Airlines
for America (A4A), the industry trade organization for the leading U.S.
airlines, today delivered its Summer Air Travel Forecast and
first-quarter 2014 results for U.S. passenger airlines, which achieved
strong operational performance and modest profitability in the face of
one of the harshest winters in memory.
A4A projects summer 2014 air travel to rise to its highest level in six
years, with a record number of passengers traveling internationally on
U.S. carriers. Approximately 210 million passengers (2.28 million per
day) are expected to fly U.S. airlines from June 1 – August 31, up 1.5
percent from 2013. This includes 29.9 million travelers (325,000 per
day) on international flights – an all-time high. Published airline
schedules show Canada, Mexico, the United Kingdom, Germany and Japan,
respectively, as the top five nonstop destinations from the United
States.
“It’s a great time to fly, as air travel remains one of the best
consumer bargains in America, given its superior speed and
affordability,” said John
Heimlich, A4A Vice President and Chief Economist. “U.S. airlines are
well prepared to accommodate the increased travel demand in the summer
months by adding seats and continuing to make customer-focused
investments in their product.”
Improving Finances Benefiting Customers, Employees, Investors and
the Overall U.S. Economy
During the first quarter of 2014, nine publicly traded U.S. passenger
carriers collectively reported a Generally Accepted Accounting
Principles (GAAP) net profit of $401 million, resulting in a 1.1 percent
net profit margin, improved from a collective net loss of $552 million
during the same period in 2013. Operating revenues rose 3.7 percent
year-over-year due in large part to a 1.1 percent increase in the number
of air travelers, the equivalent of an additional 21,000 passengers per
day. Fuel remained the largest and most volatile cost for airlines,
accounting for 33 percent of overall operating expenses.
Despite entering 2014 with approximately $72 billion of debt and coping
with some of the worst winter weather on record, modest financial
progress enabled carriers to continue significant levels of reinvestment
to further enhance the customer experience. First-quarter capital
expenditures for the nation’s airlines totaled $3 billion, on track to
meet the $12 billion in reinvestment expected for the full year.
Advancements include 1,751 new aircraft, of which 255 are scheduled for
delivery in 2014 or the equivalent of roughly one aircraft received
every weekday of the year.
“The modest margins are enabling airlines to shore up their balance
sheets while accelerating reinvestment in people, products and
technologies that enhance the overall travel experience,” said Heimlich.
“In the first quarter, airlines did a great job meeting the needs of
their customers despite facing severe winter weather, including two of
the worst aviation weather days ever recorded.”
Heimlich noted that, while U.S. airline finances are steadily improving,
the industry still faces significant financial challenges, including
paying down debt, pursuing investment-grade credit and seeking margins
on par with or better than the S&P 500 average.
1Q 2014 Financial Summary:
-
Net profit: The $401 million profit, or $484 million excluding
one-time items, reflects the results of nine U.S. passenger airlines –
Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines,
Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit
Airlines and United Airlines.
-
Operating Revenues and Expenses: While revenues increased 3.7
percent year-over-year, fuel costs declined 4.3 percent. Lower fuel
costs largely offset sharp increases in labor, airport-related and
aircraft costs. Jet fuel remains the U.S. airlines’ largest and most
volatile expense. Every penny increase per gallon annually costs
airlines an additional $180 million.
-
Capital Expenditures (CapEx): U.S. airlines reinvested $3
billion in the product and customer experience during the first
quarter, which equates to about $18 per enplaned passenger. Airline
CapEx rose 141 percent from 2010 to 2013; a total of $12 billion of
reinvestment is expected in 2014.
1Q 2014 Operational Performance
-
Customer Service: U.S. passenger airlines’ operational
performance remained strong, improving markedly from January to
February to March as meteorological conditions improved. According to
the Department of Transportation (DOT), from January to March U.S.
carriers improved the rate of completed flights from 93.46 percent to
98 percent; the on-time arrival rate increased from 67.72 percent to
77.6 percent and the share of passengers having their bags properly
handled rose from 99.4 percent to 99.6 percent.
Federally Imposed Taxes on Air Travel Continue to Rise
Four decades ago, taxes and fees accounted for less than one tenth of
the price of an airline ticket. Today, the amount has skyrocketed to
nearly a quarter of the price or $62 on a typical $300 roundtrip
domestic ticket. That amount is scheduled to rise again in July to $63
when the Transportation Security Administration’s passenger tax
increases to $5.60 on a one-way trip. It could go even higher if other
taxes proposed by the Obama administration become law. Adding insult to
injury, DOT’s Full Fare Advertising Rule enables the government to hide
the outsized, ever-increasing amount that airline customers pay in
government-imposed levies by burying the charges in the advertised price
of a ticket.
“Since travel is often optional for individual consumers and businesses,
even the smallest increase in the total price of a ticket has a negative
impact on travel decisions,” said Heimlich. “DOT’s Full Fare Advertising
Rule dampens demand for air travel and harms the economic viability of
our nation’s travel and tourism industry, which generates over $2
trillion in U.S. economic activity annually, by enabling the government
to bury tax hikes in the advertised price of a ticket.”
A4A launched a campaign to Restore Transparency in Airfare
Advertising Rules and encourages customers, airline employees,
stakeholders and the general public to visit www.airfaretransparency.com and
send a letter to the Administration and Members of Congress voicing
their support for transparent airfares.
ABOUT A4A
A4A airline members
and their affiliates transport more than 90 percent of all U.S. airline
passenger and cargo traffic. America needs a cohesive National Airline
Policy that will support the integral role the nation’s airlines play in
connecting people and goods globally, spur the nation’s economic growth
and create more high-paying jobs.
For more information about the airline industry, visit www.airlines.org
and follow us on Twitter @airlinesdotorg.
For more information about the National Airline Policy campaign:
Visit: www.nationalairlinepolicy.com
Twitter: @Natl_Air_Policy
Facebook: facebook.com/nationalairlinepolicy
Copyright Business Wire 2014