A4A: US airlines earned $390 million in 2011 on 0.3% profit margin

The 11 US passenger airlines that have reported 2011 earnings posted aggregate net income of $390 million for the year, down 86% from a $2.7 billion net profit in 2010, according to Airlines for America (A4A).

Excluding bankrupt American Airlines (AA), which incurred a $2 billion net loss last year, the carriers earned a $2.4 billion net profit for 2011, down 25% from $3.2 billion in net income in 2010 for the 10 carriers. Excluding AA "doesn't at all change the picture" of an industry operating on a slim profit margin and facing a heavy tax burden, A4A chief economist John Heimlich told reporters Tuesday in Washington.

With the 11 airlines' 2011 expenses rising faster (up 15.5% year-over-year) than revenue (up 12.6%), profit margin dipped to a mere 0.3%, down 1.9 points from 2010. (Excluding AA, profit margin was 2%, down 1.1 points from 2010.)

Despite earning positive net income in aggregate for two straight years, US airlines have "flat-to-mediocre balance sheets," Heimlich said. "[Carriers] have to maintain a conservative posture [regarding capacity] … expecting the worst [in terms of fuel prices] … Fuel remains the largest and most volatile cost."

But Heimlich said the industry is "much more lean and agile" than it was just four years ago and maintained that 2011 earnings were "far better than it would have been if we had the same industry as 2008 … We've had a tremendous transformation since 2008."

A4A president and CEO Nicholas Calio added, "While [US airlines] may have made mistakes some years ago, putting too much capacity in the market, we have now cut our costs to bare bones in an effort to be profitable." A more sensible "national airline policy" that reduced taxes and regulations on US airlines would "put our industry on a path to sustainable profitability," he said. "We could become sustainable. If you look at the discipline with which the current crop of CEOs and employees are operating the business, it's completely different than 10, 15 years ago."

Article Source : ATW Daily News