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Q3 brings cargo growth for American carriers

By control on October 25, 2011

The third quarter of 2011 was very profitable for both Delta Air Lines’ and Southwest Airlines’ freight businesses, with cargo revenues surging 13 percent and 12.9 percent, year-over-year, respectively. Competitor American Airlines also saw revenue growth in this three-month period, reporting more modest gains of 4.8 percent.

Despite increased cargo traffic, all three carriers reported greater expenses in the third quarter of 2011, resulting from sky-high oil prices and fuel hedging.

Fuel cost American Airlines an average of $3.15 per gallon during the quarter; it averaged $2.24 per gallon during the same period last year, according to the carrier. This additional expense, which translated to $653 million, contributed greatly to American’s third-quarter net loss of $162 million.

Fuel hedging similarly impaired Southwest’s overall productivity, highlighted by the carrier’s net income loss of $120 million in the third quarter. “Our economic fuel costs per gallon, which excludes the [generally accepted accounting principles] markdown, increased approximately 34 percent compared to third quarter last year,” Southwest Airlines CEO Gary Kelly said in a statement. “This surge in fuel costs caused our quarterly profits to decline despite record revenue results.”

Delta seemed largely immune to the effects of the increasing fuel prices, however. The Atlanta-based carrier posted a GAAP net income of $549 million in the third quarter of 2010, a year-over-year increase of 51 percent. Delta officials said revenue gains, along with $97 million of settled fuel hedge earnings, helped the carrier offset the $1 billion impact of increased fuel prices.

Either way, cargo also played a huge part in Delta’s third-quarter success, company officials revealed. With profits rising $30 million, year-over-year, Delta’s freight operations saw operating revenue surge to $257 million in the third quarter.

Jim McKeon, strategic adviser of the Southwest Airlines Cargo Management Group, told Air Cargo World that Southwest’s cargo operations are also performing well. And he believes that the integration of AirTran’s freight network, which is tentatively scheduled for the first half of 2012, will especially propel Southwest’s cargo business.

The carrier will also be relying on its 2012 acquisition of Boeing 737-800 aircraft to boost freight operations, McKeon said. “Beyond the AirTran integration and the 737-800 series aircraft acquisition, we will continue to invest in initiatives to improve our cargo customer’s experience with Southwest Airlines Cargo,” he told Air Cargo World.

For instance, McKeon revealed, Southwest is currently investing in tracking-and-tracing technological improvements, which officials hope to deploy by mid-2012. “We are also deploying an inline acceptance process in several of our larger cargo facilities, which provides our customers with a much more efficient experience while tendering freight to Southwest,” McKeon revealed to Air Cargo World.

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