Newspaper article THE JOURNAL RECORD

Ticket Tax Leaves Mixed Airline Earnings

Newspaper article THE JOURNAL RECORD

Ticket Tax Leaves Mixed Airline Earnings

Article excerpt

NEW YORK (Bloomberg) -- U.S. airlines that filled seats with more high-fare business travelers were able to offset the impact of a renewed federal ticket tax, while some other airlines will have lower second-quarter earnings because of the tax.

Airlines didn't pay the tax in the year-ago quarter because Congress let it lapse. The tax helps fund the Federal Aviation Administration.

"Most of the problem is the imposition of the ticket tax," said Vivian Lee, an airline analyst at Bankers Trust New York Corp. "It's having a larger impact than expected." Northwest Airlines Inc., Continental Air Lines Inc. and Trans World Air Lines Inc. are expected to post lower earnings, analysts said. Other airlines -- UAL Corp.'s United Airlines, AMR Corp.'s American Airlines, Southwest Airlines Inc. and US Airways Group Inc. -- countered the tax by filling more seats and attracting profitable business travelers, analysts said. Little change is expected in Delta Air Lines Inc.'s earnings. Even without the burden of the excise tax, profit growth at most of the major airlines slowed in the second quarter, analysts said. Traffic growth is slowing and airlines are finding it harder to raise fares, they said. "We're at a point where historically airlines are more profitable than ever, so just by definition it's going to be harder for them to keep earnings momentum going," Lee said. While the industry's total passenger traffic rose 4.5 percent in May, according to the Department of Transportation, that was slower than the 5.6 percent increase reported in April and 7.5 percent in March from the year-earlier months. While some airlines were able to attract more business passengers, industry wide the growth in business fares fell short of analysts' expectations. In May, business fares were an average of 19 percent higher than the previous May, according to the Department of Transportation. Yet that's lower than the increases of 24 percent in April and 31 percent in March. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.