The 10 publicly traded US passenger airlines collectively reported a pre-tax profit margin of 14.2% in 2016, according to Airlines for America (A4A). Based on pre-tax earnings of $22.3 billion, the 2016 profit margin was 0.5 point lower than 2015.
Compared to other major US corporations’ 2016 pre-tax profit margins, the combined 10 US airlines’ profit margin falls in between Ford (4.5%) and Starbucks (19.7%), according to A4A. As an industry, the US airlines’ 14.2% pre-tax profit margin continues to lag behind the entire US corporate average for 2016 (15.8% margin), but the gap is nonetheless the “narrowest on record,” IATA said.
A4A released its 2016 evaluation March 20 as part of its annual spring air travel forecast. The 10 US airlines in A4A’s analysis are Alaska Airlines/Virgin America, Allegiant Air, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines.
ATW estimates the 10 airlines earned $13.9 billion in net profit in 2016, a 42% drop from the $23.9 billion in net profit they earned in 2015. A4A’s report did not include total net profit figures.
Combined operating revenues in 2016 were $ 157.1 billion, down 1% from $158.6 billion in 2015 as 5.2% lower fares offset 3.1% traffic growth.
Combined airline operating expenses totaled $132.5 billion, up 0.9% from $131.3 billion in 2015 as labor costs grew 9.3% year-over-year (YOY) in 2016. Full-time equivalent (FTE) employment at US passenger airlines reached over 411,100 jobs in 2016, the highest level since 2007. While fuel costs were down 17% YOY in 2016, all other cost categories saw increases during the year, A4A said.
“Cash flow generated in 2016 allowed US airlines to retire expensive debt, acquire new aircraft … upgrade facilities, expand IFE and Wi-Fi offerings, deploy more seats, increase staffing and wages and reward investors,” A4A VP and chief economist John Heimlich said.
In its evaluation, A4A noted that in 2016, US passenger airlines reinvested approximately $17.5 billion into their respective products, nearly $1.5 billion per month.
From 2010 to 2016, the 10 US airlines retired $62.8 billion in debt; between 2010 and 2015 $17.4 billion in cash was returned to shareholders. In 2016 alone, $8.5 billion in debt was retired and $13.1 billion in cash was returned to shareholders.
Traffic and capacity systemwide scheduled service on all US airlines reached record highs in 2016, A4A said, with enplaned passengers rising 3.1% YOY to 823 million, RPKs rising 3.5% to 933 billion and ASKs rising 3.9% to 1.1 trillion ASKs. Overall passenger load factor slipped 0.4 points to 83.4%.
In its spring air travel forecast, A4A forecast the number of passengers traveling on US airlines between March and April 2017 will rise 3.9% over the same period in 2016.
Approximately 144.9 million passengers are expected this March and April—2.4 million per day—an 89,000 passenger-per-day increase over 2016, with available seats up 110,000 per day YOY. Eighteen million passengers—296,000 per day—will be on international flights, A4A said.
Over 350 new aircraft were delivered in 2016, and by year-end, the 10 reporting airlines had purchase commitments for 1,409 aircraft valued at over $80 billion. The 10 airlines will take delivery of 337 new aircraft in 2017, A4A said.
Mark Nensel email@example.com