ATW Editor's Blog

Embrace, don’t hate, your profitable airline


US airline profitability is getting the industry a bad press. You’d think, in a capitalist society that resents government intervention and applauds entrepreneurialism, that Americans would feel good about seeing some of their most well-known global brands doing well.

The reality is the opposite; uniquely, when it comes to its airlines, Americans prefer them down-at-heel. More accurately, perhaps, they would prefer them to be government-owned and controlled. It’s a quixotic view fueled by the nation’s leading newspapers and magazines – the LA Times, New York Times, Washington Post and Time magazine and more have all run columns attacking US airline profitability and service – and so-called passenger/consumer advocate groups that are calling for more regulations and taxes on airlines.

This is wrong on so many levels, it’s hard to know where to begin to communicate the message that financially healthy airlines are good for the industry, for passengers, and yes, even for the country.

IATA DG Tony Tyler took a stab at that messaging in a speech in New York today, saying “profitability is a good thing for which no one need apologize.”

Tyler pointed out that commercial aviation is growing because the value it has delivered has continued to increase over the 102 years of its existence. Globally, the 3.8 billion people and 53 million tonnes of cargo that airlines will safely carry this year supports some $2.4 trillion in economic activity and some 58 million jobs, he said. In the US, the world’s largest single air market, aviation supports some 5.7 million jobs, including tourism-related employment, and contributes some $562 billion to US GDP.

That last point, GDP contribution, is why airlines are good for the country.

And look what US airlines are doing with their new-found financial stability and profitability: buying new aircraft, adding new products and services, paying their employees better so they are happier in their jobs. Here’s one example: American Airlines generated record revenue last year of $6.3 billion, but it also made capital expenditures of $6.2 billion and paid down $2.2 billion debt. It’s bringing into service the Boeing 787 and 737 MAX, introduced lie-flat, long-haul business- and first-class cabins that – finally! – compete with those of international competitors.

Yes, US carriers are also paying down debt and rewarding shareholders with more meaningful, closer-to-industry-standard returns, but that’s what any responsible, private business must do.

US airlines are now delivering to the investor while also running incredibly safe operations that transport millions of people to just about anywhere they want to go, within the US or globally. Apple and Amazon do not have to worry about – or spend money on - ensuring their customers are safe. But for every single one of these profitable US carriers, safety is the top priority – and it’s a very expensive priority.

US defense contractors profited – some richly -- from the Iraq and Afghanistan wars; how is that ok, but airline profitability is wrong?

Tyler is correct – airlines should not apologize for being profitable.

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