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A quick google search returns several articles such as this one claiming that airlines make less than $10 in profit from each customer.

I feel there are a few reasons to doubt this premise:

You can connect through some destinations more cheaply than landing there

Skiplagged is a service helps users find cheaper airfare by booking flights that connect through their actual intended destinations to ones that are less popular and therefore are being sold more cheaply. Users are then expected to simply intentionally miss their final connection.

This means that a travel agency or airline can book seats on more planes and sell that connecting flight for less money. If the airlines have very small profit margins, then that proposition wouldn't just return less profit; it would lose money.

Ticket prices are higher in recent years

After 30 years of gradual decline due to competition, prices have been increasing since 2010 and have returned to levels they were at before the 'great recession'.

Rising prices are contrasted by apparent decreasing costs

  • Fuel prices have come down since spiking in 2010
  • Pilots work long hours and in some cases for surprisingly low pay
  • There's less leg room than ever due to cramming more seats on each plane
  • Meals and other niceties common in the 90's have disappeared from most flights
  • Many flights now don't have screens to watch movies on or ports to connect earphones to; customers connect their devices to the entertainment system via wifi

So, is the claim that airlines turn $10 profit per customer accurate?

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    Note that overbooking has more to do with the fact that quite often, not everyone who buys a ticket shows up, and airlines want to make as much money as they can regardless of the actual per-passenger profit. post-gazette.com/news/transportation/2017/04/13/… – JAB Apr 13 '17 at 15:25
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    @JAB You're of course correct, but the question is, is that merely a 'cash grab' or is it truly a necessity to avoid running a loss? – Kevin Laity Apr 13 '17 at 15:27
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    @Jan Doggen I've removed the mention of the video, but not all of my cited information applies worldwide, and the picture of 'what does the average airline make from each customer' could vary widely if asked about the whole world. – Kevin Laity Apr 13 '17 at 15:36
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    I don't understand the first point. The $10 per customer claim is clearly an average, and it doesn't contradict the possibility that some tickets are much more profitable (e.g. those where the airline charges more for a nonstop than for an onward connection). – Nate Eldredge Apr 13 '17 at 16:59
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    @KevinLaity: I would dismiss your premise - that there is a qualitative difference between a "cash grab" and "necessity to avoid running a loss" for a business motivated to make a profit for its shareholders. – Oddthinking Apr 14 '17 at 2:40
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TL:DR

United makes about $9.50 per passenger.

Detailed:

United Airlines Q4 and full year 2016 performance results offer a great starting point for these calculations.

We can see that United recorded a Q4 net operating income of $397 million. In the same time frame, United recorded having moved 36.023 million passengers. This gives us a baseline number of $11.02 net income per passenger.

This number is only a good starting point though, as it assumes all of United's revenue is from passenger traffic, but they also recorded revenue of $1,291 million from "Cargo" and "Other Operating Revenue". To get a more accurate picture of the profit/passenger, we'll have to dig a bit deeper.

United registered a net revenue from "Total passenger revenue" of $7,761 million for Q4. With their given pre-tax margin of 9.8%, we can see that they had a pretax revenue per passenger of $21.11. Their "Income tax expense" of $487 million on "Income before income taxes" of $884 million represents 55.09%. Applying that rate to their per passenger income drops it to $9.48 net income per passenger.

Their yearly result using the same method is $9.22 net income per passenger

I've been unable to find Southwest's passenger counts, but they have a pretax operating margin of 18% with a net income margin of 11%, so I would expect that they make a bit more per passenger than United.

Same story with American Airlines. No passenger counts, but a pretax operating margin of 11% with a net income margin of 7%.

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    So if someone buys one of those silly bottles of "artisan water" that cost $15, they provide about twice the profit of a traveler who doesn't? – Nat Apr 13 '17 at 19:02
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    Yes. Much like if you buy a TV and an overpriced HDMI cable at an electronics retailer, they'll make more profit off the cable than the TV. – Aric TenEyck Apr 13 '17 at 19:06
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    I feel I should point out that, if you're restricting the revenue to money spent by passengers, you also have to restrict the expenses to those relevant to passengers. – Glen O Apr 14 '17 at 5:51
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    @Nat this answer uses calculations based on the total profit United makes and averages it out per passenger. It's likely that if you actually broke it down per passenger, those who buy no items or check no bags actually make the airline less than $9.50/person by a fair bit, but it's pretty difficult to fully determine the actual costs per person - maybe they paid more for their ticket, etc. – enderland Apr 14 '17 at 18:25
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    "After you tip your flight attendant, please return them to the upright and locked position." – Dennis Williamson Apr 14 '17 at 22:21
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Generally, yes, but that's not necessarily an argument for overbooking as aggressively as they do (the context in which the claim was made). They don't make a huge amount of profit per customer, as per the numbers in A Bailey's answer. By the same token, since they move such a large volume of customers, they don't incur huge per customer costs, either.

