The airline industry is, by and large, bankrupt. Google "airlines in bankruptcy 2006" and you’ll see plenty of names: United, American, Delta, Northwest, Aloha, ATA, US Airways. Since the beginning of commercial air travel, the cumulative profits of this country’s carriers–all airlines, all years–is negative. That’s right, $14 billion of cumulative losses is the career total for this industry. (Industry data link.)
Operating in a highly capital intensive industry is difficult. (I devote a section of Businomics: How to Grow Profits Throughout the Economic Cycle to this challenge.)
However, utter lack of common sense has to enter into the industry’s problems. I recently looked into flying my son home from college for the summer. He goes to Worcester Polytechnic Institute in Massachusetts. The cost of a round-trip ticket, Boston to Portland and back, is about $321. We weren’t sure of the return date for the fall term, so I looked at the cost of a one-way ticket: $585. So the airlines are begging us one-way travelers to buy a roundtrip ticket and then throw away the second half. Then the airlines find plenty of no-shows, so they overbook their flights. When they’re wrong about the number of no-shows, they buy off travelers to take a later flight, or they bump travelers. Either way, the practice shows no respect for the customers. No wonder they airlines are bankrupt.