_We Privatize the _*_Gains_* _ And Socialize the *Loses*_ That was hitting the nail on the head right there!!! Modern Day Business tactics... Truly underrated comment.
There’s a reason why the game Monopoly usually ends in bankruptcy. Even the “winner” theoretically loses because there’s no remaining source of revenue.
the scariest thing is places like backrock buying up housing its bad now because its something they know you need just wait till they own the majority percent everyplace has felt this over the last 10 years with the greedy landlords moving out of ca into other towns and china is also getting in on it
Therefore most airlines are national state airlines, esp. the very successful ones. Countries which privatized got eaten up by the budget airlines only taking the most lucrative routes and all competing against state airlines with unlimited funding. It’s completely stupid western countries allowed access to them.
I don’t buy into the narrative that we have to bail them out. And if they fail they fail, but in all likelihood they’ll go into some sort of restructuring and reorg in order to be more profitable. If we keep socializing the risky behavior through bailouts and subsidies, we legitimize that behavior and screw up the incentives.
Kinda agree, but I think short terminism is in built into this capitalist system. They can’t help but gut themselves for short term profit. You would end up with airlines constantly in bankruptcy and highly dysfunctional.
@@TheBooban That's what we need to have happen. They need to keep going into bankruptcy until a robust business model is hashed out. Constantly bailing them out isn't doing them anygood. As well as aircraft development stagnation. There needs to be competition. We need the concords brought back, competition on comfort and spaciousness rather than gutting value of service.
@@shanewillbur1325 the Concorde was removed from service because it made no money. If you want 100% free market and no bailouts you are going to get endless 737s and never see a supersonic aircraft ever because they simply aren’t very profitable
@@shanewillbur1325 Concord failed (and I use that term strictly economically - it was a MARVEL of engineering and one hell of a ride) because of free market. The plane itself was built by a nationalized joint venture (France & UK). There IS competition right now - consumers have just proven time & time again to value price over services.
@@adamp9348 ..... which is funny. Consumers love to complain about all the "fees" airlines charge, making a $100 ticket $250. But we also complain about lack of service, legroom...We can't have it both ways. I do miss the regulated days. All inclusive, comfortable seats, polite staff and great meals. Unlike say local transportation (automobile, bus, bike) that is necessary for daily life. Flying in a luxury and a privilege. We can't forget that.
Airlines are one those industries you have to trade the stock in and out of the market a lot to make any money. Buy at the bottom and get out when you've made a nice profit before they hit the next turn down. Highly cyclical.
@@h1inc816 .50 cents isn't worth bothering with. It's more like a 10 to 30 dollar jump. AA won't be doing that with horrible cashflows and 40 billion in debt. They are the weakest of the bunch.
My biggest problem with airlines is those flights that take you multiple stops for what can be done with a single regional flight of just 2 hours. When they take 20 hours or more with long layovers at multiple airports. And when booking amtrak train ride takes less time and require no hassle and no going through security to board the train. Now once better trains are built, they will be able to provide ground competition to flying.
It’s not as simple as “better trains” in the US Rail infrastructure has to be rebuilt. Amtrak doesn’t own most of their track it’s owned by freight companies and they give their freight trains priority. That’s the reason you see something like 11 hour delays for Amtrak trains. Also rail for high speed trains has to be straight for long periods of time for the train to work as High Speed. If not, the train will just go as slow as a conventional train. Finally, regional 2 hour hops aren’t profitable. That’s why airlines use Hub and spoke. That’s why NASA and a bunch of startups are working on Regional Air Mobility (RAM) They are using technologies such as electrification, and automation, to bring down the cost of small (as in 2-9 seater propellor aircraft) on these short routes. It would be on demand service instead of scheduled where you would could hail a small aircraft (not necessarily an airplane some of these are EVTOL concepts) to your local small airport and fly to another small airport close to your final destination. The electrification is being used to bring down the cost of fuel and the automation is being used to bring down the number of pilots to 1 or 0 depending on the type of aircraft (0 is actually remotely piloted and is only planned for some cargo aircraft for now) Look up NASA’s Regional Air Mobility study and or Companies like LILILUM (New Aircraft) Pyka (new aircraft) Vertical Aerospace (New Aircraft) Reliable Robotics (automation) X-Wing (automation) The technologies for Regional Air Mobility are all coming together the question is: Will customers make the business model work? Will people be willing to sit in small 2-9 seater aircraft and get shaken up by all the small bumps airliners don’t feel because they fly higher? In the far future Would they be willing to step on a small remotely piloted aircraft that will still be cramped and small and bumpy compared to an airliner? Time will tell. The idea is great but I fly these small aircraft people want to use for regional air mobility They would have to be completely redesigned. They have no AC, they get really hot, and when they slow down the cabin smells like fuel. If you aren’t into flying, (most people aren’t) it will be pretty unpleasant experience. If the aircraft are redesigned (which they will be) and be electric and comfortable and aerated it can be a very pleasant experience. Unfortunately the turbulence will be something people will have to get used to. It’s a lot bumpier flying lower to the ground especially below a cloud.
@@nikobelic4251 The problem with that mode of thinking is the public. We live in a highly litigious and activist society, and the slightest offense or screwup can mean the difference between profit and loss due to a new law banging down on the offender. Single pilot electric aircraft? First time one goes down and kills someone, the activists will devour the airline, manufacturer, pilot etc. Consider if will, the aftermath and effects of Colgan Air 3407 as an example of this.
In long term, bailouts mean that everyone loses. Bailouts prevent the industry from healing and bad companies keep making bad business. This all so means that there are fewer jobs available in long term.
Airlines support millions of jobs directly and indirectly, so they will always be bailed out in times of crisis. No sane government would let their airline sector collapse just for ideological reasons or for simplified economic theories of the “ free market”
That’s a very naive perspective. Airlines are strategically crucial businesses. Just as concerns national security, the airlines provide a reserve fleet of aircraft that can be quickly repurposed for troop transport in the event of war. For that reason alone, the government has a strong interest in keeping them flying. And there are many other good reasons why we ought to keep this strategic industry alive, even if that means that at times it runs at a financial loss.
@@JohnnyAmerique I could say the exact same thing. Rescue packages will save companies not industries. No recession or catastrophe destroys an industry at once, the only thing that can happen is a slump. The only reason for rescue packages is to choose whether to save the economy now and destroy it in the future or vice versa.
As a former regional airline employee who was laid off back in 2018 prior to the pandemic, I can definitely see it from different angles. There are too many jobs that are connected with the aviation industry and it is very much needed domestically as well as internationally. No one can predict what will happen in the future, but history has shown the legacy airlines the unexpected can and will happen. The first reflex is to lay off workers and at the same time satisfy your stockholders...what about a rainy day fund? Thats something I have never understood. Despite all of the events over the years, legacy airlines always bounced back and enjoyed alot of profitable years even though covid is a whole different beast all together. I am glad there were stipulations with the bailouts, but unfortunately its still on the tax payer regardless.
@@BondJFK True and yet that has backfired on them with alot of canceled flights ✈️. Well when they can automate gate and baggage agents then I will start to worry.
@@freddytang2128 Yes, in a free market, poorly managed, inefficient companies would go bankrupt. They would get bought up by new, more proficient owners. Incompetent CEOs would get fired, not a pay raise. Rewarding failure is a road to disaster, you are telling them that regardless of how incompetent they are, big daddy will always be there to save them. What incentive would they have to improve in that situation?
@@daviidon “brought up by more proficient owners” wow first time I hear someone advocate oligopoly where a few big players control an industry and reduce competition
@@freddytang2128 They were never competition if they couldn't turn a profit. An inefficient company is a burden to society. I've never seen anyone argue that the public should fund the lavish lifestyles of incompetent CEOs.
COVID, GFC, 9/11 - the airline industry is one of the few where you could do everything right operationally and still get the rugged pulled from under you
en.wikipedia.org/wiki/List_of_airline_bankruptcies_in_the_United_States Uhhh, this long list of bankrupt airlines begs to differ on "always" getting a bailout...
