What does the future of aviation look like in 2022? Airlines with positive profit margins should maintain or improve their efficiency and leverage to maximize profitability ensuring that the positive profit margin is maintained or improved. While there have been a number of economic and geopolitical challenges during this decade, such as those impacting Brazil and Russia, globally it has been a recession-free decade. As a Premium user you get access to the detailed source references and background information about this statistic. While the pandemic has changed things drastically, United will undoubtedly be hoping to return to its glory days as soon as possible. Over the decade though airline expansion in Asia means it is by far the biggest region as 2019 draws to a close. Consumers Following the worst year on record for the aviation industry Here are the top five. Figures prior to 2016 were taken from previous reports. A lock ( LockA locked padlock ) or https:// means youve safely connected to the .gov website. You can learn more about the cookies we use here. Long-established airlines regularly yelp that the Gulf newcomers get state handouts in the form of reduced landing fees and subsidised fuel from the governments of Dubai, Qatar and Abu Dhabi, though the charges are largely unwarranted. 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(October 5, 2021). What will it take to Decarbonise Aviation? stream Fort Worth, Texas, United States. But, just because a company has a higher average gross margin doesnt mean it is automatically a better investment than another. The calculations and analysis are based on research on 10 prominent US airlines for the 2019 Oliver Wyman Airline Economic Analysis. The Airline Business World Airline Rankings covering the 150 biggest airlines showed collective operating losses of $15 billion in 2008 and net losses in excess of $30 billion. IATA figures for annual industry net profits - including the $25.9 billion it projects airlines will collectively make in 2019 - show an unbroken decade of profits in 2010. American Airlines Group net profit margin as of December 31, 2022 is 0.26%. Please do not hesitate to contact me. This is a good sign for the airline's profitability and shows efficient use of resources. October 5, 2021. The aviation industry has always been a turbulent one, with airlines constantly on their toes to try and turn a profit. The higher rates of seat and ASK capacity growth reflect a move to larger aircraft types or higher-density configurations, as well as longer sector lengths. Delta Air Lines posted net profits of $29.7bn across the first nine of the decade. Join over 45k+ readers and instantly download the free ebook: 7 Steps to Understanding the Stock Market. Indeed only one of the 10 biggest airlines in 2009 made it into the black that year. Profit margins range between 2.7% and 42.9% across routes. Gross Profit Margin = (Revenue - Cost of Goods Sold) / Revenue This number will be a percentage, where the higher the percentage the more profitable a company is on delivering their goods or services. As a result low-cost carriers now account for well over half of all seat capacity on Indian routes, Cirium schedules data shows. So, for $HURN wed calculate gross profit as: = Total revenues Direct costs Reimbursable expenses= 871,014 592,428 26,918= 251,668 thousand, = Gross Profit / (Toral revenues and reimbursable expenses Reimbursable expenses)= 251,668 / (871,014 26,918)= 29.8%. As per IATA, the airline industry losses reduced to -$9.7 billion in 2022, a significant improvement from the losses of $137.7 billion (-36.0% net margin) in 2020 and $42.1 billion (-8.3% net margin) in 2021. The phase one pact, aimed at settling two years of trade tensions between Israeli flag-carrier El Al has generated a full-year operating profit of $113 million, and ended the period with a net surplus of $109 million. 4 0 obj The last two reasons have been the driving force behind deployments in the airline industry. To put it in context: Delta Air Lines, once again the most profitable airline group in the world in 2019 with a net profit of $4.8 billion, this year posted a net loss of $5.7 billion in the . Management and/or analysts might have better reasoning to why this is the case rather than not, in which case the company reports Gross Margins above 50%; my point is that a good analysis of gross margin should require a judgment call especially if comparing to peers when some metrics have the possibility of not being 100% clear. Europe 's weak airline profit margins are not the result of weak traffic growth. Globally, operating profit margins for leading players have typically been in the midteenseven exceeding 20% for