When the airlines took control of capacity a few years ago, the industry changed. What had been a history of feast or famine for them has turned into more consistent profitability. Not all airlines are sharing in this wealth equally but overall, the industry is improving even if some of it is at the expense of their frequent fliers.
For the airline industry, the first quarter is typically their worst. While business travel is steady during this period, it is a time of frequent weather delays and reduced leisure travel. Thus it was no surprise that overall, the industry reported losses of $552 million. This was actually better than the previous year but certainly not what the industry wants to see moving forward.
As always, some airlines performed better than others.
Southwest Airlines had positive results, announcing a dividend increase to stockholders while Delta Air Lines, despite warning that their earnings would not be as high as projected, nevertheless was profitable once again and said they would pay a divided for the first time in many years. On the other hand, United Airlines reported a loss of $448 million, about 80% of the industry total.
Obviously these industry losses are not coming from fees. Indeed, the overall reported losses would be much higher if earnings were based on airfare alone. As expected, fees were higher last year than in previous years. Passengers spent $3.5 billion for baggage and $2.6 billion for change fees. Baggage fee increases came primarily from three smaller airlines: Sprit, Alaska, and Frontier. Expect to see higher change fee totals for this year since all the legacy airlines have recently raised their rates.
March was a disappointing month for on-time arrivals, dipping below 80%. United fared better in on-time arrivals than profits, placing eighth out of sixteen domestic carriers but still lowest of the legacies. Southwest was tenth while Hawaiian Airlines was first. The other legacy airlines placed fourth (DL), fifth (US), and sixth (AA).
Probably the most unexpected results came from the most recent annual J.D. Power survey. Despite higher fees and airfares, satisfaction among passengers is at its highest level in seven years. Alaska Airlines ranked first overall, followed by Delta. JetBlue was the favorite among low cost carriers despite a recent dismal on-time performance record of 72%. Southwest placed second.
This satisfaction rating is particularly surprising given that first quarter Department of Transportation (DOT) complaints were up 17%. Perhaps this means passengers are more accepting of the fees but they still don’t like being squeezed into those tubes for hours and definitely despise being ‘involuntarily denied boarding’ (IDB). However, the DOT numbers were good news for those who like bumps because the increase in IDB also means there were also opportunities to voluntarily give up your seat for a later flight (VDB).
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