Pampered?

Where Do U.S. Airline Profits Go? Away From Travelers, Toward Investors


Compared with those ultralux Asian and Middle Eastern airlines, it’s easy to disparage the service levels of the average trip aboard an American (AAL), Delta (DAL), or United (UAL) plane. Overhead TVs in the aisle, circa 1980? Yep, the U.S. airline giants still have ‘em. Free meals on a six-hour, cross-country flight or a 10-hour haul to Hawaii? Those aren’t in the budget.

Yet when it comes to airline profits, no one does it like the U.S. carriers. After several Asian carriers reported results in recent days—including Cathay Pacific Airways’ (293:HK) half-year profit of $45 million announced on Wednesday—the financial difference between the U.S. airlines and the foreign carriers that travelers love to fly is striking. Nowadays, Delta clears a $45 million profit in less than a week during the summer.
 
With a mind on Cathay’s results, which marked an enormous increase over the same period last year, Bloomberg Businessweek tallied the results at other highly regarded airlines. Granted, the operating conditions for U.S., Asian, and Middle Eastern airlines differ, but the dramatic disparity in financial results illustrate to some extent differing philosophies. (And, as Delta executives routinely argue, the large Middle Eastern carriers are state-subsidized and don’t compete fairly on costs, an accusation those airlines deny.) All figures below have been converted to U.S. dollars:

Singapore Airlines (SIA:SP), which often vies for the top spot in rankings of best airlines, earned $39 million in its most recent quarter ended on June 30.

• Japan’s All Nippon Airways (9202:JP), another of the five-star airlines in the Skytrax ratings, earned a little less than $3 million for the quarter.

Asiana Airlines (020560:KS), the South Korean airline known for its premium service, isn’t profitable at the moment.

• Emirates, one of the world’s largest international carriers, earned $898 million in the year ended March 31.

In comparison, Delta fell only $9 million short in one quarter ended in June of Emirates’ $898 million haul for its full fiscal year. American Airlines earned $864 million in the second quarter, while United Continental’s profit finished near $800 million for the same period.

The striking disparity also helps show that while travelers love to fly on Singapore and Emirates, their inner investor is likely to bet on American and Delta—and then, of course, complain about the dreary flight.

Bachman is an associate editor for Businessweek.com.

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Companies Mentioned

  • AAL
    (American Airlines Group Inc)
    • $50.71 USD
    • 0.57
    • 1.12%
  • DAL
    (Delta Air Lines Inc)
    • $47.38 USD
    • 0.61
    • 1.29%
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