So, the argument that they must overbook because they don't make a large amount of profit per customer is offset by the fact that reducing the overbooking, slightly, would also mean they're only losing a small amount of profit per customer, as well.

You can't claim one and ignore the other. Airlines are hugely profitable. 2016 was a record year for them, as a whole ($35.6 B in profits), and 2015 was a record before that ($25.6 B in profits). Fuel costs are 1/3 what they were two years ago, yet fares are still about the same.

NYT: Airlines reap record profits, passengers get peanuts

IATA: Another Strong Year Expected For Airlines

CNN Money: Airlines posted record profits last year (2015)

Some of the information contained in this post requires additional references. Please edit to add citations to reliable sources that support the assertions made here. Unsourced material may be disputed or deleted.

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    "they're only losing a small amount of profit per customer". Not true, since these customers have paid full price, but not utilized any of the services. A no-show to an overbooked flight represents mostly profit to the airline. $194/no-show for United by my calculations. To put it another way, United has to sell about 20 less tickets for each non-show to an overbooked flight. – A Bailey Apr 13 '17 at 18:15
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    @ABailey - I didn't say that it was the same. Your calculation ignores the costs associated for bumping a paying customer, which disappear if you don't overbook flights AS MUCH. I'm not sure why you are fixating on no-shows, we're talking about overbookings and people who do show up. Flush with revenue and profits, airlines have recently upgraded much of their fleets to newer planes, which also skews any per passenger calculation for years when they go ahead and make that investment. What needs to be figured to be truly accurate is the non-capital operating costs of a "average" flight. – PoloHoleSet Apr 13 '17 at 18:22
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    This is flawed. Flying a plane costs almost the same amount irrespective of the number of passengers. Which means each person who flies makes the airline $10 while each person who doesn't fly costs them the ticket price (e.g. $300). [E.g. a full 300 seat plane at $300/ticket makes the airline $90k revenue. With $10pp profit, that's means there were $87k in costs. The same plane with 280 people makes $84k in revenue with almost the same $87k in costs, meaning the airline lost $3k]. It's this asymmetry that drives overbooking. – JoshG79 Apr 13 '17 at 19:14
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    @PoloHoleSet they're not overbooking with the intention of bumping. They're overbooking to fill slots that invariably end up empty because people don't show. You're focusing on the wrong outcome - bumping. The airlines know that for an average flight, X% of the people who reserved seats for the flight won't show up. Without overbooking, planes would fly X% empty on average which costs them X% in passenger revenue. By overbooking they can close that gap at the cost of occasionally bumping someone when <X% fail to stay home. – JoshG79 Apr 13 '17 at 19:38
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    I did an analysis of this about 15 years ago for a university project. Based on publicly available data, I determined that about 15% of tickets sold were neither used nor refunded, and that the value to the airline of an unused ticket was so high that, considering only first-order effects (eg. compensation to bumped passengers), profit was maximized by overbooking to the point that nearly every flight had more passengers show up than could fit in the airplane. (Second-order effects such as loss of goodwill were outside the scope of the analysis.) – Mark Apr 13 '17 at 22:19
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According to American Airlines Group Reports Fourth Quarter and Full Year Profit AA had 199M passenger enplaments resulting in 2676M Net income in the 12 months ending December 31, 2016. This means 13.47 USD or so per passenger.

Southwest in 2016 had $2.24 billion net income from enplaning 151,740,357 passengers. We are looking at 14.76 USD per passenger.

Of course the above figure presumes all income comes from passengers. There are cargo operations etc which further lower this figure. So below 10 USD is perhaps not true for the more profitable airlines but it's not too far from the truth either.

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    In addition to cargo, airlines also get tons of revenue from their loyalty programs (by selling miles) and also make a lot from their co-branded credit cards. The latter is pretty much pure profit from the airline's perspective. In all likelihood, the profit on actual tickets is indeed below $10 across all of the major U.S. airlines. – reirab Apr 16 '17 at 7:36
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False. According to The Economist (April 22, 2017 print edition, online article),

Airlines in North America posted a profit of $22.40 per passenger last year; in Europe the figure was $7.84.

Graph:

enter image description here

According to the above graph, the claim would've been true in 2012 and 2013. But not in the past few years.


Another source is the IATA's Dec 2016 forecast for 2017 per passenger profits:

  • North American carriers: $19.58.
  • European: $5.65.
  • Asia-Pacific: $4.44.
  • Middle-Eastern: $1.56.
  • Latin American: $0.76.
  • African: −$9.97 (that's a loss of $9.97).

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