WSJ: Airlines report strong profits after price hikes and cost cuts

WSJ: Airlines report strong profits after price hikes and cost cuts

WSJ: Airlines after price hikes, cost cuts show high profits

Airplane at Frankfurt Airport. Illustrative photo.

New York – A year ago, many airlines were struggling with cash shortages as some countries were slow to lift travel restrictions related to the covid-19 pandemic. Now that the borders are fully open, some of these carriers are reporting high profits, The Wall Street Journal (WSJ) reported.

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International Consolidated Airlines Group (IAG), the owner of British Airways, said today that it returned to profit last year for the first time since the start of the pandemic. Singapore Airlines earlier this month reported a record net profit for the nine months to the end of December. Australia's Qantas Airways this week reported a record half-year pre-tax profit.

“This is a huge turnaround given the massive losses we faced 12 months ago,” Qantas chief executive Alan Joyce said.

According to analysts, the results were supported by a combination of interest from travelers who had been sitting at home for a long time due to the coronavirus restrictions and were eager to travel, and the cost-saving measures that many companies implemented during the pandemic. Airlines in many countries have also been greatly helped by funding from governments.

One factor that has helped companies return to profitability has been consumers' willingness to pay more for airline tickets. Airlines are still struggling with staff shortages and are unable to return all their planes to the air. This limits the supply of seats and flights and increases prices.

“There wasn't enough capacity to meet the demand,” said Australian investment firm E&P analyst Cameron McDonald. “The only way to get demand under control is through pricing, and compared to historical trends, you're seeing very, very high ticket prices,” he added.

Other carriers in the US and Europe have also seen a recovery. . Delta Air Lines had higher revenue last year than in 2019, and American Airlines Group reported record fourth-quarter revenue.

In Europe, IAG, which also owns Aer Lingus and Iberia, said its revenue rose 173 percent last year. The company also posted its first full-year profit since the start of the pandemic. Further high profit growth is expected this year as well.

Air France-KLM CEO Ben Smith pointed out that seats in first and business class are more occupied than before the covid-19 pandemic, despite that the revival of corporate travel is lagging behind. He attributes the increase to tourists choosing to enjoy their first long-haul flights since 2019.

In Asia and the Pacific, however, airlines are still lagging behind this recovery. One of the reasons was China, which until recently was restricting travel due to covid-19 and keeping its borders mostly closed. Another reason was the reliance of some airlines on international routes compared to places like the US, where airlines were helped by domestic flights unaffected by border closures. Domestic routes were also supported by Qantas airlines.

However, the International Air Transport Association (IATA) estimated in December that airlines in Asia will report a loss of USD 6.6 billion (CZK 148 billion) this year. This figure includes Chinese airlines whose performance has been hurt by China's zero-tolerance policy for the covid-19 disease. China's borders are already open, but the suppressed demand for flights from China to abroad may take some time to recover. Hong Kong's Cathay Pacific Airways has seen a series of losses since the start of the pandemic and does not expect to fully restore to pre-pandemic capacity until the end of 2024.