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Airlines Rake in Cash as Fares Stay Cheap. What’s Wrong With This Picture?

Wall Street squares off against the industry while travelers benefit.
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Air Travel Is Up, Fares Are Down, Here's Why

It’s a strange time in the airline industry. Wall Street can’t seem to say enough bad things about carriers awash in profits. The four largest U.S. airlines banked $4.1 billion this spring, but saw revenues slide about 2 percent industrywide due to an avalanche of cheap fares, a notion some analysts call pricing dysfunction. On Friday, American Airlines Group Inc. became the latest to join the “best of times, worst of times” club, announcing a $1 billion second-quarter profit on revenue that was nevertheless down 4.3 percent.

So, for the airlines, profits are fine. For passengers, fares are great, too. These things aren’t supposed to travel together. Here’s what’s going on: