American airlines have turned around or have turned just a corner, only time will tell but one thing is certain that those who were running into losses have started showing big profits. What are the reasons for their excellent performance? They have turned mean…. Yes, they have started making money on such things which were just common courtesies. Ancillary fees such as bag charges and change fees combined with higher fares and more passengers have combined to boost the industry's results, even with higher costs. The latest record-setters Thursday included Southwest Airlines Co., Alaska Air Group Inc. and JetBlue Airways Corp., all of which said their third-quarter earnings establish new highs for them, excluding special items.
The puzzling question is; why Pakistani flag-carrier, PIA is sinking in spite of all these tricks? It has no dearth of customers as passengers have to wait to get booking on PIA flights, it is relatively more expensive even on sectors where it has to face competition, it would charge you for virtually everything, it is unable to provide basic amenities like pillows and blankets to all passengers, its food is no better than road-side food cart, yet it is not only sinking itself, it is sinking the entire economy along with it. If with higher fares and overcrowded booking offices, this airline is sinking, it will never cruise.
Imagine, if each aircraft in the fleet has to carry 450 employees most of which are managers, how it can fly. And this is the highest employees-to-aircraft ratio. Is the airline flying at a low altitude and is heading towards a crash?
The Dallas Morning News has narrated the story of American Airlines. According to the papers, U.S. airlines were beaten down and losing billions of dollars, just a year ago. This year, most are posting record profits. Southwest Airlines announced Thursday that it had earned $205 million on operating revenue of $3.19 billion during the third quarter. A year ago during the same period, the airline lost $16 million on revenue of $2.67 billion. The reason for the turnaround, in a nutshell: revenue. United Airlines Inc. and Continental Airlines Inc., which merged Oct. 1 into United Continental Holdings Inc., combined for net income of $741 million in the third quarter, or $840 million excluding items.
As a group, the eight large carriers that have reported so far boasted net income of $1.87 billion in the three months ending Sept. 30. A year earlier, they lost $588 million. Through nine months, the same carriers have earned $2.3 billion. Last year? A loss of $3.1 billion. That's a $5.4 billion turnaround from 2009. "Oh, my," Southwest Airlines chairman and chief executive Gary Kelly told analysts Thursday, "what a difference a year makes."
Normally, such a boost in an industry's earnings is driven by a combination of cost cuts and revenue increases. That's not the case in 2010. Airlines aggressively reduced their expenses and slashed their capacity and head counts beginning in 2008 as they struggled first with high fuel prices and then with a worsening economy. With little more to cut in 2010, most airlines have seen their expenses creep upward. But the same carriers saw their operating revenue jump $4.95 billion year over year, led by United Continental's $1.6 billion increase and Delta Air Lines Inc.'s $1.4 billion climb in revenue.
A continuing worry for Wall Street is that airlines emboldened by their higher passenger loads and climbing revenue, will be tempted to boost capacity by buying more airplanes or taking parked ones out of the desert. Southwest raised some eyebrows Thursday when Wright said the carrier's capacity in available seat miles will be up 5.3 percent in the fourth quarter, 8 percent in first quarter 2011 and 5 percent in the second quarter.