Times used to be, airlines were so busy fighting each other for passengers, they ended up losing money instead of making it. But American Airlines CEO Doug Parker says things are different now that many of the major carriers have merged: huge losses are a thing of the past, Parker thinks, predicting smooth skies for the big airlines from here on out.
Parker spoke on the industry’s recent transformations at American’s annual meeting last week, Skift.com reports, furthering his argument that airline consolidation has made the major names relatively impervious to the slings and arrows of business.
“My personal view is that you won’t see losses in the industry at all,” Parker said. “We have gotten to the point where we, like other businesses, will have good years and bad years, but the bad years will not be cataclysmic. They will just be less good than the good years.”
To that end, Parker noted that in both 2005 and 2015, oil cost about $55 a barrel, and U.S. airlines had about the same number of seats for sale on flights. But even though the economy was arguably slightly better in 2005, American lost about $28 billion, Parker said. In 2015, the airline earned $19 billion.
“That’s the difference between life and death,” Parker said. “This is the difference between a business that was dysfunctional and one the edge of insolvency at all times and one that this vibrant and growing and taking care of its customers and employees.”
He believes mergers are the cause — like the one between American Airlines and U.S. Airways — taking the industry from a “fragmented, inefficient [and] unfocused” thing, to an atmosphere where competitors are making rational decision to boost returns for investors.
Sure, the industry could face a downturn at some point, Doug admits, but they could go back up again, and will be able to weather the storm better than they did in the past.
“We aren’t suggesting there won’t be cycles in the future,” he said. “There will be. We are a business that is tied to the economic cycles. We are a cyclical business. But we are starting at such a much higher level, that our view is when the down cycles come, you won’t see losses again.”
American Airlines CEO Says Industry May Never Again Lose Money [Skift.com]
by Mary Beth Quirk via Consumerist
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