Airline profits may mean more elbow room for a little while

by Tom Johansmeyer on

The airline industry wants to thank you. Last year, it was mired in despair. The post-financial crisis recession left the carriers beleaguered and desperate for a turn of fortune. Corporate and leisure travel had fallen precipitously, and doubling down on extra fees, though prudent for profits, alienated both those considering a flight and the passengers with little choice but to hit the road. The brutality of 2009 was evident, and it seemed as though all there was for 2010 was the hope for something better.

Well, hope paid off.

Three quarters into this year, money is again beginning to flow, as a result of (finally) climbing fares, additional fees and an increase in passenger traffic. United Continental, Southwest and JetBlue have reported strong profits for the third quarter using a variety of tactics, but an increase in sales and higher prices appear to be the universal driver. And, this may translate to a bit more elbow room for you.
According to the Associated Press, airlines are beginning to bring back some of the routes they cut last year, as indicated by decisions at Delta and American Airlines to hire more flight attendants. The challenge, however, will be to increase capacity (and thus headcount) without imperiling this year’ hard-won profits.

The business of satisfying pent-up demand isn’t easy for the airline sector. After all, capacity can’t be added one seat at a time. Restoring a route to handle more passengers comes with it the obligation to fill the plane (to the extent possible) each time, in accordance with revenue per available seat mile (RASM) targets.

Nonetheless, the carriers seem ready to rise to the challenge. JetBlue is amping up fourth quarter capacity by up to 10 percent, with Delta looking at an increase of 5 percent to 10 percent. This follows even faster growth in September, according to the Associated Press:

Still, most of the airlines saw traffic rise even faster than capacity in September suggesting they have enough business to support the additional flights. The only exception was Delta, which added capacity slightly faster than traffic rose.

The moves come in anticipation of a strong 2011, according to Ray Neidl, an analyst for Maxim Group. He tells the associated press that the growth in capacity “is a little more long-term,” adding that “[d]espite the lackluster economy, it’s going to be a big year for airlines, especially as consolidation kicks in.”

So, what does this mean for the flying public?

Well, you may not have to occupy that middle seat for a little while, and the odds that someone else will be in it may be improving. The increase in capacity necessarily precedes an increase in sufficient demand to make it profitable, so enjoy it while you can! If the airlines can’t fill those new seats, a return to austerity could send you back to sharing an armrest.

[photo by Joe Shlabotnik via Flickr]

Airline fees never going away, $1.2 billion in first half

by Tom Johansmeyer on

In the first six months of 2010, U.S. airlines raked in $1.2 billion – and that’s just from change and cancellation fees. The industry is on track to see $2 billion in revenue just on ticket-related fees this year.

According to the Bureau of Transportation Statistics, here’s where the money’s going:

  1. Delta had the most at $347.1 million in the first half of 2010
  2. American Airlines was a distant second at $235.3 million in ticket related change fees
  3. United Airlines pulled in $158.3 million
  4. US Airways generated $128.3 million from ticket fees
  5. Continental Airlines picked up $120 million

JetBlue didn’t hit the top five (finishing sixth), but it did lead the low-cost category in change and cancellation fees, with $55.7 million.

[photo by cliff1066 via Flickr]

Airline passengers want more self-service options

by Tom Johansmeyer on

Hey, airlines: passengers don’t want your help. Seriously. We’d rather take control of our fates. Let us make our own choices and pay for what we consume.

Well, that’s what a new survey reveals. The fifth annual SITA/Air Transport World Passenger Self-Service Survey finds that air travelers would like a bit more independence. Seventy percent, this year, want automatic boarding gates – where scanning a boarding pass opens a turnstile – up from 57 percent. In fact, self-service is already the norm, with more than 70 percent using airport kiosks for flight check-in, and two-thirds want to see expanded kiosk use, including: paying baggage fees, purchasing meals, printing bag tags and getting delayed luggage.

I guess this provides support for that old saying: if you want it done right …

[photo by joiseyshowaa via Flickr]

Five reasons airline fees up 50% year-over-year

by Tom Johansmeyer on

Does your wallet feel a little bit lighter? A new USA Today analysis reveals that airline fees are on the rise, with some up more than 50 percent relative to a year ago. The study compares the extra fees (not to be confused with fares) of 13 airlines and shows just how important this revenue source is to the airline sector.

According to USA Today, “The numerous fees are a sore subject for many fliers, but their dissatisfaction hasn’t deterred airlines from bringing in record revenue from additional fees.”

The fees were good for $2.1 billion last quarter, with $893 million of it coming from checked bags and $600 million from changed reservations.

So, where did all this money come from? Here are five ways airlines have turned those extra charges into a big business:

1. First checked bag: most airlines in the United States hit you for up to $25 for the first bag you check, with only Southwest and JetBlue abstaining. Most charged $15 a year ago, according to USA Today, with four not playing this aspect of the fee game.

2. Change fee spikes: a year ago, the most expensive coach change fee was $250, charged by Continental, Delta, United Airlines and US Airways. This year, it surged to $300, an increase of 20 percent, charged by American Airlines for some international flights.

3. Pay to call: still resisting the internet? Booking by phone costs an extra $35 on US Airways, while Allegiant Air hits you for a $29.98 round-trip booking fee and another $14.99 for “convenience.”

4. Preferred seating: United asks for up to $159 for preferred seating, which can give you up to five more inches of leg room. A year ago, it would have set you back only $119.

5. Get a receipt: Continental (for which this isn’t new) – along with American, Hawaiian and US Airways – have an extra fee for passengers who want a receipt after they have taken their flights.

[photo by Deanster1983 via Flickr]

Airline extra fees: $2 billion in three months

by Tom Johansmeyer on

Airline fees are definitely not going away anytime soon – not after the second quarter it gave the airline industry. Carriers in the United States raked in $2.1 billion in fees and extra charges in the second quarter of this year, a 13 percent year-over-year surge. And, it was good enough to deliver the sector’s first profitable quarter since 2007.

Well, here’s the worst part for you: most of it came from checked baggage fees. This annoyance was good for $893 million in the second quarter of 2010, a gain of 16 percent from the second quarter of 2009. Reservation fees were good for $594 million, with ancillary revenue (e.g., frequent flier mileage sales and pet fees) reaching $618 million.

Delta benefited most from the fees that passengers hate most, at $682 million. American Airlines and US Airways were next.

[photo by cliff1066 via Flickr]