Good times start again for US-based airlines

Southwest Airlines CEO Gary Kelly all but said as much in a July 24 conference call to discuss the company’s second quarter earnings:

“Right now, the demand is very strong, and it is balanced very nicely with the supply of seats. We’re going to manage our growth very carefully so that we don’t upset that balance.”

US Airlines are making money again, with U.S. carriers reporting record profits for the second quarter of this year, but don’t look for them to use that money to add flights or upgrade service.

Where airlines once burned through cash the way a jumbo jet burns fuel, these days they are content to stay in a financial holding pattern.

The profits are either given back to investors, in the form of dividends or stock buybacks, or used for expansion, said Jay Sorensen, president of IdeaWorks, a Shorewood airline industry consulting firm.

“I don’t think the latter is going to happen, in terms of expansion,” he said. “Airline management is going to push back against that because that’s what got them into trouble in the first place.”

Southwest, the market share leader at Milwaukee’s Mitchell International Airport, reported record second-quarter profit of $465 million and set records for full planes and passenger fare per mile. Revenue rose 8%. In July, the airline’s planes were 86.7% full.

Those numbers certainly are strong, but the recent past continues to haunt airlines, leaving them gun-shy about spending money.

“The only other thing that I think needs to be mentioned here is that we’ve lived through a brutal decade where every balance sheet in the industry was stressed and most went bankrupt. So you just can’t extrapolate 2014 into infinity,” Kelly said.

“We do want to make sure that we err on the side, financially, of being conservative and being very well prepared for the unpredictable,” he added. “The unpredictable’s happened a lot to us in 43 years.”