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BTS 57-17

Monday, December 11, 2017

BTS Contact: Dave Smallen

Tel: 202-366-5568

BTS Statistics Release: 3rd Quarter 2017 Airline Financial Data

U.S. scheduled passenger airlines reported an after-tax net profit of $3.7 billion in the third quarter of 2017, down from $4.7 billion in the second quarter and down from $3.8 billion in the third quarter of 2016, the U.S. Department of Transportation's Bureau of Transportation Statistics (BTS) reported today (Table 1).

Fig1

The 24 U.S. scheduled service passenger airlines reported an after-tax net profit as a group for the 18th consecutive quarter.

In addition to the after-tax net profit of $3.7 billion based on net income reports, the scheduled service passenger airlines reported a $6.3 billion pre-tax operating profit in the third quarter of 2017, down from $7.7 billion in the second quarter and down from $7.2 billion in the third quarter of 2016. The airlines reported a pre-tax operating profit - as a group - for the 26th consecutive quarter (Tables 1, 4).

Net profit or loss and operating profit or loss are two different measures of airline financial performance. Net profit or loss includes non-operating income and expenses, nonrecurring items or income taxes. Operating profit or loss is calculated from operating revenues and expenses before taxes and other nonrecurring items.

Total operating revenue for all U.S. passenger airlines in the July-September third-quarter of 2017 was $45.6 billion. Airlines collected $34.2 billion from fares, 75.0 percent of total third-quarter operating revenue (Table 4).

Total operating expenses for all passenger airlines in the third-quarter of 2017 were $39.3 billion, of which fuel costs accounted for $6.8 billion, or 17.3 percent, and labor costs accounted for $13.6 billion, or 34.6 percent (Table 4).

In the third quarter, scheduled passenger airlines collected a total of $1.2 billion in baggage fees, 2.7 percent of total operating revenue, and $720.2 million from reservation change fees, 1.6 percent of total operating revenue. Fees are included for calculations of net income, operating revenue and operating profit or loss (Table 4).

Baggage fees and reservation change fees are the only ancillary fees paid by passengers that are reported to BTS as separate items. Other fees, such as revenue from seating assignments and on-board sales of food, beverages, pillows, blankets, and entertainment are combined in different categories and cannot be identified separately.

See airline financial data press releases and the airline financial databases for historical data.

Domestic

From domestic operations, U.S. scheduled passenger airlines reported an after-tax net profit of $2.6 billion in the third quarter of 2017, down from $4.1 billion in the second quarter and virtually unchanged from $2.6 billion in the third quarter of 2016 (Table 2).

Fig2

The 24 U.S. scheduled service passenger airlines reported an after-tax net profit from domestic operations as a group for the 18th consecutive quarter.

In addition to the domestic after-tax net profit of $2.6 billion based on net income reports, the scheduled service passenger airlines reported a $4.7 billion pre-tax operating profit from domestic operations in the third quarter of 2017, down from $6.5 billion in the second quarter and down from $5.4 billion in the third quarter of 2016. The airlines reported a pre-tax operating profit from domestic operations - as a group - for the 26th consecutive quarter (Table 2).

Total operating revenue from domestic operations for all U.S. passenger airlines in the July-September third-quarter of 2017 was $33.6 billion. Airlines collected $24.1 billion from fares, 71.7 percent of total third-quarter operating revenue (Tables 2, 5).

Total operating expenses from domestic operations for all passenger airlines in the third-quarter of 2017 were $28.9 billion, of which fuel costs accounted for $4.5 billion, or 15.7 percent, and labor costs accounted for $9.7 billion, or 33.6 percent (Tables 2, 5).

In the third quarter, passenger airlines collected from domestic operations a total of $950 million in baggage fees, 2.8 percent of total operating revenue, and $465 million from reservation change fees, 1.4 percent of total operating revenue (Tables 2, 5).

International

The 17 U.S. scheduled passenger airlines that operate internationally reported an after-tax net profit of $1.1 billion in the third quarter of 2017 from their international operations, up from $613 million in the second quarter and down from $1.2 billion in the third quarter of 2016 (Table 3).

Fig3

The 17 U.S. scheduled service passenger airlines reported an after-tax net profit from international operations as a group for the 11th consecutive quarter.

In addition to the international after-tax net profit of $1.1 billion based on net income reports, the scheduled service passenger airlines reported a $1.6 billion pre-tax operating profit in the third quarter of 2017 from their international operations, up from $1.2 billion in the second quarter and down from $1.8 billion in the third quarter of 2016. The airlines reported a pre-tax operating profit from international operations - as a group - for the 22nd consecutive quarter (Table 3).

