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Airlines Profit Thanks to Ancillary Revenue Like Baggage Fees

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Airlines Profit Thanks to Ancillary Revenue Like Baggage Fees

Plane Landing - Airline Profits Up Thanks To Ancillary RevenueThe airlines are flying some very friendly skies with United-Continental, Delta, US Airways, AMR Corporation, and others, posting better than expected earning for this year’s summer travel season.

Third quarter profits for the airline’s topped already optimistic Wall Street expectations with some perennial losers posting profits for the first time in years.

Delta announced on Wednesday that it had netted profits of $363 million over the summer.

This is a significant turnaround over last year when the company posted a net loss of $80 million in the same quarter.

US Airways also reported gains, earning a net income of $240 million, an amount that beat many analysts’ predictions. Southwest Airlines, which has been on a third-quarter losing streak since 2008, reported it earned $205 million from July to September.

Also reporting soaring earnings was budget airline JetBlue Airways with $59 million in net income, and the Alaska Air Group, which announced a net income of $122.4 million.

Fresh from their recent merger, United Continental Holdings, Inc., earned a combined $741 million. United Airlines earned $387 million, while Continental Airlines earned $354 million. If special items are excluded, the two carriers earned $840 million.

Plane Landing - Pink Sky - Airline Profits UpBut the big winner this week was AMR, the parent company of American Airlines. Though the airline’s earnings lagged behind those of competitors, the airline posted profits for the first time since 2007. American Airlines announced that its third quarter earnings had risen to $143 million.

The healthy airline numbers were aided by a resurgence of international traffic and business travel. Delta Air Lines, for example, saw a 54 percent increase in non-stop, trans-Pacific flights. The airline also saw European travel increase by 25 percent.

In addition to a thawing economy, the airlines also are reaping the rewards of aggressive moves to decrease capacity. Most major airlines have either grounded planes or cut flights.

With fewer existing seats, the airlines were able to charge more for fares, boosting passenger yield by 11 percent compared to last summer.

The elephant in the room, however, has been the airline profits tied to auxiliary fees such as baggage charges and reservation changes. In September, the Bureau of Transportation Statistics release a report stating that auxiliary fees alone had brought in $2.1 billion in profits for 21 passenger airlines in the third quarter.

By Adriana Padilla for

Related Links: NPR, Wall Street Journal, Reuters

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