Fear of crashing Tuesday, June 19, 2007
This week's Economist magazine has an excellent survey on air travel with some scary figures
- since 2001, the industry has incurred losses of $40bn collectively, mostly in the USA
- it owes $200bn
- Last year, the industry broke even & is forecast to make $1.5bn next, which means a 1.1% net margin on gross revenues of $473bn
Aside from a few star financial performers, most of the industry fails to cover its cost of capital, despite the industry reaching a record 76% load factor average.
Worried about crashing - who'd be an (long position) investor in most airlines?
posted by John Wilson @ 1:23 PM Permanent Link
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1 Comments:
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At 3:19 PM,
Hawkeye said...
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I recall seeing some 10-15 years ago an article in The Economist which showed that the cumulative profitability of the entire airline industry since the early days in the 1920's was negative. i.e. As a whole the airline industry was in deficit and had always been so. Clearly this remains the case and we have seen a number of major airline companies which failed in the time between that article and today. In an age when air travel is being called into question because of its carbon footprint, would it not be wiser to ask how the industry can continue to operate when it is clearly also not profitable in general. The answer of course, is that many airlines are Govt controlled or subsidised and companies therefore run at a loss because state controlled industries do not have the same economic forces governing their survival as do public companies.
