Why airlines are always going bankrupt
davidoks.blog
Why airlines are always going bankrupt
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Re: Why airlines are always going bankrupt
#2> From its deregulation in 1978 to the end of 2025, the airline industry has cumulatively lost money: its net profit over those 47 years sits at negative $37 billion.
That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits. My understanding is that before regulation, routes were allotted by the government. So an airline might own New York to Boston, so they didn't have to compete. Obviously de-regulation changed that.
The article doesn't go into it, but unions are also a challenge. Much of the airline industry is unionized. So you have situations where pilots that have been there a while get a lot more money. You have people doing essentially the same job but some are getting paid 3x as much just because they've been there a long time. In most industries, there is higher pay for senior talent, but that's because they're more effective at their job, and produce higher output. In this case it's just a legacy cost that makes some airlines incredibly uncompetitive through structural features.
Re: Why airlines are always going bankrupt
#3This argues airlines are undifferentiated. In the aggregate, maybe that's true. Personally, I have a long list of airlines I try to avoid flying.
Re: Why airlines are always going bankrupt
#4This argues airlines are undifferentiated. In the aggregate, maybe that's true. Personally, I have a long list of airlines I try to avoid flying.
Maybe not related but fascinating: "Annual spending on Delta-branded American Express cards comes out to about 1 percent of U.S. GDP. In 2025, this produced about $8 billion in revenue for Delta, accounting for more than the entirety of its profit."
Re: Why airlines are always going bankrupt
#5Great post. Thanks for sharing.
I always wondered why airlines were always running bankrupt… Now I know.
Re: Why airlines are always going bankrupt
#6This argues airlines are undifferentiated. In the aggregate, maybe that's true. Personally, I have a long list of airlines I try to avoid flying.
Maybe not related but fascinating: "Annual spending on Delta-branded American Express cards comes out to about 1 percent of U.S. GDP. In 2025, this produced about $8 billion in revenue for Delta, accounting for more than the entirety of its profit."
New revenue model idea: Charge $40/month on a person's credit card; a subscription. This buys the customer miles. Whenever you want to go somewhere, you use your miles. I think it would work based on the fact that people are willing to pay much more money for services if it's spread out and predictable. The fact that it's pre-paid also creates a lock-in benefit for the airline that the 'pay later over time' schemes lack.
Re: Why airlines are always going bankrupt
#7> From its deregulation in 1978 to the end of 2025, the airline industry has cumulatively lost money: its net profit over those 47 years sits at negative $37 billion. That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits. My understanding is that before regulation, routes were allotted by the government. So an airline might own New York to Boston, s…
> That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits
Sometimes it does and sometimes it doesn't. It depends on the industry, as the article goes into detail to explain.
Re: Why airlines are always going bankrupt
#8> From its deregulation in 1978 to the end of 2025, the airline industry has cumulatively lost money: its net profit over those 47 years sits at negative $37 billion. That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits. My understanding is that before regulation, routes were allotted by the government. So an airline might own New York to Boston, s…
> was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits.
That's because this assertion is economically illiterate. Deregulation can lead to increased profits where otherwise companies have monopoly power. But often, the regulation was there in the first place to ensure that companies had sufficient profit to invest in expensive infrastructure. (E.g. railroads).
Re: Why airlines are always going bankrupt
#9Fascinating article. One sentence jumped out to me:
> So Chapter 11 is a relief valve for airlines struggling under the weight of their fixed costs; but it doesn’t really do much to help the system as a whole
The American founders writing a uniform federal system of bankruptcy was a stroke of genius that's been paying dividends for 250 years now.
Re: Why airlines are always going bankrupt
#10Fascinating article. One sentence jumped out to me: > So Chapter 11 is a relief valve for airlines struggling under the weight of their fixed costs; but it doesn’t really do much to help the system as a whole The American founders writing a uniform federal system of bankruptcy was a stroke of genius that's been paying dividends for 250 years now.
Chapter 11 bankruptcy as well as all modern corporate law has its roots in the tycoons of the late 19th century. They lobbied and wrote it which is why it's corrupt.