The Dallas Morning News Airline Biz Blog has this comment from US Airways President Scott Kirby where he asserts that a la carte fees will represent 100% of their profit for their fiscal year.  He cites those fees as making a huge difference in US Airways and the airline industry as a whole.

The part I object to is characterizing those fees as “new” revenue”.  Those services have always been provided and they’ve always had a cost and that cost has always been a part of pricing.  The difference is in the unbundling and that doesn’t make it “new revenue.  It makes it more identifiable but I question whether airline profits we are seeing now are truly a result of a la carte fees. 

You see, I keep looking at the airlines who essentially have no fees or minimal fees and those airlines continue to be rated best for service and enjoy some of the highest profits in the business. 

More likely, airline profits are coming much more from capacity restraint and let’s not kid ourselves, there was a huge amount of capacity removed from the market(s) at the start of this crisis and it continues to be closely managed by airlines so far.  So much so that most airlines are seeing historically high load factors on their flights.  Load factors that arguably cannot be sustained forever. 

Why?  Because an 85% load factor indicates that you’re actually leaving money on the table in the form of passengers who are not flying because A) the prices are too high or B) they cannot get on the flights they need to be on.  Airlines know this and while they’re enjoying the profits, someone will blink eventually. 

Most likely, airlines such as Southwest or jetBlue will start to add capacity and growth to their systems to take advantage of those deferring travel presently and that will force legacy and SuperLegacy airlines to reconsider their capacity management. 

Consolidation has made that capacity restraint easier for now but that won’t last and I still see one airline who arguably could either be removed from the market or who will go through bankruptcy organization and then the game changes again.  That’s American Airlines, by the way. 

This business is highly cyclical and we’re just seeing the beginning of the top end of a cycle.  Don’t kid yourself into believing that airlines have finally figured out how to manage themselves in this market.

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