Airlines for America (Washington), a trade group representing the United States airlines, forecasts the busiest summer season ever. The group estimates 222 million passengers will fly on U.S. airlines from June 1 through August 31, up 4.5 percent from the same season a year ago.

U.S. airlines, according to the report, are collectively increasing the number of seats by 4.6 percent to meet the forecast demand.

Here is the report:

Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, forecast that summer 2015 air travel would rise to its highest level ever while reporting that U.S. passenger airlines achieved strong operational performance and improved profitability in the first quarter despite another harsh winter.

“The continued rise in U.S. consumer sentiment and employment is leading to more people traveling more often, and air travel remains one of the best consumer bargains in America”

A4A projects approximately 222 million passengers (2.4 million per day) are expected to fly on U.S. airlines from June 1 – Aug. 31, up 4.5 percent (104,000 passengers per day) from 2014. This includes 31 million travelers (332,000 per day) on international flights – a record high. To accommodate the expected growth in demand, airlines are increasing the number of available seats by 4.6 percent, or 126,000 per day, during this period.

Published airline schedules show Canada, Mexico, the United Kingdom, Germany and Japan, respectively, as the top five nonstop international destinations from the United States. Year over year, airlines are adding the most seats to the marketplace for flights between the United States and Mexico, the United Kingdom and China.

“The continued rise in U.S. consumer sentiment and employment is leading to more people traveling more often, and air travel remains one of the best consumer bargains in America,” said John Heimlich, A4A Vice President and Chief Economist. “With 13 of the 15 busiest air travel days of the year falling in the summer months, U.S. airlines are well-prepared to accommodate the increased travel demand by adding flights and seats, and deploying new and larger aircraft, along with a boost in staffing to enhance the customer experience.”

Improving Finances Benefiting Customers, Employees, Investors and the Overall U.S. Economy

During the first quarter of 2015, 10 publicly traded U.S. passenger carriers collectively reported a Generally Accepted Accounting Principles (GAAP) net profit of $3.1 billion, or 8.4 percent, which improved from 1.1 percent during the same period in 2014. Operating revenues rose 3.1 percent year over year, due in large part to a 3.9 percent increase in the number of air travelers, which is the equivalent to an additional 72,400 passengers per day. Wages and benefits rose 10.5 percent, overtaking fuel for the top spot among industry operating expenses. While the 8.4 percent margin is an improvement over last year, it leaves the industry shy of the U.S. corporate average of 9.8 percent, as measured by the Standard & Poor’s (S&P) 500.

Heimlich noted that February 2015 was the 15th consecutive month of employment gains at U.S. airlines, having added nearly 9,500 jobs over the past five years.

Despite entering 2015 with approximately $66 billion of debt and coping with another harsh winter, meaningful financial progress enabled carriers to continue significant levels of reinvestment to further enhance operational reliability and the customer experience. First-quarter capital expenditures for the nation’s airlines totaled $3.6 billion, on track to exceed $14 billion for the full year. Collectively, these 10 airlines are slated to take delivery of 367 new aircraft in 2015, or the equivalent of roughly one per day.

“Healthy air-travel demand and lower, yet still volatile, fuel prices are helping U.S. airlines close the gap to average U.S. corporate profitability,” said Heimlich. “In the first quarter, airlines invested more than $20 per passenger in capital improvements, taking care of employees, continuing to pay down debt and returning cash to shareholders.”

1Q 2015 Financial Summary

Net profit: The $3.1 billion profit and 8.4 percent net margin reflect the results of 10 U.S. passenger airlines – Alaska Airlines, Allegiant Air, American Airlines, Delta Air Lines, Hawaiian Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines, United Airlines and Virgin America.
Operating Revenues and Expenses: Revenues increased 3.1 percent year over year and total operating expenses declined 6.7 percent, due in large part to lower fuel costs. Total fuel expenses for the group fell 32.9 percent. The decline in fuel costs exceeded increases in labor, airport-related and aircraft costs.

