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True/false? US Legacy Airlines Never Profitable  
User currently offlineJamesontheroad From United Kingdom, joined Jul 2005, 543 posts, RR: 1
Posted (6 years 3 months 3 days 8 hours ago) and read 2651 times:

At some point the other night (after a few pints) a friend said to me - on the news that BA had just turned some pretty impressive profits - that not one of the US legacy airlines has ever turned a profit since deregulation.

I laughed at him and told him that even an American airline could make money. But thinking about it, I couldn't specify which one or when. So was he talking out of his tailfin? I don't know enough about the historical finances of AA, CO, DL, NW, UA and US... have any of them ever been clearly in the black since 1978?

Thanks  bigthumbsup 

23 replies: All unread, jump to last
 
User currently offlineJcavinato From United States of America, joined Jan 2005, 520 posts, RR: 0
Reply 1, posted (6 years 3 months 3 days 8 hours ago) and read 2633 times:

Oh, yes, many/most were profitable after 1978, though there were many ups and downs. USAirways, for example, was very profitable in the mid- to late 1990s.

There is a point that is tossed around the industry financial circles and transportation economists, and that is: As a whole the commercial airline industry has yet to turn a life time profit. The point being the sums of annual deficits and subsidies that were put into the industry compared to the total profits earned, it is still in the negative.

Another industry that never turned a life time profit was the American electric interurban industry.


User currently offlineMayor From United States of America, joined Mar 2008, 10377 posts, RR: 14
Reply 2, posted (6 years 3 months 3 days 8 hours ago) and read 2633 times:

Well, DL turned a profit every year from 1947 until 1982.....4 years after deregulation and then was profitable again in the 80's and 90's. Your friend should do their homework.


"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineAogdesk From United States of America, joined Jun 2004, 935 posts, RR: 3
Reply 3, posted (6 years 3 months 3 days 8 hours ago) and read 2628 times:

Patently false, but perfectly acceptable considering the circumstances.  Wink

User currently offlineMayor From United States of America, joined Mar 2008, 10377 posts, RR: 14
Reply 4, posted (6 years 3 months 3 days 8 hours ago) and read 2620 times:



Quoting Aogdesk (Reply 3):

I'm guessing you're referring to the OP and not my post, right?



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineFlyDeltaJets87 From , joined Dec 1969, posts, RR:
Reply 5, posted (6 years 3 months 3 days 8 hours ago) and read 2612 times:



Quoting Jamesontheroad (Thread starter):
I don't know enough about the historical finances of AA, CO, DL, NW, UA and US... have any of them ever been clearly in the black since 1978?

Most of them posted in the black just last year.


User currently offlineKnope2001 From United States of America, joined May 2005, 2893 posts, RR: 30
Reply 6, posted (6 years 3 months 3 days 8 hours ago) and read 2577 times:

There is an often-quoted stat that the entire cumulative financial history of the US airline industry is well in the red...add up everyones profits and loses for the past 80 years and it's net-negative.

As one of those often-quoted stats, it may or may not be true. But even if it is, this is very much different than saying not one US airline has ever turned a profit since deregulation, which is easily domonstrated as false.


User currently offlineRichierich From United States of America, joined Nov 2000, 4247 posts, RR: 6
Reply 7, posted (6 years 3 months 3 days 8 hours ago) and read 2560 times:

Ummm, that's a long time to have been in the red. Don't you think at least one of them, in fact all of them, have made money during certain periods since 1978?

This industry is cyclical. When the going is good, there is a lot of money that can be made. When the going is bad, it can be very very difficult and even the most seasoned airline can lose money. its a matter of weathering the storm, so to speak. WN has largely been the most successful airline in US history, and they are currently making money but only by some good fortune and good decision making... if not for the hedges, they too would be oozing money very quickly. Believe me, they know it too.

Speaking of storms, the current "storm" that US airlines are in might be the most critical EVER. Hyperbole on my part? Maybe but I doubt I am far off base. Things are really really bad for US airlines, especially legacy carriers not named Southwest. And I fear they are going to get worse before things start getting better. 2008 could go down as a banner year for airline failures on this side of the pond (and probably elsewhere too).



None shall pass!!!!
User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 8, posted (6 years 3 months 3 days 8 hours ago) and read 2549 times:

Legacy airlines entire profits summed from 1903-2008 are deeply deeply unprofitable.....there have been periods of high profitability, but they have been more than outweighed by the bad years 1990-94, 2001-05, 2008-?

User currently offlineMayor From United States of America, joined Mar 2008, 10377 posts, RR: 14
Reply 9, posted (6 years 3 months 3 days 8 hours ago) and read 2536 times:



Quoting EXAAUADL (Reply 8):
Legacy airlines entire profits summed from 1903-2008 are deeply deeply unprofitable.....there have been periods of high profitability, but they have been more than outweighed by the bad years 1990-94, 2001-05, 2008-?

That's not the same as saying that none of the legacy airlines have turned a profit since 1978. That's just wrong.



