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Airlines Post Huge Profits on Higher Fares

Want proof that fares are up? Look no further than the latest round of airline financial reports, for the third quarter of 2010. United? $387 million. Continental? $354 million. Delta? $363 million. That’s over a billion dollars right there. Tack on US Airways‘ $240 million, American‘s $143 million, Southwest‘s $195 million, JetBlue‘s $59 million, and AirTran‘s $36.3 million and, well, you get the picture.

So what’s behind all this cash? Higher fares are the main driver. Here’s a telling snippet from Delta’s financial release: “Passenger revenue increased 19 percent … compared to the prior year period on 2 percent higher capacity.” So that’s a 19 percent jump in cash with only a 2 percent boost in people, all of which accounted for $1.3 billion in revenue compared to last year.

Fees have played a role as well. Baggage fees, in particular, are higher year over year, and DOT data shows revenue from all ancillary fees is on a steady, upward march.

Look around at just about any airline and you’ll see the same thing: revenue outpacing capacity by wide margins. Many airlines, such as Delta, held pretty firm on capacity and saw huge gains. Others, like JetBlue, added capacity and still saw revenue grow at a rapid rate.

This all serves to illustrate that fares are, indeed, up, and that travel is in the middle of a very strong rebound. And because airlines have refrained from adding back seats even as demand picked up, they’ve been able to push fares up and reap huge profits.

The loser in all this, of course, is passengers, who have more competition for the flights they want and end up paying hefty fares for the privilege of flying. This equation is especially troubling with the holidays coming up. Already we’re seeing fares trending upward for Thanksgiving, though Christmas fares are holding steady for now.

Readers, in your experience, are fares up or down?

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