US airlines poised for long overdue recovery?

At long last, there were indicators that the long-troubled North American airline industry may be speeding towards profitability again, according to reports from American and Southwest.

The US’s leading carrier, American, posted second-quarter profits five times higher than the same quarter of last year.

American posted a second-quarter profit of US$291 or US$1.14 per share, compared with last year’s $58 million and 30 cents a share.

American Chief Executive Gerard Arpey was cautious. In a statement, he said:

“Our performance indicates very clearly that we are on the right track, but also demonstrates  —  just as clearly  —  that we have more work to do.”

Discount carrier Southwest Airlines also reported a doubling of second quarter earnings, with net profits rising from US$333 million from US$144 million the year before.

“We generated higher recent yields to offset significantly higher jet fuel prices,” Southwest Chief Executive Gary Kelly said in a statement.

Southwest has tried to overcome rising fuel prices with higher fares.

“In the short term, the trends appear positive,” said Airwise News.

Southwest said third-quarter bookings are strong and that the increase in operating costs, including fuel, should be less than the 4.9% rise in the second quarter.

Mr Kelly said the company should easily exceed its goal of increasing earnings by 15% in 2006.

Report by David Wilkening