They do get bailouts but it is mainly the big airlines who managed to survive decades of competition. The government is not bailing out every airline that needs help just like they did not bailout every single bank during the Financial Crisis. But yes, bailouts are frustrating especially when companies proceeded to do stock buybacks during better times
It's fairly lower on the list of total expenses for a major airline. Fuel and labor are well over 50% of the total expenses alone. Maintenance is about number 5 on the list typically given the general reliability of modern aircraft.
I worked for an airline for 5.5 years in Australia. I took redundancy in 2020 due to COVID. It is true a lot of airlines operate on thin margins. The cost of fuel, cost to repair and maintain a single aircraft and equipment for it is astronomical, paying employees, uniforms, hotel rooms for layovers, training (and maintaining), airline software/programs/computers, lounges, advertising, food, services, codeshares, paying for their “spot” within the terminal - check in counters/gates/aero bridges/food court then unforeseeable delays/cancellations…. the list goes on. Tie that in with that they’re an airline/business competing with other airlines and constantly have to lower their prices to get customers in the door and choose them so the profit margin really isn’t there. It is but it isn’t… I’m 50/50 on the bail out scheme. I know multiple airlines got help from the Australian Government during COVID. It’s a tough one. They’re a business at the end of the day but they keep our country moving. Without airlines the country stops - it is probably more important than we realise. Every flight is loaded to the brink with cargo (in fact, cargo would take priority over having a bum on the seat - more $$$). More to the point though, there isn’t many domestic carriers Australia so if you lose one it creates a monopoly for the remaining airline and they essentially have no competitor which means they can start charging whatever price for tickets they want. So either way really the customer pays - be it tax or price of their airfare. Also, another point, is as far as I’m aware the airline I worked for used to put all their profits back into the company to keep “building it” and didn’t have much cash. This was a tax right off I believe and the company paid big time with COVID. But then being a business they need to have more accountability for their actions and need to operate with less risk (i.e. not loading all your profit back into the business to grow it and keep more “rainy day” cash at hand). So it kinda sucks for the consumer because either way we lose…
I'm an aussie as well, and you make excellent points. With regards to bailouts, I'm of the opinion the real issue is that the logic behind deregulation is no longer valid (or wasn't pre-COVID). Air travel is no longer the "luxury" it was in the 70's/80's. If an industry is that integral to a nations economy that a bailout is required during a financial crisis, I'd argue the regulation of the industry needs to be re-examined. This isn't a judgement on the performance of the industry itself, but rather a recognition that the negative externalities of the industry need to be managed from outside of it.
@@alooga555 did it not occur to you how much time you waste navigating airport security, checking in early and all. Furthermore, you can keep train stations and depots close and compact in the city centre. You save a lot of time with this features. There's a reason the Acela still runs, it makes sense because it's simply faster because of all the little things that add up to being faster in spite of planes being speed wise faster.
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@@hermeslein6614 China may have money, but it's domestic market is useless. Downtown is skyscrapers; 5 miles out is pure 19th century. Just like USSR, the country has nukes, while it's people can't even buy a car.
My wife has been an airline reservation agent for the past 20+ years. She still works at her same desk but that desk has belonged to four different airlines since she was first hired.
When wages go up expenses go up which forces prices to go up so the business stays profitable. Eventually the employees just goes to higher prices. Simple inflation. You didn’t improve their life all you did was devalue the currency of their country. Which indirectly actually hurts their pockets.
@@roysalman6720 isn't the companies already profited so much before? Plus for example a company earned billions, if they raise salary based on inflations, they'll still be profitable
Southwest has always beaten American and Delta for me. You also get 2 free baggage built into that price. I can fly Southwest from Minneapolis to Denver anywhere between $100-$150 roundtrip; I'm looking at $200+ with other competitors. It has made skiing Colorado resorts viable for me.
Another thing is that countries have government owned airlines and those are heavily subsidized, many of them don't care about profits as long as they are giving services at a cheaper rate.
not necessarily , some do make a profit but most make large losses . they also can’t compete with private sector low cost airlines or even legacy more comfortable airlines in terms of price and comfort
We’re still recovering from the pandemic. Of course airlines are struggling. We’ve not been allowed to travel. Lots of countries will still not accept US travelers. It’s not hard to understand.
Israel and the USA won't accept me because I haven't had the jab, I miss going abroad, Americans are lucky they have such a big country with plenty of warm climates.
@8:06 “making sure the airlines meet government regulated safety standards”, cue the ground crew chap climbing on the mid rail of his mobile steps to clean the windscreen! 👍🏻
Yes, there is a substitute for air travel . I visit at least 5 countries in a day on RUclips - Bangkok, Osaka,Taipei, Guangzhou, Hawaii. It’s armchair travel in 4K, complete with drone shots . The choice is unlimited , you can explore a whole city or you can explore a few streets at a time.
I feel like a lot of the issues with airline financial health in 2020 stem from stock buybacks impacting cash reserves. While buybacks are good for investors, in terms of financial health for a company, it can put them at risk if they don’t have enough reserves. They wouldn’t have needed anywhere near the bailouts they got last year had they not been buying back stock
The problem with this narrative is that entering into 2020, airlines has record reserves - more than enough to weather 9/11. Accumulating excess reserves beyond that would have been irrational, and they would have been taxed away by the use it or lose it tax.
@@tachin2.07 That was always going to happen no matter what as air travel matured. But as the video explains, we'd be flying much more comfortably and much more cheaply today had the airlines NOT been deregulated.
In spite of all of this, many of the same players have stuck with this difficult and troubled industry for decades, and others are constantly trying to get in the game by creating low cost start-ups. CEOs, VPs and other industry insiders are not telling the whole truth about the profitability of the industry, or how it really makes its money. Hauling cargo is almost alway insanely lucrative especially on overseas routes, and the US government has spent decades working with the industry in stripping workers of rights and power so that they can be easily and legally squeezed by the industry executives whenever airlines have difficulties, including self inflicted ones..
I googled the CEO salaries and it goes up to around $13 million per year. People losing their jobs (earning maybe $50k per year) because it is a business cost which the business cannot sustain, however if you cut the CEO salary down to $100k per year, with the rest you could basically pay 258 yearly salaries at $50k per year. Prove me wrong
Well, the only carrier prior to COVID that wasn’t operating in the red was Southwest. March of 2020, Delta was operating at -$14 Billion, United -$29 Billion, American -$40 Billion while Southwest was in the black at +$7 Billion. COVID and overreaching regulations have really restricted the playing field for profitability
I've been working for American Airlines the past 4 years and haven't seen a raise above new hires. It's either you stay the same as entry pay or you become a supervisor.
This report appears to focus on US airlines only. Are international airlines (i.e., British Airways, Emirates, Japan Air, etc.) experiencing the same challenges? Wondering if US airlines could benefit from practices of foreign airlines.
I think it‘s difficult to compare especially Arab airlines to western ones, since they are essentially state-owned and serve as a poster child for their countries… don‘t think that they face the same issues (taxation, labor laws, landing fees at home etc.)
@@mvpfocus Spell check got me smart ass, I flew from DTW to AMS once a month for three years with them for work and racked up over 500k flight miles with them.
@@becazapatero2477 A company can't keep operating at a loss in perpetuity. Sooner or later, investors are going to start seeing through the clouds of revenue to profits or lack thereof. The airline industry has been at a race to the bottom ever since the first batch of deregulation of the early 80's...Uber has been operating at a loss since their inception and it's only going to get worse as Drivers demand higher wages, States start passing legislation, fuel costs go up, etc. People are starting to see companies like Uber for what they really are. High tech sweatshops. As such, and what the growing trend is, investors are starting to tire of "Unicorns", plus the era of cheap money is coming to an end as Boomers go into retirement....I could go on....
