As fuel prices continue to drop, profits are soaring at some of the biggest US airlines—though not their trip fares.
The airlines are expecting even cheaper fuel this coming holiday travel season, thanks to the recent nosedive in crude oil prices. The price of jet fuel, typically an airline’s biggest expense, has dropped by about one-fifth since mid-June.
Airlines are also benefiting from a continuous strong travel demand, allowing them to push fares higher. Holiday travel bookings are already in strong effect, despite travel warnings and worldwide Ebola scares.
According to newly released financial reports, four of the largest US airlines sold at least 83 percent of their seats in the third quarter, which includes travel-heavy summer vacation season, as opposed to more than a quarter of seats that went empty a decade ago.
American Airlines Group Inc. earned an all-time best $942 million profit in the June-September quarter, almost double the amount that American and US Airways earned separately last year before they merged. CEO Doug Parker also predicted more groundbreaking records for the upcoming quarter and full-year earnings.
United Continental Holdings Inc. posted a net income of $924 million, up from $379 million last year. The adjusted profit was a record $1.1 billion.
Southwest Airlines Co. also reported rising profits, up 27 percent to $329 million.
United reportedly cut its fuel bill by $135 million this year, and Southwest saved about $64 million—about 4 percent in each case. All three companies beat Wall Street’s predictions for net earnings.
Airlines for America, a trade group for the biggest airline carriers, estimated that every penny decline in fuel prices saves the industry about $190 million. If fuel stays at current low prices, carriers could save over $10 billion.
Most airline officials agree that the savings would go straight to profit and won’t be spent to add flights or cut fares. Big airlines have already increased fees by $4 for a US round-trip ticket.
“Air travel remains a great bargain,” said American Airlines President Scott Kirby in a media conference call. “In a strong demand environment, we don’t have plans to go out and just proactively cut fares.”
“What I would not want to do to customers is take them through this same volatile ride with fares—lower them one day, raise them the next day,” mentioned Southwest CEO Gary Kelly, who wants to avoid raising plane fares if oil prices start to increase. “I think that that would be absolutely the worst thing that we could do.”
(With reports from Associated Press)
