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Why airlines are always going bankrupt

davidoks.blog

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Re: Why airlines are always going bankrupt

#21

Post by kayfox »

xenadu02 wrote: post #15
bko wrote: post #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, s…

A race to the bottom on pilot pay won't help anything. Well it may lead to less qualified pilots. You can ask Boeing how well screwing over labor has worked for them if you like. All US airlines have the same labor costs for pilots and it isn't their highest cost anyway. That would be fuel. If you want to divvy up costs that way: Boeing is probably the biggest problem. Both them and Airbus eat up all possible excess…

How exactly does Boeing drive up the cost? The cost of the aircraft is less than 20% of the lifetime cost of operating an airliner and a lot of the maintenance cost is not related to the cost of parts from Boeing, since most parts that get replaced on an aircraft are not made by Boeing and airlines do not go through Boeing to buy them.

Re: Why airlines are always going bankrupt

#24

Post by pfannkuchen »

bko wrote: post #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, s…

Could it be Hollywood accounting?

Re: Why airlines are always going bankrupt

#25

Post by zbentley »

rayiner wrote: post #17
flextheruler wrote: post #10

Earlier quoted context omitted.

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.

U.S. bankruptcy law is a foundational social technology that enables the marvelous world around you to exist.

Even if that's true, current bankruptcy law is still really far from socially optimal.

There are a lot more points on the "how does your system respond to business failure" spectrum besides low-consequence ch11/better-luck-next-time and debtors' prison.

Re: Why airlines are always going bankrupt

#27

Post by listenallyall »

bko wrote: post #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, s…

Airlines are popular employers specifically because they offer a clear vision of future pay increases and better, more prestigious, schedules. People, especially pilots, are willing to put up with a lot early on because they are confident that sticking with the plan will eventually allow them to earn double and triple their early-career salaries.

Same thing happens in law, investment banking, etc... the hardest workers are often the youngest and least-paid. They do it because they know big money may come later.

Re: Why airlines are always going bankrupt

#28

Post by tyingq »

One thing it leaves out. For bankruptcies that result in reorganization rather than liquidation, it offers the airline an "out" on its many labor contracts. And freedom to renegotiate that contract with a lot of leverage. Labor is the highest cost they have, other than fuel.

Re: Why airlines are always going bankrupt

#29

Post by jmalicki »

zbentley wrote: post #25
rayiner wrote: post #17

Earlier quoted context omitted.

U.S. bankruptcy law is a foundational social technology that enables the marvelous world around you to exist.

Even if that's true, current bankruptcy law is still really far from socially optimal. There are a lot more points on the "how does your system respond to business failure" spectrum besides low-consequence ch11/better-luck-next-time and debtors' prison.

What's a country with a more effective system? Not saying that the lack of a more effective system means the US's is optimal, but the outcomes for capital reallocation are far better in the US than the UK for instance.

In the US, workers at a bankrupt company can often show up to the same workplace the next day or week and not skip a beat, the customers might not even know they're doing business with a different entity - only the owners have changed - the old ones get wiped out and their debtors take control.

Re: Why airlines are always going bankrupt

#30

Post by [deleted] »

kayfox wrote: post #21
xenadu02 wrote: post #15

Earlier quoted context omitted.

A race to the bottom on pilot pay won't help anything. Well it may lead to less qualified pilots. You can ask Boeing how well screwing over labor has worked for them if you like. All US airlines have the same labor costs for pilots and it isn't their highest cost anyway. That would be fuel. If you want to divvy up costs that way: Boeing is probably the biggest problem. Both them and Airbus eat up all possible excess…

How exactly does Boeing drive up the cost? The cost of the aircraft is less than 20% of the lifetime cost of operating an airliner and a lot of the maintenance cost is not related to the cost of parts from Boeing, since most parts that get replaced on an aircraft are not made by Boeing and airlines do not go through Boeing to buy them.

[deleted]
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