4 ms·

There are like 2 airlines in the world that are profitable. Nearly every airline is either supported by the state or losing money. I don’t think airlines losi

There are like 2 airlines in the world that are profitable. Nearly every airline is either supported by the state or losing money. I don’t think airlines losing a ton of money is unique to the US and so I don’t think the US airline industry’s state tells us much about the effect of US bankruptcy laws at all.

gruez 8y ago
>There are like 2 airlines in the world that are profitable What? random search: https://en.wikipedia.org/wiki/World%27s_largest_airlines https://en.wikipedia.org/wiki/World%27s_largest_airlines at least 10 that are profitable
- nostrademons 8y ago
  Under what time horizon? Of the top 10: American Airlines went bankrupt in 2012 US Airways (took over American) went bankrupt in 2002, 2004, Delta went bankrupt in 2005 Continental went bankrupt in 2010 Lufthansa, Air France, IAM (British Airways + Iberia), China Southern, and China Eastern are state-supported. That leaves Southwest and ANA as the only ones on the list that have neither been bankrupt in the last 15 years nor are state-supported. It's pretty strong support for the GP's point.
  - btilly 8y ago
    Add JetBlue, Ryanair, Cathay Pacific, IndiGo...there are a lot more than 2 profitable airlines worldwide. But it is hard to compete with a rival that has explicit support from a state. Whether that be owned by the state, or with negotiating advantages from an arrangement like Chapter 11.
    - ksec 8y ago
      Funny when Cathay Pacific is listed among those, all the other three are low cost airlines, while Cathay are consider the "normal" or premium in today's world. One reason Cathay got to be profitable is because they are one of the 5 largest cargo flight Airline in the world.
  - Symbiote 8y ago
    In what way is BA subsidised? It's been a private company for decades. (I haven't looked into the orders.)
    - avar 8y ago
      BA is a flag carrier. Russia only allows one airline per European country (and sometimes none) to overfly Siberia. That the government of the UK continues to pick BA as its flag carrier amounts to a state subsidy. This is something the EU has tried to address in the past, but not much can be done about it as Russia imposes the policy unilaterally. But regardless of how it started and who's to blame, the net effect is that when BA flies from e.g. London to Tokyo they can pick a shorter route than their competitors, this makes them much more profitable than they otherwise would be. They effectively hold a state-sponsored monopoly on certain routes.
  - NeedMoreTea 8y ago
    Lufthansa, Air France, and British Airways (IAG) were all privatised over 20 years ago. Where is the state support?
    - ksec 8y ago
      Not parent, but my guess would be while they don't have state support, but they do get preferential treatment?
      - Mindwipe 8y ago
        No they don't, that would be illegal under European state aid law.
  - igravious 8y ago
    > Lufthansa, Air France, IAM (British Airways + Iberia), China Southern, and China Eastern are state-supported. Source for this claim for each of these airlines. Given that subsidising industries/companies is banned in the EU I don't see how any airline in the EU could be receiving state support. I'd say Ryanair and Easyjet and a bunch of others would be hollering about it from the roof-tops. I get that China Southern and China Eastern are state backed at the administrative level, but neither is the flag carrier (Air China is) and both are publicly traded? Are they actively state sponsored since they were set up?
adventured 8y ago
> There are like 2 airlines in the world that are profitable. Your premise is outdated. The US airlines are very profitable now and have been for many years. Consolidation has brought the market to a state of profitability as the normal condition. Their margins are solid and the corporate income tax cut took their formerly high tax rates down to more reasonable levels that are globally competitive (eg Delta went from a typical 33% effective rate down to 24-25%). Operating income the last four years combined: Delta $24 billion, American $21b, United $18b, Southwest $14.5b, Alaska Air $4.7b, JetBlue $4b, Spirit $1.8b All of those airlines have been profitable every year for the last five fiscal years (both in terms of net and operating income). So that's seven consistently profitable airlines just in the US market. Air Canada has also been profitable every year for the last five years. This change to their business condition is also why Warren Buffett has gone through and purchased the max position he can in all the majors (Berkshire owns just under 10% of Delta, Southwest, United, American). He regards them as having gone through a consolidation transformation akin to the railroads, which took the US railroad industry from being a frequent basket case to consistently profitable (leading Berkshire to acquire Burlington Northern).