Total operating revenue from international operations for all U.S. passenger airlines in the July-September third-quarter of 2017 was $12.0 billion. Airlines collected $10.1 billion from fares, 84.3 percent of total third-quarter operating revenue (Tables 3, 6).

Total operating expenses from international operations for all passenger airlines in the third-quarter of 2017 were $10.4 billion, of which fuel costs accounted for $2.3 billion, or 21.8 percent, and labor costs accounted for $3.9 billion, or 37.3 percent (Tables 3, 6).

In the third quarter, passenger airlines collected from international operations a total of $265 million in baggage fees, 2.2 percent of total operating revenue, and $256 million from reservation change fees, 2.1 percent of total operating revenue (Tables 3, 6).

3rd Quarter Margins for All Scheduled Passenger Airlines

All U.S. scheduled passenger airlines reported a combined net income margin of 8.2 percent in the third quarter of 2017, down from a net margin of 8.6 percent in the third quarter of 2016. Net margin is the net income or loss as a percentage of operating revenue. These airlines reported an operating profit margin of 13.9 percent in the third quarter of 2017, down from 16.3 percent in the third quarter of 2016. Operating margin is the operating profit or loss as a percentage of operating revenue (Table 4).

Reporting notes

Additional airline financial data can be found on the BTS website, including industry statistics for other individual low-cost and regional airlines. See tables for operating profit/loss, operating revenue and fuel cost and consumption. See the BTS financial databases for more detailed data.

By regulation, for the quarter ending Sept. 30, airlines that operate at least one aircraft that has more than 60 seats or the capacity to carry a payload of passengers, cargo and fuel weighing more than 18,000 pounds must report financial data to BTS by Nov. 15. The airline filings are subject to a process of quality assurance and data validations before release to the public.

Revised carrier data and late data filings will be made available monthly on TranStats on the Monday following the second Tuesday of the month. All data are subject to revision. BTS will release fourth-quarter 2017 data on May 7.

Table 1. Quarterly U.S. Scheduled Service Passenger Airlines Financial Reports

Reports from 24 airlines in 3Q 2017

(millions of dollars)

	3Q 2016	4Q 2016	1Q 2017	2Q 2017	3Q 2017	Dollar Change 2Q2016-2Q2017
Net Income	3,825	2,010	1,939	4,671	3,743	-82
Operating Profit/Loss	7,248	4,102	3,267	7,734	6,335	-914
Operating Revenue*	44,406	41,103	39,696	46,190	45,616	1,211
Fares	33,325	30,450	29,387	34,633	34,200	875
Baggage Fees	1,101	1,029	1,027	1,177	1,216	115
Reservation Change Fees	731	661	724	738	720	-11
Operating Expenses	37,158	37,001	36,428	38,455	39,282	2,124
Fuel	6,096	5,844	5,938	6,450	6,801	705
Labor	12,748	12,955	12,784	13,616	13,589	841

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

* Passenger airline operating revenue includes four other categories. 1) Transport-related is revenue from services which grow from and are incidental to the air transportation services performed by the air carrier. Examples are in-flight onboard sales (food, liquor, pillows, etc), code share revenues, revenues from associated businesses (aircraft maintenance, fuel sales, restaurants, vending machines, etc). 2) Miscellaneous operating revenue includes pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees. 3) Cargo revenue from transporting cargo in belly of aircraft. 4) Mail revenue from transporting mail in belly of aircraft. See the P1.2 database http://www.transtats.bts.gov/Fields.asp?Table_ID=295

Table 2. Domestic Quarterly U.S. Scheduled Service Passenger Airlines Financial Reports Reports from 24 airlines in 3Q 2017

(millions of dollars)

Domestic Operations	3Q 2016	4Q 2016	1Q 2017	2Q 2017	3Q 2017	Dollar Change 2Q2016-2Q2017
Net Income	2,584	1,766	1,853	4,058	2,638	54
Operating Profit/Loss	5,441	3,533	2,991	6,502	4,726	-715
Operating Revenue*	32,935	31,622	30,395	34,957	33,650	715
Fares	23,598	22,628	21,730	25,245	24,117	520
Baggage Fees	868	822	818	930	950	83
Reservation Change Fees	468	439	477	481	465	-3
Operating Expenses	27,495	28,089	27,404	28,455	28,924	1,429
Fuel	4,080	4,038	4,069	4,320	4,548	468
Labor	9,172	9,512	9,370	9,800	9,726	554

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

Table 3. International Quarterly U.S. Scheduled Service Passenger Airlines Financial Reports

Reports from 17 airlines in 3Q 2017

(millions of dollars)

