Lower fuel costs propel airline profits high

The US aviation industry's profits galloped over 60 percent, thanks to the slump in oil prices. The last nine months of 2015 witnessed a record profits level for the US aviation industry.

The numbers for the whole year yet to be announced as the fourth quarter is coming to end. The drop in jet fuel costs also helped airlines offset the surge in labor costs. However, the fare revenues dropped as the airlines passed the fuel cost benefit to passengers.

The lower jet fuel costs propelled airline profits. The jet fuel cost slid 38 percent and helped the US aviation industry saving $4.3 billion during the third quarter alone. With this, airlines were able to offset the rise in labor costs to the tune of $1.4 billion during the quarter.

According to the Department of Transportation, the US aviation industry recorded $8.8 billion profits. The first nine months of the year including summer travel season, the airlines posted $22 billion in operating profits. This is 75 percent rise when compared with the previous corresponding period, as reported by CNN Money.

Despite soaring profits, airlines stocks are reeling under pressure. Stocks of American, United were down this year. Delta and Southwest shares were marginally up.

Airline stocks may turn bullish in 2016, forecasts International Air Transport Association (IATA). As per a report by Seeking Alpha, the lower oil prices have lasted for over one year. Fuel accounts for 30 percent operating expenses of airlines. The lower oil price is boosting operating profits of airlines.

Some of the fuel cost benefits have been passed onto passengers. This is reflecting in the drop in fare revenues, which fell $384 million in the quarter. Airlines didn't include the addition revenues of $56 million in baggage and change fees collected during the year. 

According to a report by Yahoo Finance, the oil price drop has been enhancing the bottom line of airlines. The huge savings will further strengthen the financial muscle of airlines and this will prompt them to go for share buyback programs, higher dividends for shareholders and reduction in debts. 

Paying passengers flew four percent more miles in the first nine months of 2015. The US airlines recorded an encouraging occupancy rate of 83 percent during the first nine months.

Melanie Hinton, the spokeswoman for Airlines for America, said: "This year is the first year since the Great Recession that US airlines' profitability has fallen in line with the average US company.  This return to profitability has benefited customers as airlines are strong able to compete and reinvest in their business with new planes, products, and destinations. Importantly, US airlines are reinvesting on average $1.3 billion per month into the passenger experience."