gruez 8y ago

>There are like 2 airlines in the world that are profitable What? random search: https://en.wikipedia.org/wiki/World%27s_largest_airlines https://en.wikipedia.org/wiki/World%27s_largest_airlines at least 10 that are profitable

nostrademons 8y ago
Under what time horizon? Of the top 10: American Airlines went bankrupt in 2012 US Airways (took over American) went bankrupt in 2002, 2004, Delta went bankrupt in 2005 Continental went bankrupt in 2010 Lufthansa, Air France, IAM (British Airways + Iberia), China Southern, and China Eastern are state-supported. That leaves Southwest and ANA as the only ones on the list that have neither been bankrupt in the last 15 years nor are state-supported. It's pretty strong support for the GP's point.
- btilly 8y ago
  Add JetBlue, Ryanair, Cathay Pacific, IndiGo...there are a lot more than 2 profitable airlines worldwide. But it is hard to compete with a rival that has explicit support from a state. Whether that be owned by the state, or with negotiating advantages from an arrangement like Chapter 11.
  - ksec 8y ago
    Funny when Cathay Pacific is listed among those, all the other three are low cost airlines, while Cathay are consider the "normal" or premium in today's world. One reason Cathay got to be profitable is because they are one of the 5 largest cargo flight Airline in the world.
- Symbiote 8y ago
  In what way is BA subsidised? It's been a private company for decades. (I haven't looked into the orders.)
  - avar 8y ago
    BA is a flag carrier. Russia only allows one airline per European country (and sometimes none) to overfly Siberia. That the government of the UK continues to pick BA as its flag carrier amounts to a state subsidy. This is something the EU has tried to address in the past, but not much can be done about it as Russia imposes the policy unilaterally. But regardless of how it started and who's to blame, the net effect is that when BA flies from e.g. London to Tokyo they can pick a shorter route than their competitors, this makes them much more profitable than they otherwise would be. They effectively hold a state-sponsored monopoly on certain routes.
- NeedMoreTea 8y ago
  Lufthansa, Air France, and British Airways (IAG) were all privatised over 20 years ago. Where is the state support?
  - ksec 8y ago
    Not parent, but my guess would be while they don't have state support, but they do get preferential treatment?
    - Mindwipe 8y ago
      No they don't, that would be illegal under European state aid law.
- igravious 8y ago
  > Lufthansa, Air France, IAM (British Airways + Iberia), China Southern, and China Eastern are state-supported. Source for this claim for each of these airlines. Given that subsidising industries/companies is banned in the EU I don't see how any airline in the EU could be receiving state support. I'd say Ryanair and Easyjet and a bunch of others would be hollering about it from the roof-tops. I get that China Southern and China Eastern are state backed at the administrative level, but neither is the flag carrier (Air China is) and both are publicly traded? Are they actively state sponsored since they were set up?

adventured 8y ago

> There are like 2 airlines in the world that are profitable. Your premise is outdated. The US airlines are very profitable now and have been for many years. Consolidation has brought the market to a state of profitability as the normal condition. Their margins are solid and the corporate income tax cut took their formerly high tax rates down to more reasonable levels that are globally competitive (eg Delta went from a typical 33% effective rate down to 24-25%). Operating income the last four years combined: Delta $24 billion, American $21b, United $18b, Southwest $14.5b, Alaska Air $4.7b, JetBlue $4b, Spirit $1.8b All of those airlines have been profitable every year for the last five fiscal years (both in terms of net and operating income). So that's seven consistently profitable airlines just in the US market. Air Canada has also been profitable every year for the last five years. This change to their business condition is also why Warren Buffett has gone through and purchased the max position he can in all the majors (Berkshire owns just under 10% of Delta, Southwest, United, American). He regards them as having gone through a consolidation transformation akin to the railroads, which took the US railroad industry from being a frequent basket case to consistently profitable (leading Berkshire to acquire Burlington Northern).