Airlines posting largest profits in a decade

The bad news for passengers is that they are paying more for their tickets but the good news for the industry is that the year could shape up to be the most profitable in a decade.
 

Operating profits for airlines in the United States exceeded US$7.1 billion in the first nine months of 2010, according to the most recent data from the US Department of Transportation.
 

That tally surpasses the industry’s full-year profits going back to at least 1999, when airlines posted income of $6.8 billion over 12 months.
 

That’s due in part to the fact that air fares are much more expensive this year.

Fares jumped 13 percent since 2009, according to an average of domestic ticket prices compiled by the US Bureau of Transportation Statistics. And that doesn’t include new fees within the past couple of years.
 

“The industry’s big haul is in stark contrast to 2008, when it lost more than $5.5 billion in the face of a double whammy: A recession that sent demand into a tailspin and fuel prices that spiked sky-high,” says CNNMONEY.com.
 

Carriers responded by cutting the number of flights they offered, slashing those with the fewest passengers. They packed the airplanes full so they wouldn’t lose money on empty seats. And they added fees for services that once came for free, like checked baggage and in-flight food, to boost income.
 

"They were preparing for the worst," Robert Pickels, airline industry expert and senior equity analyst for Manning & Napier, told CNN. "If you’re staring into the abyss like that, it really changes your behavior."
 

This survival strategy turned into a money-making boon when demand unexpectedly picked up this year, despite persistent high unemployment that had previously kept passengers at home.
 

"The baggage fees are a way to raise fares without publicizing the raised fares," Pickels said.
 

By David Wilkening