3 Horrible Facts About the Airline Industry
CHARLOTTE, N.C. (TheStreet) -- Things are so bad for the airline industry that even good weather causes problems.
In February, mild weather enabled several carriers to post extremely high completion rates. JetBlue(JBLU) and US Airways(LCC) , for instance, completed 99.8% and 99.7%, respectively, of their scheduled flights.
|At any airline, the principal pursuit of most employees is to provide on-time operations. At US Airways last year, on-time performance was spectacular. Just not as spectacular as the rise in oil prices.|
Their reward? Because more flights mean less revenue than expected for each flight operated, the carriers failed to meet expectations for revenue per available seat mile, an industry metric that measures the amount of revenue associated with each seat flown one mile.
But isn't that always the way in this cursed industry, which has been unprofitable for investors since the days of the Wright brothers? For all of its efforts to restructure, U.S. airlines squeezed out marginal profits last year and in 2010, after losing $50 billion in the previous decade.
Yes, the dramatic reshaping of the industry, which now charges fees for services and restrains capacity, was long needed. No, this sector is not fixed. Last year, U.S. airlines made just $390 million -- less than half a penny per dollar of revenue.
Three events this month have underscored the deep-seated problems of an industry whose fate is almost entirely dependent on external factors:
Airline profits are slaves to oil prices
On March 14, US Airways CEO Doug Parker sent an ironic letter to employees.
"We did everything right last year: record revenue performance, seven first-place finishes in the Department of Transportation rankings and we kept our costs competitive," Parker said. "However, the reality of this business is we made less in profit in 2011 because the price of fuel was $1.2 billion higher than it was in 2010; therefore our profit-sharing checks are smaller."