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isn't the airline industry at a net loss since its inception? I know that is a common belief.

sokoloff 9y ago
The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. -- Warren Buffett, in the 2007 Berkshire Hathaway shareholder letter This article (from which I extracted that quote) suggests the industry has been profitable since 2010. Low oil prices haven't prevailed for that entire time, so it's not just that. https://www.fool.com/investing/2017/03/05/7-ways-warren-buffett-blasted-the-airline-industry.aspx https://www.fool.com/investing/2017/03/05/7-ways-warren-buff...
- Spooky23 9y ago
  Airlines are just another common carrier or utility... they were profitable until the GOP deregulated it. The technology itself doesn't provide competitive advantage, and the local monopoly aspect of the transportation system in the regulated days allowed for sustainable competition. The change you've seen in recent years is another sort of government intervention -- cheap capital has driven consolidation. So instead of an FAA commission allocating gates and routes, companies are buying up the competition.
  - sokoloff 9y ago
    > they were profitable until the GOP deregulated it. Ted Kennedy was the driving force in Congress and President Carter signed the legislation. Airline deregulation was a good thing (IMO), but the GOP doesn't get the credit/blame for it.
  - helper 9y ago
    They were profitable because the CAB asked airlines how much it cost to run their business and then worked backward from whatever they said to arrive at the fixed fares for routes. While this is great if you want to build an airline with a giant internal bureaucracy, its not great for people who just want to get from point A to point B. The members of the CAB were all political appointments and generally did not act for good of the consumer. When Louis Hector was appointed to CAB he insisted that air service be instated to his parent's home town of Carinda, Iowa (as a joke). No one on the commission had any objections. Incidentally, if you are looking for a good read on the history of the US airline industry from the early days of flying mail routes until the mid 90s the book 'Hard Landings' by Thomas Petzinger is really great.

The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down. -- Warren Buffett, in the 2007 Berkshire Hathaway shareholder letter This article (from which I extracted that quote) suggests the industry has been profitable since 2010. Low oil prices haven't prevailed for that entire time, so it's not just that. https://www.fool.com/investing/2017/03/05/7-ways-warren-buffett-blasted-the-airline-industry.aspx https://www.fool.com/investing/2017/03/05/7-ways-warren-buff...

Spooky23 9y ago
Airlines are just another common carrier or utility... they were profitable until the GOP deregulated it. The technology itself doesn't provide competitive advantage, and the local monopoly aspect of the transportation system in the regulated days allowed for sustainable competition. The change you've seen in recent years is another sort of government intervention -- cheap capital has driven consolidation. So instead of an FAA commission allocating gates and routes, companies are buying up the competition.
- sokoloff 9y ago
  > they were profitable until the GOP deregulated it. Ted Kennedy was the driving force in Congress and President Carter signed the legislation. Airline deregulation was a good thing (IMO), but the GOP doesn't get the credit/blame for it.
- helper 9y ago
  They were profitable because the CAB asked airlines how much it cost to run their business and then worked backward from whatever they said to arrive at the fixed fares for routes. While this is great if you want to build an airline with a giant internal bureaucracy, its not great for people who just want to get from point A to point B. The members of the CAB were all political appointments and generally did not act for good of the consumer. When Louis Hector was appointed to CAB he insisted that air service be instated to his parent's home town of Carinda, Iowa (as a joke). No one on the commission had any objections. Incidentally, if you are looking for a good read on the history of the US airline industry from the early days of flying mail routes until the mid 90s the book 'Hard Landings' by Thomas Petzinger is really great.