The airline industry is a service industry. The airlines are in the business of transporting people and their belongings as well as products. The major characteristics of the industry include the following: capital intensive, high cash flows, labor intensive, highly unionized, and seasonal. These characteristics are the cause of the industry’s then profit margin. In fact “airlines, through the years, have earned a net profit between one and two percent, compared to an average of above five percent for U.S. industry’s as a whole”. Due to the industry’s thin profit margin, it comes as no surprise that the

The airline industry has been for the most part profitable for the last sixty years. However a thin profit margin has been a major problem throughout the industry’s history. The majority of the airlines are unable to profitably deal with extreme economic events such as depression, recession, war, and of course the September 11 attacks. Furthermore they are unable to profitably deal with changes in the industry such as, the government deregulation that occurred in the late 70’s and early 80’s. The results of such events are larger than average declines in profit compared to higher profit margin industries. This fact can be seen in the annual reports published by the Air Transport Association. In 1978 net profit for the industry was 1,196,537,000. This profit dropped sharply over the next four years to (733,435,000). This decrease in profit was due to the government deregulation of the industry. Another example is the industry’s incapability of dealing with rising fuel cost during Desert Storm. Profits went from 1,811,267,000 in 1989 to (2,444,460,000) by 1992. Yet another example is the drop in passengers due to the terrorist attacks. The industry’s profits dropped from 6,998,931,000 in 2000 to (10,063,889,000) in 2002. However there are companies such as Southwest who have managed to stay profitable through even the worst times. These companies have done this by maximizing revenue.

Southwest and other profitable companies have achieved their profitability through maximization of revenue. There are several ways to increase revenue, the easiest being to increase passenger load factor. Southwest flew at a 68.1 percent load factor in 2001. Non-profitable companies such as United Airlines and U.S. Air Ways flew at less than 50 percent load factor. The passenger load factor is extremely important since “75 percent o

Some topics in this essay:
Internet Maximizing, American Airlines, Transportation Association, Storm Profits, Communist Socialist, Transport Association, Airlines Airways, Airlines Air, Blue Southwest, , load factor, airlines able, troubled airlines, airline industry, profit margin, free market, able operate free, united airlines, industry airlines, minimizing costs, minimizing costs maximizing, increase revenue, airlines able operate, operate free market, costs maximizing revenues,