Airlines Bid for More Profits
CHARLOTTE, N.C. -- The employment picture is dim, fuel prices are at record levels, the economy is slowing, and airline share prices are near a five-year-low.
But the U.S. airline industry remains optimistic for 2008.
The industry will likely report a net profit of $3.5 billion to $4.5 billion this year, economist John Heimlich of the Air Transport Association estimated Friday. That follows 2007 profits of about $5 billion and 2006 profits of around $3 billion.
"In 2008, ongoing passenger and cargo revenue strength -- particularly in the international arena -- will help offset a sizeable increase in fuel expenses and a modest increase in nonfuel expense," Heimlich wrote in a report. "That would make 2006-2008 the airlines' first profitability 'three-peat' since 1998-2000."The outlook calls for capacity reductions, combined with continued strong demand. "In the face of uninspiring forecasts for the U.S. economy and yet another record year for crude oil prices, the nation's carriers have moved aggressively to redeploy assets and adjust aircraft utilization to trim unprofitable flying," Heimlich said. "Passenger and cargo demand is surging globally," he noted. "The reality is that the world economy, led by China, India and other developing economies, is growing at twice the rate of the U.S. economy." A traffic report by US Airways (LCC) backed up Heimlich's outlook. The carrier, which has repeatedly called for industrywide capacity reductions, said its December capacity declined 4.4% from a year earlier while passenger revenue per available seat mile increased between 2% and 4%.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV