Airlines moving toward profits

April 18, 2010 at 12:00a.m.

Associated Press

ATLANTA

Fares are higher, demand is up and the airlines have established a steady revenue stream from add-on fees for baggage, pillows and food.

That formula is moving the industry back toward profitability as early as this summer, a change that will have implications for travelers.

But first: more red ink. Starting Tuesday, when Delta Air Lines, Continental Airlines, US Airways and the parents of American Airlines and United Airlines begin reporting their results for the first quarter, all are expected to post losses.

One-time costs for February snowstorms and substantially higher fuel prices weighed down results. That follows a combined loss of $3.8 billion for those carriers last year.

But the results will be better than a year ago, and the quarter ended on a positive note, with most carriers showing improvements in traffic and a key revenue metric.

As the airlines look forward to the busy summer season, here are some of the implications for travelers of steps carriers are taking to get back in the black:

Five major U.S. carriers promised Sunday not to impose fees on carry-on bags. Spirit Airlines, a small Florida airline, plans in August to start charging customers up to $45 to place a bag in an overhead bin. It was unclear how long the major carriers’ pledge would last, and fees for checked baggage and other once-free amenities haven’t stopped people from flying. But many of those fees can be avoided — though it would be hard for most travelers to avoid a carry-on fee.

Add-on fees for baggage, changing reservations and the like have become increasingly important for U.S. airlines. Combined with other miscellaneous operating revenue — such as the sale of frequent-flier- award miles to airline business partners — fee revenue totaled $1.95 billion in the third-quarter of 2009. That’s roughly 36 percent higher than a year earlier, according to the latest figures available from the Bureau of Transportation Statistics.

Summer airfares could be up to 25 percent higher on average than last year, according to travel Web site Priceline.com. The average cheapest roundtrip, purchased 14 days in advance for travel in the top 50 U.S. markets cost roughly $332 Friday, 13 percent more than a year ago, according to FareCompare.com.

Besides raising fares, most U.S. airlines have are imposing surcharges on peak travel days, restricting sales and releasing smaller percentages of the cheapest seats.

Airlines have been dropping unprofitable routes and reducing the number of flights between certain cities. That’s left fewer nonstops, meaning it’s taking longer to get from some points to others.