Air Transport World

High tide for profits: strong traffic and the absence of the ticket tax boost U.S. airlines to a record quarter.(Industry Overview)

U.S. major passenger airlines continued to benefit from the absence of the 10% ticket tax in the second quarter ended June 30. Together with surprisingly strong traffic, this "invisible" fare hike helped boost airlines to another record quarterly performance on a 9% rise in revenues. ValuJet's service cutbacks following its fatal crash in May and its subsequent grounding in mid-June probably also boosted results at USAir and Delta in particular.

Collectively, the 10 companies earned $ 1.4 billion in the three months to June 30, compared with $992 million earned by those same companies in the year-ago period (see tables). The airlines achieved an average net profit margin of 6.5% and an operating margin of 11.5%, figures rarely reached in the deregulated era. Excepting Delta, every carrier improved on its performance on the year-ago period. Delta's earnings were reduced by a $273 million restructuring charge.

Total airline traffic rose 7% in the quarter, against only a 3% rise in capacity. Although the cost of fuel rose 15-20% compared with a year ago, owing to the new fuel tax and higher crude prices, airlines still managed to grow revenuers faster than expenses. …

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