What are the economics/business structure that make the airline industry so fragile (bankruptcies, bail outs, etc)?
In: Economics
Even in the best of times, their profit margins are really thin. The industry is very competitive not only between airline companies, but they also have to compete with cars and trains.
But when the economy enters a recession, they start to lose customers. And the big problem with that is that flying a plane full of customers costs them the same as a plane only half full, but they get half as much income from it. Regardless of how many passengers are on the plane, the insurance cost, the personnel costs, the maintenance costs, and the docking fees are the same. There’s some savings in fuel cost, but not enough.
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