"A committee is a group of the unprepared, appointed by the unwilling, to do the unnecessary"----Fred Allen
User currently offlineDeltaAVL From United States of America, joined Mar 2007, 1893 posts, RR: 6
Reply 10, posted (6 years 3 months 3 days 8 hours ago) and read 2517 times:

If the airline industry had never made a profit, we wouldn't have an airline industry...


"We break, We bend, With hand in hand, When hope is gone, Just hang on." -Guster
User currently offlineLeskova From Germany, joined Oct 2003, 6075 posts, RR: 70
Reply 11, posted (6 years 3 months 3 days 8 hours ago) and read 2502 times:



Quoting DeltaAVL (Reply 10):
If the airline industry had never made a profit, we wouldn't have an airline industry...

Yes, there'd be an airline industry. It'd just look completely different than the one the US has today.



Smile - it confuses people!
User currently offline102IAHexpress From United States of America, joined Feb 2005, 1156 posts, RR: 3
Reply 12, posted (6 years 3 months 3 days 7 hours ago) and read 2472 times:



Quoting EXAAUADL (Reply 8):
Legacy airlines entire profits summed from 1903-2008 are deeply deeply unprofitable.....there have been periods of high profitability, but they have been more than outweighed by the bad years 1990-94, 2001-05, 2008-?

 checkmark 

To answer the op.
It's more true than it is false. Sure there have been some good times, but as a whole it's been a big money loser. The cliche that is often used, says the airline industry has never made a sustained, substantial return on invest comes from a government report to congress entitled...

National Commission to Ensure a Strong Competitive Airline Industry : report (to accompany H.R. 904) (including cost estimate of the Congressional Budget Office).

http://catalog.gpo.gov/F/8YS4S6NPXV4...006684&set_entry=000004&format=999


User currently offlineTimz From United States of America, joined Sep 1999, 6813 posts, RR: 7
Reply 13, posted (6 years 3 months 3 days 7 hours ago) and read 2453 times:

It might depend on what exactly he said. He may not have been claiming that no legacy had had a single profitable year since 1978; if he meant no legacy was overall profitable, totalling the figures for the whole period 1978-2008 ... could that be true?

User currently offlineB6fll From , joined Dec 1969, posts, RR:
Reply 14, posted (6 years 3 months 3 days 7 hours ago) and read 2413 times:

Moving foward the LCC's like B6, WN, and FL will make profits...Im not so sure about the legacies. If i had to pick one legacy that will make a profit in the future I would say CO...

User currently offlineIrelayer From United States of America, joined Jul 2005, 1073 posts, RR: 2
Reply 15, posted (6 years 3 months 3 days 7 hours ago) and read 2397 times:

I think the point is that commercial airlines barely eek out a profit (compared to the costs you incur in buying your capital) when everything is running smoothly, but lose horrendous sums of money when even one of the many complex factors affecting their bottom lines takes a nosedive. It is a house of cards, to be sure. Screw with one tiny little element in this whole system and the whole house collapses. In most ways it isn't even worth it, but for the fact that our way of life depends on widely available, plentiful and speedy air travel.

Just look at the cost of entry, and the barriers to entry to this industry. Starting an airline right now is a tremendous effort from both a financial and logistical standpoint. Not only do the established players do everything in their power to prevent you from getting your foot in the door, you have absolutely no pricing power, no loyal customer base, and few financial resources. You can't just start an airline, gradually build it up, and expect it to be profitable at any point along the way. It is all or nothing. Either do it right from the beginning, like B6, or start small and get crushed (like Indy Air or Skybus). Even when you get to the stage where you can compete with the rest of the industry, there is no guarantee that you are going to make a dime. The only guarantee is that you will lose money most of the time, and that you will lose more and more of it as time goes on because of labor costs, new capital expenditures, and fare wars. Pretty grim, but it seems to me that it is a fact of life right now.

I am VERY interested and also at the same time absolutely terrified to see how this situation will shake out in the next 6-8 months.

-IR


User currently offlineLarshjort From Denmark, joined Dec 2007, 1445 posts, RR: 0
Reply 16, posted (6 years 3 months 3 days 7 hours ago) and read 2376 times:



Quoting DeltaAVL (Reply 10):

If the airline industry had never made a profit, we wouldn't have an airline industry...

Just look at Alitalia, they haven't been profitable at all (except 1998) and they still exists  duck 

/Lars



139, 306, 319, 320, 321, 332, 34A, AN2, AT4, AT5, AT7, 733, 735, 73G, 738, 739, 146, AR1, BH2, CN1, CR2, DH1, DH3, DH4,
User currently offlineDocLightning From United States of America, joined Nov 2005, 19510 posts, RR: 58
Reply 17, posted (6 years 3 months 3 days 7 hours ago) and read 2344 times:

If they were all unprofitable for that long, they'd be out of business.

In the late '90's most carriers made bank, as that was the era of the silicon boom.