International Operations	3Q 2016	4Q 2016	1Q 2017	2Q 2017	3Q 2017	Dollar Change 2Q2016-2Q2017
Net Income	1,225	244	86	613	1,105	-120
Operating Profit/Loss	1,806	569	277	1,233	1,609	-197
Operating Revenue*	11,470	9,482	9,301	11,233	11,967	496
Fares	9,727	7,822	7,656	9,388	10,083	355
Baggage Fees	233	207	209	247	265	32
Reservation Change Fees	263	222	246	257	256	-8
Operating Expenses	9,665	8,913	9,024	10,000	10,358	693
Fuel	2,016	1,806	1,868	2,130	2,253	237
Labor	3,576	3,443	3,414	3,816	3,863	287

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

Table 4. Quarterly U.S. Scheduled Passenger Airlines Revenue, Expenses and Profits

Reports from 24 airlines in 3Q 2017

(millions of dollars)

	3Q 2016	3Q 2017	Change	2016-2017 % Change	% of 3Q 2017 Revenue or Expense Total
Operating Revenue
Passenger Fares (scheduled/charter)	33,325.8	34,200.1	874.3	2.62	74.97
Cargo	664.1	751.5	87.4	13.16	1.65
Baggage	1,100.8	1,215.5	114.7	10.42	2.66
Reservation Changes	730.8	720.2	-10.6	-1.45	1.58
Transport-Related*	7,248.1	7,251.4	3.3	0.05	15.90
Other**	1,336.4	1,477.5	141.1	10.56	3.24
Total Operating Revenue***	44,406.0	45,616.2	1,210.2	2.73	100.00
Operating Expense
Fuel	6,096.1	6,800.6	704.5	11.56	17.31
Labor	12,748.0	13,589.0	841.0	6.60	34.59
Rentals	2,227.5	2,259.0	31.5	1.41	5.75
Depreciation & Amortization	2,116.6	2,305.8	189.2	8.94	5.87
Landing Fees	778.6	812.0	33.4	4.29	2.07
Maintenance Materials	607.9	596.1	-11.8	-1.94	1.52
Transport-Related*	4,614.7	4,831.2	216.5	4.69	12.30
Other****	7,969.7	8,087.8	118.1	1.48	20.59
Total Operating Expense	37,159.1	39,281.7	2,122.6	5.71	100.00
Profits or Losses
Operating Profit	7,246.9	6,334.5	-912.4	-12.59	N/A
Operating Margin# (%)	16.3	13.9	-2.4	N/A	N/A
Nonoperating Income/(Expense)##	-1,088.7	-510.8	577.9	-53.08	N/A
Pre-Tax Income	6,158.2	583.7	-5,574.5	-90.52	N/A
Income Tax Benefit/(Expense)	-2,349.2	-2,080.7	268.5	-11.43	N/A
Other Income/(Expense)	0.0	0.0	0.0	0.0	N/A
Net Income	3,809.0	3,743.1	-65.9	-1.73	N/A
Net Margin### (%)	8.6	8.2	-0.4	N/A	N/A

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

* Transport-Related is revenue/expenses from services which grow from and are incidental to the air transportation services performed by the air carrier. Examples are in-flight onboard sales (food, liquor, pillows, etc), code share revenues, revenues and expenses from associated businesses (aircraft maintenance, fuel sales, restaurants, vending machines, etc).

** Other revenue includes miscellaneous operating revenue (including pet transportation, sale of frequent flyer award miles to airline business partners and standby passenger fees) and public service revenues subsidy.

*** Based on U.S. Department of Transportation accounting standards, Total Operating Revenues are overstated by code share revenues which are included in both the mainline Transport-Related Revenues and the code share Passenger Revenue. Code share revenues are expensed out in the mainline Transport-Related Expense to allow a true Operating Profit(Loss). This reporting may understate all components of operating revenue, including Passenger Revenue, as a percentage of Total Operating Revenue.

**** Other expense includes purchase of materials such as passenger food and other materials; and purchase of services such as advertising, communication, insurance, outside flight equipment maintenance, traffic commissions and other services.

^# Operating margin is the operating profit or loss as a percentage of operating revenue

^## Nonoperating Income and Expense includes interest on long-term debt and capital leases, other interest expense, foreign exchange gains and losses, capital gains and losses and other income and expenses.

^### Net margin is the net income or loss as a percentage of operating revenue.