Having worked in the industry for over 30 years .. airlines are either filing for bankruptcy or are becoming insolvent and a single step away from recivership... the single biggest problem is its inability to predict or hedge the cost of fuel and stuiped regulations.. 90% of all airless outside of America are subsidize by thier governments.. just look at Airbus.
@@axellacaze9115 - I guess @thomas Burke having worked for over 30yrs in the industry didn’t do a lot to help him understand basics like the difference between airplane manufacturers and airline carriers, huh?
They didn’t pay down their debt, certainly nowhere close to the amount of shares they repurchased. Hard to argue shareholders don’t deserve the pain they’ve had to endure. That’s what happens when you pay yourself for years instead of your creditors, they begin to own you. :)
How about all businesses focus on their employees first, which then translates to employees actually wanting to be there and take care of customers, which then translates to the bottom line for shareholders. It’s ridiculous when a company goes public and gears EVERYTHING to shareholders first. People are laid off, cost-cutting takes place, service suffers, and in many businesses, customers go elsewhere, which isn’t good for the business or shareholders. My husband works for a company who was bought out by another company whose sole purpose is to trim the fat and re-sell. They laid off so many people that the people left in certain areas are working 80-hour weeks, because one person is now doing the job of ten. I used to work for the company myself when it was an LLC, and the leaders actually treated employees like gold (free lunch, free breakfast goodies, free development classes, holiday parties, the CEO would have lunch with each employee to get to know them). It went public, and all of that went away. "I truly believe that if you take care of your employees, they will take care of your business.” Richard Branson
The cost of jet fuel is the biggest profit killer for any air carrier (no matter if you are commercial, cargo, or private). Jet fuel is the most expensive thing in the aviation industry. Time to create new ways to fuel aircrafts of the future!
They need to focus on leisure and people taking vacations . With the metaverse and internet and VR you don't really need to fly to a meeting or business trip anymore .
The book "Why The Airline Business Is Broken" by Michael O'Leary highlights several problematic aspects of the airline industry globally: 1) Overcapacity: Airlines have added too many seats to the market, leading to intense competition and pricing wars. This has resulted in lower fares for passengers but also lower profit margins for airlines. 2) High costs: Airlines have high fixed costs, such as aircraft leasing, maintenance, and crew salaries. These costs are not easily reduced, making it challenging for airlines to operate profitably. 3) Regulation: The airline industry is heavily regulated, with strict safety and security standards. While these standards are necessary, they also add to the cost structure of airlines and limit their ability to innovate and compete. 4) Infrastructure: Airports and air traffic control systems are often outdated and inefficient, leading to delays and additional costs for airlines. 5) Technology: The airline industry has been slow to adopt new technologies, such as artificial intelligence and automation, which could help reduce costs and improve efficiency. 6) Environmental concerns: The aviation industry is a significant contributor to greenhouse gas emissions, with increasing pressure from governments and consumers to address this issue. These problems have led to financial instability and bankruptcies in the airline industry, particularly during times of economic downturn or geopolitical uncertainty. The COVID-19 pandemic has further exacerbated these issues, with a significant drop in demand for air travel and resulting financial losses for airlines.
the alternative is to run franchise airliner. That way a starter in the industry could run a new route for example, with their budget. But still get connection to the parent company.
Air transportation is super regulated Expenses, maintenance, insurance Every single part from rivets and screws to entire engines have to be approved by FAA and manufacturers. Every repair has to be done by an approved and licensed mechanic. The cost of just the aircraft itself is just astronomical and that’s if everything goes well.
Airline deregulation has been bad for passengers, taxpayers, and the airlines themselves. It's been nothing but worse service, cramped seats, bailouts and bankruptcies.
It hasn't been renovated in decades and lost most of it's traffic with the shut down of the Northwest/Republic hub. Redundant to ATL once they merged with DL
The problem is built into the airline business. To understand lets first look at the cab business. The charge one pays is based on several factors. Distance between starting point and destination, toll fees, and time. The further your destination, the larger the final bill. In contrast, airlines do not charge by the distance, time and landing fees. They calculate all the seats they can sell to a destination. This is why a ticket from LA to NY is cheaper than a flight from LA to Reno. Obviously the fuel costs, time to fly and landing charges in NY are FAR greater than a flight to Reno. The problem is if an airline were to charge based on fuel costs, payroll for the flight crew and landing fees, the tickets would be very high to purchase. So airlines lose money on the long flights unless the flights are 80%+ full all the time. But by charging more on the shorter flights, it offsets the costs on the longer flights since those long flights generally are major destinations like LA, Vegas, Dallas, Chicago, Atlanta, Miami, and NY. If airlines charged by the air miles, they would lose traffic, but the flights would be profitable. On the counter argument that we should have more rail systems like Europe, in Europe traveling 2 hours by train you can have traveled thru several countries. Or traveled from one side of Switzerland to the opposite side. Whereas in the US, traveling 2 hours you are only halfway to your destination. Europe had their railway systems long before the automobile was even created.
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I love how these airlines are complaining about how hard it is to make their margins, yet they are still making millions and even billions in profit. Profit is after expenses, so essentially they just need to readjust investor expectations to expect lower profits due to increase in EMPLOYEE (not executive) wage increases and infrastructure costs to maintain an industry leading fleet. This will allow for better training and hiring standards to increase employee and customer satisfaction, creating less of a volatile industry to invest in. Just something to think about…
Report does not makes sense. Airlines hedge the fuel prices for long runs (futures contract). They don't shop for fuel day today. So whatever the dude is saying does not make sense.
Thankfully for a lot of routes there is indeed an alternative, which I use frequently. Trains. I hate flying and try to find away around it every time I have to travel longer distances.
If the investors who find profits from fossil fuel investments continue to dictate policy, the Nation will insist that air travel is essential.... The reality of tax dollars used to support an industry that appeals to instant gratification, or something closely resembling that..... has become more of a consumer of fuel than an asset..... Who is the fortunate ones who benefit from gulping massive gallons of Fuel for the ability to travel at speeds we may have only dreamed about a hundred years ago? The truth is indicated as Mother Nature demonstrates just how beneficial Greed has become.....
I mean a year later from this video countless airlines boasting insane profits in high single billion $ range despite high oil prices. Emriates, SIngapore, Ryanair, list goes on $$$
Yeah, share buybacks and bailouts. Not a fan. They should just nationalize the airlines if they desperately need a bailout, wipe out the share holders and save jobs. The auto industry turned out fine after.
The minimum wage for airline employees should be nothing less than $15 per hour. This should include people who work directly for the airline and contract workers who work for an outside company.
Airline Strategy during the pandemic: Schedule more flights = more capacity = more people booking flights = more revenue for the airline = more capital in the airline’s pockets = happier investors and shareholders Considering: 1. Shortage of staff (due to layoffs and furlough) 2. Airline knowing the active on-duty employees and actual labour needed for operating flights 3. Poor customer service (due to staff shortage and poor training) 4. Little to no passengers’ protection in case of cancellation and delays in the US Why should US airlines improve? Right now airlines are enjoying high load factor due to the cancellation of flights that are unable to depart due to the shortage of staff. Having a high load factor is more profitable for airlines since adding more passengers to one flight is less costly that having two flight with 50% load factor. Moreover, other airlines are experiencing the same issues… so it is also hard for customers to switch airline and choose “a better one”. Therefore, do not expect to see big improvements in the short term…. Airline companies still have to recover for the losses in 2020 and 2021… and guess who is going to suffer the consequences? Customers…. That’s why they have been saying “during those holidays pack some patience”
American Airlines CEO Doug Parker took home his smallest paycheck last year since becoming the head of the Fort Worth-based carrier, bringing in $10.66 million in total compensation
Remember Richard Ferris, United Airlines. He wanted to create an airline/hotel/travel & entertainment company. Wonder how that would have worked out? Would COVID have had less effect on a diversified company?
0:50 It might not have substitutes, but once you're in the industry and conform to the appropriate regulations & qualifications, for any given service the barrier to entry seem fairly low. The plane'll go anywhere, so as long as you can strike up a deal with the airport services you can enter a market. It feels like a perfectly competitive market.
