Originally Posted by
alfaromeo
The difference between cash flow and profit in the quarter comes down to advanced bookings. If I buy a ticket in March for a June vacation, the cash flow shows up in the March quarter. The revenue for the ticket is not booked until the June quarter when I actually take the trip. You normally see cash flow beat profit in the first quarter as passengers book ahead for summer travel. In the September quarter, you usually see profit ahead of cash flow as those advanced bookings unwind but you still get the tail end of the summer travel surge.
This is true, but other big differences include depreciation and capital expenditures. Paying cash for airplanes decreases total cash flow, but doesn't affect profits. Similarly, an airline can have negative earnings caused by depreciation, but positive cash flow for years as it's fleet ages. The problem is that eventually you gotta buy new airplanes.
An airline typically should generate massive amounts of operating cash flow, but most of that eventually needs to be poured back into aircraft purchases. Paying down debt is one way to prepare for that. Paying cash for new purchases is another.
And none of this directly affects net income. And that's where our sights should be when it comes to contract improvements in the coming years. An airline that is not profitable can't pay above industry average wages, regardless of what we deem to be "fair" or what we're "worth". It's never happened yet.