Can airlines really be profitable if ALL THE AIRLINES:

– BUY aircrafts from the same manufacturers

– Land at the same airports (and pay the same charges)

– Use the same airport infra

– recruit from the same pool

– have a union that will decide the salaries and the bonus

– fly the same passengers?

Tough. really tough.

When do airlines make money? When they are being set up? Not sure.

Can they try differentiating between customers? Selling tickets in bulk – say they go to a L&T and say – we will give you a 10% discount if you fly a million miles a month, immaterial of class or flight timings? Tough. They may over fly Mum-Delhi and not fly Delhi-Srinagar at all. Moreover thanks to the net, such offers are difficult to give to just one customer.

If airlines can choose which airport to use (vow! and each city has 2-3 competing airports, it could help). Then the airports will be PAYING the airline – so that its shopping malls, restaurants, etc can earn some revenue.

If a city ties up with the airport company and woos corporates to open offices in those cities – airlines could benefit.

All these ideas may happen – not sure how soon. Till then they will keep going in and out of bankruptcy….

Of course Air India (is it now called Indian Airlines? I am confused) can never go into bankruptcy. It has always been in bankruptcy denial mode!

Left to themselves (and no state subsidy) the airlines will go the railroad business (in India they are protected by a monopoly and a poor population that cannot afford cars) or the shipping business.

Something is rotten about the transport business. It never makes money for the shareholder. However look at the entreprenurial optimism – money keeps flowing in – God help them.

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  1. This is what Warren Buffet said:

    “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

    If the truth is so much out in open, why do people set up airlines? Why is Jet continuing today? Why is Indigo investing more? There is something which we are unaware of.

  2. I really wonder what is the difference between airlines business and banking business? The banking regulations also have little room for innovation. Still banking is profitable. How come? or is there colluding? or is it because banks do not have to open branches in rural areas (like mobile operators have to give connectivity in rural area and airlines have to fly to andaman-nikobar…where they make heavy losses.)

    I think Airlines lack locking the customer. They should give 2 flights free on 8 flights. That would help.

  3. Rotten part is self interest of the political class as you mentioned Air India in ‘bankruptcy denial mode’.

    I too felt the same today morning, will ever any airline or Govt’s Railway (monopoly bit apart) ever make profits?

  4. yes,multiple airports would help.currently the airports and th govt agree on some nonsensical no-compete agreement ie they will not allow another airport in the vicinity of 100 kms for many years.
    this is cronyism of the worst sort.

    in dallas,i know that there are 2 airports a)DFW for the major airlines and b)Lovefield for southwest and other budget airlines.
    yes lovefield is a small airport,but it makes a huge difference.that is why southwest is very very successful.
    buffet missed investing in southwest that is why his rant about killing orville wright.he is another ignoramus,running down things he knows nothing about

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