U.S. Airline Earnings Show Race Between Rising Costs and Higher Revenues

A sharp drop in fuel prices midway through the fourth quarter of 2018 was welcome. But it didn’t prevent U.S. airlines from paying 24 percent more for their fuel this fourth quarter versus last. So once again, industry margins declined. But not much. The country’s nine largest scheduled airlines that have reported (Frontier hasn’t yet done so) collectively earned a 9.7 percent fourth quarter operating margin, down just slightly from 10.4 percent a year earlier. Full-year margins fell more substantially, to 10.4 percent from 13.1 percent. But by the second half of 2018, industry fares began firming, helping to offset much—but not all—of the steady fuel inflation that persisted through mid-October. Better pricing helped mitigate ongoing labor cost inflation too. In the second and third quarters, not one major U.S. airline managed to increase its margins year-over-year. But by the fourth quarter, a few—led by Spirit—did. The big story last quarter was indeed stronge