Why The Airline Business Is Broken

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Passenger airlines are a crucial industry in the global economy, but the sector is also extremely volatile. Running a passenger airline is an asset-intensive industry with narrow profit margins. Despite the risks, the industry has experienced some periods of consistent growth, which can lull investors into a false sense of security. Watch the video above to learn whether investors should steer clear of the sector and why passenger airlines struggle to stay profitable. 0:00 - Introduction 1:35 - Industry shocks 6:16 - Business models 8:28 - Deregulation and consolidation 12:55 - Industry outlook Billionaire investor Warren Buffett once called himself an “air-o-holic” because of how tempted he is to invest in commercial airlines. But he learned the hard way, twice, that the industry can be a risky bet. Airline stocks have been on a wild ride since the beginning of the pandemic, which shows just how volatile the sector can be. “It seems that airlines once or twice a decade are hit with these really hard-to-process exogenous shocks, whether it’s something like 9/11 or the Great Recession,” said Adam Gordon, managing director and partner at Boston Consulting Group’s Airline Practice. The passenger airline industry is already asset-intensive, with narrow profit margins. Despite the risks, the industry has experienced some periods of consistent growth. Airlines saw big growth in profits for about a decade prior to Covid, which analysts attribute to the airlines restructuring p

Published 2021-11-16 · Watch on YouTube ↗
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