Delta, US Airways learn to stay profitable
Wednesday, January 25, 2012
Delta and US Airways are learning to stay profitable.
Both reported better-than-expected fourth-quarter earnings on Wednesday, capping two straight years of annual profits. By avoiding deep discounts on fares and unprofitable routes, the two carriers have done well even as fuel costs soar and the economic recovery remains fragile.
It’s the same discipline that’s helping the entire U.S. airline industry. Southwest last week reported higher earnings and said travel demand is strong. United Continental Holdings Inc. is expected to report a fourth-quarter profit on Thursday.
“We simply do not see any evidence of macroeconomic weakness in our business,” said US Airways President Scott Kirby.
It was Delta’s first back-to-back annual profit since 1999-2000. US Airways last reported profits two years in a row in 2006-2007.
Delta’s stock price rose more than 6 percent while shares of US Airways leaped 17 percent.
Both airlines kept a lid on the amount of flying they did last year and raised fares 10 times, a high number of increases.
The same strategy appears to be in place for 2012. Delta plans to reduce flying 2 percent to 3 percent this year, maybe more. Airlines can reduce flying by cutting flights, eliminating destinations, or switching to smaller planes. US Airways said it will increase flying by only 1 percent this year, mostly overseas.
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