After years of struggling with financial problems and a deep recession, the big airlines are now rolling in profits -- and the reasons why may surprise you.
Major airlines are showing soaring profits after facing years of struggling to get back into the black, buoyed by a stronger U.S. economy and lower fuel prices.
United Continental Holdings Inc. and Southwest Airlines Co. both predicted profit records would be broken this quarter after posting record first-quarter earnings last week, according to a Wall Street Journal report.
United, the No. 2 carrier that is based in Chicago, posted a profit, while No. 4 carrier Southwest posted its eighth straight quarter of profit increases. Alaska Air Group Inc., a smaller airline company, beat estimates by Wall Street investors. And No. 3 Delta Air Lines Inc. posted its best first quarter in its history.
Results have not yet been released for the top carrier, American Airlines Group Inc., which were expected Friday.
It’s not all good news for carriers, which have to grapple with a strong U.S. dollar, a problem especially for international flights. Although three U.S. airlines that reported on Thursday showed profits, there were weak gains in unit revenue compared to a year ago.
It actually declined for Alaska Air, which saw its unit revenue dip 5.7 percent from a year ago. United and Southwest saw theirs rise by 0.4 percent and 0.3 percent, respectively.
Part of that weakness comes with flying farther distance and with having more seats per flight. That means even though unit revenue declines, it helps lower costs for the airline and improve earnings.
United expects to see its unit revenue decline up to 6 percent in the second quarter, but expects it to recover after that.
The summer is the best time of year for the airline industry, and many airlines are raising their capacity, with United bumping its up by as much as 3.25 percent in the second quarter. Alaska will increase its by 10.5 percent, and Southwest will increase it by 7 percent.
