Why do airlines exist?
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Why do airlines exist?
Airline industry ranks consistently at the bottom part of the list of industries by profit margins. There are very few airlines that have been profitable over a long period of time. There are more stories of airlines being in financial trouble than there are of them making the big bucks. Even the ones making the higher margins are the ones that operate at huge scales in terms of fleet size and routes requiring large investments.
Yet, startup airlines are dime a dozen, especially in emerging markets. So my question, I guess, is what is the lure? Why would anybody want to be in the airline business? Except for state run airlines, I don't see why anyone would invest in the commercial airline business.
Yet, startup airlines are dime a dozen, especially in emerging markets. So my question, I guess, is what is the lure? Why would anybody want to be in the airline business? Except for state run airlines, I don't see why anyone would invest in the commercial airline business.
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Well, I suppose every new airline owner thinks they can do better. Those who've tried before and failed often try again. They're hooked. It's a bit like wanting to own a football team, very few other than Manchester United or Barcelona make any money, but folks seek to own them because of the romance of the game. There's still a level of romance about the airline industry too, and humans aren't entirely rational beings.
This is a good video to watch, from around 2 minutes in...
Air travel is a "sexy" industry, despite long periods of terrible profitability and small periods of mediocre profitability.
Air travel is a "sexy" industry, despite long periods of terrible profitability and small periods of mediocre profitability.
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Firstly: the airline industry is inherently risk-averse, which is fine if you're responsible for the safety of several tens or hundreds of passengers (most of whom have no real understanding of risk) but a kills commercial innovation.
Secondly: up to now, new entrants to market have required sums of money that typically can only come from investors who will only take a (modest) risk if they know that the venture is run by a management team with the "right experience" - i.e. well-trained in risk avoidance, and reared on a long history of state support.
Thirdly: everything that can or does go wrong is the airline's fault, especially if the paying passenger is an idiot who can't or won't read T&Cs or follow instructions so The Powers That Be insist on a range of rules and regulations that tie up funds that could otherwise be used to grow the business.
What's needed is for someone from outside the airline industry to come in with some radical, real-world, retail experience and the arrogance to face up to the idiotic members of the public and anyone else who gets in the way of a good commercial operation. A sweet-shop owner from Mullingar, for example.
Fortunately, Pandora's box has been opened and all manner of nasty commercial realities are going to disrupt the cosy alliances and quasi-monopolies that even the Sweetshop Owner feels bound to pursue.
Secondly: up to now, new entrants to market have required sums of money that typically can only come from investors who will only take a (modest) risk if they know that the venture is run by a management team with the "right experience" - i.e. well-trained in risk avoidance, and reared on a long history of state support.
Thirdly: everything that can or does go wrong is the airline's fault, especially if the paying passenger is an idiot who can't or won't read T&Cs or follow instructions so The Powers That Be insist on a range of rules and regulations that tie up funds that could otherwise be used to grow the business.
What's needed is for someone from outside the airline industry to come in with some radical, real-world, retail experience and the arrogance to face up to the idiotic members of the public and anyone else who gets in the way of a good commercial operation. A sweet-shop owner from Mullingar, for example.
Fortunately, Pandora's box has been opened and all manner of nasty commercial realities are going to disrupt the cosy alliances and quasi-monopolies that even the Sweetshop Owner feels bound to pursue.
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Yep and then the sweet shop owner decides that since they now have a monopoly that they will control the market and dictate terms to all in sundry. Then those big bad airline alliances won't seem bad at all.
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Yes. The poaching sweet-shop owner has become a mean-and-nasty gamekeeper, but in trying to purge his estate of other hunters, he has affected the natural state of things. That's where Pandora comes in.
The airline industry is now where IT was about twenty years ago. Just when it looked like Microsoft and Apple would take over the world, the dying Mozilla got a new lease of life, two new kids appeared on the block and built up a huge, shared following, and the buying public suddenly realised that they could demand more of their IT suppliers and get it.
The great wave of innovation in IT by teenage, garage-based individuals will be mimiced in the travel/aviation industry and EASA/FAA/BA/RA/AF won't be able to do anything about it. There is a tendency on this board to ridicule the ideas of bedroom entrepreneurs, but they and their peers will be paying for travel for the next forty years and if they're saying "what we need is ..." then we ignore them at our peril.
The airline industry is now where IT was about twenty years ago. Just when it looked like Microsoft and Apple would take over the world, the dying Mozilla got a new lease of life, two new kids appeared on the block and built up a huge, shared following, and the buying public suddenly realised that they could demand more of their IT suppliers and get it.
The great wave of innovation in IT by teenage, garage-based individuals will be mimiced in the travel/aviation industry and EASA/FAA/BA/RA/AF won't be able to do anything about it. There is a tendency on this board to ridicule the ideas of bedroom entrepreneurs, but they and their peers will be paying for travel for the next forty years and if they're saying "what we need is ..." then we ignore them at our peril.
Last edited by CelticRambler; 2nd Mar 2013 at 08:33.
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Without the airlines, the world as we know it in 2013 would be completely different.
The ailines are not only here to make profit, but they are encouraged by many governments as they allow other businesses and economy to grow in general.
Good or bad thing, I don't know, but there is much more to the airline than its own profit. Globalization, deregulation, tourism...
The ailines are not only here to make profit, but they are encouraged by many governments as they allow other businesses and economy to grow in general.
Good or bad thing, I don't know, but there is much more to the airline than its own profit. Globalization, deregulation, tourism...
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Every tinpot African dick-tater has to have his own airline for his own personal use and that of his henchmen. Profit or loss is irrelevant, it's all funded by the UN, World Bank, IMF, Oxfam, EU, etc.
