Marketplace Report: Mixed News from Airlines

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United Airlines has reported its first quarterly profit since the year 2000. But Northwest Airlines is still struggling with labor issues, and flight attendants have rejected wage agreement with the bankrupt carrier. Tess Vigeland of Marketplace talks with Madeleine Brand about the latest news from the airline industry.


Back now with DAY TO DAY. This week, United became the fifth major airline to report a profit for the second quarter. Earnings are up more than 150 percent for the industry as a whole this time over last year. MARKETPLACE's Tess Vigeland is here. And Tess, first let's talk about United. Profitable?

TESS VIGELAND reporting:

Yes. It's been a long haul for this airline. This is the first quarterly profit since the year 2000. United reported a second-quarter net income of $119 million, that's about 93 cents a share. Now compare that with where it was just a year ago - for the second quarter of last year, it reported a loss of $1.4 billion, $12.33 a share. That time, it was still bankrupt.

United exited Chapter 11 this past February, and it's been able to engineer this recover despite record high prices for jet fuel.

BRAND: And other airlines are also profitable. Why the turnaround?

VIGELAND: Yes, part of it is because as anyone knows who has booked a flight lately, all the airlines have been hiking their fares. In fact, Delta just announced yet another $5 price hike last week. That's $5 each way on domestic flights. Fares across the board are up about 10 percent just this year, but that's not stopping people from flying. So that demand is helping fuel these better earnings results despite those high oil prices.

Southwest posted a $330-million profit. American, $291 million. Continental, $198 million. For American Airlines, by the way, that was only its second profit in the last five years. Now Northwest and Delta, of course, are still in Chapter 11, undergoing very painful cost-cutting measures. The other airlines already went through that, so they're starting to see the results, though that's small comfort to all the employees who had to take pay and benefit cuts, and in some cases, actually lost their jobs.

BRAND: Well, tell us more about Northwest Airlines, because flight attendants there are fighting those cost-cutting measures.

VIGELAND: Yes. This battle has been going on for quite a while now. Northwest has been able to get concessions from most of its unions, but the flight attendants don't want to accept the deal that the airline is offering to them. The union several times has threatened random walk-outs. And then you have kind of a last-minute deal, and then the union doesn't ratify it. That happened again this week.

Northwest has been trying to get $1.4 billion in wage and benefit cuts, trying to get out of bankruptcy. It has these agreements with pilots and ground operators, but those contracts don't take effect until something happens with the flight attendants. Northwest has now imposed a new contract on them, including an average pay cut of 21 percent. The flight attendants say that they have started a 15-day countdown toward a strike, which the airline claims would be illegal. So we'll see what happens there.

And Madeleine, coming up later today on MARKETPLACE, we'll take a look at a company that says it's got a major update to the internal combustion engine.

BRAND: Thank you, Tess. Tess Vigeland of Public Radio's daily business show MARKETPLACE. It's produced by American Public Media.

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