U.S. Airlines Profitable Again, But Oil Prices Threaten
And don't expect relief from jam-packed airplanes either.
Delta, which reported net profits of $593 million for 2010 -- one of its best years ever -- has cut 101 planes from its fleet over the last 18 months and plans to eliminate another 101 over the next 18 months, chief executive Richard Anderson says.
Jeff Smisek, chief executive officer of the recently merged Continental United Holdings, says, "We remain committed to capacity discipline."
That means Continental and United, which together reported net income of $253 million for 2010, will resist the urge to add more seats or planes even as the economy improves.
If fewer seats are available, airlines can command higher prices for them.
Despite the improving profits, the volatility of oil prices has made airline executives very cautious.
In addition, after a long stretch with no significant fare increases, the airlines have regained their enthusiasm for them, imposing four hikes since mid-December.
But that may not be enough if oil prices continue to rise.
Delta chief executive Richard Anderson also says "we are watching fuel prices and are prepared to adjust capacity" if they continue to rise.
The record-breaking snowstorms this winter also are making big dents in airline profits.
JetBlue, the only sizable U.S. carrier based in New York, says the snow devoured about $30 million in revenue in December, and the weather has only worsened in January.
Even Delta, whose Atlanta hub is usually spared the ravages of winter, saw its December revenues reduced by $45 million, primarily due to 4,000 flight cancellations in snowbound Atlanta and in the Northeast.
Among the major U.S. carriers, only American reported a net loss for 2010.
Its parent company, AMR Corp., recorded a net loss of $471 million, but even that was better than 2009's net loss of $1.5 billion.
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Photo, Delta Air Lines