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For the first time in years, airlines could be profitable again

Marketplace Staff Dec 30, 2010

For the first time in years, airlines could be profitable again

Marketplace Staff Dec 30, 2010


STACEY VANEK SMITH: The cold and very white Christmas we saw in much of the country took its toll on the economy. Retailers lost an estimated billion dollars worth of business Airlines, 150 million and thousands of passengers lost countless years off of their lives.

One such passenger is travel analyst and Daily Finance columnist Peter Cohan. His holiday flight from Milwaukee to Boston was canceled on Sunday. He joins us live. Good morning Peter.

PETER COHAN: Good morning.

VANEK SMITH: From what I understand, your flight from Milwaukee to Boston was canceled on Sunday. Tell us about it.

COHAN: It was canceled on Sunday and they cheerfully told us that we could get a flight to Boston on Friday. So a five day wait in Milwaukee.

VANEK SMITH: And what did you decide to do.

COHAN: We decided to drive. So we rented a car and we drove in two days. We got back Tuesday morning. And so, if I had waited fro the airlines to give me a flight I’d still be in Milwaukee right now.

VANEK SMITH: Now you wrote in a column in Daily Finance that you expect lots more Milwaukee-type drives in your future and in everyone’s future. Why is that?

COHAN: Well it has to do with a statistics called Load Factors, which basically means what percentage of the seats are filled on airplanes. The factor is at a record level 82 percent which is fantastic for profits, but it means that on this particular situation which we were in and obviously thousands of others were in, it’s a 4.6 day wait for getting your flight because every seat is full and you just can’t get an empty seat for almost five days.

VANEK SMITH: Obviously, when you’re a passenger, this is terrible. But from a purely business perspective, are airlines just being smart?

COHAN: It’s fantastic for the airlines. Basically, what happened is that the airlines have lost $50 billion in the last decade. But in this year, it looks like they’re going to be profitable for the first time. They’re going to make $3 billion in profit. What’s really interesting is that as they’re low-factors increased up to that 82 percent, the estimates for their losses kept going down and down. So in April they were expected to lose $2.8 billion but last week an airline industry consultant said the industry would make $3 billion, which is probably the first time the industry has made money in a long long time.

VANEK SMITH: Not great news for us, but good news for the airline industry. That’s Peter Cohan in Boston. Thank you, Peter!

COHAN: Thank you.

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