Delta Air Lines (DL) president Ed Bastian said that "the important impact of consolidation" can be seen in US airlines' financial results, which remain positive despite a difficult operating environment characterized by high fuel prices and shaky consumer confidence.
"The US industry is on track to generate $2 billion in net profits this year led by Delta Air Lines and United [Continental Holdings]," he said, noting that the DL-Northwest Airlines and United Airlines (UA)-Continental Airlines (CO) mergers have created a "more stable business platform" for the industry. US major airlines posted an aggregate net profit of $1.09 billion in the third quarter (ATW Daily News, Nov. 22).
Speaking last week at the Latin American and Caribbean Air Transport Assn. (ALTA) Airline Leaders Forum in Rio de Janeiro (ATW Daily News, Nov. 21), Bastian said, "If a few years ago I told you that we'd be paying $130 a barrel for refined jet fuel, that our two biggest markets—the US and Europe—are struggling economically, that Japan would be recovering from a devastating earthquake and tsunami and that war would be going on in the Middle East—all in one year—you'd think we'd be on our knees, that we'd be burning cash and struggling for survival." Instead, he noted, "We're posting solid profits …We're generating significant cash flows."
Deutsche Bank senior analyst Michael Linenberg, also speaking at the ALTA conference, said that from 1985-2005 a more fragmented US industry generated just three years of positive free cash flow. But, including estimates for 2011 and 2012 earnings, an increasingly consolidated industry is on track to achieve positive free cash flow in six of seven years, he said.
He noted that the top four US carriers controlled 60% of the country's passenger airline market in 2007 but are expected to control 82% next year.