Capital Expenditures (CapEx): U.S. airlines reinvested $3.6 billion in the product and customer experience during the first quarter. Airline CapEx rose 170 percent from 2010 to 2014; more than $14 billion of reinvestment is expected in 2015.
1Q 2015 Operational Performance

Customer Service: U.S. passenger airlines’ operational performance improved markedly year over year as airlines invested in systems, procedures and staffing operations to cope with the winter weather. According to the Department of Transportation, first quarter 2014 to first quarter 2015, U.S. carriers improved the rate of completed flights from 95.4 percent to 96.9 percent. On-time arrival rate increased from 72.2 percent to 76.3 percent, and the share of passengers having their bags properly handled rose from 99.56 percent to 99.61 percent. The rate of involuntary denied boardings fell from an already low 1.37 per 10,000 customers to 0.85 per 10,000.

Meanwhile the group previously forecast spring travel to rise to the highest level in seven years:

Airlines for America (A4A), the industry trade organization for the leading U.S. airlines, has delivered its Labor Day air travel forecast and first half 2014 results for U.S. passenger airlines, which reported improving profitability, enabling carriers to invest in their workforce, reduce debt and enhance the customer experience for airline passengers.

“Airlines are key drivers of jobs and economic growth, and improving finances have further accelerated their investments in people, products and technology to enhance the travel experience for customers”

A4A projects a 2 percent year-over-year increase in the number of passengers flying on U.S. airlines during the seven-day Labor Day travel period. From Wednesday August 27 through Tuesday, September 2, A4A expects 14 million air travelers will take to the skies, up from an estimated 13.8 million in 2013, with the busiest day of the period occurring on Friday, Aug. 29. Airlines are adding seats to the marketplace to accommodate the expected increase in demand.

First Half 2014 Financial Performance

Nine U.S. passenger airlines – Alaska, Allegiant, American, Delta, Hawaiian, JetBlue, Southwest, Spirit and United – collectively reported a net profit of approximately $3.8 billion, up from $1.6 billion during the same period last year. This translated to a net margin of 5 percent, or 5 cents on every dollar of revenue, an improvement from the 2.1 percent margin reported in the first half of 2013.

The year-over-year improvement was driven by a 6 percent increase in operating revenues, which outpaced the 2.2 percent increase in operating expenses, including rising wages and benefits, airport landing fees, terminal rents and aircraft ownership costs. Despite remaining their largest and most volatile cost, fuel costs dipped 2.4 percent. Airlines also saw modest relief in maintenance expenses and aircraft rents.

“Airlines are key drivers of jobs and economic growth, and improving finances have further accelerated their investments in people, products and technology to enhance the travel experience for customers,” said John Heimlich, A4A Vice President and Chief Economist. “With U.S. personal incomes continuing to outpace airfares, air travel is far more accessible to customers than it was in the past.”

While airfare remains affordable, airlines and their customers continue to pay more than their fair share in federally imposed taxes. From 2000 to 2013, adjusted for inflation, base fares dropped 8 percent while taxes rose 49 percent. Four decades ago, taxes and fees accounted for less than one-tenth of the price of an airline ticket. Today, the amount has skyrocketed to 21 percent of the price or $62 on a typical $300 roundtrip domestic ticket. That amount further increased in July to $63 when the passenger tax more than doubled to $5.60 on a one-way trip. It could go even higher if other taxes proposed by the White House become law.

In the first half of 2014, these nine airlines invested $7 billion – more than $1 billion per month – to benefit customers. New and refurbished aircraft are being delivered at a rate of nearly one per day, including 149 received in the first six months and 168 additional units slated for delivery in the remainder of the year. Additional investments include route expansion, development of mobile technology, enhanced airport check-in areas, lounges and gates. Additionally, airlines were able to further reduce gross debt by $1.8 billion.

First Half 2014 Operational Performance

U.S. airlines overcame numerous extreme weather events, such as the polar vortex and severe thunderstorms, to post a completion factor of 96.9 percent and an on-time arrival rate of 74.2 percent. According to the Department of Transportation, 99.6 percent of passengers had their bags properly handled and complaints remained low at 1.49 per 100,000 passengers.

“Customers continue to benefit from the proactive approach airlines are taking to cope with extreme weather and minimize travel disruptions,” said Heimlich. “Despite some of the worst winter weather conditions in recent memory, airlines continued to meet the needs of their customers, while connecting communities and economies and creating jobs.”