Major Airlines Expected to Be Profitable in 2009

A year ago, most experts were predicting that 2008 would be a strong year for the airline industry, with high hopes for growth and billions in profits. Those expectations were shattered by a record-breaking spike in oil prices, followed by a plunge in demand for travel as the economy took a nose dive. The year’s events were a stark reminder that predictions can quickly go awry in the tumultuous airline business.

So many are being cautious about forecasting 2009. The biggest factors that will affect airline passengers, employees and investors are the economy and price of oil, which remain question marks.

“It’s no secret that the big question is what’s going to happen with the economy,” said Dan Garton, executive vice president of marketing for American Airlines, based in Fort Worth. “Nobody knows for sure, and the industry’s health is very closely tied to the economy.”

Still, many analysts are predicting the major airlines to turn a small profit despite the downturn, although projections have been slashed in recent months. The airlines are likely to continue cutting their passenger capacity, which could keep ticket prices stable. Travelers can expect to keep paying fees on items like checked bags and may have to start paying for some new services as well.

American hopes to receive approval for its alliance with British Airways, which would allow it to coordinate with that airline on operations, scheduling and marketing for trans-Atlantic flights.

Dallas-based Southwest Airlines, meanwhile, plans to begin flying into New York City for the first time and will work to build the first North American low-fare alliance with the Canadian carrier WestJet and Mexican airline Volaris. “I think 2009 is going to be a very, very interesting year for the airlines,” said travel analyst Terry Trippler of Tripplersview.com.

Analysts expect AMR Corp., the parent of American Airlines, to post a profit of $1.74 per share in 2009, excluding special gains and charges. Southwest is also expected to make money, with analysts predicting a 59 cent-per-share profit.

Both airlines plan some big moves to help boost revenue during the year. American executives hope to win approval for an alliance with British Airways. It’s a partnership that both airlines have craved for years but hasn’t been allowed by government regulators because of concerns that the airlines would dominate London’s Heathrow Airport, Europe’s busiest hub.