After the major part of transportation will shift to electric mode then only industry which will be using fuel such as diesel will be aviation industry. Long term investment will reap you reward
I bet if we let them fail, the airline industry would rise bigger and better. New people with better ideas would take over. Man, I wish this country was capitalistic country…oh wait… we are. Too bad we don’t live like. But if you are a normal business owner you’re pretty much screwed.
If we don't live like a capitalist country are we really a capitalist country? Seems like calling our country capitalist is nothing more than a facade.
airline also fire all the employee during start of covid, now they can't hire them back. Kind of "you reap what you sow" situation. Oil future contract was negative, I didn't see airline gobble them during 2020 june when negative oil future contract happen. Lack of long term planning is more of an issue than any of this short input resource shock.
They offered leave packages and employees took them. Despite Covid-19 the increase of air travel happened quicker than the airlines were anticipating and now they are struggling with staffing for the time being. Both pilots and flight attendants go through weeks long of training in order to work.
To be fair… The airlines didn’t have the money to gobble up oil future contracts. They just sat on what they had and decreased expenses to a maximum. It it weren’t for COVID the drop in oil prices would have been amazing for the airlines
Faktor yang memperburuk pengelolaan dalam industri airlines sangat banyak tinjauan dari sisi sisi yang bertautan dengan segmen segmen penunjangnya. Ini harus diberikan model model perkuatan khusus untuk membenahinya,terkadang faktor faktor tak terduga tidak di masukkan ke dalam parameter faktor pengaruh
1:25 if air travel is such a integral part of the economy and society why do they struggle to make a profit. Dude that’s like saying everybody gotta eat drink and wear clothes why not all restaurants cafes clothes retailers make a profit.
investors: buy all and invest in sector, if anyone loses all market share shifts to others and u still gain future: electric aircraft will eliminate jet fuel pricing shocks and per flight cost will also come down
You forgot one thing, which upends all other analysis: in a net-zero world - which is coming up fast - it's impossible to fly long-distance without Jet-A. The energy & land requirements for bio/e-fuels make those options impossible. The future of aviation can only be short-haul. It's time to cash in the profits - severe turbulence ahead...
In case it hasn't already been done, I'd like to see a video on the future of aviation in relation to recent developments in global warming. Furthermore, how could aviation industry react if it were to be discouraged, or even severely limited, for environmental reasons, by governments, if it doesn't find a way to be more sustainable in a reasonable amount of time. Anyways great videos. Thanks a lot!
IMO, if an industry is so critical that it cannot be allowed to fail, then it should not be a private industry. If they want a bailout, they should be giving ownership stake in return. Enough bailouts, and they become a government run service.
It's better to use high-speed rail should airline industry declines to the point of no return, at least until it recovers or if the industry restructures. It closes the gap regarding in distances where for airlines, it is too expensive and too short, while for automobile, it would take too long. But still, I find airlines fascinating for at least moving a large number of people to destinations where they want to go.
_We Privatize the _*_Gains_*
_ And Socialize the *Loses*_
That was hitting the nail on the head right there!!! Modern Day Business tactics... Truly underrated comment.
Agreed. Anyone who thinks we have a free market is delusional.
There’s a reason why the game Monopoly usually ends in bankruptcy. Even the “winner” theoretically loses because there’s no remaining source of revenue.
So u mean they won't pay taxes on profit??
@@vinaybhat7670 There’s too many ways to avoid taxes
the scariest thing is places like backrock buying up housing its bad now because its something they know you need just wait till they own the majority percent everyplace has felt this over the last 10 years with the greedy landlords moving out of ca into other towns and china is also getting in on it
Short term answer: Yes
Long term answer: Still yes. Low margins, high competition, hardly any moats.
And ton money from goverment around word. They wont let national airplane gone to bankcrupt. Make they look bad
China defeat USA as the most richest country wahahaha
Competition? hahahahahah
Covid did not mess up the airlines industry,,,,,Fauci did by funding the lab
But it wasn't a yes or no question(?) The title was why airlines struggle to stay profitable.
I do find the airline industry fascinating. It runs on razor thin margins, but it's so necessary.
Therefore most airlines are national state airlines, esp. the very successful ones. Countries which privatized got eaten up by the budget airlines only taking the most lucrative routes and all competing against state airlines with unlimited funding. It’s completely stupid western countries allowed access to them.
@@TheBooban true
@@TheBooban the national airlines should exist but the private airlines must be allowed to do so as well
American airlines are kinda garbage.
They have to run on razor thin margin to make your ticked affordable
I don’t buy into the narrative that we have to bail them out. And if they fail they fail, but in all likelihood they’ll go into some sort of restructuring and reorg in order to be more profitable. If we keep socializing the risky behavior through bailouts and subsidies, we legitimize that behavior and screw up the incentives.
Kinda agree, but I think short terminism is in built into this capitalist system. They can’t help but gut themselves for short term profit. You would end up with airlines constantly in bankruptcy and highly dysfunctional.
@@TheBooban That's what we need to have happen. They need to keep going into bankruptcy until a robust business model is hashed out. Constantly bailing them out isn't doing them anygood. As well as aircraft development stagnation. There needs to be competition. We need the concords brought back, competition on comfort and spaciousness rather than gutting value of service.
@@shanewillbur1325 the Concorde was removed from service because it made no money.
If you want 100% free market and no bailouts you are going to get endless 737s and never see a supersonic aircraft ever because they simply aren’t very profitable
@@shanewillbur1325 Concord failed (and I use that term strictly economically - it was a MARVEL of engineering and one hell of a ride) because of free market. The plane itself was built by a nationalized joint venture (France & UK).
There IS competition right now - consumers have just proven time & time again to value price over services.
@@adamp9348 ..... which is funny. Consumers love to complain about all the "fees" airlines charge, making a $100 ticket $250. But we also complain about lack of service, legroom...We can't have it both ways.
I do miss the regulated days. All inclusive, comfortable seats, polite staff and great meals.
Unlike say local transportation (automobile, bus, bike) that is necessary for daily life. Flying in a luxury and a privilege. We can't forget that.
Airlines are one those industries you have to trade the stock in and out of the market a lot to make any money. Buy at the bottom and get out when you've made a nice profit before they hit the next turn down. Highly cyclical.
Easy, right?
At the end of the day there's only one rule in trading.
American Airline (AAL) dropped to $19 a share today which is a strong buy. Looking to sell at $19.50 to $20
@@h1inc816 .50 cents isn't worth bothering with. It's more like a 10 to 30 dollar jump. AA won't be doing that with horrible cashflows and 40 billion in debt. They are the weakest of the bunch.
@@h1inc816 yeah this didn’t age well
Once again CNBC trurns a blind eye to huge ceo compensations and bonuses.
My biggest problem with airlines is those flights that take you multiple stops for what can be done with a single regional flight of just 2 hours. When they take 20 hours or more with long layovers at multiple airports. And when booking amtrak train ride takes less time and require no hassle and no going through security to board the train. Now once better trains are built, they will be able to provide ground competition to flying.
It’s not as simple as “better trains” in the US
Rail infrastructure has to be rebuilt.
Amtrak doesn’t own most of their track it’s owned by freight companies and they give their freight trains priority. That’s the reason you see something like 11 hour delays for Amtrak trains.
Also rail for high speed trains has to be straight for long periods of time for the train to work as High Speed. If not, the train will just go as slow as a conventional train.
Finally, regional 2 hour hops aren’t profitable. That’s why airlines use Hub and spoke. That’s why NASA and a bunch of startups are working on Regional Air Mobility (RAM)
They are using technologies such as electrification, and automation, to bring down the cost of small (as in 2-9 seater propellor aircraft) on these short routes.
It would be on demand service instead of scheduled where you would could hail a small aircraft (not necessarily an airplane some of these are EVTOL concepts) to your local small airport and fly to another small airport close to your final destination.
