Achieving sustained profitability through more effective management tools and better industrial relations is the challenge for the industry.
Airline services can be categorized as being intercontinental, intracontinental, regional or domestic and may be operated as scheduled services or charters.
Profits in the airline industry can fluctuate wildly, precipitating exit. For instance, while United reported a record net loss of $542 million in the third quarter of 2001, they reported earnings of $425 million and $359 million in the corresponding quarters of 1998 and 1999, respectively. The reason for these fluctuations is that an airline’s costs are largely driven by labor and fuel, which are fixed in the short run. Hence, moderate fluctuations in demand, such as those caused by the events of September 11, can hugely affect profits. The robust earnings of most airlines in 1998 and 1999 can be traced both to the booming economy that spurred demand, particularly for high-fare business travelers, and to low fuel prices.
