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US airlines face uphill struggle

Predictions in Air Transport World Magazine’s January issue are that airlines will eke out a profit worldwide in 2006, but remain mired in red ink in the US for the sixth consecutive year.

However, buoyed by a strong economy around the world, the magazine predicts new records will be set for the number of passengers and amount of cargo carried.

Good profits are anticipated from carriers in the Asia/Pacific region, and Europeans will enjoy profits, although slimmer ones compared with 2005. But in the US, only low cost carriers - such as Southwest and JetBlue - and regional airlines will expect positive results. The older network carriers will produce sufficient losses to drag combined financials into the red, says J.A. Donoghue, editorial director of the ATW MEDIA GROUP.
“The high price of oil is hurting airlines’ profit potential worldwide,” Donoghue said, “but US network carriers will not be able to raise fares enough to cover their higher operating costs despite expectations of a slight capacity loss on domestic routes. Network carriers have made great progress in cutting costs, but the persistent high fuel costs keep profits just out of reach.”
In ATW’s January issue Donoghue predicts that, if the world can avoid further outbreaks of disease, terrorism and disruptive storms, airlines worldwide will earn $1.5 billion. US airlines as a group, including the budget carriers, will record a $3.2 billion operating profit, but will end up with a net loss of $2.1 billion, excluding special items.
World airline traffic will rise 7.5% in revenue-passenger kilometers (an RPK is one paying passenger flown one kilometer) and 5.1% in passenger numbers, while cargo will grow 5.8% after a fairly flat 2005. US airlines will see 3.1% more passengers and a 5.5% rise in RPKs, with cargo up 4.5%, with stronger growth expected in international traffic as network carriers escape murderous domestic competition by redeploying aircraft to long-haul routes.