American Airlines Bag Fees

Flush with cash, American Airlines will pay a dividend to investors in August, the first time its done so since 1980. (Nam Y. Huh/Associated Press)

American Airlines is the latest U.S.-based airline to show improving fortunes by paying its first dividend since 1980, and plans to buy back up to $1 billion US of their own stock to boost investors' stakes.

The new AA, which was formed in late 2013 when it took over U.S. Airways and became the biggest U.S.- based airline in the world, declared a dividend of 10 cents a share for shareholders of record Aug. 4.

The company also plans to buy back $1 billion of its own shares, and top up employees' pensions plans, after releasing quarterly results Thursday that show profit more than tripling to $864 million versus $220 million last year. 

Profits would have been an all-time record of $1.5 billion in the quarter, were it not for special one-time charges related to the U.S. Airways deal.

Strong finances

After years of shaky finances, airlines are seeing much stronger bottom lines of late as consolidation has reduced the number of carriers, leading  to higher ticket prices and fuller planes. IATA, the international group that tracks the industry, predicts global airline profits will almost double to $18 billion this year.

They're also doing better because they're raking in billions in extra fees for things like extra bags, priority seating and refreshments. Such fees have risen 1,200 per cent from under $3 billion in 2007 to more than $31 billion last year, the latest data shows.

United Airlines doesn't pay a dividend but Southwest Airlines does, and Delta Airlines restored its dividend last August after halting it throughout the financial crisis. 

Air Canada does not currently pay a dividend but Calgary-based WestJet pays 12 cents per share, which works out to a dividend yield of just under two per cent at current prices.

Corrections

  • A previous version of this story incorrectly reported that WestJet doesn't pay a dividend. In fact it does, as the company is paying 12 cents per share every quarter after a recent hike in March.
    Jul 24, 2014 3:36 PM ET