US Airline outlook most promising since 1999
US passenger and cargo airlines should earn $4 billion this year excluding bankruptcy restructuring and reorganization gains, up from an estimated $2-$3 billion in net income in 2006, according to the Air Transport Association’s annual economic outlook.
“The outlook for 2007 is the most promising in years, thanks to a healthy revenue environment and the realization of extensive cost-reduction efforts,” said ATA vice president and Chief Economist John Heimlich.
Under the forecast, 2006-07 would be the industry’s first back-to-back period of profitability since 1999-00. US airlines lost $35 billion between 2001 and 2005, according to Reuters.
ATA expects passenger capacity to rise 2.5% in 2007 in line with projected US GDP growth of 2.5%-3%. However, Mr Heimlich told Reuters that “global economic growth has begun to slow, and barring any dramatic changes to the industry operating environment, revenue growth will decelerate in 2007.”
He also pointed out that in spite of the improvements, “debt levels remain high,” leaving airlines vulnerable to further fuel spikes, recession and exogenous events such as terrorism, pandemics and natural disasters.
Analysts are also predicting AA will take in a profit of anywhere from $200 million to $470 million for the year — following 2005’s loss of $861 million.
In another boost for US airlines, jet fuel prices have fallen to their lowest levels in a year and a half. That’s particularly good news for the big carriers that were slow and cautious in hedging their bets.
In still another airline development, US Airways raised its takeover offer for larger, bankrupt rival Delta Air Lines by about 20 percent to $10.3 billion. That move is expected to put pressure on reluctant Delta management, which last month rejected the original $8.5 billion bid.
Report by David Wilkening
David
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