The electrification is being used to bring down the cost of fuel and the automation is being used to bring down the number of pilots to 1 or 0 depending on the type of aircraft (0 is actually remotely piloted and is only planned for some cargo aircraft for now)
Look up NASA’s Regional Air Mobility study and or Companies like
LILILUM (New Aircraft)
Pyka (new aircraft)
Vertical Aerospace (New Aircraft)
Reliable Robotics (automation)
X-Wing (automation)
The technologies for Regional Air Mobility are all coming together the question is:
Will customers make the business model work?
Will people be willing to sit in small 2-9 seater aircraft and get shaken up by all the small bumps airliners don’t feel because they fly higher?
In the far future Would they be willing to step on a small remotely piloted aircraft that will still be cramped and small and bumpy compared to an airliner?
Time will tell.
The idea is great but I fly these small aircraft people want to use for regional air mobility
They would have to be completely redesigned.
They have no AC, they get really hot, and when they slow down the cabin smells like fuel.
If you aren’t into flying, (most people aren’t) it will be pretty unpleasant experience.
If the aircraft are redesigned (which they will be) and be electric and comfortable and aerated it can be a very pleasant experience. Unfortunately the turbulence will be something people will have to get used to. It’s a lot bumpier flying lower to the ground especially below a cloud.
@@nikobelic4251 The problem with that mode of thinking is the public. We live in a highly litigious and activist society, and the slightest offense or screwup can mean the difference between profit and loss due to a new law banging down on the offender. Single pilot electric aircraft? First time one goes down and kills someone, the activists will devour the airline, manufacturer, pilot etc. Consider if will, the aftermath and effects of Colgan Air 3407 as an example of this.
@@starventure I agree 100%
Never gonna happen.
How do you turn a billion dollars into a million dollars? Start an airline.
It’s actually
“How do you become a millionaire.
Start with a Billion Dollars and start and then start an airline”
@@nikobelic4251 Right.
like Trump
@@RsOnTheStreetS yeah
But the quote is from Richard Branson
Invest in pot stock
In long term, bailouts mean that everyone loses. Bailouts prevent the industry from healing and bad companies keep making bad business. This all so means that there are fewer jobs available in long term.
Airlines support millions of jobs directly and indirectly, so they will always be bailed out in times of crisis. No sane government would let their airline sector collapse just for ideological reasons or for simplified economic theories of the “ free market”
That’s a very naive perspective. Airlines are strategically crucial businesses. Just as concerns national security, the airlines provide a reserve fleet of aircraft that can be quickly repurposed for troop transport in the event of war. For that reason alone, the government has a strong interest in keeping them flying. And there are many other good reasons why we ought to keep this strategic industry alive, even if that means that at times it runs at a financial loss.
@@JohnnyAmerique I could say the exact same thing. Rescue packages will save companies not industries. No recession or catastrophe destroys an industry at once, the only thing that can happen is a slump. The only reason for rescue packages is to choose whether to save the economy now and destroy it in the future or vice versa.
that was so biased, sometimes bailout really work out, depending on which company to bailout
Billon dollar companies needing bailouts is crazy to me.
As a former regional airline employee who was laid off back in 2018 prior to the pandemic, I can definitely see it from different angles. There are too many jobs that are connected with the aviation industry and it is very much needed domestically as well as internationally. No one can predict what will happen in the future, but history has shown the legacy airlines the unexpected can and will happen. The first reflex is to lay off workers and at the same time satisfy your stockholders...what about a rainy day fund? Thats something I have never understood. Despite all of the events over the years, legacy airlines always bounced back and enjoyed alot of profitable years even though covid is a whole different beast all together. I am glad there were stipulations with the bailouts, but unfortunately its still on the tax payer regardless.
That 'rainy day fund' you mentioned already exists. They just call it 'tax payer money'.
@@BondJFK True and yet that has backfired on them with alot of canceled flights ✈️. Well when they can automate gate and baggage agents then I will start to worry.
@@idib1739 lol 😆 yeh!
Coming soon. Massive unemployment is waiting for us. :(
@@thalesbessa7862 does this mean pilots jobs are in jeopardy?
Is it worth getting into flight training now if my job will be automated?
No, they keep profits when they succeed and get bailed out when they fail.
what do you prefer, let airlines go bust? you want massive flight cancellations, tens of thousands of people laid off, and less competition?
@@freddytang2128 Yes, in a free market, poorly managed, inefficient companies would go bankrupt. They would get bought up by new, more proficient owners. Incompetent CEOs would get fired, not a pay raise.
Rewarding failure is a road to disaster, you are telling them that regardless of how incompetent they are, big daddy will always be there to save them. What incentive would they have to improve in that situation?
This guy gets it. This is why free markets are good it rewards meritocracy
Either bail out all bussiness that fail or bailout none. Fair
@@daviidon “brought up by more proficient owners” wow first time I hear someone advocate oligopoly where a few big players control an industry and reduce competition
@@freddytang2128 They were never competition if they couldn't turn a profit. An inefficient company is a burden to society. I've never seen anyone argue that the public should fund the lavish lifestyles of incompetent CEOs.
COVID, GFC, 9/11 - the airline industry is one of the few where you could do everything right operationally and still get the rugged pulled from under you
Short term: Yes
Long term: they always get bailouts.
Rinse and repeat 🤘
en.wikipedia.org/wiki/List_of_airline_bankruptcies_in_the_United_States
Uhhh, this long list of bankrupt airlines begs to differ on "always" getting a bailout...
@@benchoflemons398 Or they buy their own stocks to maintain the mere appearance of their still being a valued company.
Conservatives are the worst at being economically conservative sigh. Bailouts while apposing covid relief
They do get bailouts but it is mainly the big airlines who managed to survive decades of competition. The government is not bailing out every airline that needs help just like they did not bailout every single bank during the Financial Crisis. But yes, bailouts are frustrating especially when companies proceeded to do stock buybacks during better times
Aircraft maintenance is often forgotten on why it’s hard to stay profitable. It’s expensive to fix planes.
It's fairly lower on the list of total expenses for a major airline. Fuel and labor are well over 50% of the total expenses alone. Maintenance is about number 5 on the list typically given the general reliability of modern aircraft.
The biggest downfall of the industry.
I worked for an airline for 5.5 years in Australia. I took redundancy in 2020 due to COVID.
It is true a lot of airlines operate on thin margins. The cost of fuel, cost to repair and maintain a single aircraft and equipment for it is astronomical, paying employees, uniforms, hotel rooms for layovers, training (and maintaining), airline software/programs/computers, lounges, advertising, food, services, codeshares, paying for their “spot” within the terminal - check in counters/gates/aero bridges/food court then unforeseeable delays/cancellations…. the list goes on. Tie that in with that they’re an airline/business competing with other airlines and constantly have to lower their prices to get customers in the door and choose them so the profit margin really isn’t there. It is but it isn’t…
I’m 50/50 on the bail out scheme. I know multiple airlines got help from the Australian Government during COVID. It’s a tough one. They’re a business at the end of the day but they keep our country moving. Without airlines the country stops - it is probably more important than we realise. Every flight is loaded to the brink with cargo (in fact, cargo would take priority over having a bum on the seat - more $$$). More to the point though, there isn’t many domestic carriers Australia so if you lose one it creates a monopoly for the remaining airline and they essentially have no competitor which means they can start charging whatever price for tickets they want. So either way really the customer pays - be it tax or price of their airfare. Also, another point, is as far as I’m aware the airline I worked for used to put all their profits back into the company to keep “building it” and didn’t have much cash. This was a tax right off I believe and the company paid big time with COVID. But then being a business they need to have more accountability for their actions and need to operate with less risk (i.e. not loading all your profit back into the business to grow it and keep more “rainy day” cash at hand). So it kinda sucks for the consumer because either way we lose…
I'm an aussie as well, and you make excellent points.
