2011 is already shaping up to be another profitable year for the airline industry, as airlines stocks are expected to continue their rebound from the global economic recession.
For 2010, the NYSE Arca Airline Index, comprised of the 13 most highly capitalized companies in the sector, jumped from a 30.91 point low in February to around 50 points at the close of the year.
The International Air Transport Association expects a $8.9 billion profit for the global airline industry in 2010, with $3.5 billion coming from the North America region.
But much of this increased profitability was unrelated to the fundamental operations of the airlines: getting passengers from point A to point B.
Airline mergers in 2010 between Continental/United, Southwest/AirTran, and Delta/Northwest led to capacity cuts on popular routes. This drove up the average fare price as demand for seats increased and helped bolster the airlines’ bottom line.
Airlines also brought in increased revenue from ancillary fees for items such as checked luggage and onboard extras. During the third quarter of 2010, The Department of Transportation reported the airline industry collected $2.1 billion in ancillary fees, a nearly 10 percent increase over the same period in 2009.
With investor expectations high on last year’s earnings, the pressure to sustain growth in profitability is likely to have airline executives looking for creative means of boosting their bottom line.
For consumers, this could easily mean a new array of fees, on everything from charging for infants traveling on an adults lap to charging for carry-on luggage.
The first of newly implemented fees for 2011 is a universal $10-$20 price hike on fares from legacy carriers. Though no explanation was given for the fee increase, industry analysts suspect this is a response to rising oil prices caused by increased demand from developing countries.
Though it’s still premature to accurately predict what free services will be unbundled from the fare price, this is a story that travelers will undoubtedly be returning to throughout 2011.
By Fernando Padilla for Petergreenberg.com.
Related Links on Petergreenberg.com:
- Airline Industry Recovery Continues: Traffic Up, Number of Empty Seats Down
- 3rd Quarter Profit Reports Paint Mixed Picture of Airlines
- Airlines Profit Thanks To Ancillary Revenue Like Baggage Fees
- Airline Profits Soar As Staffing Shrinks, Fees Rise
- How To Avoid Airlines’ Fees
- Air Travel: Airlines & Airports section
- Budget Travel section