I received this email Wednesday from a Dallas reader, who had seen our article on AMR and the negotiations between American Airlines and its pilots’ union:

“I read your article in today’s edition and couldn’t help but wonder whether any major airline has earned a profit? It seems that all I read about the airline industry seems to concentrate on massive losses. And that makes me curious about whether they ever turn a profit or were usually awash in cash because of their high revenue figures?”

Well, it seems that way at times, doesn’t it?

I thought I would share my reply

Dear XXXX,

I assume this is not a rhetorical question, although it certainly could be.

Right now, all major U.S. airlines are making profits – except AMR/American Airlines. Here are the results through the first nine months, in millions of dollars:

Through Sept. 30 2011 2010
Alaska Air Group $181 $186
AMR (American) -$884 -$373
Delta Air Lines $429 $574
JetBlue Airways $63 $89
Southwest Airlines $26 $328
United Continental $978 $1,280
US Airways Group $54 $474
Total $847 $2,558

That chart illustrates American Airlines’ problem – it can’t make money at a time all its competitors are making money. Rising fuel costs have hurt the profits of the industry, but the other carriers are still profitable despite that increase in fuel expense.

The last decade, 2001-2010, was a horrible one for airlines. As a group, U.S. airlines lost $54.6 billion, and made money in only three of those years (2006, 2007 and 2010).

The Air Transport Association has numbers going back to 1947. In the 64 years from 1947 through 2010, the industry has been profitable in 45 of those years. However, the profits in those 45 years, $63 billion, is more than offset by the losses in the other 19 years, $97 billion). That means the industry since 1947 has cumulatively lost about $34 billion.

That’s why Warren Buffett, who put some money into US Airways back in the 1990s, wrote in his 2008 letter to Berkshire Hathaway shareholders: “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

Terry Maxon

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