> "With a net profit margin of just 2.4%, airlines only retain $5.42 per passenger carried," said Tony Tyler CEO of International Air Transport Association (IATA) at the group's 70th AGM in Doha, Qatar.
I suspect they're interested in single-digit cost reductions.
We can't be held responsible for their own financial mismanagement - likewise they should not be eligible for any bailout funds - or they can sell their stock on the market to raise funds.
Did they? Airline stock prices have collapsed, so unless insiders sold everything in January, "enrich themselves" really means standard executive pay...which might be high, but that's another issue. Airlines, as businesses, didn't behave especially irresponsibly for the past decade. It's nothing like the banking excesses in 2007 that causes 2008.
Air travel in the US was significantly more expensive when it was heavily regulated. By your logic, you very quickly get to a Chinese level of state ownership of businesses. Practically every large cap company would be on that list.
If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs).
It's true that many people bargain hunt, but the people that don't (primarily business people who need to fly on short notice and on fixed schedules) subsidize lower fares for those who do.
At the moment, it is the investors who are subsidizing lower fares at Uber and Lyft, to the tune of billions of dollars per year. You're right about the autonomous cars. At this rate, Uber will run out of money before autonomous cars can save it. And even if they do, Uber will be a low margin business.
>The profit bit of the picture, though, has changed a lot. Last year America’s airlines made $24 billion—more than Alphabet, the parent company of Google.
Wow, that's profound. An industry with 600k employees made more than Google last year! Next you'll be telling me the banking industry makes more than Microsoft!
Airlines need to make big profits in good years - they lose money like crazy in bad years. I don't know if it's still true, but at one time if you subtracted all the money US airlines lost from the money they made since the beginning of the industry you'd have a negative number.
To the larger point, this is what happens when you pile on a bunch of regulations and then allow industry to capture the regulators. The barriers to entry are raised so high it's impossible to have real competition.
It’s true investing in the airline industry has been a good way to lose money for a long time.
But citing early post pandemic years to make that point feels misleading.
It’s like saying someone drives badly and instead of pointing to their speeding tickets, it’s like pointing out their car is in the shop with body damage… from a falling tree branch.
All travel was shut down for a while and when it opened up business travel was nonexistent. It’s still down and expected to never return to prepandemic. It’s amazing they made any profit in 2023.
Yes, airlines are not highly profitable but pandemic years are a terrible example due to being a weird black swan event.
They enriched themselves through stock buybacks over the last decade to boost stock price and executive compensation, at the cost of not having money on hand to weather bad times.
Does your discounted unregulated fare rate include the cost of the all the bailouts over the decades? Are you fine with letting the airlines fail this time?
It's probably due to the power balance. Corporate consolidation is at an all time high so what choice do you have when they all have the same shitty policies.
>The airlines are shafting customers while making more money than ever before.
Air travel in the US is hardly a lucrative business. It's a tough racket:
"Domestic passenger airline operations lost $10 billion from 1979 to 1989, made profits of $5 billion in the 1990s and lost $54 billion from 2000 to 2009. To put these numbers in context, at the end of 2009, the entire book value of U.S. passenger carriers’ assets was about $163 billion and the book value of shareholder equity was $10 billion. Even at the end of 2000, after six consecutive profitable years, their assets were $159 billion and shareholder equity was $40 billion."
Thanks, I like Levine and remember reading that. He basically argues that airlines financial strategy was optimal for shareholders, given covid and guaranteed government support. But firstly, he only considers the two uses of money proposed in the NYT, improving customer service or reducing the debt burden. Secondly, his whole argument is predicated on airlines being bailed out by government - which is true, but I believe shouldn't. I personally believe a lot of value is being destroyed by lack of long term investment and short term incentives, leading to problems such as these ones. And finally, even Levine admits that buybacks might be suboptimal for other stakeholders (eg employees, clients).
>I don't know if it's still true, but at one time if you subtracted all the money US airlines lost from the money they made since the beginning of the industry you'd have a negative number.
Out of curiosity, what does the landscape look like if you excluded carriers that went outright bankrupt?
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