A short course in airline economics
First. let’s establish that I’m no fan of of traveling … especially commercial air travel … via cattle-herding airlines.
That said, I scratch my head when folks characterize airlines as ruthless profiteers.
They may be ruthless but, I think, to be a profiteer a company has to make money, right?
Below is a chart that’s a bit dated, but makes a directional point.
The graph shows cumulative net income of US air carriers since 1938.
What is says:
Since that fateful day when Orville & Wilbur took off, U.S. airline companies have — as a group — LOST money.
There has been some recouping in the past decade — due mostly to consolidation — but not enough to get the industry back above the birth-to-date Mendoza line.
What’s going on?
For openers, according to an analysis charted by AEI, “real” airfares – adjusted for inflation – dropped substantially when the industry was deregulated … and, fares have only started to bounce back over the past couple of years.
All of those annoying ala carte fees (ticket changes, baggage, soft drinks) have, on average, tacked on an additional $22 per round-trip — about 5.5%.
And, costs have pretty much leveled off – save for the periodic fuel price jolts.
The bottom line: Relatively flat costs … coupled with nudged-up pricing (from rock bottom levels) … have boosted airlines’ earnings … but, birth-to-date, the industry is still running in the red.
Those economics might explain why airlines are now charging for everything, adding ever-shrinking seats, and filling planes to the brim .