After losing billions in 2008 and 2009, the airline industry was expected to gain over 15.1 billion in profits according to the International Air Transport Association (IATA) in 2010. Not only has there been an increase in travelers worldwide, but extra fees such as baggage, reservation change, pet travel, and food and beverage fees have helped turn a major financial crisis into a surplus.
The airlines aren’t completely out of financial dangers just yet since a 15 billion profit translates to only about a 2.7 percent profit margin, according to IATA officials. Analysts report airlines have been working hard in order to save the industry and keep pilots and attendants employed. One plan has been consolidations including Delta acquiring Northwest in 2008 (making Delta the second largest airline in the world), in October of 2010 United merged with Continental (creating the world’s largest airline), and Southwest is expected to merge with AirTran in early 2011, which will open one of the largest markets (Atlanta) to Southwest.
The big test will be if the airlines will be able to survive fuel costs, which are expected to escalate in 2011. Analysts from Zacks Investment Research report, “Airline operations are geared toward aviation fuel prices, a major variable cost. Fuel prices, though high currently, remain well below the 2008 levels of over $140 per barrel that had ravaged the airlines industry. “Analysts expect the industry to get through it since, if anything, airline companies will find a way to tack on more “extra fees” to the customer.