DOW JONES NEWSWIRES 
 

Operating margins at U.S. airlines improved last quarter for the first time in 18 months, the U.S. Department of Transportation said Monday, as network carriers reported the lowest loss margins since 2007.

The department also said the industry collected $669.6 million in baggage fees in the most recent period, up 18% from the previous quarter and nearly quadruple the dollar amount a year earlier. As the recession battered lucrative business-class flying and consumer travel, airlines have instituted more baggage fees to cope.

The data from the DOT's Bureau of Transportation Statistics come after improved revenue and profit outlooks by carriers in recent days. They suggest the worst may be behind the industry after several quarters of big losses and plunging traffic.

Overall, the average of 21 U.S. carriers had a 1.25% operating profit margin in the second quarter, while the prior quarter and last year's figures were in the red.

The group of seven network airlines has reported negative operating margins for seven consecutive quarters, but the second quarter's -0.5% was the smallest during that stretch. AMR Corp.'s (AMR) American Airlines reported the weakest results at -21.8% while Northwest Airlines had the best at 6.9%. Delta Air Lines Inc. (DAL), which acquired Northwest last year, was next at 2.9%.

Low-cost airlines posted a 7% operating margin, the best performance in nearly two years, and regional carriers had a 7.2% margin, the highest figure since the end of 2006.

-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@dowjones.com