some carriers. Domestic operations, includes 25 U.S. airlines: After-tax domestic net profit (net income). You can learn more about the cookies we use here, Airline Business Covid-19 recovery tracker. While airlines in the United States stretched their unbroken string of operating profits to eight years in 2018, theyre facing tough choices moving forward as costs rise and margins narrow. During 2000 to 2009, a tumultuous period book-ended by the 9/11 terror attacks and the global financial crisis, airlines turned a profit collectively in just three of the 10 years. Demand for air travel remains high in 2023. Figures prior to 2016 were taken from previous reports. By 2015, capacity growth was peaking above four percent, while GDP was 2.9 percent. Delta had the industry's highest Seat Profit Margin (SPM) in 2017. The largest of these, Emirates, has more than trebled its revenues since 2009. Now that we know how to calculate gross profit margin, its time to think about the implications of the metric. Profit margins have an average of about 13.3% across routes. This is significantly better than losses of $42.0 billion and $137.7 billion that were realized in 2021 and 2020 respectively. Gross margin improved to 80.04 % in 4. In 2012 they made profits of only $4 for every passenger carried. This is due to the nature of their contracts being serviced to various U.S. government entities. Domestic results for 25 scheduled airlines, International results for 19 scheduled U.S. airlines. The Atlanta-based megacarrier recorded a net income of $4.76 billion in 2019 with a revenue of $47 billion, a huge margin of 10%. But they rapidly turned into bloated nationalised industries that regarded profit as a dirty word. Industry Mergers: Airline industries have already, and will continue to merge operations in order to keep costs lower and try to aid in profit margin increases. His background in political science and economics gives him unique insight into issues surrounding international travel and governmental regulations. Profit from the additional features of your individual account. Compare this with the high correlation in gross profitability. This means that calculating gross margins for potential investments is likely to be a very worthwhile experience, and that companies with sustained higher gross margins than peers are more likely to sustain those moving forwardwhether because of inherent competitive advantages or otherwise. The rapid spread of low-cost carriers in turn has prompted price competition and more sophisticated in-house lower fare units or product offerings from network carrier groups. Reporting notes Gross profit margin (gross margin) is the ratio of gross profit (gross sales less cost of sales) to sales revenue. Airline Financial Data, United States Department of Transportation, Introduction to Transportation Statistics, Freight Logistics Optimization Works (FLOW), Government Transportation Financial Statistics, Local Area Transportation Characteristics (LATCH dataset), National Transportation Knowledge Network, Advisory Council on Transportation Statistics, Transportation Services Index 2023 Release Schedule, Fares: $86.7 billion, 66.7%, compared to 64.5% in 2020, Fuel: $23.0 billion 15.6%, compared to 9.8% in 2020, Labor: $52.6 billion 35.7%, compared to 39.7% in 2020. Airlines continued to receive life support from their governments, totaling $243 billion since the beginning of the pandemic. American Airlines brought in $1.24 billion in baggage fees last year, the highest among the 11 U.S. carriers who reported to the BTS. I like using the free website bamsec.com to quickly pull up a companys financial documents. Oil prices dipped further, reaching their lowest level for more than decade in early 2016. Solutions Delivered The devised PESTLE analysis for airline helped the airline industry client to assess all the external marketing factors affecting their business decisions. The World Airline Rankings showed the 100 biggest airline group posted collective operating profits of almost $50 billion in 2018. United was next at $933.3 million and Delta came in third with $817.1 million collected. These higher costs were only partially offset by fuel surcharges the airlines implemented to mitigate the higher fuel costs. But that roughly halved in 2017 and 2018 as the big Gulf carriers began moderating growth for a variety of internal and external reasons, and seat capacity on Middle East routes will be increased only fractionally in 2019 compared with the previous year. This number will be a percentage, where the higher the percentage the more profitable a company is on delivering their goods or services. A few surprising takeaways were that past revenue growth