CEO Richard Anderson’s team at Delta Air Lines today reported a net profit of $1.37 billion for the third quarter, a truly spectacular achievement.
Anderson said expects Delta to set an all-time profit record in 2013.
US airlines in general are having a very good third quarter, with analysts anticipating a combined net profit of some $2.8 billion across the five largest carriers. They are achieving this despite high fuel prices - their single largest cost - a government that taxes airlines as if flying were a hazard to humans no less harmful than tobacco, and a regulatory environment that needlessly lumbers on with an antiquated, congested air traffic control system while severely penalizing airlines for flight delays.
My concern is that Congress and the travel-column media, given their track record, will use the industry’s 2013 financial performance as yet another weapon to whack airlines at every opportunity. They will attack these profits and point to ancillary fees as if it is fundamentally wrong for airlines to make money. So what about the hotel industry? Should its profitability be capped? Should hotels be compelled to provide free sodas, meals, parking, Internet and movies? Some hotel chains do, some don’t. But they are free to select the business models that best generate revenue. Airlines should be no different.
A large part of the US airlines’ financial success, of course, is tight capacity control. They have learned to deliver supply that closely matches, not overwhelms, demand. To the traveling public, that means full planes. And that is also now a moaning point for Congress and the travel media. Again, hotels and restaurants are allowed to be full, but not airplanes?
The truth is, just like other service industries, airlines have to compete and offer value. Different airlines, like different hotel brands, have different value offerings. Buy a room at a Motel 6 and you can’t expect Ritz-Carlton trimmings. But people seem to think that every airliner they board should come with Ritz-Carlton service at Motel 6 prices.
A financially healthy airline industry is the best thing for everyone, most especially the passenger. Profitable airlines don’t go out of business, so competition is maintained; they can invest in new, more comfortable aircraft and they can add new destinations and improve their cabin offerings. Many of the now-profitable US carriers are doing all these things. That's a good way to run a business and the best way to provide excellent customer service.