and weak financial returns, turned in a company income record for the summer quarter, with $79 million, even though the 24¢ profit per share fell below analysts’ forecasts.

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