was generally NOT indicative of future revenue growth; future revenue growth was pretty random. Net Airline capacity rose at its quickest rate over the second half of the decade as fuel prices relented. "Ebit Margin of Commercial Airlines Worldwide from 2010 to 2022, by Region. The industry began unregulated, primarily used as a means of transporting mail. From rising competition and consumer demands, to labor deficits and union strikes, to fluctuations in fuel prices, airline decision-makers need to constantly adjust . You can only download this statistic as a Premium user. Get full access to all features within our Business Solutions. Emirates & Philippine Airlines Reveal Interline Deal To Increase Passenger Connectivity, Over 9 Million Passengers Flew To Mexico In January, 18 Destinations: AirAsia X's Summer Operations From Kuala Lumpur, Qantas Says Too Many Airbus A380s Are Returning From Storage At Once, Vistara Brand To Discontinue After Merger With Air India, Why Republic Airways Is Suing Flight Students. IATA. Industrywide, IATA is forecasting full-year global revenue of $838 billion, compared with $899 billion predicted in June. More bankruptcies Not all airlines have been. Pranjal is enthusiastic about new aircraft types and has his stories regularly picked up by renowned publications including Forbes. 4Q 2021 domestic operating expenses: $34.3 billion, of which: Share of total 4Q 2021 domestic operating expenses: Fuel: $5.5 billion, 16.2%, compared to 8.2% in 4Q 2020, Labor: $11.8 billion, 34.5%, compared to 38.1% in 4Q 2020, Compared to $149 million profit in 3Q 2021. Thats when margins began to fall, despite lower oil prices. But though the industry has done much to connect the world, it has done little to line the pockets of the airlines themselves. Passenger numbers for the leading 100 carriers topped 3.8 billion in 2018 and, even while traffic growth slowed this year, are likely to end the decade at around the 4 billion mark. With a focus on developments across the airline industry as a whole, and within Europe in particular, Graham has also edited FlightGlobal daily papers from events such as the IATA AGM, moderates industry panels and co-presents the Airline Business podcast. The decade began with airlines stabilising their financial performance from the major hits taken in the fallout from the financial crisis. Combining it with an understanding of operating margin can help you find businesses which excel at what they do, and hopefully provide great investment opportunities for the decades to come. Airlines will have to figure out a way to cut fuel usage as they grow capacity, or face rising carbon offset payments under the Carbon Offsetting and Reduction Scheme for International Aviation. Airline Industry recorded Pre-Tax Loss compare to Pre-Tax Income achieved in previous quarter. Maybe surprising was the higher gross margins in financials and healthcare, with the average sitting around 45% across the entire market. Commercial airlines - global EBIT margin 2010-2022 Published by Statista Research Department , Feb 3, 2023 Following a dramatic increase in 2015, the EBIT margin of commercial airlines. Rise and fall in market prices are affectedd by supply, demand, and the cost of goods/services sold. As the traditional revenue streams through ticket sales come under . Shell Aviation: What will it take to Decarbonise Aviation? (Note that Depreciation and Amortization is also included in Operating Profit/Income). That compares with just one operator freight company FedEx Express - which posted an operating in excess of $1 billion in 2009. Nearly two-thirds of that stemmed from North American carriers, with around a third attributable to Asia-Pacific operators. Of the major European groups Lufthansa and IAG have both expanded through acquisition. In 2018 there were 17 budget brands appearing among the top 50 biggest airlines alone and four carriers Southwest Airlines, Ryanair, EasyJet and IndiGo featured among the top 10. Net after-tax profits for airlines and, to a lesser extent, Aerospace Original Equipment Manufacturers (OEMs) currently track lower than a composite of all manufacturing companies. Learn more about how Statista can support your business. See the BTS financial databases for more detailed data including numbers for individual airlines. Simply calculating a companys gross margin can differ depending on the industry; sometimes instead of Cost of Goods youll see Cost of Sales. Notably growth on services touching China increased by 150% - at an annual compound growth rate of just shy of 10%. The liberalisation of air travel in the 1980s led to competition from upstarts to the state behemoths, many of which were privatised wholly or