Is it ‘insane’ for airlines to earn strong profits?

Is it really “insane” and “staggering” for “greedy” and “mean” American Airlines to earn a $7.6 billion net profit for a full year? That puts American’s annual net profit just $45.8 billion behind Apple’s most recent full-year net earnings. American is getting closer to Microsoft, which saw its net earnings drop nearly $10 billion year-over-year in its 2015 fiscal year to $12.2 billion.

Are US airline CEOs like American’s Doug Parker cackling as they roll around in piles of cash in their offices? You might think so if you read “5 Ways Airlines Are Finally Becoming Less Greedy & Mean,” which Time blasted through cyberspace this week after American said it would offer fee-free snacks to economy passengers on some domestic flights.

Not once but twice does the article’s author, Brad Tuttle, describe American’s earnings in 2015 as “insane.” American’s profit figures are “beyond aggravating” to passengers, he posits. Since airlines are now “riding high on the hog,” it’s time for them to stop being “ruthless and unnecessarily cruel to customers,” Tuttle writes.

He does acknowledge that US airfares in January were down 14% year-over-year. But, as Tuttle wrote in January, passengers “have good reason to be upset” that fares aren’t down much more “because their savings on airfare is a pittance compared to the profits airlines are reaping thanks to phenomenally cheap fuel costs.”

Imagine if Apple, for example, were covered by a major media outlet in this way: After reaping a ludicrous $53.4 billion full-year net profit, ruthless Apple Inc. is sticking to an outrageous $649 price tag for the iPhone 6S. If you merely want another 0.8 inch of screen space, Apple is tacking on another $100 for the 6S Plus. This high price doesn’t even get you music—ever-greedy Apple slaps on an annoying $9.99 per month fee if you want access to its Apple Music service.

In reality, Apple is covered by the media as what it is: a business, a major for-profit corporation.

The truth is that revenue and yields are down almost across the board for US airlines, which is one reason why airline stocks such as American’s remain priced pretty low despite the record profits. American is also facing fierce competition from ultra-low cost carriers such as Spirit Airlines. American is doing well, yes, but these are not stroll-in-the-park days for the company.

“This is an industry that’s operating like a real business,” Parker said last week. Indeed, for most of their existence, US airlines did not act like real businesses, leading to years of heavy losses and multiple trips to the bankruptcy court. That, more than meanness and greed, led to sub-par customer service by US airlines.

Profitable companies should be in a better position to offer good customer service than bankrupt companies—and US airlines have started to invest in their products, which should improve. Those airlines that don’t improve will deservedly lose customers.

Airlines, which are extremely cost-intensive businesses (even with low fuel prices), will charge passengers what the market allows them to charge—just as Apple does.