Airlines Set To Fly To Near Record High Revenues For Second Quarter

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Starting with Monday’s 2nd quarter earnings release by Delta (NYSE: DAL) and ending on July 29thwith Southwest (NYSE: LUV),AirlineFinancials.com estimates the nine largest US airlines will report an accumulated $1.77 billion in net profitson $31.5 billion in revenues. This updated estimate is at the high end of the May 18 projection when AirlineFinancials.com stated: The nine largest US passenger airlines will end the 2nd quarter with over $1.4 billion in profits. This could increase to $1.8 billion if fuel prices remain at or below current levels.”

Every major airline excluding American (NYSE: AMR), should be reporting significant profits for the recent 2nd quarter. American is estimated to be at or near break-even.
Leading the way in estimated 2nd quarter profit margins is US Airways NYSE: (LCC) at 8.17% followed by Alaska (ALK) at 7.8%, Southwest at 7.74%, Continental (NYSE: CAL) at 7.67%, Delta at 6.46%, United (NASDAQ: UAUA) at 6.25%, Air Tran (NYSE: AAI) at 5.65%, JetBlue (NASDAQ: JBLU) at 3.04%, and American at .03%. Average 2nd quarter profit margin for all nine airlines is estimated at 5.63%.
Note: “profit margin” is the ratio of net profits/total operating revenue. (See following charts for 2nd quarter 2010 estimated revenue, profits and margins.)
Q2 2010 est profit and margin.jpg
Q2 2010 est operating revenue.jpg
If these 2rd quarter 2010 estimates hold true, excluding 2007, they will be the highest 2nd quarter profits in the last ten years.
Further, 2010 industry revenues are estimated to be the 2nd highest in the history of the airlines topped only by 2008.
(See following charts for five year history of revenue, profit and margins. Delta includes Northwest.)
Industry Q2 historical profit and margins.jpg
Industry Q2 historical revenue.jpg
Conclusion- AirlineFinancials.com projects all of the airlines noted above will have strong revenue performance for the
remainder of 2010. Excluding American and assuming fuel prices remain in the $75-$85 per barrel price range, the airline
industry should see significant profits for the current 3rd quarter.
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Disclosure- The above opinions and comments should not be used to determine the worth of any stock or investment. At the time
of writing, the author and his family did not hold stock and/or derivative positions in any of the airlines covered in this article.
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Robert Herbst is an independent airline industry consultant. He is the founder of AirlineFinancials.com which provides
airline industry analysis and commentary for major US carriers. In addition to his consulting work, Mr. Herbst was a
commercial pilot from 1969 until January 2010. His aviation experience and financial background provide a unique
analytical perspective into the airline industry.