partly. Chart. Share of total 4Q 2021 domestic operating revenue: Fares: $23.2 billion, 68.6%, compared to 61.4% in 4Q 2020. statistic alerts) please log in with your personal account. Unless, of course, something unexpected causes the skies to darken once again. Aaron is a senior manager in the transportation practice who handles Oliver Wyman'saviation business intelligence offering, PlaneStats.com. Schiphols operator says this is a necessary intermediate step as it FlightGlobal is the global aviation communitys primary source of news, data, insight, knowledge and expertise. An official website of the United States government Here's how you know. First of all, its obvious that the higher gross margins are better. Norwegian had 18 Max jets in service at the time of the aircrafts global grounding. In part, the need to carefully manage the costs you . Domestic Airlines in Australia industry outlook (2022-2027) poll Average industry growth 2022-2027: x.x lock Purchase this report or a membership to unlock the average company profit margin for this industry. Moreover, Europe 's RPK growth has closely tracked the global average for a number of years. Statista. Statista. Full-service . The latter types opened up a range of lower-density route pairings from western Europe to the east coast of the USA. In 2021, due to the coronavirus outbreak, commercial airlines estimate. More about profit margin . The World Airline Rankings showed the 100 biggest airline group posted collective operating profits of almost $50 billion in 2018. Using the EDGAR Full Text Search to find instances where other companies mention Booz Allen Hamilton in their 10-ks, I found a company who considered themselves to be direct competitors to $BAH, a company called Atlas Technical Consultants. Compare AAL . 2009 - 20123 years. You may opt-out by. Seat capacity has been increased 3.2% - the slowest rate of annual growth across the decade while ASK capacity growth of 3.6% matches that of 2012, the only other year of sub-5% growth by that metric. Iata projects that airlines will collectively earn net income of $29.3bn on revenues of $727bn generating the strongest profit margins since the mid-1960s. See the tables that accompany this release on the BTS website for additional 2020 annual (Tables 1-6) and fourth-quarter (Tables 7-12) financial results. Gross profit margin is one of the three main margins formulas in a companys income statement which measures a companys efficiency in creating profitability. Given the potential for a global economic slowdown in 2019 and 2020, reversing the decline in profit margins will become more of a challenge. ", IATA, Net profit of commercial airlines worldwide from 2006 to 2022 (in billion U.S. dollars) Statista, https://www.statista.com/statistics/232513/net-profit-of-commercial-airlines-worldwide/ (last visited March 05, 2023), Net profit of commercial airlines worldwide from 2006 to 2022 (in billion U.S. dollars) [Graph], IATA, October 5, 2021. At the end of 2009 IndiGo carried just over 6 million passengers. Given the pressures of fuel prices and several other factors, Delta's 10% profit margin is considered a benchmark and sets the airline apart from its competition in the US. US airlines ejoyed eight straight years of profitability. . BTS will release first-quarter 2021 data on June 14. "Profit margins are at all-time record . Airlines have doubled seat capacity on services to and within Asia-Pacific, Cirium schedules data showing seat capacity of 2.36 billion for the 12 months ending December 2019. All rights reserved. These flag carriers were regarded as important strategic businesses with monopoly powers that conferred national pride and international prestige. One caveat: While margins have tightened since 2015, they are still higher than they were from 2010 to 2013, when they were six percent or lower and oil prices were consistently above $80. Usually, if I were to see a company like this, I would just take Cost of Revenue and subtract that from Revenue to get Gross Profit. This formula can be useful for uncovering if a company has a competitive advantage, more on that later. Operating expenses include things like: Selling and marketing is also called SG&A, and so another easy way to identify the Gross Margin is to look for the profit number above SG&A-type expenses. 