Airlines Post Highest Profits in 10 Years: How, Why, and What is the Future of Air Travel?

The last we heard, the airline industry was hurting. Airlines like Frontier were filing Chapter 11, and other airlines began charging for services that had previously been included with the price of a ticket. In late 2010, everything from a basic (if not subpar) meal to a checked bag to even use of the on-board lavatory were no longer included services. In fact, budget UK airline Ryanair now charges for credit card payments, online and airport check-in, and bags weighing more than 15kg (equivalent to about 33lbs). 2007 and 2008, even in to 2009, customers also saw fuel surcharges, which never seemed to leave when fuel prices dropped.

These are reasons why the average traveler would be appalled to see the December 22 headline from CNN Money, "Airlines Post Fattest Profits in 10 Years". Wait, what?!

Just a few weeks ago, I did some investigating of my own and found that a ticket to a destination that I had gone to many times would cost me more than double what I have paid in the past. On top of paying a small fortune for this ticket, I could not be assured that my seat would assigned, and according to the aircraft's seat map, there actually weren't any seats available on the airplane.

While the people at large and governments around the world (especially the United States and European Union) have made strides in protecting passengers with documents such as the "Passengers' Bill of Rights", airlines still, notoriously, overbook flights leading to frustrated customers and unpleasant flights.

In addition to cutting services, airfare has jumped 13% since 2009, in a faltering economy. This is, as any economist will be all too familiar with, a case of cause and effect when it comes to supply and demand. Carriers cut the number of flights offered and completely removed flights that didn't have as much demand. Even as recently as December 2010, Continental Airlines announced that it had postponed it's November 2011 launch of it's Houston to Auckland route, as well as the delivery of the airline's first Boeing 787 (which is now projected to be sometime in 2012).

In addition to slashing capacity, mergers have also taken a toll on supply and demand in the industry. The recent merger of United Airlines and Continental Airlines has lead to layoffs in both the former's hub of Chicago as well as the latter's hub of Houston. The combination of some flights and the elimination of many duplicate flights both between the two airlines as well as across the airlines' alliance group, Star Alliance, (which is composed of 27 member airlines), has contributed to the problem.

What is the future of the airline industry? With a struggling world economy that will presumably be on the rebound in 2011 in to 2012, travelers can only hope that the airlines will increase supply by re-introducing old routes as well as putting more aircraft back in to service. Though most passengers will find it upsetting, it is probably a good idea to get used to increasing fees across the board as well as inferior service overall.

Resources:

http://www.aviationexplorer.com/defunct_airlines_worldwide.htm

http://www.dailymail.co.uk/travel/article-1263905/Ryanair-toilet-charges-phased-in.html

http://money.cnn.com/2010/12/22/news/companies/airline_fares_profits/index.htm?hpt=T2

http://www.bloomberg.com/news/2010-12-06/continental-puts-off-houston-auckland-start-on-boeing-787-delay.html

http://www.staralliance.com/en/about/airlines/