Table 5. Domestic Quarterly U.S. Scheduled Passenger Airlines Revenue, Expenses and Profits

Reports from 24 airlines in 3Q 2017

(millions of dollars)

	3Q 2016	3Q 2017	Change	2016-2017 % Change	% of 3Q 2017 Revenue or Expense Total
Operating Revenue
Passenger Fares (scheduled/charter)	23,598.4	24,117.4	519.0	2.20	71.67
Cargo	235.0	251.4	16.4	6.98	0.75
Baggage	867.6	950.1	82.5	9.51	2.82
Reservation Changes	467.6	464.7	-2.9	-0.62	1.38
Transport-Related*	6,703.4	6,693.3	-10.1	-0.15	19.89
Other**	1,063.6	1,172.8	109.2	10.27	3.49
Total Operating Revenue***	32,935.6	33,649.7	714.1	2.17	100.00
Operating Expense
Fuel	4,080.2	4,547.7	467.5	11.46	15.72
Labor	9,171.9	9,726.0	554.1	6.04	33.63
Rentals	1,717.2	1,711.0	-6.2	-0.36	5.92
Depreciation & Amortization	1,517.4	1,616.2	98.8	6.51	5.59
Landing Fees	588.8	603.2	14.4	2.45	2.09
Maintenance Materials	464.4	456.9	-7.5	-1.61	1.58
Transport-Related*	4,438.6	4,638.7	200.1	4.51	16.04
Other****	5,516.0	5,624.0	108.0	1.96	19.44
Total Operating Expense	27,494.5	28,923.7	1,429.2	5.20	100.00
Profits or Losses
Operating Profit	5,441.1	4,726.0	-715.1	-13.14	N/A
Operating Margin# (%)	16.5	14.0	-2.5	N/A	N/A
Nonoperating Income/(Expense)##	-1,002.7	-415.7	587.0	-58.54	N/A
Pre-Tax Income	4,438.4	4,310.3	-128.1	-2.89	N/A
Income Tax Benefit/(Expense)	-1,854.2	-1,672.0	182.2	-9.83	N/A
Other Income/(Expense)	0.0	0.0	0.0	0.0	N/A
Net Income	2,584.2	2,638.4	54.2	2.10	N/A
Net Margin### (%)	7.8	7.8	0.0	N/A	N/A

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

^#Operating margin is the operating profit or loss as a percentage of operating revenue

^### Net margin is the net income or loss as a percentage of operating revenue.

Table 6. International Quarterly U.S. Scheduled Passenger Airlines Revenue, Expenses and Profits

Reports from 17 airlines in 3Q 2017

(millions of dollars)

	3Q 2016	3Q 2017	Change	2016-2017 % Change	% of 3Q 2017 Revenue or Expense Total
Operating Revenue
Passenger Fares (scheduled/charter)	9,727.4	10,082.7	355.3	3.65	84.26
Cargo	429.1	500.1	71.0	16.55	4.18
Baggage	233.2	265.4	32.2	13.81	2.22
Reservation Changes	263.2	255.5	-7.7	-2.93	2.14
Transport-Related*	544.7	558.1	13.4	2.46	4.66
Other**	272.8	304.7	31.9	11.69	2.55
Total Operating Revenue***	11,470.4	11,966.5	496.1	4.33	100.00
Operating Expense
Fuel	2,015.9	2,252.9	237.0	11.76	21.75
Labor	3,576.1	3,863.0	286.9	8.02	37.29
Rentals	510.3	548.0	37.7	7.39	5.29
Depreciation & Amortization	599.2	689.6	90.4	15.09	6.66
Landing Fees	189.8	209.0	19.2	10.12	2.02
Maintenance Materials	143.5	139.2	-4.3	-3.00	1.34
Transport-Related*	176.1	192.5	16.4	9.31	1.86
Other****	2,453.7	2,463.8	10.1	0.41	23.79
Total Operating Expense	9,664.6	10,358.0	693.4	7.17	100.00
Profits or Losses
Operating Profit	1,805.8	1,608.5	-197.3	-10.93	N/A
Operating Margin# (%)	15.7	13.4	-2.3	N/A	N/A
Nonoperating Income/(Expense)##	-86.0	-95.1	-9.1	10.58	N/A
Pre-Tax Income	1,719.8	1,513.4	-206.4	-12.00	N/A
Income Tax Benefit/(Expense)	-495.0	-408.7	86.3	-17.43	N/A
Other Income/(Expense)	0.0	0.0	0.0	0.0	N/A
Net Income	1,224.8	1,104.7	-120.1	-9.81	N/A
Net Margin### (%)	10.7	9.2	-1.4	N/A	N/A

Source: Bureau of Transportation Statistics, Form 41; Schedules P1.2 and P6

# Operating margin is the operating profit or loss as a percentage of operating revenue

## Nonoperating Income and Expense includes interest on long-term debt and capital leases, other interest expense, foreign exchange gains and losses, capital gains and losses and other income and expenses.

### Net margin is the net income or loss as a percentage of operating revenue.