With regards to bailouts, I'm of the opinion the real issue is that the logic behind deregulation is no longer valid (or wasn't pre-COVID). Air travel is no longer the "luxury" it was in the 70's/80's. If an industry is that integral to a nations economy that a bailout is required during a financial crisis, I'd argue the regulation of the industry needs to be re-examined. This isn't a judgement on the performance of the industry itself, but rather a recognition that the negative externalities of the industry need to be managed from outside of it.
@@grizzlednerd4521 100% agree with you. Spot on
not true. it all depends on management, Singapore Airlines made a record net profit so why cant Australia do it ?
As long as you can't control oil prices. You can't win.
China is now the richest country
Hydrogen fuel on the way
@@hermeslein6614 and they don't believe in airlines, high speed rail can carry millions
@@MrBoliao98 Sure, but it still takes three hours from Paris to London be Eurostar.
@@alooga555 did it not occur to you how much time you waste navigating airport security, checking in early and all. Furthermore, you can keep train stations and depots close and compact in the city centre. You save a lot of time with this features. There's a reason the Acela still runs, it makes sense because it's simply faster because of all the little things that add up to being faster in spite of planes being speed wise faster.
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If the legacy carriers weren't busy with stock buy backs, they wouldn't be struggling so much.
America is now defeated as richest country by China wahah next most powerful country
@@hermeslein6614 China may have money, but it's domestic market is useless. Downtown is skyscrapers; 5 miles out is pure 19th century. Just like USSR, the country has nukes, while it's people can't even buy a car.
@@hermeslein6614 China has no domestic market. Without trade, China is a zero.
And they will do buy backs again. And yes, we the idiots, will bail them out again. For the airlines it’s a casino where you can never lose.
@David LOL, millions of Americans can't even afford basic healthcare
My wife has been an airline reservation agent for the past 20+ years. She still works at her same desk but that desk has belonged to four different airlines since she was first hired.
“They have had to increase the starting wages for new hire employees”
You say that like it’s a bad thing. Curious.
When wages go up expenses go up which forces prices to go up so the business stays profitable. Eventually the employees just goes to higher prices. Simple inflation. You didn’t improve their life all you did was devalue the currency of their country. Which indirectly actually hurts their pockets.
It depends , wages are often the largest operational cost to business
@@roysalman6720 isn't the companies already profited so much before? Plus for example a company earned billions, if they raise salary based on inflations, they'll still be profitable
Right? I just hit that part and paused the video to check the comments!
it's from a business point of view. It is a bad idea from a business owner perspective regardless if its awful or not.
Idgaf if I fly ever again. When I was little I used to love flying. Now it's terrifying, not from the heights or speed, the PEOPLE
Air travel has become too accessible pricing wise. It's only going to get worse.
Just like ski slopes, parks, beaches, libraries, cafes.... Great when there's a few people, hell when it's full
*I am a full-time Day Trader. I must admit that I have never traded airline stocks. I already do well but I get scared to touch that category.*
Why day trade airlines, if there are so many other ways to lose money? ;-)
@@Mesozoic_mammal
That is quite literally the point he made.
🤦🏻
There are no train stocks anyway because trains belong to the government just like tanks and firefighter trucks and police cars.
in what universe is Southwest still a "low cost" airline? They're usually at least 20% more expensive than American or Delta.
I’m gusssing short flights are cheaper
Haven't seen cheap southwest flights in a longtime
@@rickyayy just flew today on a $39 SWA fare.
@@haimingxu6922 they are actually mostly more expensive
Southwest has always beaten American and Delta for me. You also get 2 free baggage built into that price. I can fly Southwest from Minneapolis to Denver anywhere between $100-$150 roundtrip; I'm looking at $200+ with other competitors. It has made skiing Colorado resorts viable for me.
Another thing is that countries have government owned airlines and those are heavily subsidized, many of them don't care about profits as long as they are giving services at a cheaper rate.
not necessarily , some do make a profit but most make large losses . they also can’t compete with private sector low cost airlines or even legacy more comfortable airlines in terms of price and comfort
In South Africa the state owned one tickets is very expensive compared to private one
Think our government stepped in to run our airlines over too many plane crashes.
Staff have been wearing the cost for the last couple of years.
In Australia, aircraft engineering careers have enjoyed 2 decades of decay.
We’re still recovering from the pandemic. Of course airlines are struggling. We’ve not been allowed to travel. Lots of countries will still not accept US travelers. It’s not hard to understand.
Israel and the USA won't accept me because I haven't had the jab, I miss going abroad, Americans are lucky they have such a big country with plenty of warm climates.
@@mvpfocus We didn't need vaccines before covid, even for the vaccinated, travel internationally is very complicated now.
@@mvpfocus Yes but that's different to what it's now like with Covid.
@@mvpfocus Before Covid I didn't need to prove I had any jabs.
@@mvpfocus Spanish flu.
@8:06 “making sure the airlines meet government regulated safety standards”, cue the ground crew chap climbing on the mid rail of his mobile steps to clean the windscreen! 👍🏻
my thoughts exactly lmao
They busted the union so there's no longer any safety standard.
Thanks, airline is a risky business, public has been smart, they demanded low price, business travel, got smart too, shareholders are grethy.
Yes, there is a substitute for air travel . I visit at least 5 countries in a day on RUclips - Bangkok, Osaka,Taipei, Guangzhou, Hawaii. It’s armchair travel in 4K, complete with drone shots . The choice is unlimited , you can explore a whole city or you can explore a few streets at a time.
Delta has won this profit game. Most profitable airline on the planet not even close.
No. China is
I feel like a lot of the issues with airline financial health in 2020 stem from stock buybacks impacting cash reserves. While buybacks are good for investors, in terms of financial health for a company, it can put them at risk if they don’t have enough reserves. They wouldn’t have needed anywhere near the bailouts they got last year had they not been buying back stock
The problem with this narrative is that entering into 2020, airlines has record reserves - more than enough to weather 9/11.
Accumulating excess reserves beyond that would have been irrational, and they would have been taxed away by the use it or lose it tax.
Stock buybacks reduce dividends payouts too.
Sounds like deregulation has been harmful to both the consumer and the airlines themselves.
Yeah, this is interesting phenomenon, seems like free market doesn't work in this sector.
@@hyy3657 as in many other transport sectors
Well you can fly at a bargain and to more places than before, so consumers possibly had benefited about deregulation
@@tachin2.07 That was always going to happen no matter what as air travel matured. But as the video explains, we'd be flying much more comfortably and much more cheaply today had the airlines NOT been deregulated.
@@None0fYourBusiness Thats not true
If cheaps are low is because competition and doing thing uncorfotable
In spite of all of this, many of the same players have stuck with this difficult and troubled industry for decades, and others are constantly trying to get in the game by creating low cost start-ups. CEOs, VPs and other industry insiders are not telling the whole truth about the profitability of the industry, or how it really makes its money. Hauling cargo is almost alway insanely lucrative especially on overseas routes, and the US government has spent decades working with the industry in stripping workers of rights and power so that they can be easily and legally squeezed by the industry executives whenever airlines have difficulties, including self inflicted ones..
I googled the CEO salaries and it goes up to around $13 million per year. People losing their jobs (earning maybe $50k per year) because it is a business cost which the business cannot sustain, however if you cut the CEO salary down to $100k per year, with the rest you could basically pay 258 yearly salaries at $50k per year. Prove me wrong
How old are you?
Well, the only carrier prior to COVID that wasn’t operating in the red was Southwest. March of 2020, Delta was operating at -$14 Billion, United -$29 Billion, American -$40 Billion while Southwest was in the black at +$7 Billion. COVID and overreaching regulations have really restricted the playing field for profitability
@Rohit S not letting people travel ¿?
I've been working for American Airlines the past 4 years and haven't seen a raise above new hires. It's either you stay the same as entry pay or you become a supervisor.
This report appears to focus on US airlines only. Are international airlines (i.e., British Airways, Emirates, Japan Air, etc.) experiencing the same challenges? Wondering if US airlines could benefit from practices of foreign airlines.
