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Profit margins for airlines soaring [Update]

December 20, 2010 | 11:08 am

LAX photoBolstered by revenues from luggage fees and other charges, the nation's airlines reported the highest quarterly profit margins in years, the U.S. Department of Transportation reported Monday.

Large network carriers, such as Delta Air Lines and American Airlines, reported a profit margin of 10.5% during the third quarter of 2010, the highest quarterly rate since the agency began keeping financial airline numbers in 2002. Meanwhile, the country's low-cost airlines, including Southwest Airlines and JetBlue Airways, reported an 11% profit margin for the year's third quarter, the highest since the third quarter of 2006.

[Update: A previous version of this story said the profit margins for low-cost airlines for the third quarter were the highest since 2003.]

The study did not include profit records for smaller regional airlines.

The profit margins for the country's largest airlines were boosted by increasing revenues that the carriers are collecting in fees charged to passengers to check baggage, change reservations, fly standby and buy food, drinks, pillows, blankets and entertainment, among other charges.

In the third quarter, the costs for the 10 largest airlines to fly each available seat one mile grew about 5%, compared with the same period in 2009. But revenue from ancillary fees, including bag fees, reservation change fees and pet transportation charges, grew by nearly 10% to $2.1 billion, compared with the same period in 2009, according to the U.S. Department of Transportation. The revenue from baggage collection fees alone rose by nearly 23% to $906 million.

Delta Air Lines reported the highest revenue from ancillary fees, $693 million for the third quarter, or nearly 8% of the airline's total revenue, the federal agency reported.

-- Hugo Martin

Photo: A plane at Los Angeles International Airport. Credit: Los Angeles Times