US Airlines Again Will Earn Half the World’s Profits

After earning more than half the world’s airline industry profits for three consecutive years, US airlines will only earn nearly half the world’s profits for 2017.

In its report, [IATA] said total airline industry net profit in 2018 will rise to $38.4 billion, an increase of around 11 percent on the projected figure for 2017.

The bulk of the profit generated next year will come from North America where, according to IATA, airlines in the region are forecast to record a combined net profit of $16.4 billion.

In its statement, IATA said the U.S. figure, up from a forecast $15.6 billion in 2017, actually represents a slight fall away in market share.

“North American airlines have generated more than half of the industry’s profits produced in the past three years, but rising cost pressures have slowed further improvements,” the report said.

Asia-Pacific should generate $9 billion in profit while Europe generates $11.5 billion.

Remember that the next time you hear about an airline asking government for special favors, protection for jobs, or subsidies to start international service from a local airport. The desperation in their voice is fake.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Yup, it’s “outrageous” that US airlines have figured out how to actually operate their businesses profitably. Just like Silicon Valley and our shale oil revolution are outrageous.

    Or not.

    It’s American ingenuity. Capitalism isn’t perfect, but it’s sure better than the alternative.

  2. LOL. “Ingenuity” in this case is a multi-year run of low oil prices + the elimination of much of the competition in the marketplace + the rise in ancillary fees + the degrading of the flying experience.

  3. The US aviation market does well because the county is wealthy and there’s no other options like Trains. Other regions that value of their currency/cost living is lower (Africa), Europe has more regulation and many ULCC and trains etc.
    North America also includes Mexico and Canada, so you can’t blame just a few airlines.

  4. @iahphx – The airlines should be free to make as much profit as they possibly can (capitalism is wonderful) but the profit should be because they provided a service that people wanted in an efficient and profitable way. Increasingly they are trying to earn profits by using the government to prevent competition so they can provide a crappy product in an inefficient way as they only option (crony capitalism sucks).

  5. @Doug — If the US government actually did its job correctly — protecting US airlines from unfair subsidized overseas competition — their profits would be even higher. Mind you, their margins aren’t fantastic; the airline business is a very hard and competitive business. But they do a better job of running their companies than most of their international competitors. That’s largely because of the smart business practices they’ve adopted that annoy many people on this website. Despite the whining, US air travel remains a fantastic deal. Most markets have tremendous competition. The “problem” is that many customers want a great product for less than the cost of providing that product. That’s increasingly harder to find in the American air travel market.

  6. @iahphx

    Maybe you should read this:

    https://www.economist.com/news/leaders/21721201-americans-are-treated-abysmally-their-airlines-they-should-look-europe-lessons-lack

    “….Not so in America: at 40 of its 100 biggest hubs, a single carrier now accounts for more than half of capacity. That pushes up prices….”

    It’s government-protected monopoly at its worst. Just like the taxi medallion owners…… May the U.S. legacy airlines share the same fate.

  7. If US airlines were losing money then you would criticize them for that as well. You are blinded by your bias. They are profitable precisely because they aren’t beholden to a government’s interests, and can make business decisions on their own merit. This means not flying to ME because there is no way to turn a profit competing against heavily subsidized and govt owned ME carriers.

    The airline industry is highly competitive. Inflation adjusted average fare prices are at historical revord lows, the number of competing airlines has not changed significantly, with new entrants offseting consolidation, yet all the lefties want to cry about evil US capitalists.

    Profit is not a four letter word. It’s certainly much easier to write socislist drivel on the internet than to run a profitable enterprise.

  8. There are black, Jewish and Hispanic southerners, but mostly these ethnic and religious minorities in the South don’t support the anti-consumer, Trump-supporting Republican Party and a government stacked (even in the courts) to favor corporate interests over consumers.

    The US airline industry apologists in, out of, or around government are the reason why the US airline industry cartel kingpins have all these profits. When collusion and cartel type behavior are allowed (and even encouraged by the government), and when corporate and governmental disclosure requirements are as weak as they are in the US, the outcome is the consumers get fleeced and the corporate kingpins and their crony backers gain a windfall on the back of fleeced consumers.

  9. The US airlines are not profitable because of their “ingenuity”, but because they have a huge domestic market protected from competition. The US government has not invested in high speed trains like Europe or China and has allowed the airlines to consolidate, forming an Oligopoly with limited competition ( a lot less than EU or Asia).
    Therefor, prices for short-haul flights are higher than in EU/Asia and service is bad.
    I have no problem with airline profits – but then create open skies and full competition, too. Allow foreign airlines to fly domestically. Let’s see how profitable the US3 will be then…

  10. The USA generates 40% of the world’s GDP. Of course its airlines would generate proportional amount of profit.

  11. @porciuscato — Have you actually tried to buy an airline ticket lately? Some of the prices are insanely cheap. I remember a decade or so ago that if you didn’t stay a Saturday night, it could cost you almost $2000 on a domestic roundtrip. That fare might be $400 now.

    Leisure travellers have it even better. Frontier is routinely selling sub $30 tickets now, and the majors often add $15 or $20 and sell it as basic economy.

    I don’t redeem many frequent flyer miles anymore for int’l trips because they’re just so cheap to buy. Every day, secretflying.com will have a half dozen amazing airfare deals.

    The majority of air travelers who have “problems” with the current airline market are folks who want perks at low prices. Perks in the airline industry are a lot like luxury goods; they are marketed to folks spending other people’s money (business travelers). They are usually (but not always) bad deals for folks spending their own money. They have to buy the cheap bare-bones fares. That may not be what you’d prefer to buy, but that’s how the market has evolved. For most travelers, it’s far more good than bad.

  12. And yet they’ve found a way to gouge us for even MORE money by charging to choose your seat when you book online, whereas that was just until recently standard and free. They’ve got balls.

  13. @gary – US Airlines report to shareholders and shareholders demand top line revenue (among other things). Good for US Airlines for doing all they can to increase the top line, even if that includes trying to squeeze more support out of things like the govt.

    @iahphx – I agree completely with you. US Airlines have figured out how to do business, and some of them (DL WN) much much better than others (AA, UA, etc). And even though they’re doing record business consumers aren’t paying through the nose for the service… In 1986 I bought a transcon economy ticket (probably on DL but I don’t really remember) for $386. Adjusted to today’s dollar that’s $868…I’m not paying ANYWHERE close to that amount for a ticket and I even balk often at paying $386. My $386 ticket was in the summertime, pricing a similar ticket today I see that if I pay $297 I’m at the high end of the RT range…that’s $173 in 1986 dollars.

    Things really have improved in the US air markets in the past 30 years, I for one am not complaining. Sure, my chances of upgrading are slim to none, but I’m getting my tickets cheaper than just about any other time in the history of aviation.

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