Airlines expect to report highest annual profits in 10 years

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After one of the worst economic slumps in airline industry history, the nation’s eight largest airlines are expected to report a combined $3.95 billion in profit from $122.2 billion in revenue in 2010, according to an industry analyst.

If the projections prove true, it would mean that the airlines collected the highest annual profits in over 10 years and the second-highest annual revenue ever, said Robert Herbst, an industry consultant and founder of AirlineFinancials.com.

Herbst, who was a commercial airline pilot for 35 years, expects his projections to be confirmed over the next two weeks when the nation’s airlines release their financial reports for the last three months of the year. Financial reports for the third quarter of 2010 showed rising profits for the airlines.

The improving financial reports would reflect a dramatic turnaround for the industry, which lost $58 billion between the Sept. 11 terrorists attacks and 2009, according to the Air Transport Assn., the airline’s trade group.

Herbst attributed the rising revenue and profit numbers to growing demand and extra revenue from ancillary fees, such as charges for checked bags and meals on the planes. While demand has increased, most airlines have resisted adding new planes or additional routes, filing the cabins to the highest capacity level in years, he noted.

But the analyst said the industry’s profit margin could vanish this year if fuel prices spike suddenly.

‘It doesn’t take much of an increase in oil prices to turn things around,’ Herbst said.

-- Hugo Martin

(Photo: Airlines operating out of Los Angeles International Airport. Credit: Los Angeles Times.)