Low-cost US airlines hitting turbulence
The latest earnings reports from Southwest and JetBlue are clear indications that low-cost and short haul carriers are flying into more turbulent times.
Southwest reported earlier this month a drop in third-quarter earnings of $48 million. The problems were attributed to higher fuel costs and slower traffic because of restrictions on carry-on bags.
At about the same time, JetBlue reported a narrow third-quarter loss. The airline posted a net loss of $500,000.
The company responded by saying it would slow its growth rate over the next three years by reducing its fleet of planes.
Other airlines, however, are reporting improved profitability.
The nature of the airline industry appears to be undergoing a shake up after the major airlines reorganized and re-directed their efforts.
“Traffic has returned, planes are running fuller and fares have risen sharply. The major airlines are taking more advantage of those fare hikes than the lower-cost carriers,” wrote Business Week.
With lower cost structures, the major airlines should have more flexibility to match low-cost rivals.
Analysts say despite its slower earnings, however, Southwest remains a solid performer in the airline business.
Report by David Wilkening
David
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