Airlines’ profits set to soar in 2015

A United Airlines flight lands in November at O'Hare International Airport in Chicago.
A United Airlines flight lands in November at O'Hare International Airport in Chicago. TNS

The airline industry in 2015 is likely to be healthy again because of mergers and falling jet fuel prices, and while consumers might be stuffed into slimmer seats in coach, at least they will be able to enjoy new and upgraded planes and more onboard amenities, such as Wi-Fi and streaming video.

“2015 is poised to be one of the best, if not the best, years for the U.S. airline business,” said Henry Harteveldt, a travel industry analyst with Atmosphere Research Group.

“It’s not an entirely positive picture, of course,” Harteveldt said. “Uncertain economic climates in parts of Europe and Asia could affect U.S. airlines’ international profitability. But overall, 2015 should be a year that makes airline CFOs happy.”

Here’s what to expect in 2015 for fliers and for the airline industry:

Fare relief

Globally, airfares are expected to fall 5.1 percent, according to the International Air Transport Association, although many experts do not predict that kind of price drop in the U.S.

Travel website Expedia projects mostly mild decreases in ticket prices in North America during 2015, with some increases.

Why aren’t fares falling faster in the U.S. given airline profitability and fuel prices that have plummeted in recent months to the lowest levels in more than four years?

U.S. Sen. Charles E. Schumer, D-N.Y., has called for a federal investigation into what he describes as “extremely high” fares, citing a 10 percent increase during the past five years. He suggests that airline mergers and reduced competition might be inflating fares.

But Airlines for America, the U.S. airline industry group, claims fares have been growing far slower than inflation if judged over a longer period of time – say a decade.

Besides, the group argues, since when is making a profit from lower costs a bad thing?

“When the price of coffee beans falls, no one asks Starbucks why his or her latte does not cost less,” the airlines group said in a recent statement.

Onboard amenities

Airlines are putting some money back into their businesses. John Heimlich, chief economist for Airlines for America, said airlines are upgrading their airplanes and the airports they use at the highest spending rate in 13 years.

Onboard wireless Internet access is not new, but it also will become nearly ubiquitous in 2015, even on regional jets that fly passengers to network hubs.

Delta was an early adopter of Wi-Fi for all planes, but others are catching up. American said this month that it will equip 250 of its regional jets with onboard wireless Internet access. United announced weeks earlier that it would put Wi-Fi on more than 200 of its larger United Express regional jets by next summer.

Typically the newer Wi-Fi is faster, more reliable and sometimes satellite-based instead of air-to-ground, meaning passengers can stay connected over water on international flights.

United, American and Southwest Airlines will be big providers of streaming video in 2015.

Providing streaming video is a move away from video entertainment on seat-back screens, instead allowing passengers to stream movies and TV shows, often free, to their iPads and laptops.

Airlines also are adding power outlets to seats, even in coach, to keep those devices charged.

Shrinking space

The entertainment upgrades could help distract economy-class fliers from their cramped quarters. Leg and elbow space in airplane seats is shrinking as airlines try to make more money by cramming more seats in the back while selling upgrades for extra legroom.

But there’s some indication that some of those smaller seats may not be so bad. “We’re seeing certain slim-line seats having the same level of comfort as the traditional ones did,” said Adam Gwosdof, chief data officer at Routehappy, which rates flights on Wi-Fi and other factors. “It’s not now universally a bad thing.”

Still, it’s likely that if you want electronic amenities, in-seat power and leg room, you’re going to have to pay more.

Airline shuffles

American Airlines is likely to undergo the most change in 2015 as it integrates with US Airways.

The carrier announced this month that it would spend more than $2 billion on customer-related improvements. In 2014, the airline took delivery of 100 planes and expects 112 more next year, giving it claim to having the youngest fleet among U.S. network carriers.

Behind the scenes, American will seek FAA approval of a single operating certificate, allowing American and US Airways to operate as a single entity, although ongoing labor-contract negotiations will affect its ability to realize full benefits of that.

Just as important, American will combine its reservations systems, the backbone of an airline.

That move has been perilous for other airlines, notably United in 2012 when the combined system experienced glitches. Compounded by poor employee training, the switch-over resulted in months of widespread delays and cancellations, and led to defections by business customers.

Frequent fliers

In 2015, United and Delta will add spending requirements for elite status – those gold and platinum members who get free seat upgrades, free checked bags and early boarding, among other benefits. Delta’s shift to the revenue-based system takes place Thursday; United’s on March 1.

The changes are meant to reward big-spending corporate travelers, an airline’s most profitable customers. American resisted a similar move next year as it combines frequent-flier programs with US Airways. However, American said this month it will award bonus frequent-flier miles to customers who buy the pricey seats in the first-class and business-class cabins, beginning Thursday.

Not only will recent changes mean fewer top elite fliers vying for those upgrades, but airlines are aggressively selling seat upgrades at the time of booking or even when checking in. That shrinks the pool of first-class seats left to be awarded to elite-status travelers.

AirTran makes last flight

AirTran Airways has ceased to exist.

The Dallas-based carrier, which was acquired by Southwest in 2011, joins Northwest Airlines, which was bought by Delta, and Continental Airlines, which merged with United Airlines, in retirement. US Airways will disappear after it is folded into American Airlines – those two merged in December 2013 but still operate separately for now.

The mergers have left four carriers in control of more than 80 percent of the U.S. air-travel market.

AirTran's final flight, from Atlanta to Tampa, Fla. took off late Sunday.

The trip, dubbed Flight 1, was a nod to the airline’s first flight in 1993, when it was known as ValuJet.

Associated Press