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2014: MORE BUSINESS OR MORE PROFITS?

January 2, 2014

Happy New Year. As I look back on 2013 headlines, which I plan to do in the next few posts, I’m pleased that American Airlines and US Airways are finally merging. Having participated in a merger (Western Airlines and Delta Air Lines) I know that many employees will lose benefits, retirement funds, and promotional opportunities, but at least most people will have a job in 2014.

But the big question for 2014: Will the new American make more money? The profit question might be one you need to be asking too. This merger will leave just four airlines controlling more than 80 percent of the U.S. air-travel market. But the basic challenge in the airline industry hasn’t changed: Airlines only have a profit margin of 1-2%.

Compare this to the smartphone industry. According to a WSJ report, Samsung records roughly a 20% operating margin on their mid-tier Galaxy S3 Mini, and a 28% margin on its high-end Galaxy S4. Apple’s operating-profit margins on its new iPhone 5S and 5C phones are reported to be 30% to 35%.

What is your profit margin? It should be the top question you are asking yourself going into a new year. Does your company have its cost in line so you can make more in 2014? Tough question.

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