eli5: How are airline companies profit margins so thin?

Question

Theres like 5 companies in the US that handle ALL the flights. How do they still have thin profit margins despite being the only options?

Edit: spelling

In: 72

Answer 1

Their costs are super high and they rarely have monopolies. Customers typically compete on price so they have to lower prices to rock bottom to compete.

The routes that they do make profit from are international routes where there’s typically less competition and more business travelers who are less price-sensitive. Or in some cases flights from their hub where they’re the only airline offering the flight due to the hub’s ability to concentrate demand onto a single route.

For example, United Airlines is the only airline that flies from Denver to Fargo ND. This is because they can connect you to the rest of their network from Denver, getting you from Fargo to anywhere in the country with just 1 stop, so the number of people flying that route includes all the people from Fargo that want to go anywhere in the country. Since Delta and American do not have a hub in Denver, they don’t have this advantage so it wouldn’t make sense for them to offer a nonstop on that route.

The problem is that if you just wanted to get from Fargo to Denver, your only nonstop option will be United, so they upcharge due to their monopoly.