The two major factors that are affecting the earnings of airline companies are higher fuel costs and the bad economy. Higher fares during the fourth quarter of last year helped airlines post higher than expected earnings. Airlines had to implement strategies in order to offset the higher fuel costs and their strategies paid off. Here is a short review of some of the airlines that made profits during the fourth quarter of 2011.
In order to offset the increase in higher fuel costs, Delta had to increase airfare and decrease flights so that it would match the demand. This strategy helped them post earnings in the fourth quarter. As a result of limiting their flights, Delta had lower fuel costs compared to the same period of last year.
Southwest Airlines also had to implement a similar strategy and ended up increasing their earnings for the fourth quarter. The airlines’ fuel and oil cost was higher than it was for the same period last year. The average fares increased by 10% and passenger unit revenue increased by 8.2%. The demand for air travel did not weaken during the final quarter and this helped the airlines surpass their targets.
JetBlue experienced stronger profits for the fourth quarter and this was also due to increasing their fares. JetBlue is expecting to continue seeing good earnings at least for the first half of this year.
United Continental also saw higher-than-expected fourth quarter earnings. The airlines also experienced an increase in their fuel expenditures for the last quarter. Fuel cost the airlines $3.1 billion for that quarter, a significant increase for the amount it paid during the same quarter of last year.
While some airlines were posting profits for the 4th Quarter of last year, US Airways posted lower Q4 profits as it experienced a 30% jump in fuel expenditures. The airlines had to pay $1.2 billion more than the amount they paid for fuel during the same period of last year.
The airline industry has only started to recover from the beating it experienced during the last decade. Many airlines have had to close their doors and hang-up their wings. Some airlines had to undergo mergers in order to survive.
Even though the nation is continuing to experience economic difficulties the demand for air travel did not seem to decrease for some airlines. For airlines that experienced a decrease in demand, the strategy to decrease their flights to match the demand paid off enabling them to post stronger earnings.
The biggest hurdle to a full recovery of the airline industry is the rise in aircraft fuel prices. Airlines across the globe have been struggling to cope with higher fuel prices. Adding to this is the weak economy that the US has been experiencing for quite some time. However, as long as the demand for air travel does not go down to levels where airlines can no longer justify their flights, the airline industry will still hopefully continue its recovery. The higher than expected earning of some airlines during the fourth quarter of last year gives hope to the airline industry.