2021 Annual Results for All 25 Scheduled Passenger Airlines. That year, GDP grew 2.5 percent versus capacity growth well above three percent. Based on current trends and pressures, the operating margin for US airlines is expected to narrow to between five and six percent in 2019 a margin that is less than 40 percent of the. IAG is the parent company behind British Airways, Iberia, Vueling, and several other European airline companies. IATA figures show passenger load factors steadily rising across the decade, topping 82% in 2019. instrumental in achieving . Seat capacity routes touching the Middle East more than doubled over the decade. However, gross profit is before operating profit, which does not account for the expenses required to operate the business. However, a comparison between peers assumes companies are going after the same market or products/services. While brands in the US market have been lost through the consolidation, in the rest of the world names and operations have largely remained intact even where acquisitions have taken place. Industry margins reached 15 percent, helped by oil prices that averaged around $50 a barrel. Delta Air Lines, the most profitable airline group of the past decade, has alone amassed almost $30 billion in net profits over the first nine years of this decade - with another strong profit set to follow for 2019. P&L, Vision, Strategy, Network Planning & Distribution, NDC Worldwide IATA Partnership & Alliances, Cutting-edge visionary with over +25 years of quantifiable international experience in the Aviation and IT Digital Transformation industry, strategically focused, and with exceptional leadership skills. This is in remarkable contrast to the previous decade. Low-cost carriers devastated their model of feeding short-haul passengers onto more lucrative long-haul services. Register in seconds and access exclusive features. To calculate gross margin, start at the very top of the income statement: Gross Profit Margin = (Revenue Cost of Goods Sold) / Revenue. The particularly strong airline profits - and passenger traffic demand - over the second half of the last decade for airlines in part reflects a period of lower fuel costs. Global air traffic - number of flights 2004-2022, Global air traffic - annual growth of passenger demand 2006-2022. In other words, part of $BAHs revenue should include the compensation from billable expenses, which do appear to be required as part of delivering the service (defined as direct subcontractor expenses, travel expenses, and other expenses incurred to perform on contracts in the 10-k). For one, we want to make sure we are comparing gross margins between peers. among other factors. Seven of the 100 biggest airlines by passenger number in 2009 have ceased operations during the last decade, including two casualties this year after the grounding in April of Indias Jet Airways and UK leisure Thomas Cook Airlines.. It is profit after Cost of Goods Sold or Cost of Sales. This means that when they say, past performance is not a guarantee of future results, this is especially true for high revenue growth rates! 4Q 2021 international operating revenue: $7.4 billion, of which: Share of 4Q 2021 international operating revenue: Fares: $5.2 billion, 70.6%, compared to 54.5% in 4Q 2020, Baggage fees: $290 million, 3.9%, compared to 5.0% in 4Q 2020, Reservation change fees: $28 million, 0.5%, compared to 0.6% in 4Q 2020. Net profit of commercial airlines worldwide from 2006 to 2022 (in billion U.S. dollars) [Graph]. (October 5, 2021). While prices subsequently recovered, they have remained relatively stable since. This was perhaps best typified by the previously unthinkable arrival of Ryanair at Lufthansas Frankfurt fortress in 2017. Airline margins stabilizing in difficult business environment In last week's Airlines Financial Monitor we reported on an apparent stabilization in operating margins at the industry level . By continuing to browse this site you are agreeing to our use of these cookies. Unfortunately, they dont mention any billable expenses, but lets do more digging. Let us know in the comments! The airline industry has seen sustained profitability since 2010, with global profits reaching a peak of $38 billion in 2017, according to the International Air Transport Association. Meanwhile, a new breed of state airlines, based mainly in the Persian Gulf, has brought more competition for long-haul passengers. Profit from the additional features of your individual account. The average operating profit margin of the whole airline industry has been 2.8% in the last 10 years ( Figure 1) (IATA, 2014). But even in Asia profits are expected to drop next year by USD200 million compared to estimated 2011 levels and by USD5.7 billion from 2010 levels. That was driven by rapid expansion over the first seven years of the decade at an average annual growth rate of 9.5%. In those six decades passenger kilometres (the number of flyers multiplied by the distance they travel) have gone from almost zero to more than 5 trillion a year. Cleveland, Ohio, United States. x][%m~`y tm t6 AI6#J^,0JI#)J}7m~y}yo??