Airlines Will Report Record Profits for 2015
This month, airlines are expected to announce that they earned impressive profits during 2015. After a string of years characterized by major struggles and modest gains, last year’s earnings will certainly be seen as a welcome sign of success. Furthermore, the mixture of low fuel prices and high demand for tickets has given airlines (and the people who invest in them) a reason for optimism going into 2016.
More than impressive
Actually, 2015’s earnings are more than impressive. Last year was the best year for airlines since deregulation. The benchmark was set in 2006, when U.S. carriers earned $16.5 billion. That followed up one of the worst years on record. In 2005, American carriers finished more than $28 billion in the red.
By the end of the third quarter of 2015, U.S. airlines’ profits were already higher for the year than they were in 2006. Airlines reported more than $17 billion in profits between January and September. Good fourth quarter numbers will give the industry its best year since deregulation… by a very wide margin.
“A blowout record” (and what it means for fliers)
Airline analyst Robert Mann used a sports-like term to describe 2015’s airline profit numbers to USAToday:
“It’s a blowout record. The individual quarter earnings may exceed any prior year’s earnings, and that’s how good it’s been and how good it will be if oil prices stay low and if customers continue to be willing to pay the fares and fees the industry is charging.”
Fliers will be hoping that these record profits will lead to lower airfares. Though there are some good deals to be had, Mann seems to be right to a large extent. Airlines seem to be intent on hanging on to their current structure of fees and fares. Investors will expect them to ride the wave as long as possible before passing any savings along to customers.
Airlines won’t act quickly
Also, airline profits have been anything but consistent. The aforementioned $40 billion-plus swing in 2005 and 2006 is an extreme example, but one only has to glance the final profit-loss tallies for the previous years to see that success one year does not guarantee massive profits the following year. It might not even guarantee any profits at all.
Another group also wants something out of airlines' 2015 success. Airline employees, especially pilots, had to sacrifice salary increases and profit sharing deals during the mostly-lean years following 9/11. Now that airlines seem to be headed for firm financial ground, employees want to get what they feel should be coming to them. This is especially true for those in the cabins and cockpits who stuck it out while their employers struggled.
One group trumps both passengers and employees, however. Investors will be happy with 2015’s record profits, but they will also want to see more cost cutting and streamlined operations before they put too much airline stock in their portfolios. So the first goal for U.S. carriers in 2016 will probably be to appease Wall Street. Any deals for travelers or perks for employees will come only when investors are happy.
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