Things weren't going well when 9/11 occurred, but that was when the problems got big. See, the Bush administration has made a fatal error. It tried to use 9/11 to its advantage. It used 9/11 to justify a bunch of completely unsustainable practices. I'm not talking about civil rights travesties and security, I'm talking about managing the country.

See, the U.S. had a problem on 9/11, which was this group called Al-Qaeda. The correct response to a problem like that is to swarm into Afghanistan, rout them as best as you can, oust the Taliban, and tell the world that the next time someone pulls a stunt like that, "things could get real serious." And then maybe come up with a Marshall Plan for the region.

And then drop it.

And they didn't just drop it. And so in the last 5-6 years: Little new infrastructure has been built in any city. The ATC system has seen budget cuts and certainly no upgrades. Oil supply is feared because of continued U.S. occupation in the mid-east. Huge disasters, like New Orleans, have gone completely left to sit and rot. And then people wonder why the airlines are hurting just as much as everyone else is.

And that's a very small, but very important, part of why the airlines, and everyone else, is hurting right now.

Except me. I work for the government. I'm doing fine.  Smile


User currently offlineWesternA318 From United States of America, joined Oct 2004, 5652 posts, RR: 24
Reply 18, posted (6 years 3 months 3 days 6 hours ago) and read 2313 times:



Quoting Jamesontheroad (Thread starter):
I don't know enough about the historical finances of AA, CO, DL, NW, UA and US... have any of them ever been clearly in the black since 1978?

AA was climbing out of a funk in the mid-70s due to their network at the time and their reliance on the 747s and DC-10s they had in the fleet. When Robert Crandall took over, he whipped the airline into shape.

CO was also in a funk towards the mid to late 70s with a stagnant route network, and again, over reliance on its widebodies. Al Feldman came in from Frontier to shape it up, with the help of CO's aging founder, Bob Six.

DL was as quoted before, profitable from the late 40's up until 1983. Then from 1984 to 1991. Things were good until the Pan Am debacle and when Leo Mullin took over.

UA was out of all of the majors, the one airline the CAB never issued a new route to domestically, after their merger with Capital. They were therefore, one of the first of the majors to endorse deregulation, along with Frontier mk 1. Texas Air didnt jump into the fray until after Texas Int'l management said it was the only way for TI to grow.

Quoting Jcavinato (Reply 1):
USAirways, for example, was very profitable in the mid- to late 1990s.

USAirways was profitable all the way from when it was at the end of its Allegheny days up until Stephen Wolf took over, and the string of accidents they had in the early to mid-90s. After Wolf took over, they were spiralling towards the abyss.



Next trip: SLC-DEN-SLC-PHX-JFK-LAX-SLC with my wife and oldest daughter. F9 to and from DEN, US to JFK, AA 321 and CR7
User currently offlineAogdesk From United States of America, joined Jun 2004, 935 posts, RR: 3
Reply 19, posted (6 years 3 months 3 days 6 hours ago) and read 2313 times:



Quoting Mayor (Reply 4):
I'm guessing you're referring to the OP and not my post, right?

Correctamundo.... Wink All I could picture was his buddy talking airline economics after polishing off a few pints......

Hell, it doesn't make any sense when one is sober, beer may very well provide some clarity.....


User currently offlineWesternA318 From United States of America, joined Oct 2004, 5652 posts, RR: 24
Reply 20, posted (6 years 3 months 3 days 6 hours ago) and read 2268 times:



Quoting DocLightning (Reply 17):
Except me. I work for the government. I'm doing fine.

LOL Doc, well put!



Next trip: SLC-DEN-SLC-PHX-JFK-LAX-SLC with my wife and oldest daughter. F9 to and from DEN, US to JFK, AA 321 and CR7
User currently offlineEXAAUADL From , joined Dec 1969, posts, RR:
Reply 21, posted (6 years 3 months 3 days 6 hours ago) and read 2267 times:



Quoting Mayor (Reply 9):
That's not the same as saying that none of the legacy airlines have turned a profit since 1978. That's just wrong.

Actually most airline losses have occurred since 1978.

Quoting DeltaAVL (Reply 10):
If the airline industry had never made a profit, we wouldn't have an airline industry...

it makes enough of a profit enough of the time to sucker new investors


User currently offlineMD-90 From United States of America, joined Jan 2000, 8507 posts, RR: 12
Reply 22, posted (6 years 3 months 3 days 6 hours ago) and read 2253 times:

Delta had a billion dollar profit year not that long ago.

User currently offlineUSFlyer MSP From United States of America, joined May 2000, 2122 posts, RR: 0
Reply 23, posted (6 years 3 months 3 days 5 hours ago) and read 2193 times:



Quoting WesternA318 (Reply 18):
USAirways was profitable all the way from when it was at the end of its Allegheny days up until Stephen Wolf took over, and the string of accidents they had in the early to mid-90s. After Wolf took over, they were spiralling towards the abyss.

US had very poor results in the Early nineties which is why they needed British Airways to invest in them way back when.


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