Record profits ahead for airlines
2014 could be most profitable year on record for global airlines — but don’t expect cheaper fares.
Los Angeles Times
The world’s airline industry has rebounded from the recession and expects 2014 to be the most profitable year on record, thanks to stable fuel prices and growing travel demand.
That’s great news if you’re an airline executive or shareholder. But don’t expect the suddenly well-off airlines to pass along their good fortune to passengers by slashing fares.
Industry experts do say the continued pressure from low-cost carriers should keep the big network carriers from imposing dramatic fare hikes.
“People don’t have to worry about fare increases,” said Jan Brueckner, an economics professor at UC Irvine.
Instead, airlines probably will invest more of their profits in roomier seats, better entertainment systems and tastier food. That would enable them to offer pricier seats and extras for fliers ready to move up from the economy section.
“It’s a way of extracting more money,” Brueckner said.
The Geneva-based International Air Transport Assn. predicted that the world’s airlines will take in a combined $19.7 billion in profits this year, surpassing the previous high of $19.2 billion in 2010.
The merger of several of the United States’ largest airlines helped boost profits by eliminating redundant services and cutting competition.
Airlines will use some of the profits to add seats, pay down debt, raise wages and benefits for employees and update aging equipment, said Jean Medina, a spokeswoman for Airlines for America, the trade group for the nation’s airlines.
In some cases, she said, airlines will issue dividends to shareholders.