US: Airline revenue is rising but so too are costs

Airlines have figured out how to extract more money from passengers, and they will need it to cover rising costs for their own fuel, labour and other expenses. Not long ago, investors demanded that the airlines boost prices, even if it meant reducing flights to create a shortage of seats. Now they are obsessed with controlling expenses. They punished Southwest on Thursday after the carrier warned about a surprisingly large increase in costs next year. Southwest reported a 16% increase in Q3 profit on higher revenue, beating expectations, but the shares dropped more than 8% in afternoon trading. On the other hand, American Airlines Group reported that its profit plunged 48% from a year ago because it failed to fully pass on $750m in higher fuel prices to consumers. Yet American's shares climbed 8% after company executives laid out a plan to reduce spending, boost revenue, and grow earnings next year. All four of the largest US airlines saw higher revenue in Q3 than a year ago, and revenue per seat, a stand-in for average prices, is rising. Empty seats are hard to find. United ] President Scott Kirby called it "one of the best revenue environments we've ever seen." Airlines are facing a strong headwind, however, from surging fuel prices. Spot prices are up about 35 percent from this time last year, according to government figures. United said this month that it was recovering its entire fuel-cost increase from passengers, and Delta said it was covering about 85%. American, however, said Thursday that it recovered just 40% in Q3.<br/>