4 ms·

>The commercial airline industry has lost money over the whole of its existence. Wait, what? How can that be possible? Wouldn't the airlines cease to exist if

>The commercial airline industry has lost money over the whole of its existence. Wait, what? How can that be possible? Wouldn't the airlines cease to exist if they never generated profits?

nesyt 10y ago
I'm not sure where the parent is drawing that claim from but I imagine they could continue to exist with government subsidies.
marcosdumay 10y ago
There are subsides, and there is a difference between "losing money most of the time" and "losing money on average".
matthewowen 10y ago
Not saying this is the case here, but the answer is by bankruptcy and continual capital investments. Let's assume that some small number of airlines continually make small profits (or at least break even). That creates a non-negative balance. However, let's assume that a number of other airlines are frequently being established and receiving capital investment, before ultimately failing and declaring bankruptcy. If the losses those airlines represent outweigh the positive balance from our successes, then the industry loses money, despite some players continuing to exist. To take it further: if you assume people keep making capital investments with capital drawn from other industries, it's possible that the industry continues to exist even whilst no company generates profits in the long term.
btilly 10y ago
This is possible thanks to Chapter 11 bankruptcy. In most countries when you go bankrupt, you go out of business. In the US you usually go into Chapter 11. This lets you default on some of your debt, renegotiate contracts, and then come out of bankruptcy stronger than before. The problem with this is shown with airlines. They would all make a profit if they could just lose some of them. Unfortunately whenever that looks like it might happen, the loser goes into Chapter 11, enjoys a competitive advantage, recovers, and comes out of it stronger. Then someone else goes bankrupt.
- 1_2__3 10y ago
  That... Doesn't match history at all. Mergers have been far more dominant in recent years than bankruptcies, but you ignore them completely.
  - btilly 10y ago
    It is a very large piece of the long-term puzzle for how airlines are still in business despite having lost money consistently. http://www.npr.org/2011/11/29/142909836/is-bankruptcy-business-as-usual-for-airlines http://www.npr.org/2011/11/29/142909836/is-bankruptcy-busine... That said, consolidation through mergers has happened recently. We will see how that plays out going forward.
deleted 10y ago
[deleted]

>The commercial airline industry has lost money over the whole of its existence. Wait, what? How can that be possible? Wouldn't the airlines cease to exist if they never generated profits?

nesyt 10y ago

I'm not sure where the parent is drawing that claim from but I imagine they could continue to exist with government subsidies.

marcosdumay 10y ago

There are subsides, and there is a difference between "losing money most of the time" and "losing money on average".

matthewowen 10y ago

Not saying this is the case here, but the answer is by bankruptcy and continual capital investments. Let's assume that some small number of airlines continually make small profits (or at least break even). That creates a non-negative balance. However, let's assume that a number of other airlines are frequently being established and receiving capital investment, before ultimately failing and declaring bankruptcy. If the losses those airlines represent outweigh the positive balance from our successes, then the industry loses money, despite some players continuing to exist. To take it further: if you assume people keep making capital investments with capital drawn from other industries, it's possible that the industry continues to exist even whilst no company generates profits in the long term.

btilly 10y ago

This is possible thanks to Chapter 11 bankruptcy. In most countries when you go bankrupt, you go out of business. In the US you usually go into Chapter 11. This lets you default on some of your debt, renegotiate contracts, and then come out of bankruptcy stronger than before. The problem with this is shown with airlines. They would all make a profit if they could just lose some of them. Unfortunately whenever that looks like it might happen, the loser goes into Chapter 11, enjoys a competitive advantage, recovers, and comes out of it stronger. Then someone else goes bankrupt.

1_2__3 10y ago
That... Doesn't match history at all. Mergers have been far more dominant in recent years than bankruptcies, but you ignore them completely.
- btilly 10y ago
  It is a very large piece of the long-term puzzle for how airlines are still in business despite having lost money consistently. http://www.npr.org/2011/11/29/142909836/is-bankruptcy-business-as-usual-for-airlines http://www.npr.org/2011/11/29/142909836/is-bankruptcy-busine... That said, consolidation through mergers has happened recently. We will see how that plays out going forward.

deleted 10y ago

[deleted]