How did the airline companies become so unprofitable?

[sandorski]

Originally posted by: bigredguy

Originally posted by: sandorski
For the older airlines the big problem was the New Discount no-frills competition. The New airlines offered super cheap travel that the only way for the Old airlines to compete was to also go No-frills.

Unions are not to blame, but the Older airlines also had higher employee compensation than the Newer airlines which also has made it very difficult for the Older airlines to compete.

Older airlines also had a wide variety of routes, some of which were Profitable, some of which were not. The Newer airlines were very picky about their routes and stuck to only profitable ones.

Then the Fuel Price increases came and 9/11, pushing the weak airlines and even the healthy ones to the brink. If one of the major airlines was allowed to collapse it would probably benefit everyone, but no one wants to be that one so they'll continue scraping by hoping the Other Guy collapses or the Public decides to start flying again.

Certainly Government should stop infusing cash to the airlines. Shortly after 9/11 was reasonable, but to continue it now is just a waste. Let fate decide who lives/dies and the survivors will become healthier due to decreased Supply. Government can provide the better help to Airlines in other ways besides throwing around Cash at them:

1) Better/Faster security checks of Passengers. Much more people will fly if flying is less of a hassle

2) Health Care reform. Real Healthcare reform.

3) Perhaps temporary Tax Breaks/Deductions on Fuel Costs.

Woohooo, airline monopoly

I doubt a monopoly would occur, there are just too many airlines in the US right now and a thining of the heard would benefit the survivors.

 

[bigredguy]

Originally posted by: sandorski

Originally posted by: bigredguy

Originally posted by: sandorski
For the older airlines the big problem was the New Discount no-frills competition. The New airlines offered super cheap travel that the only way for the Old airlines to compete was to also go No-frills.

Unions are not to blame, but the Older airlines also had higher employee compensation than the Newer airlines which also has made it very difficult for the Older airlines to compete.

Older airlines also had a wide variety of routes, some of which were Profitable, some of which were not. The Newer airlines were very picky about their routes and stuck to only profitable ones.

Then the Fuel Price increases came and 9/11, pushing the weak airlines and even the healthy ones to the brink. If one of the major airlines was allowed to collapse it would probably benefit everyone, but no one wants to be that one so they'll continue scraping by hoping the Other Guy collapses or the Public decides to start flying again.

Certainly Government should stop infusing cash to the airlines. Shortly after 9/11 was reasonable, but to continue it now is just a waste. Let fate decide who lives/dies and the survivors will become healthier due to decreased Supply. Government can provide the better help to Airlines in other ways besides throwing around Cash at them:

1) Better/Faster security checks of Passengers. Much more people will fly if flying is less of a hassle

2) Health Care reform. Real Healthcare reform.

3) Perhaps temporary Tax Breaks/Deductions on Fuel Costs.

Woohooo, airline monopoly

I doubt a monopoly would occur, there are just too many airlines in the US right now and a thining of the heard would benefit the survivors.

Yeah, just like the oil companies in the U.S. ...

 

[db]

Almost nobody who has posted has it right. Most people have just inserted their generic bias and made a post.

The airlines used to be subsidized by the gov't. All of them were.
Deregulation and the Patco strike started the slide.
New carriers could startup with a financial advantage over legacy carriers. Their costs were lower so of course many of them did well.
Competition, the economy, fuel prices and political/economic opportunity have contributed to what is happening to the legacy carriers.
But this idea of the government bailing out airlines--that happened once (maybe twice: someone please specify). Lots of companies are now trying to bail out of their retirement obligations, even companies which are not in any financial trouble. And guess what? Companies everywhere are going to be doing the same stuff to everybody: lowering wages, medical, retirement, work rules, etc. The political and economic climate is near perfect to achieve these "cost reductions". When it happens to you, then it will mean something; as long as it's someone else, you don't give a sh*t, right?

 

[Kelemvor]

Originally posted by: Genx87
Airlines have never been what I consider great profit houses. They usually spend what profit that have on new equipment.

That said Union greed in the early and mid 1990s lead to huge pension and compensation plans they simply couldnt afford once cheap airlines without the burden became popular. Then you have a huge rise in fuel costs and 9-11 and it is a recipe for disaster.

People will attack me for the Union comment but look at the other big industry with heavy union labor, auto, and you see the exact same issue.

Public sector is the last great stand of union labor in this country because no politician is going to say no to their meal ticket when the union comes calling for high wages for low performance in a govt job.

What he said.