Likewise
I think it‘s difficult to compare especially Arab airlines to western ones, since they are essentially state-owned and serve as a poster child for their countries… don‘t think that they face the same issues (taxation, labor laws, landing fees at home etc.)
My family have no intentions to travel by air. We have also completely stopped traveling by air for business.
so u take boat?
Regional airlines are the ones to watch. Way ahead buying and selling them. Jet Blues only 10 bucks a share!!!
I thought their biggest expense was fueling upper management's pockets instead cos they barely reinvest their cashflow they are always bailed out
Well, they do spend free cash on stock buybacks and dividends, so there is that
I remember years ago they (news media)said airline's was one of the most profitable businesses
I miss Northwest Airways, their service was great, I always flied them.
@@mvpfocus Spell check got me smart ass, I flew from DTW to AMS once a month for three years with them for work and racked up over 500k flight miles with them.
@@donaldsebolt6890 It’s COVID. We all got a hair up …….
Your debating airways and airlines. But fly straight over flied? Flew..
8:09 The guy cleaning the window. That looks really dangerous!
Companies like Uber are just now learning the lessons of the airlines...
What do you mean?
@@becazapatero2477 A company can't keep operating at a loss in perpetuity. Sooner or later, investors are going to start seeing through the clouds of revenue to profits or lack thereof. The airline industry has been at a race to the bottom ever since the first batch of deregulation of the early 80's...Uber has been operating at a loss since their inception and it's only going to get worse as Drivers demand higher wages, States start passing legislation, fuel costs go up, etc. People are starting to see companies like Uber for what they really are. High tech sweatshops. As such, and what the growing trend is, investors are starting to tire of "Unicorns", plus the era of cheap money is coming to an end as Boomers go into retirement....I could go on....
@@Telluwide
Yea that makes sense.
Thank you! ❤️🧘🏻♀️
Damn, "their putting you in a metal tube" that's how you feel bruh
@lei prince: A lot of the "tubes" and other parts of the airframes are made of composites instead of metal nowadays in order to reduce fuel costs.
Having worked in the industry for over 30 years .. airlines are either filing for bankruptcy or are becoming insolvent and a single step away from recivership... the single biggest problem is its inability to predict or hedge the cost of fuel and stuiped regulations.. 90% of all airless outside of America are subsidize by thier governments.. just look at Airbus.
Airbus is not an airline... It's like comparing boeing to delta airlines.
Truth
@@axellacaze9115 - I guess @thomas Burke having worked for over 30yrs in the industry didn’t do a lot to help him understand basics like the difference between airplane manufacturers and airline carriers, huh?
Wow..... zero mention of the regional airline system.
They didn’t pay down their debt, certainly nowhere close to the amount of shares they repurchased. Hard to argue shareholders don’t deserve the pain they’ve had to endure. That’s what happens when you pay yourself for years instead of your creditors, they begin to own you. :)
How about all businesses focus on their employees first, which then translates to employees actually wanting to be there and take care of customers, which then translates to the bottom line for shareholders. It’s ridiculous when a company goes public and gears EVERYTHING to shareholders first. People are laid off, cost-cutting takes place, service suffers, and in many businesses, customers go elsewhere, which isn’t good for the business or shareholders. My husband works for a company who was bought out by another company whose sole purpose is to trim the fat and re-sell. They laid off so many people that the people left in certain areas are working 80-hour weeks, because one person is now doing the job of ten. I used to work for the company myself when it was an LLC, and the leaders actually treated employees like gold (free lunch, free breakfast goodies, free development classes, holiday parties, the CEO would have lunch with each employee to get to know them). It went public, and all of that went away.
"I truly believe that if you take care of your employees, they will take care of your business.” Richard Branson
The cost of jet fuel is the biggest profit killer for any air carrier (no matter if you are commercial, cargo, or private). Jet fuel is the most expensive thing in the aviation industry. Time to create new ways to fuel aircrafts of the future!
They need to focus on leisure and people taking vacations . With the metaverse and internet and VR you don't really need to fly to a meeting or business trip anymore .
0:52 HSR are good alternative, but only in densely populated areas with close proximity.
The book "Why The Airline Business Is Broken" by Michael O'Leary highlights several problematic aspects of the airline industry globally:
1) Overcapacity: Airlines have added too many seats to the market, leading to intense competition and pricing wars. This has resulted in lower fares for passengers but also lower profit margins for airlines.
2) High costs: Airlines have high fixed costs, such as aircraft leasing, maintenance, and crew salaries. These costs are not easily reduced, making it challenging for airlines to operate profitably.
3) Regulation: The airline industry is heavily regulated, with strict safety and security standards. While these standards are necessary, they also add to the cost structure of airlines and limit their ability to innovate and compete.
4) Infrastructure: Airports and air traffic control systems are often outdated and inefficient, leading to delays and additional costs for airlines.
5) Technology: The airline industry has been slow to adopt new technologies, such as artificial intelligence and automation, which could help reduce costs and improve efficiency.
6) Environmental concerns: The aviation industry is a significant contributor to greenhouse gas emissions, with increasing pressure from governments and consumers to address this issue.
These problems have led to financial instability and bankruptcies in the airline industry, particularly during times of economic downturn or geopolitical uncertainty. The COVID-19 pandemic has further exacerbated these issues, with a significant drop in demand for air travel and resulting financial losses for airlines.
the alternative is to run franchise airliner. That way a starter in the industry could run a new route for example, with their budget. But still get connection to the parent company.
Air transportation is super regulated
Expenses, maintenance, insurance
Every single part from rivets and screws to entire engines have to be approved by FAA and manufacturers.
Every repair has to be done by an approved and licensed mechanic.
The cost of just the aircraft itself is just astronomical and that’s if everything goes well.
Yet we still have planes failing
Fuel Costs are the reason for losses in Airline Industry. The best way to be in Profits is to have Medium Haul Planes with 3 Spool Engines.
Airline deregulation has been bad for passengers, taxpayers, and the airlines themselves. It's been nothing but worse service, cramped seats, bailouts and bankruptcies.
You can thank Jimmy Carter.
I watching this before taking off from Memphis using Allegiant. The airport was among the worst I have ever been
It hasn't been renovated in decades and lost most of it's traffic with the shut down of the Northwest/Republic hub. Redundant to ATL once they merged with DL
Memphis is a dump. I’m from there and every time I go back, I’m shocked how crappy it is. The whole area is crappy. I’m glad I left.
@@usgator I've never been there but definitely been told no real reason to go.
@@johniii8147 you’re not missing anything…lol
@@usgator Downtown is decent but a dump compared to Nashville
The problem is built into the airline business. To understand lets first look at the cab business. The charge one pays is based on several factors. Distance between starting point and destination, toll fees, and time. The further your destination, the larger the final bill. In contrast, airlines do not charge by the distance, time and landing fees. They calculate all the seats they can sell to a destination. This is why a ticket from LA to NY is cheaper than a flight from LA to Reno. Obviously the fuel costs, time to fly and landing charges in NY are FAR greater than a flight to Reno. The problem is if an airline were to charge based on fuel costs, payroll for the flight crew and landing fees, the tickets would be very high to purchase. So airlines lose money on the long flights unless the flights are 80%+ full all the time. But by charging more on the shorter flights, it offsets the costs on the longer flights since those long flights generally are major destinations like LA, Vegas, Dallas, Chicago, Atlanta, Miami, and NY. If airlines charged by the air miles, they would lose traffic, but the flights would be profitable. On the counter argument that we should have more rail systems like Europe, in Europe traveling 2 hours by train you can have traveled thru several countries. Or traveled from one side of Switzerland to the opposite side. Whereas in the US, traveling 2 hours you are only halfway to your destination. Europe had their railway systems long before the automobile was even created.
The us is so big you need 2 days to get halfway to where you need to go
One Word...... Deregulation. It was the beginning of a conglomerate that hinders growth.
