WASHINGTON--(BUSINESS WIRE)--Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today reviewed first quarter 2016 results for U.S. passenger airlines and released its summer air travel forecast, which projects summer 2016 passenger volumes to exceed the previous all-time high set in 2015 by 4 percent.
Approximately 231.1 million passengers (2.51 million per day) are expected to fly in scheduled service on U.S. airlines from June 1 – Aug. 31 compared to 222.3 million passengers over the same time period in 2015, a 95,500 passengers-per-day increase. This includes 30.5 million travelers (331,000 per day) on international flights. To accommodate the record volumes, airlines will be offering 2.78 million seats per day to meet demand, which equates to an increase of 109,400 seats year-over-year.
“We saw airfares fall throughout 2015 and that trend continued in the first three months of 2016,” said John Heimlich, A4A Vice President and Chief Economist. “As airlines compete for passengers across an increasing portfolio of markets, air travel is becoming increasingly affordable and accessible.”
Record Number of Passengers, Low Fuel Costs Help Airlines Post Modest Profit
First quarter 2016 results reflect the improving finances of 10 publicly traded U.S. airlines (Alaska Airlines, Allegiant Airlines, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America). They collectively reported pre-tax earnings of $4.8 billion, resulting in a margin of 13.2 percent – up from 11.2 percent in 2015. Operating revenues in 2016 were flat, as 6.7 percent lower fares offset 6.2 percent traffic growth. Airline operating expenses fell 1.5 percent, as lower fuel costs offset higher employee wages and benefits, which rose 12.6 percent to $10.5 billion – averaging $942 million more per month than in 2010.
Airline profitability was in line with the overall U.S. corporate average and significantly trailed that of McDonald’s, Apple, Altria, Monsanto and other Fortune 500 companies. Notably, however, in the first quarter 2016, U.S. passenger airlines reinvested $4.7 billion, or nearly $1.5 billion per month, in their products and services through capital expenditures. From 2010 through the first quarter of 2016, U.S. airlines cumulatively reinvested $69 billion into the customer experience, primarily through the acquisition of new aircraft, onboard Wi-Fi and entertainment, ground equipment, IT systems and mobile technology.
“As the airline business got healthier in recent years, airlines have made significant reinvestments in the customer experience,” said Heimlich. “Carrying on the pace set in 2015, airlines look to create a high-quality passenger experience from the moment they arrive at the airport to when they touch down at their destination. The investments are paying off as intensifying competition, product reinvestment, and improving operational performance have led to multiple independent surveys showing customer satisfaction matching or surpassing all-time highs.”
Along with enhancing the customer experience, airlines retired another $1.3 billion of expensive debt in the first quarter and added close to 8,000 more jobs, bringing U.S. passenger airline employment to its highest level since 2008. Airlines also returned $4.7 billion to shareholders through stock buybacks and dividends and offered domestic flyers the largest number of seats since the Great Recession. From 2010 through first quarter 2016, airlines collectively retired $56 billion in debt and returned $22 billion in cash to shareholders. Thanks to a concerted effort to improve creditworthiness, combined debt for these 10 carriers now constitutes just 32 percent of operating revenues, down from 45 percent in 2010.
First Quarter 2016 Financial Summary
- Net profit: The 13 percent pre-tax profit margin reflects the results of 10 U.S. passenger airlines – Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America.
- Operating Revenues and Expenses: Operating revenues were flat year-over-year, as lower airfares offset traffic gains. Operating expenses fell $459 million or 1.5 percent as 28.9 percent lower fuel costs offset 12.6 percent higher labor costs. Airlines also saw an increase in airport terminal rents and landing fees as well as aircraft ownership costs.
- Capital Expenditures: In addition to expanding schedules, airlines are deploying larger aircraft – primarily by replacing 50-seat airplanes with larger regional jets.
- Employment: U.S. passenger airlines added workers to the payrolls throughout the first quarter of 2016 as February marked the 27th consecutive month of year-over-year gains. (March data was not available at the time of this release.) The year-to-date average of 403,100 full-time equivalent employees (FTEs) constituted an increase of approximately 25,000 FTEs from 2010 and the highest level since 2008.
First Quarter 2016 Operational Performance
U.S. airlines saw improvements in Department of Transportation (DOT) core operational metrics in the first quarter of 2016 in part because of investments made in aircraft, IT systems, procedures and staffing. U.S. airlines completed 99 percent of all flights in the first quarter of 2016 and posted an on-time arrival rate of 82.1 – up from 96.9 percent and 82.1 percent, respectively, in the same quarter of 2015. Airlines properly handled 99.72 percent of bags up from 99.64 percent in 2015. The rate of involuntary denied boardings fell from 0.82 per 10,000 passengers in 2015 to just 0.60 in 2016 – the fourth best result of any quarter since DOT began tracking in 1995.
The U.S. airline industry continues to be in the safest period in its history due to the ongoing and strong collaboration among the airlines, labor, manufacturers and government.
With Record Numbers Traveling, A4A Calls on TSA to Manage Staffing to Meet Higher Demands
With 231 million passengers taking to the skies this summer, A4A encourages the Transportation Security Administration (TSA) to quickly optimize staffing to avoid the excessively long lines travelers have waited in this spring.
“Research shows that people who get through security more efficiently have a significantly better travel experience,” said Sharon Pinkerton, A4A Senior Vice President of Legislative and Regulatory Affairs. “It has been a challenging spring with flyers waiting in lines that take more than 60 to 90 minutes to get through security. We encourage TSA to quickly hire and train new staff to help alleviate this problem, and we also encourage more travelers to enroll in TSA PreCheck as we move into another record-setting travel season.”
To help customers have a better travel experience, A4A is encouraging people to enroll in expedited screening programs, like TSA’s PreCheck or Custom and Border Protection’s Global Entry, allow extra time at the airport, and if they experience a long line, use our website (ihatethewait.com) to share wait times.
The website enables travelers to tweet their airport code or location to @AskTSA along with their issue and the hashtag #iHateTheWait. The website is designed to aggregate TSA’s social media tools (Twitter and Instagram), making it easier for customers to send messages and photos of their wait in airport security lines, raising awareness of the issue and serving as crowd-sourced information.
Annually, commercial aviation helps drive nearly $1.5 trillion in U.S. economic activity and more than 11 million U.S. jobs. Airlines for America (A4A) vigorously advocates on behalf of the American airline industry as a model of safety, customer service and environmental responsibility and as the indispensable network that drives our nation’s economy and global competitiveness.
America needs a cohesive National Airline Policy that will support the integral role the nation’s airlines play in connecting people and goods globally, spur the nation’s economic growth and create more high-paying jobs. A4A works collaboratively with the airlines, labor groups, Congress and the Administration to improve air travel for everyone.
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