They wont exactly be soaring. But U.S.
airlines should be able to reduce their cumulative losses in 2006
to $1 billion to $2 billion and possibly post a cumulative profit
in 2007, the chief economist for the industrys trade association
While we are far
from being out of the woods, we are poised to turn the corner, John
Heimlich, vice president and chief economist for the Air Transport
Association, said in the annual forecast he released Jan.
-- at least what passes for optimism in the U.S. airline industry
these days -- is based on several factors.
cost-cutting: Traditional network carriers have simplified and
shrunk their mainline fleets, which are now 20% smaller than in
mid-2001, Heimlich said.
Airlines have also
eliminated more than 160,000 jobs since then and, with changes in
work rules, theyve seen labor productivity surge by 30%.
improved fuel efficiency by 18% since 2000, although thats been
masked by the rise in fuel costs.
also is based on forecasts that fuel prices will be slightly lower
this year and that fares will continue to rise. Financial analysts
are predicting a 5% to 6% increase in passenger revenue this year.
If fares rise and fuel prices fall, he said, the airlines might be
able to reduce their break-even load factor to 80% or even a bit
lower this year.
figure has been higher than 81% for four of the past five
airlines cannot realistically expect to fill that high a percentage
of their seats.
The course of fuel
prices has been difficult to predict, which puts a big question
mark on any forecast. But, even if Heimlichs forecast proves
accurate, the industry still will be struggling.
To put this in some
perspective, even with U.S. airlines pushing through a bunch of
fare hikes this year, ATA figures show that domestic fares through
the first 11 months of 2005 averaged 19% below 2000 levels,
Also, years of
heavy losses have left U.S. airlines carrying more than $100
billion in debt, which is about $30 billion more than five years
ago, he added.
It will take
several years of profits to dig our way out of this hole, Heimlich
One consequence is
that Heimlich foresees more industry consolidation, including at
least one major merger proposal in 2006.