Boom times for big US airlines: $3.9 billion in 2Q profits

[mitty14u2]

Source: theolympian

FORT WORTH, TEXAS
Compared with their checkered track record, major airlines are enjoying boom times.

Planes are full, and jet fuel is still much cheaper than it was last year. The four biggest U.S. carriers just reported a collective second-quarter profit of $3.9 billion.

And yet investors seem to be looking past the bottom line. They have become obsessed with fare prices — falling now for more than a year — that may foreshadow thinner profits in the future.

When the airlines held calls this month to discuss their second-quarter operations, investors pressed them to reduce flights and the supply of seats in order to drive up fares. They cheered when Delta Air Lines Inc. and United Continental Holdings Inc. said that they would trim growth plans in the fourth quarter — sending shares of both higher.

Read more here: http://www.theolympian.com/news/business/article91223077.html#storylink=cpy

Read more: http://www.theolympian.com/news/business/article91223077.html

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Big Airlines Benefit from Bailout Bill

June 07, 2002
Airline lobbyists' dreams came true last fall when Congress hastily passed the $15 billion airline bailout bill authorizing $5 billion in direct compensation and another $10 billion in loan guarantees. Sadly, this legislation provides billions to a small number of large airlines that were bleeding red ink long before Sept. 11th.

In deciding who gets how much, the biggest carriers walked away with the lion's share of the cash, while many small carriers did not receive enough to cover the costs of being grounded for two days. The formula for dispensing the money benefited the biggest fliers by multiplying the number of seats by the total miles flown by an airline and eligibility for compensation was not limited to losses incurred in the days following Sept. 11 when all flights were grounded. Any airline could apply for compensation for losses suffered as a result of a downturn in business between September 11 and December 31 of last year.

Since enactment of the law, more than 380 airlines have received $3.94 billion in direct assistance from the federal government. A review of the payouts shows that 80% have gone to the nine largest commercial carriers with United Airlines receiving the biggest slice of the pie - $644 million.

The biggest airlines essentially got everything they asked for, and responded by laying off thousands of employees and drastically reducing service. More than 70,000 workers were fired and hundreds of flights were canceled after the bailout was signed into law last fall.

http://www.taxpayer.net/library/weekly-wastebasket/article/big-airlines-benefit-from-bailout-bill

AIRLINES ARE STILL BEING SUBSIDIZED MONOPOLIES SCREWING THE PUBLIC DAILY

[msongs]

1. the perfect passenger: standing, holding a loop hand-hold, like on a city bus nt

[bhikkhu]

2. The article you use to justify the hate is from 2002

I don't have any problem with airlines making a profit - its how companies continue to exist, whereas losses are what lead to layoffs and bankruptcies. If you look up the definition of "monopoly", it doesn't fit. There are many airlines in the US, and a pretty healthy competition between them; if I wanted to fly somewhere around the country I'd have plenty of options; that's good.

I imagine they are making money now because fuel is cheap and the economy is decent, people are traveling and its more affordable. I don't see how that's a bad thing. On a personal note, a neighbor's daughter recently finished her four year degree, then went through a flight attendant training program and got a good paying job right away, and loves it so far.

The airline industry has added something like 70,000 jobs in the last year in the US.

[AllyCat]

3. Okay, but since fuel is cheap, can they get rid of the baggage surcharge?

[msongs]

4. got that right! it's all about greed not customer service nt

[alcibiades_mystery]

5. I agree with almost everything you say

But if prices went up because fuel went up, prices should come down when fuel comes down. The problem is that their costs have gone down significantly, while their prices have stayed the same. In a normal competitive environment, one player would drive prices down by responding to the reduced costs. But that hasn't happened. How can e explain it? There are, of course, numerous possible explanations, but collusion is among the reasonable explanations for a drastic reduction of costs NOT followed by a competitive reduction of prices.

[strategery blunder]

6. The industry's capital costs are very, very high, and relatively fixed.

The older aircraft get, the more intensively they must be maintained, the more difficult the maintenance becomes, and the higher the risk of maintenance errors or other mechanical failures leading to a crash. Moreover, maintenance really isn't something that should be cut during an economic downturn (and the airline industry, for all its profits now, did not do so well last decade), as Alaska Airlines learned with Flight 261 to cite one example. So there is much pressure in the industry to keep fleets up to date.

When aircraft have a design lifespan of 20-30 years, and cost anywhere from $40-200M each depending on type and other factors, and an airline has to maintain a fleet of several hundred or even a couple thousand of them, such airline has some very good reasons to take advantage of the good times that have nothing to do with greed at all. The costs of fuel have gone down for now, and sure that benefits the airlines, but saying "fuel costs half of what it did a couple years ago, therefore fares should go down by half right now!" fails to take into account the comparatively immovable costs of fleet amortization and is therefore error.

