photo courtesty of aa.com
For the first time in more than a decade, all four of the airlines' key economic drivers
1. supply of airline seats
2. travel demand
3. operating costs
4. fares
are moving in the right direction, at least from the perspective of the USA's airlines. As a result, a growing list of airline bulls says that 2006 should show vast improvement from a disastrous 2005 in which U.S. airlines collectively lost an estimated $10 billion.
For consumers, it means higher fares and fuller planes. But for the industry, relief is overdue after five miserable years of the worst downturn ever in commercial aviation. Even established skeptics such as analyst Vaughn Cordle of AirlineForecasts, agree that "the industry is on the cusp of a recovery" in 2006. And, he says, it could turn into a "major recovery" if oil prices fall further than expected. In particular, American Airlines, the USA's largest carrier, and No. 5 Continental Airlines are both well-positioned for turnarounds.
US Airways — formed in September when America West acquired the old US Airways out of Chapter 11 bankruptcy and adopted its name — could also turn a profit in 2006.
No. 2 United is expected to emerge from Chapter 11 in the first quarter, but it's not expected to earn a profit before 2007.
Fewer Seats:
In the domestic market, the number of airline seats for sale this month is down 5% from a year ago, according to a USA TODAY analysis of schedule data from Back Aviation Solutions. That's 128,000 seats per day that are no longer available for sale, and the constricted supply makes it easier for airlines to get a better price.
Higher Fuel Costs:
But those sacrifices and savings have been overwhelmed by high fuel prices. In 2001, oil was slightly more than $30 a barrel. However, strong demand and tight capacity for refining and delivery had more than doubled oil prices even before Hurricanes Katrina and Rita struck the Gulf Coast last summer. The price of crude hit $69.91 a barrel on Aug. 30, the day after Katrina struck, according to the ATA.
In the following weeks, the cost of refining it into jet fuel soared to more than $30 a barrel, on top of the crude price. Airlines briefly paid more than $2.10 a gallon for jet fuel in October, vs. about 90 cents in October 2004.
Read the full story at USAToday
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