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Major airlines rake in $1.9 billion in third-quarter profits, but is the party almost over?

December 17, 2007

The Bureau of Transportation Statistics has a report this morning that says passenger airlines enjoyed their most profitable third quarter in nearly a decade. The major carriers had profit margins of 8.8 percent, was a 3.4 percentage point improvement from a year ago. But can the good times last? Unlikely.

Passengers have already lost their patience with the big carriers as a whole, giving them worse grades than the Internal Revenue Service. They are disgusted by their lack of customer service.

Fuel prices are soaring again, too. So anyone who expects 8.8 percent margins in 2008 is smoking something illegal. (May I have some?)

I think the airline industry is heading back into the red, and maybe one or two will even fly back under the protective wings of bankruptcy protection. They’ll certainly get the urge to merge, even though it will probably only benefit their chief executives and a few privileged shareholders.

Even the the International Air Transport Association has cut its forecast for 2008 industry profits by more than one-third, to $5 billion from the $7.8 billion it predicted in September. That’s the industry’s second earnings revision in less than six months, following a 2008 profit forecast of $9.6 billion made in June, according to my friends over at the IHT.

So should we blame higher fuel prices? A more difficult operating environment? Competition?

Hmmmm. No. At least not entirely.

I think the U.S. airline industry will start losing money again because it still doesn’t get it. After 9/11, it cut costs to the bone and depended on government handouts for its survival. All the while, many carriers let customer service slide into the toilet.

The airlines need to understand that it’s all about customer service. Until they do, it’s unlikely the industry will prosper in a meaningful way.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

8 comments

  • Jesse

    As it has been stated enough times, travel used to be pleasurable (not long ago) and airlines actually cared about the customers and what they had to say. I remember getting bumped to first class for no good reason in the past and nowadays even if the plane is empty, including first class, those who request a class bump will never get it. I would imagine a class bump would be good customer service and airlines do not want to do that.

    I imagine there ought to be an organization acting on behalf of consumers. A consumer advocacy group run by consumers not by airlines. What if we as consumers were able to get the government to add a $1 fee per ticket for this organization? Funding would be present the organization would not act on behalf of airlines interests or government interests (since the government believes there is nothing wrong with the airline industry).

    Does anyone mind a $1.00 per leg increase to fund this organization? I sure don’t.

  • http://claystorm.livejournal.com Kevin Murray

    I would not mind paying $1.00 per leg to fund a group like that.

  • David Hook

    I like your idea Jesse though it would involve the government actually agreeing to add $1 to each ticket and the airline or ticket agency to collect it to fund an organisation which could/should/would be taking both of those parties to task.

    I don’t see the government or the airlines wanting to help us do that to them.

  • Jesse

    Well, easy it won’t be!

    We need to put enough people out there to bug their reps so that they pass this through congress to make this a law. Airline companies WILL NOT LIKE THIS! If we as consumers do not get together towards a common goal, the government will not do it for us, and the only real way of us being able to do this is by having it go as a law through congress.

    Maybe a travel blogger we all know can spearhead this project by getting this into the head of the public and people like us can get proposals ready for congress.

    I wouldn’t care about $1 per leg and I would like actually having someone tell congress what WE think (representation) and fight with airlines for OUR rights as consumers. Unfortunately we are at a point in which we depend on flying a little more than we should (if we wanted to put enough pressure on airline companies).

    Please don’t tell anyone who I really am…I don’t want to be treated worst than what airlines are already treating me (us).

  • Jasper

    Quite frankly, I think $1 per leg is way too much. That would raise hundreds of millions for organization that undoubtly would start buy leasing a lavish building on K St in Washington. Nobody wants that. So, let’s leave it at a cent per leg. Surely nobody can object against a cent? Furthermore, a dollar would be too much if one of the main peeves of that consumer organization would be to constantly hammer the travell industry about all their fees and surcharges…..

  • http://travel-babel.blogspot.com Claire Walter

    Never mind the $1 per leg. Let’s think big picture, and IMHO, in the big picturen numbers can be played with to “prove” anything. Allegedly bankrupt airlines have kept flying and allegedly profitable ones probably show black on the ledger sheets now and then in order to appease/please stockholders and seduce Wall Street. Shares go up. Top execs get bonuses — on top of the bonuses they have been getting for slipping in surchanges while downsizing staff, cutting inflight niceties and trimming routes at will. Perhaps Michael Moore, having recently taken on the venal American medical/insurance industry in “Sicko,” will take on the travel industry too. Oh, I can dream, can’t I?

    Claire @ http://travel-babel.blogspot.com

  • Darryl Cohen

    At least give Continental a break. They are doing a great job from pillows to food to good attitudes.I go out of my way to fly Continental & change planes in Houston. Unfortunately my hometown airline just doesn’t seem to get it.After Bankruptcy the advertising campaign has been among the best that I recall. Unfortunately that seems to be where it ends.Customer service ,food ,pillows ? Did I say that I live in Atlanta?
    Darryl

  • http://travel-babel.blogspot.com Claire Walter

    Darryl – I wish I still Continental in my flying life. I used to live in NJ and flew Continental out of its EWR hub all the time. I moved to CO when DEN was also a Continental hub and flew it all the time too. But then, when commercial operations moved from the old Stapleton to Denver Intl Airport, where Continental initially leased all of convenient Concourse A and opened a big club facility, the airline dropped Denver as a hub — or Denver made it difficult/impossible for Continental to hub here. Now, the only places Continental flies from Denver are Houston, Cleveland and Newark — and I hardly ever fly them anymore. I was a Continental loyalist and wish I could have remained one.

    Claire @ http://travel-babel.blogspot.com

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