Fares have been drifting down a bit; that is why the article notes investor complaints, but the nature of the industry's other costs means it is imprudent for the industry to pass on the savings as quickly as consumers would like. Otherwise, if the industry fails to build sufficient capital reserves when times are good, the next downturn would see another wave of bankruptcies, Rmoney-style vulture capitalism management styles notwithstanding.

[AllyCat]

15. They raised the cost of hauling baggage pretty quickly when fuel prices rose

The charges have gotten worse.

[metalbot]

11. Most airlines hedge fuel prices pretty hard

They'll buy futures contracts to ensure that fuel price hikes don't hit them too hard. That leads to a pretty big delay in price swings from fuel costs. Earlier this month Delta took a $450 million hit on a bad bet on fuel futures, and had to ditch their contracts. Of course, the $750 million hit is just going to be passed to customers in fares/fees.

http://money.cnn.com/2016/07/05/news/companies/delta-fuel-hedges/

Air fares right now are quite cheap (in relative terms). I'm flying to Manila next month for less than $1000, and a flight I took from Texas to LA last week was $300 without much of an advanced purchase.

[BlueCollar]

8. American Airlines

Used Bankruptcy Court to abrogate my contract over 13 years ago...

I'm a mechanic. Much of my work is now mostly outsourced to third party maintenance in Hong Kong and El Salvador.

My pension was frozen. New hires don't have a pension option.

My retirement medical plan was abolished.

Sick pay and accumulation was gutted.

Thousands of us are still on lay off status or commuting from city to city to remain employed.

Stations closed.

Paid holidays reduced by over 50%.


Base pay cuts of between 13 an 23%.


We,be been trying to negotiate an agreement to begin to restore some of those for over two years.


Maybe you could tell me where those 70k jobs are?

[DemoTex]

12. My US Aiways pilots' pension was terminated 3/31/2013 by federal BK judge

Than broke the dam. The rest of the US Airways employees, then the rest of the airlines followed.

The airlines argued, speciously, that their survival HAD to be done on our backs. If that was indeed the case, then this success is also on our backs. While some active employees have seen some snap-backs in pay and benefits, those of us retired are conveniently out-of-sight and out-of-mind, if not long forgotten.

Bitter? You bet I am. I won't have anything to do with the airlines anymore. I drive everywhere I go. I have flown once in the last 14 years (family emergency), and I paid full-fare for the ticket because non-rev travel is such a joke now.

[BlueCollar]

13. US Airways are our new lords and masters

We haven't had a decent CEO or business plan since Crandall left.

With Bob you knew where you stood...

I'm working on my retirement package now.

Like you...I drive anywhere I can.

No pride left here....

[bhikkhu]

14. The Bureau of Transportation publishes the employment information

http://www.transtats.bts.gov/employment/

and then there's http://www.monster.com/jobs/q-aircraft-mechanic-jobs.aspx

I'm an automotive mechanic myself, a pretty good one, but was always very impressed with the skill level and professionalism of aircraft mechanics. I started out in Seattle, working at a shop that employed many layed-off Boeing mechanics - it always seemed to be boom or bust in the large markets like that, and even with the strong union I gather it was pretty hard.

[rafeh1]

7. Its all 0bamas fault

Creating a booming economy. We want the bush good times back..

[Mr. Sparkle]

9. There is one sentance in the article that summed up the problem with wall street

When the airlines held calls this month to discuss their second-quarter operations, investors pressed them to reduce flights and the supply of seats in order to drive up fares

I'm amazed that wall street is not a big topic of conversation in the election.

[AllyCat]

16. It should be SOME about profits, yet sadly, it is all about profits.

Wall Street looks more and more like a criminal organization every day.

[jtuck004]

10. Maybe we could elect someone who cares about saving American workers and families

as much as they care about their donors on Wall Street - and will show it by putting the help there for them instead of the bank$ter/jihadists.

...
The hurting economy

oe is one of 8 million unemployed Americans who remain without work despite a hiring surge in recent years.

The hurting economy still exists. Perhaps the most telling sign that the U.S. isn't back to normal is the 44.7 million Americans on food stamps. Joe is one of them, something else he never envisioned in his life.

Before the financial crisis there were only 26.3 million people on food stamps.



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http://money.cnn.com/2016/04/26/news/economy/middle-class-to-homeless/index.html?sr=cnnmoneybin043016middle-class-to-homeless0900vodtop