Are Airlines at Last Getting Smart?
NEW YORK (TheStreet) -- Third-quarter results painted an unfamiliar portrait of the airline industry: It looked smart.
The results showed the benefits of more than a year of reducing capacity, and of adding incremental fees that provided each of the three largest carriers with at least $1 billion annually in new revenue. The fees fundamentally altered a fare structure that had existed since stewardesses of long-defunct Pan Am served fine food on china plates at no extra charge. Airlines, it seemed, were one of the few industries that actually prepared for the recent recession.
Among the nine largest carriers, seven beat third-quarter estimates and, excluding items, six reported profits. That's not bad for consumer-sensitive companies attempting to fly through an economic slowdown.
However, it's important to remember that the minimal profits came in a quarter that is historically the industry's most profitable. Airlines make money in the second and third quarters, then spend down in the fourth and first.Airline executives are not patting themselves on their backs. They realize the industry retains structural flaws that have resulted in a cumulative loss for investors since the Wright brothers first flew. "All of us have done what was needed to do to get through this very difficult time," said US Airways (LCC) CEO Doug Parker, speaking at the conclusion of the industry's final earnings call on Thursday. "You're not going to see any additional casualties. Those of us that are around have made it through a difficult time. "But it's not over," Parker continued. "We've got to get this industry back to profitability. The standard can't just be survival. We passed that standard, but there's a higher standard: getting investors a return for their investment."
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