Finally, reason for hope in the airline industry

updated 2:01 p.m. ET Dec. 21, 2005

CHICAGO - Eight airlines are flying in bankruptcy and jet fuel prices are still wrecking budgets after spiking to all-time highs this fall. 2005 marks a fifth straight year of multibillion-dollar losses.

Yet there’s reason for cautious hope that the worst may be over in the volatile U.S. airline business. If oil prices continue their recent trend downward and no catastrophes occur, the industry could even return to a rarely visited destination in 2006: Profitability.

“We’re not saying things are hunky-dory,” said John Heimlich, chief economist for the Air Transport Association, the trade group representing U.S. airlines. “All we’re saying is that some of the indicators we look at and some of the recent trends are promising, and that’s the first time I’ve used that word in a long time.”

Walloped by more than $30 billion in losses since the 2001 terror attacks, airlines cut more labor costs, eliminated more unprofitable routes and reduced more capacity this year.

The restructuring has reshaped virtually every airline company, not just those operating under federal bankruptcy protection as 2005 wound down: United Airlines parent UAL Corp., Delta Air Lines Inc., Northwest Airlines Corp., ATA Airlines Inc., Aloha Airlines parent Aloha Airgroup Inc. and regional carriers Comair Inc., Independence Air parent FLYi Inc. and Mesaba Airlines parent MAIR Holdings Inc.

It also helped produce fuller planes and much-improved operating results. Passenger unit revenue rose 4.9 percent from January through October compared with a year earlier, according to the transport association.

Supported by strong demand and record air travel volumes, the carriers even managed to quietly raise prices more than they had in years without scaring off passengers. Domestic fares this fall were up more than 8 percent from a year ago, industry figures show, and experts foresee more increases ahead.

“There’s still a lot of pressure for fares to go higher,” said Darryl Jenkins, a consultant to numerous airlines. “We’ve got a robust enough economy that we can raise fares, and ... that will bring a lot of relief to the industry.”

The changes have helped the industry improve its operating results by about $14 billion in the last two years, according to Airline Forecasts LLC, a Washington, D.C.-based consulting firm.

Print this Email this Blog this  IM this

MORE FROM AVIATION

Aviation Section Front

United, Continental may be discussing alliance Delta pilots approve contract revisions Airlines slow down flights to save on fuel Airlines give propellers another spin United-US Airways marriage has a chance Toyota to invest in Japanese airliner project US Airways isn’t done with mergers yet Airbus to conduct ‘review’ of A380 schedule UAL, USAir in very advanced merger talks Continental won’t try to merge with United Aviation Section Front   Add Aviation headlines to your news reader: