US exported, imported record US$940B of high-value merchandise by air, up from US$928B in 2012: Airlines for America

Cindy Allen

WASHINGTON , March 6, 2014 (press release) – Airlines reinvesting in travel experience, reducing debt, providing return to shareholders and employees

A4A projects U.S. airlines and their employees will serve nearly 130 million passengers during the 2014 spring travel period

Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, today released its 2014 spring air travel forecast and 2013 results for U.S. passenger airlines, which delivered another year of strong operational performance and modest profitability.

A4A projects spring 2014 air travel to rise to its highest level in six years with a record number of passengers expected to travel internationally on U.S. carriers. Approximately 129.5 million passengers (2.1 million per day) are expected to fly U.S. airlines during March and April compared to 128.2 million passengers in 2013. This includes 17.1 million travelers (280,000 per day) on international flights – a new record for the industry.

“We attribute the increase in spring air travel to rising U.S. household net worth, an improving economy, and the affordability of air travel, which remains one of the best bargains for consumers,” said John Heimlich, A4A Vice President and Chief Economist.

The 2013 results reflect the financials of nine U.S. airlines that have released full-year 2013 results. They collectively reported a Generally Accepted Accounting Principles (GAAP) net profit of $11.6 billion or 7.8 percent of revenues. Excluding special items, net profit was $7.4 billion or 4.9 percent of revenues. At the same time, the airlines reduced debt, invested in their workforces, renewed their fleets and met customer demand by offering new and improved products, destinations and seats. These nine airlines ended the year with $71 billion in debt or 48 percent of annual revenues, having paid down $8 billion in debt from year-end 2012.

“The U.S. airline industry continued its upward climb in 2013, recording a fourth consecutive year of modest profitability, despite incurring more than $50 billion in fuel costs for the third straight year as well as increases in every single non-fuel expense,” said Heimlich. “In addition, airlines and their customers paid $19 billion in U.S. aviation taxes and fees.”

Heimlich further noted that airlines paid down debt and reinvested $12.4 billion in the travel experience for customers, and while U.S. airline profit margins rose from 0.1 percent to 7.8 percent year over year, they still remain below the Standard & Poor's 500 average of approximately 10 percent.

“While airline finances are improving, their profitability still lags the S&P 500 average and they remain focused on transitioning from accounting profits to economic profits, in which they earn their cost of capital over an entire business cycle,” said Heimlich.

2013 Financial Summary

Net profit: The $11.6 billion profit, or $7.4 billion excluding one-time items, reflects the results of nine U.S. passenger airlines – Alaska Airlines, Allegiant Air, American Airlines (including US Airways), Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines.

• Operating Revenues and Expenses: While revenues increased ­­­­­4.3 percent over 2012, fuel costs declined 3.6 percent. Last year was the first year since 2001 in which the U.S. economy grew while jet fuel prices fell. Jet fuel remains the U.S. airlines’ largest and most volatile expense. The average price the airlines paid for jet fuel rose 272 percent from 2000 – 2013 despite the airlines using approximately 11 percent less fuel. Every penny increase per gallon annually costs airlines an additional $180 million.
• Capital Expenditures (CapEx): U.S. airlines reinvested $12.4 billion in the product and customer experience in 2013, which equates to about $17 per enplaned passenger. Airline CapEx rose 141 percent from 2010 to 2013; an additional $11 billion to $12 billion of reinvestment is planned in 2014.
• International Trade: The United States exported and imported a record $940 billion of high-value merchandise by air, up from $928 billion in 2012. The average value of a kilogram exported by air was $132 or 129 times the value by sea. The average value of a kilogram imported by air was $136 or 80 times the value by sea.

• Customer Service: U.S. passenger airlines’ operational performance remained strong. According to the Department of Transportation (DOT), 99.7 percent of passengers had their bags properly handled. U.S. airlines completed 98.5 percent of their flights and 78.3 percent were on-time. For the third year, fewer than one per 10,000 passengers were involuntarily denied boarding. Consumer complaints to DOT fell to just 1.13 per 100,000 passengers.
• Record International Air Travel: International air travelers to/from the United States reached a record high of 185.4 million, an increase of 4.4 percent from 2012, with U.S. carriers transporting 53.1 percent of the total.
• Safety Record: The U.S. airline industry is in the safest period in aviation history due to the ongoing and strong collaboration among the airlines, labor, manufacturers and government.

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