How the Largest U.S. Airlines Stacked Up in 2009

by: Robert Herbst

For 2009, the nine largest airlines accumulated just over $4 billion in net losses. 2008 wasn’t much better with a $3.5 billion loss. So far, 2010 projections show a $2.7 billion net profit coming from $120 billion in operating revenue.

This article analyzes nine key financial and operational categories. A brief 2010 outlook is included at the end.

The “industry”, for this analysis, considers the nine largest US airlines: Delta (NYSE:DAL), American (AMR), United (UAUA), Continental (NYSE:CAL), Southwest (NYSE:LUV), US Airways (LCC), JetBlue (NASDAQ:JBLU), Alaska (NYSE:ALK), and Air Tran (AAI).

Collectively, these airlines and their affiliate partners carry over 88% of the US domestic passenger market share. Note: Delta and Northwest merged in October 2008. For this analysis, Northwest’s data has been combined with Delta pro-forma.

Operating Revenue (total of nine airlines)

  • 2008 = $126.2 billion
  • 2009 = $106.7 billion

When comparing the prior year, every airline had lower operating revenue in 2009. In general, the larger the airline, the larger the drop in revenue.

Operating revenue

Operating Income (total of nine airlines)

  • 2008 = -$4.3 billion (loss)
  • 2009 = +$662 million

Operating income is the difference between total operating revenue and operating expenses. Note: For this analysis, recognized one-time and special charges were removed from operating expenses.

Over the last two years, United had the largest cumulative operating loss at $1.6 billion with American close behind at $1.5 billion. The smaller carriers outperformed the large legacy airlines, with Southwest and JetBlue being the only two airlines to have positive operating income in each of the last two years. American was the only airline to have an operating loss in 2009 and it was significant at -$833 million.

Operating income/loss

Long-Term Debt (total of nine airlines)

  • 2008 = $49.4 billion (39.1% of total operating revenue)
  • 2009 = $52 billion (48.7% of total operating revenue)

As a ratio of operating revenue, excluding Southwest which stayed approximately the same, every airline increased debt in 2009 when compared with 2008. For this analysis, long-term debt is long-term debt less current maturities plus capital leases.

JetBlue has, by far, the highest debt ratios.

LT Debt ratio

Cash liquidity (total of nine airlines)

  • 2008 = $17.3 billion (13.2% of total operating expenses)
  • 2009 = $21.9 billion (20.7% of total operating expenses)

Cash liquidity for every airline improved significantly in 2009. JetBlue and Alaska had the highest cash ratios. US Airways and Delta had the lowest. For this analysis, cash includes short-term investments.

Cash ratios

Stock market capitalization (total of nine airlines)

  • 2008 = $25.1 billion (Q4 median)
  • 2009 = $25 billion (Q4 median)

Market capitalization is the stock-share price times the outstanding shares. Southwest and Delta have significantly higher market caps than all of the other airlines.

Market caps

EBITDAR and margin (total of nine airlines)

  • 2008 = $5.5 billion
  • 2009 = $9.7 billion

EBITDAR is a common financial term used to measure a corporation’s operating earnings before including interest, taxes, depreciation, amortization, and aircraft rent. The following chart shows the EBITDAR ratio of operating revenue for each airline.

United and US Airways were the only two airlines with a negative EBITDAR in 2008. Both United and US Airways made significant EBITDAR improvements in 2009. American and Southwest had the most negative change in year-over-year margins.

EBITDAR margins

Market share of passenger miles (total of nine airlines, includes regional affiliates)

  • 2008 = 768.6 billion passenger miles
  • 2009 = 730.7 billion passenger miles

Each airline’s percentage of 2009 passenger traffic was little changed with 2008. Southwest picked up most of the reduction from Delta, American, and US Airways.

Market Share

Regional affiliate impact to market share (total of nine airlines)

  • 2008 = 68.8 billion (regional affiliate passenger miles)
  • 2009 = 69 billion (regional affiliate passenger miles)

There was very little year-over-year change in total regional/affiliate passenger traffic miles. For 2009, excluding American, the five airlines with regional/affiliate partners all increased net market share after including their regional/affiliate traffic.

Market share with affiliates

Outlook for 2010

Advance ticket sales - (total of nine airlines)

  • 2008 = $16.3 billion (14.4% of 2008 passenger revenue)
  • 2009 = $15.9 billion (16.8% of 2009 passenger revenue)

Each quarter, airlines report the amount of passenger revenue collected for future travel. The following chart shows each airline’s advance traffic liability (ATL) as a percentage of the previous 12 months passenger revenue. For this analysis, FF miles expected to be used in the next 12 months may be included as ATL.

Year ending 2009 data suggests the larger legacy airlines have higher future passenger bookings than the smaller carriers. This should push fare yields and revenues higher in 2010 than they were in 2009.



For year 2010, it is the opinion of that all airlines noted above will see year-over-year increases in top line revenues. In addition, provided crude oil prices remain generally at or less than $85/barrel, current profit estimates are likely to be conservative.

Click here for a detailed numerical summary of the data in this article plus the pros and cons for each airline (PDF file).

Disclosure: At the time of writing, the author and his family did not hold stock in any of the airlines covered in this article. The above opinions and comments should not be used to determine the worth of any stock or investment.