BTS | Second Quarter 2006 Airline Financial Data: Passenger Airlines Report Largest Domestic Profit Margin Since 2000

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Second Quarter 2006 Airline Financial Data: Passenger Airlines Report Largest Domestic Profit Margin Since 2000

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BTS 43-06
Dave Smallen
202-366-5568

Monday, September 18, 2006 - A group of 21 selected passenger airlines reported a domestic operating profit margin of 7.9 percent in the second quarter, the largest profit margin for this group since the second quarter of 2000, the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation reported today in a release of preliminary data. The 21-carrier group consists of the seven largest network, low-cost and regional carriers based on operating revenue.

BTS, a part of the Research and Innovative Technology Administration, reported that the domestic profit margin for the group was the first since the second quarter of 2005. The group of low-cost carriers reported a domestic operating profit margin of 10.6 percent, the regional carrier group reported a 7.9 percent margin and the network carriers reported a 7.2 percent profit margin (Table 1). Domestic operating margin measures profit or loss as a percentage of the airline's total domestic operating revenue.

The network group's profit margin of 7.2 percent in the second quarter was a 9.4 percentage point improvement from a -2.2 percent loss margin in the second quarter of 2005 (Table 1). The seven carriers reported a combined domestic operating profit of $1.3 billion in the second quarter for the group's first profit margin since at least the beginning of 2003. In the second quarter of 2005, the seven network carriers' domestic operating loss was $0.4 billion.

The low-cost group's profit margin of 10.6 percent in the second quarter was a 5.3 percentage point improvement from a 5.3 percent profit margin in the second quarter of 2005. The seven carriers reported a combined $541 million domestic operating profit in the second quarter (Table 1).

The regional group's profit margin of 7.9 percent profit margin in the second quarter was a 2.8 percentage point loss from the 10.7 percent profit margin in the second quarter of 2005. The seven regional carriers reported a $193 million operating profit in the second quarter (Table 1).

The only airlines in the 21-carrier group to report operating loss margins were low-cost carriers Spirit Airlines and ATA Airlines (Table 3) and network carrier Continental Airlines (Table 2). The top operating profit margins were reported by low-cost Southwest Airlines (Table 3), network carrier Northwest Airlines (Table 2), and regional carrier Atlantic Southeast Airlines (Table 4).

Network carriers operate a significant portion of their flights using at least one hub where connections are made for flights on a spoke system. Low-cost carriers are those that the industry generally recognizes as operating under a low-cost business model. Regional carriers provide service from small cities, using primarily regional jets to support the network carriers' hub and spoke systems. The selected groups consist of the seven carriers in each group with the highest reported revenue in the most recent 12-month period.

The network carriers reported the highest unit revenues in the second quarter at 15.8 cents per available seat-mile (ASM). Regional carriers' unit revenues were 15.3 cents per ASM followed by the low-cost carrier group at 10.8 cents per ASM. All three groups exhibited increases in unit revenues over the year earlier period with the network airlines registering the sharpest gains at 2.5 cents (Table 5).

The highest unit revenues were reported by network carriers US Airways, Northwest and Continental (Table 6). The lowest unit revenues were reported by low-cost carriers ATA, JetBlue Airways and Southwest (Table 7).

The network carriers reported the highest unit costs in the second quarter at 14.6 cents per ASM. Regional carriers' unit costs were 14.1 cents per ASM followed by the low-cost carriers at 9.7 cents per ASM. The regional and low-cost carrier groups both had a year over year increase in unit costs of 1.4 cents per ASM compared to 1.0 cent higher for the network group (Table 9).

The carriers with the highest unit costs were network airlines US Airways and Continental (Table 10) and regional airline Comair (Table 12). The carriers with the lowest unit costs were low-cost carriers JetBlue, Southwest and AirTran Airlines (Table 11).

The regional airlines reported the highest domestic passenger average yield at 18.9 cents per revenue passenger-mile (RPM). The network carriers at 13.1 cents per RPM and the low-cost carriers at 12.1 cents per RPM both reported yield gains over the second quarter of 2005 (Table 13). Domestic passenger revenue yield measures passenger revenues against total travel by dividing domestic passenger revenues by domestic RPMs.

The top passenger revenue yields were reported by regional carriers American Eagle Airlines, Comair and Atlantic Southeast (Table 16). The lowest passenger revenue yields were reported by low-cost carriers ATA, JetBlue and Frontier Airlines (Table 15). Northwest reported the highest revenue yield of any network carrier (Table 14).

Additional airline financial data are posted on the BTS website at TranStats, the Intermodal Transportation Database, http://transtats.bts.gov. Click on "aviation," then on "Air Carrier Financial Reports (Form 41 Financial Data)," then click on "Schedule P-12." Data are compiled from quarterly financial and monthly traffic reports filed with BTS by commercial air carriers. Financial and traffic data are preliminary and include data received by BTS as of Sept. 12. Data are subject to revision.

Data from the second quarter of 2006 and previous quarters are posted on the BTS website at http://transtats.bts.gov. BTS will release third quarter 2006 financial data and revised data from the second quarter on Dec. 18.

Table 1: Quarterly Domestic Operating profit/loss margin (in percent)

Passenger Airlines by Group
Ranked by 2nd Quarter 2006 Margin
(Operating Profit/Loss as Percent of Total Operating Revenue)

Second Quarter 2006 Airline Financial Data: Passenger Airlines Report Largest Domestic Profit Margin Since 2000

Table 1: Quarterly Domestic Operating profit/loss margin (in percent)

Table 2: Quarterly Domestic Operating profit/loss margin (in percent)

Table 3: Quarterly Domestic Operating profit/loss margin (in percent)

Table 4: Quarterly Domestic Operating profit/loss margin (in percent)

Table 5: Airline Domestic Unit Revenue (Cents Per Mile)

Table 6: Airline Domestic Unit Revenue (Cents Per Mile)

Table 7: Airline Domestic Unit Revenue (Cents Per Mile)

Table 8: Airline Domestic Unit Revenue (Cents Per Mile)

Table 9: Airline Domestic Unit Costs (Cents per Mile)

Table 10: Airline Domestic Unit Costs (Cents per Mile)

Table 11: Airline Domestic Unit Costs (Cents per Mile)

Table 12: Airline Domestic Unit Costs (Cents per Mile)

Table 13: Domestic Passenger Revenue Yield (Cents per Mile)

Table 14: Domestic Passenger Revenue Yield (Cents per Mile)

Table 15: Domestic Passenger Revenue Yield (Cents per Mile)

Table 16: Domestic Passenger Revenue Yield (Cents per Mile)