Posted: February 21, 2013
Despite what they said was a healthy 2012, industry leaders worry that in 2013, upcoming spending cuts will hit already-battered airlines hard.
Those baggage fees, cramped seats and tiny pretzel bags to the contrary and notwithstanding, airline passengers enjoyed good times in 2012, according to an annual recap from Airlines for America, the industry trade group.
Last year was good because no U.S. commercial airline crashed, nearly 82 percent of flights arrived on time and only about three bags were mishandled for every 1,000 domestic passengers. Back in 2007, only 73.4 percent of flights were on time and seven bags were lost for every 1,000 travelers. Average fares ticked up, but only by a few dollars. Adjusting for inflation, domestic fares are actually down 15 percent from 2000.
Unfortunately for airline shareholders, 2012 brought another profit nosedive.
At a briefing today for journalists, John Heimlich, the group's chief economist, clicked through grim slides: Jet fuel hit a record $3.06-per-gallon average. In the 2001-2005 era, the price averaged roughly a dollar. Because of the big jumps in fuel prices, the carriers barely made money.
"U.S. airlines eked out another year of meager profitability as expenses grew faster than revenues — with record-setting fuel prices serving as the primary driver," Heimlich said. Last year, the ten largest airlines reported a combined profit of $152 million, or just 21 cents per passenger. That compared with a profit of 77 cents per passenger in 2011, and $3.18 in 2010, he said.
So far, 2013 isn't looking very encouraging: jet fuel was averaging $3.26 a gallon last week.
And on March 1, the federal government will start enacting automatic spending cuts that could furlough air-traffic controllers and checkpoint security officers.
Dan Elwell, the group's senior vice president, said the carriers have not yet gotten many details from the Transportation Department about what will happen as the cuts kick in, but he said he didn't think government officials would allow the budget process to hurt the already battered airline industry. Why? Because a healthy air transport system is "too important," the optimist said.
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