}wv[E'7v7cIF}__O>>}V".2;mdbVqfc!&o]fs|a0gOsr@j#R?^H?>2/~uO_aOi?MXx0: ZG7Yv^=J U&%Cn_s\F* r~1fN| vO@AM?>vTb`G fU5"f KVJO>Tw= }G|/ANA*5OMv#1NG0Ua6Cuvk+0OevzKo)9K_9w1_}WKL}fKf8 _F+/=A1=8.Cx5eW{~7ru_\U. To get a good sense of what makes a good gross margin, we will examine the average gross profit margin by industry over 20 years of data from the S&P 500. That had increased ten-fold by the end of 2018 to more than 61 million. endobj We provide news, data, analytics and advisory services to connect the aviation community globally and help organisations shape their business strategies, identify new opportunities and make better decisions faster. Total 4Q 2021 operating expenses: $42.1 billion: Share of total 4Q 2021 operating expenses: Fuel: $7.3 billion, 17.4%, compared to 9.2% in 4Q 2020, Labor: $14.7 billion, 34.9%, compared to 39.2% in 4Q 2020, Compared to $2.6 billion profit in 3Q 2021, Compared to $81 million profit in 3Q 2021. They join the likes of Indian carrier Kingfisher, Mexicana, Spanair, UK charter carrier Monarch Airlines and Air Berlin in ceasing operations though attempts to revive Jet continue. Dig deeper:Jumbo jets v swallows: comparing long-distance flights with migrating birds (December 2013)Why the world's biggest airport should be dug up and moved (December 2013)Asia's airports soar while America's leave passengers reaching for their sick-bags (April 2013), They were intended to treat diabetes. Scrolling down to the companys Consolidated Statements of Income for their latest 10-k, we can quickly find the Revenue and Cost of Revenue at the top: You can see that Gross Profit is clearly displayed here, with its value being the difference of Revenues subtracted by Cost of revenue (COR). While the pandemic has dragged the carrier into the red for the first time in memory, there is little doubt they will bounce back soon. And though profits levels will have fallen in 2019 as air travel demand has softened, the industry remains by its historical standards, in pretty profitable shape. ASK capacity growth peaking at 7% in 2018. Prediction 3 :- expanded industry would then have to compete more vigorously for passengers to fill seats, and fares would, thus, inevitably decline. Warren Buffett has become one of the airline industry's biggest investors after calling the business a "death trap" for investors back in 2013. . Any income statement will have 3 profit metrics, which correspond with the 3 margins formulas: The easiest to remember is that gross is at the top, and again is the measure of how much it costs a company to provide a good or service. The past decade has been the most profitable in airline history, one in which consolidation has helped the strong grow stronger but seen a host of famous brands depart, and in which the spread of low-cost carriers left almost no market untouched. Numbers change as more businesses report financial results. Domestic results for 23 scheduled airlines After-tax domestic net income $28.2 billion loss in 2020 Compared to $11.0 billion profit in 2019 Pre-tax domestic operating profit/loss $39.7 billion loss in 2020 Compared to $15.8 billion profit in 2019 2020 domestic operating revenue: $62.4 billion Share of total 2020 domestic operating revenue: With the gross profit margin, again adjusting our top line revenue to net out the billable expenses: = Gross Profit / Net Revenue= Gross Profit / (Revenue Billable expenses)= 1,875,520 / (7,858,938 2,325,888)= 33.9%. IATA. What's the profit margin of airline companies? Carsten Spohr, CEO of Deutsche Lufthansa AG, said: "Lufthansa is back. Show publisher information They fell to 9.2 percent from 12.7 percent the previous year, marking the third straight year that US airline margins have contracted. To make a good estimation on whether billable expenses should be included in Gross Profit or Operating Profit, we should look at some of its peers and their financial statements. Company Name, Ticker, Suppliers, else.. The turnaround in US carrier profitability across the decade was perhaps most evident when in 2016 Warren Buffetts Berkshire Hathaway holding company took stakes in the three US majors. Show publisher information Notably capacity in terms of flights is almost unchanged across 2019 compared with 2009. Despite sequential Revenue deterioration in 4 Q 2022 of. Based on current trends and pressures, the operating margin for US airlines is expected to narrow to between five and six percent in 2019 a margin that is less than 40 percent of the industrys peak of 15 percent in 2015. After-tax net income $2.2 billion loss in 4Q 2021 Compared to $2.7 billion profit in 3Q 2021 Compared to $7.0 billion loss in 4Q 2020 Pre-tax operating profit $894 million loss in 4Q 2021