Airlines for America (A4A) is reporting some good news for the airlines, including a 2 percent profit margin during the first half of 2013, invested in the travel experience for customers and delivered strong operational results despite challenging weather and economic conditions. A4A also recapped the industry’s environmental progress and commitments going forward.
Overall financial performance improves: Ten U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit, United and US Airways – collectively reported a net profit of approximately $1.6 billion, up from $1.2 billion during the same period last year. This translates to a net margin of 2.1 percent, also improved from the 1.6 percent margin reported in the first half of 2012, A4A says.
For the first half of 2013, A4A reports, airlines continued to reinvest this modest profitability at a rate not seen since 2001, spending approximately $6 billion. Those investments included new fuel-efficient aircraft, state-of the-art seats and interiors, modern airport terminals and customer lounges, expanded in-flight entertainment, mobile technology, Wi-Fi and gourmet meal offerings.
“While the airline industry is making the transition from razor-thin to paper-thin margins, keeping just 2.1 pennies per dollar of revenue generated in the first half of 2013, it is reinvesting in the product and travel experience for customers at a rate not seen in 12 years – to the tune of $1 billion per month,” said John Heimlich, Vice President and Chief Economist for A4A.
“Airline customers, employees, investors and the U.S. economy are all vastly better off with a financially strong industry that can cover its costs over an entire business cycle and compete effectively on the global stage, while expanding air service and creating even more American jobs," Heimlich said.
Heimlich added that U.S. airlines have built a solid foundation for the future amid a challenging economic backdrop, led first and foremost by high fuel costs. He noted that an increase of just 20 cents per gallon in the price of jet fuel would have completely wiped out the airlines’ first-half profits.
Despite a slight fuel-price relief during this six-month period, jet fuel remains the airline industry’s single-largest and most volatile expense, having already risen 26 cents per gallon since the end of June. Every penny increase in the price of a gallon per year costs the industry $180 million annually.
“The fact that airlines are still able to post a modest profit at jet fuel prices north of $3 per gallon is nothing short of remarkable,” Heimlich said. “It speaks to the work the airlines have done to transform their businesses over the past 13 years. The good news for customers is that air travel remains a great bargain with 2012 domestic round-trip airfares actually 15 percent below 2000 levels when adjusted for inflation.”
Overall operational performance remains strong: U.S. passenger airlines’ operational performance remained strong in the first half of 2013, showing substantial improvement from the past decade despite numerous thunderstorm and weather events, as well as air traffic control delays resulting from federal budget sequestration, A4A says.
According to the Department of Transportation, 99.6 percent of passengers had their bags properly handled. Also, U.S. airlines completed 98.3 percent of their flights, of which 78.1 percent arrived on time. Consumer complaints fell to just 1.13 per 100,000 passengers.
Customers continue to benefit from the proactive approach the airlines are taking to prepare for weather events and minimize travel disruptions. The airlines and their employees remain focused on providing the safest mode of transportation in the world and continuing to advocate for and improve service, efficiency and reliability for customers, A4A says.
In addition, as airlines serve more international destinations, those customers visiting the country on U.S. carriers are spending three times as much on tourism as they do on airfare, which is a win-win for airlines and for the nation’s economy.
In the first half of 2013 alone, visitors to the U.S. spent more than $20 billion on U.S. airline flights and $67 billion on additional U.S. travel and tourism-related goods and services. Because there is such a clear benefit to the U.S. economy from international tourism, airlines are calling on the Department of Homeland Security to fix the excessive customs wait times customers face upon arrival at U.S. gateway airports before dedicating any resources to opening a Customs and Border Protection preclearance facility in Abu Dhabi.
Commercial aviation is the green engine of the economy – and is getting greener, A4a says. A4A reported on the significant advancements airlines have made in their environmental and emissions reduction efforts. Carriers continue to reduce emissions even further through ongoing investments in new aircraft and engines, winglets and operational procedures in-flight and on the ground, among many other initiatives. And they are working to deploy commercially viable, environmentally preferred alternative aviation fuels that will bring additional emissions reductions in the future.
“The U.S. airlines are proud that their business models align with environmental interests – airlines are a green engine of the economy and we’re only getting greener,” said Nancy Young, Vice President of Environmental Affairs. “While aviation contributes less than 2 percent of the total U.S. greenhouse gas emissions, we are committed to doing even more to reduce our environmental footprint.”
Young noted that the U.S. airlines improved fuel efficiency by 120 percent between 1978 and 2012 – the equivalent of taking 22 million cars of the road each of those years. Further demonstrating their environmentally responsible contribution to the nation’s economy, the U.S. airlines carried 16 percent more passengers and cargo in 2012 than they did in 2000, while emitting 10 percent less carbon dioxide (CO2). The airlines also reduced noise exposures by 95 percent between 1975 and 2012 as enplanements grew 259 percent.
A4A and its members are part of a worldwide aviation coalition with a significant proposal on the table for further addressing aviation CO2 through a global sectoral approach, under the United Nations body charged with setting standards for international aviation, the International Civil Aviation Organization (ICAO).
When it convenes in its 38th Triennial Assembly next month, ICAO will consider such proposals towards a global agreement on aviation and climate change.
According to A4A, the industry’s proposal calls for ICAO to:
• reaffirm the aggressive emissions goals it set in 2010, including having aviation achieve carbon neutral growth from 2020 through concerted industry and government efforts;
• confirm and advance key pieces of ICAO work on technology, operations and infrastructure, including developing a CO2 standard for new aircraft and advancing air traffic management improvements and the deployment of commercially viable, sustainable alternative aviation fuels;
• expand country-specific action plans for aviation fuel efficiency improvements and emissions savings; and,
• commit to the development of a global emissions offsetting scheme that could be employed to fill the gap should aviation not reach its emissions goals through industry and government investment in technology, operations and infrastructure.