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Profit surge continues for US carriers

The past week has seen a continuation in the ascending fortunes of the US airline industry, with many of its carriers announcing record quarterly results.

Its four biggest carriers – American Airlines, Delta, Southwest and United – all posted record net profits in Q2 and amassed nearly $5bn in combined profit. US carriers have been greatly aided by the fall in fuel prices price in the past year, which has resulted in operational savings amounting to billions of dollars.

But while the US airline sector finds itself in rude health at present, a question many are asking is whether this surge will translate into long-term profitability.

The verdicts of analysts have been mixed. The financial services arm of investors Standard & Poor's said on Monday (July 27): “2015 and 2016 will likely be peak years for the US airline industry, and changes in either the relatively favourable economic conditions or low fuel prices could pressure the company’s earnings at some point in the future.”

Falls in profitability could also be on the horizon.

Lowered fuel prices, which contributed to Delta reducing its bill in Q2 by 40 per cent, could also fluctuate in the not too distant futur, while some carriers are predicting reduced revenues per seatmiles in the next quarter.

United has predicted revenue per seat mile will decline anywhere between five and seven per cent in Q3, while Delta estimates a reduction from 4.5 to 6.5 per cent. Southwest believes it’ll be less affected with a one per cent drop in Q3.

Another factor to consider is the allegations against American, Delta, Southwest and United that they colluded on capacity expansion in order to keep fares high despite the fall in fuel prices.

Currently under investigation from the US Justice Department, the airlines deny any wrongdoing.

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