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Maria_martt
I love how these airlines are complaining about how hard it is to make their margins, yet they are still making millions and even billions in profit. Profit is after expenses, so essentially they just need to readjust investor expectations to expect lower profits due to increase in EMPLOYEE (not executive) wage increases and infrastructure costs to maintain an industry leading fleet. This will allow for better training and hiring standards to increase employee and customer satisfaction, creating less of a volatile industry to invest in. Just something to think about…
good luck with that, it isn't maximizing short term profits.
@@edh615 but what are the short term profits being used for…?
Bail out is very free market.
Report does not makes sense. Airlines hedge the fuel prices for long runs (futures contract). They don't shop for fuel day today. So whatever the dude is saying does not make sense.
Thankfully for a lot of routes there is indeed an alternative, which I use frequently. Trains. I hate flying and try to find away around it every time I have to travel longer distances.
When they mentioned business models i thought they were gonna talk about airline miles.
If the investors who find profits from fossil fuel investments
continue to dictate policy,
the Nation will insist that air travel is essential....
The reality of tax dollars used to support an industry that appeals
to instant gratification, or something closely resembling that.....
has become more of a consumer of fuel than an asset.....
Who is the fortunate ones who benefit from gulping massive gallons of
Fuel for the ability to travel at speeds we may have only dreamed about
a hundred years ago?
The truth is indicated as Mother Nature demonstrates just how beneficial
Greed has become.....
I mean a year later from this video countless airlines boasting insane profits in high single billion $ range despite high oil prices. Emriates, SIngapore, Ryanair, list goes on $$$
High quality content!
Yeah, share buybacks and bailouts. Not a fan. They should just nationalize the airlines if they desperately need a bailout, wipe out the share holders and save jobs. The auto industry turned out fine after.
The minimum wage for airline employees should be nothing less than $15 per hour. This should include people who work directly for the airline and contract workers who work for an outside company.
Cue higher ticket prices
@@limelimelimes Nothing wrong with that.
They pay a lot more then 15 dollars per hour. Burger King 👑 in my town pays 13.25 per hour
Airline Strategy during the pandemic:
Schedule more flights = more capacity = more people booking flights = more revenue for the airline = more capital in the airline’s pockets = happier investors and shareholders
Considering:
1. Shortage of staff (due to layoffs and furlough)
2. Airline knowing the active on-duty employees and actual labour needed for operating flights
3. Poor customer service (due to staff shortage and poor training)
4. Little to no passengers’ protection in case of cancellation and delays in the US
Why should US airlines improve?
Right now airlines are enjoying high load factor due to the cancellation of flights that are unable to depart due to the shortage of staff.
Having a high load factor is more profitable for airlines since adding more passengers to one flight is less costly that having two flight with 50% load factor.
Moreover, other airlines are experiencing the same issues… so it is also hard for customers to switch airline and choose “a better one”.
Therefore, do not expect to see big improvements in the short term…. Airline companies still have to recover for the losses in 2020 and 2021… and guess who is going to suffer the consequences? Customers….
That’s why they have been saying “during those holidays pack some patience”
That's not broken, that's competition and free market.
These people balancing best between costs and income will win.
Simple answer. Other than Southwest EVERY airline in USA History has ended up bankrupt at some point.
Very inconsiderate of airlines like Spirit and Allegiant
Airlines are needed.
American Airlines CEO Doug Parker took home his smallest paycheck last year since becoming the head of the Fort Worth-based carrier, bringing in $10.66 million in total compensation
That is still over paid
Remember Richard Ferris, United Airlines. He wanted to create an airline/hotel/travel & entertainment company. Wonder how that would have worked out? Would COVID have had less effect on a diversified company?
0:50 It might not have substitutes, but once you're in the industry and conform to the appropriate regulations & qualifications, for any given service the barrier to entry seem fairly low. The plane'll go anywhere, so as long as you can strike up a deal with the airport services you can enter a market. It feels like a perfectly competitive market.
спасибо за хороший ликбез. Конечно, недооценил важность отрасли летом 2020, зря шортил
After the major part of transportation will shift to electric mode then only industry which will be using fuel such as diesel will be aviation industry. Long term investment will reap you reward
I bet if we let them fail, the airline industry would rise bigger and better. New people with better ideas would take over. Man, I wish this country was capitalistic country…oh wait… we are. Too bad we don’t live like. But if you are a normal business owner you’re pretty much screwed.
If we don't live like a capitalist country are we really a capitalist country? Seems like calling our country capitalist is nothing more than a facade.
@@agisler87 I mean, it’s still possible to rise from nothing and become something through business. Just a lot of corruption which sucks
airline also fire all the employee during start of covid, now they can't hire them back. Kind of "you reap what you sow" situation. Oil future contract was negative, I didn't see airline gobble them during 2020 june when negative oil future contract happen. Lack of long term planning is more of an issue than any of this short input resource shock.
They offered leave packages and employees took them. Despite Covid-19 the increase of air travel happened quicker than the airlines were anticipating and now they are struggling with staffing for the time being. Both pilots and flight attendants go through weeks long of training in order to work.
To be fair…
The airlines didn’t have the money to gobble up oil future contracts.
They just sat on what they had and decreased expenses to a maximum.
It it weren’t for COVID the drop in oil prices would have been amazing for the airlines
Faktor yang memperburuk pengelolaan dalam industri airlines sangat banyak tinjauan dari sisi sisi yang bertautan dengan segmen segmen penunjangnya. Ini harus diberikan model model perkuatan khusus untuk membenahinya,terkadang faktor faktor tak terduga tidak di masukkan ke dalam parameter faktor pengaruh
Airlines is a very high cost Industry and still high demand more than 300 miles out
Want to have a increased profit margin for airlines ? Stop giving CEOs stupid salaries! Simple.
Very well thought out analysis
even if they paid the ceo nothing it won’t makes a difference since they would only save a few million
1:25 if air travel is such a integral part of the economy and society why do they struggle to make a profit. Dude that’s like saying everybody gotta eat drink and wear clothes why not all restaurants cafes clothes retailers make a profit.
investors: buy all and invest in sector, if anyone loses all market share shifts to others and u still gain
future: electric aircraft will eliminate jet fuel pricing shocks and per flight cost will also come down
Maybe Airlines would do better business if they stopped treating their Economy travelers like cattles .
Exactly! Also reprimand rude counter persons. Folks don’t know anything about going the extra mile at airline counters.
Airlines are behaving the way most corporations should. Not price gouging at any opportunity
You forgot one thing, which upends all other analysis: in a net-zero world - which is coming up fast - it's impossible to fly long-distance without Jet-A. The energy & land requirements for bio/e-fuels make those options impossible. The future of aviation can only be short-haul. It's time to cash in the profits - severe turbulence ahead...
Very well produced video. Dont see a lot of high quality videos like that out there.
You look as the personification of the expression "extremely optimistic airliner virgin"
Fare hikes would help profitability but the lose of customers would happen. Tough business to be in but absolutely essential.
In case it hasn't already been done, I'd like to see a video on the future of aviation in relation to recent developments in global warming. Furthermore, how could aviation industry react if it were to be discouraged, or even severely limited, for environmental reasons, by governments, if it doesn't find a way to be more sustainable in a reasonable amount of time.
Anyways great videos. Thanks a lot!
IMO, if an industry is so critical that it cannot be allowed to fail, then it should not be a private industry. If they want a bailout, they should be giving ownership stake in return. Enough bailouts, and they become a government run service.
airline stock are fascinating, because investor take the profit, and the government always bailout the risk.
Air india will bounce back
People don't like to pay to fly but I would honestly pay way more for leg room with some food on the flight.
First Class is exactly this.
It's better to use high-speed rail should airline industry declines to the point of no return, at least until it recovers or if the industry restructures. It closes the gap regarding in distances where for airlines, it is too expensive and too short, while for automobile, it would take too long. But still, I find airlines fascinating for at least moving a large number of people to destinations where they want to go.
FedEx is doing well.
that’s because they deliver cargo, cargo companies like fed ex and ups will always do well
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