Are Airlines Making Their Comeback?
According to the Bureau of Transportation Statistics, airlines in the United States brought in a record breaking $1.7 billion in baggage fees in the first half of the year. Delta (NYSE:DAL) topped the charts with $429 million, followed by United Airlines (NYSE:UAL) with $351 million. Despite the bump in income, the notoriously broke airlines have been looking into ways to cut costs, including buying oil refineries.
In June, Delta bought an idling ConocoPhillips (NYSE:COP) refinery near Philadelphia. The company, which spent $11.8 billion on jet fuel last year, is hoping to slash fuel costs by $300 million a year. Delta also wants to try and replace imported oil with North Dakota crude. The oil could potentially be shipped by rail from the Bakken oil field in the upper Midwest.
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United is reportedly “studying” Delta’s strategy, and CEO Thomas Horton said he could follow in his rival’s footsteps if the plan pays off. United’s current strategy is to begin with the planes themselves, as the company recently took delivery of its first Boeing 787 Dreamliner, which is lighter than traditional long-haul jets.
Meanwhile, Qatar Airways is saying that it won’t take a shipment of 30 to 60 of those very same Dreamliners made by Boeing (NYSE:BA). According to Reuters, CEO Akbar Al-Bakar said, “The 787 has an engine with new technology. However, there has been a material defect in the engine which now needs replacement and inspection.”
But a spokesperson for General Electric (NYSE:GE), which builds the engine, said, “The entire fleet in operation has been inspected with no issues.”
Overall outlook for the airline industry seems to be improving, with a report from the International Air Transport Association indicating profits are expected to reach $4.1 billion in 2012, and $7.5 billion in 2013.