During 2020-22, the global airline industry's losses exceeded $200Bn.
That's nine years of profit wiped out in just 730 days!
Indian airlines incurred a loss of ₹19,564 crores in 2021-22.
By 2030, India is expected to develop into the world’s largest aviation market.
Why are airlines not able to make money when airports are always crowded?
Why is the airline industry almost always at a loss?
Let's look at how airlines generate revenue: from passengers, cargo, and food & beverages sold inside an airplane.
Running an airline is a capital intensive business.
The major one is fuel - Boeing 747 (one of the most popular planes) uses upto four litres of fuel every second.
Security is another major concern for airlines. They spend a fortune to ensure safety before every departure that includes cargo setup, 360-degree plane inspection, gear and liquid checkups, etc.
And then there are fixed costs like buying/ leasing planes, salaries, and the airport also charges them for landing and parking the planes.
Even after being a capital intensive and an industry that is highly regulated, there's enough competition as well.
And on top of that, the loyality of a customer is considerably low. Customers don’t mind switching to a different airline for a slightly cheaper flight.
Considering all this, there is no doubt that airlines are suffering to make some profit in this business.
Have you invested in any of the airlines stock?