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bko 8 hours ago [-]
> From its deregulation in 1978 to the end of 2025, the airline industry has cumulatively lost money: its net profit over those 47 years sits at negative $37 billion.
That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits. My understanding is that before regulation, routes were allotted by the government. So an airline might own New York to Boston, so they didn't have to compete. Obviously de-regulation changed that.
The article doesn't go into it, but unions are also a challenge. Much of the airline industry is unionized. So you have situations where pilots that have been there a while get a lot more money. You have people doing essentially the same job but some are getting paid 3x as much just because they've been there a long time. In most industries, there is higher pay for senior talent, but that's because they're more effective at their job, and produce higher output. In this case it's just a legacy cost that makes some airlines incredibly uncompetitive through structural features.
A race to the bottom on pilot pay won't help anything. Well it may lead to less qualified pilots. You can ask Boeing how well screwing over labor has worked for them if you like.
All US airlines have the same labor costs for pilots and it isn't their highest cost anyway. That would be fuel.
If you want to divvy up costs that way: Boeing is probably the biggest problem. Both them and Airbus eat up all possible excess profit on the back end via the cost for airliners. Break up Boeing, bring back competition in airliner manufacturing. People who want to screw over labor don't usually frame things in those terms for some reason.
kayfox 28 minutes ago [-]
How exactly does Boeing drive up the cost? The cost of the aircraft is less than 20% of the lifetime cost of operating an airliner and a lot of the maintenance cost is not related to the cost of parts from Boeing, since most parts that get replaced on an aircraft are not made by Boeing and airlines do not go through Boeing to buy them.
rayiner 3 hours ago [-]
> was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits.
That's because this assertion is economically illiterate. Deregulation can lead to increased profits where otherwise companies have monopoly power. But often, the regulation was there in the first place to ensure that companies had sufficient profit to invest in expensive infrastructure. (E.g. railroads).
listenallyall 10 minutes ago [-]
Airlines are popular employers specifically because they offer a clear vision of future pay increases and better, more prestigious, schedules. People, especially pilots, are willing to put up with a lot early on because they are confident that sticking with the plan will eventually allow them to earn double and triple their early-career salaries.
Same thing happens in law, investment banking, etc... the hardest workers are often the youngest and least-paid. They do it because they know big money may come later.
triceratops 3 hours ago [-]
> That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits
Sometimes it does and sometimes it doesn't. It depends on the industry, as the article goes into detail to explain.
pfannkuchen 20 minutes ago [-]
Could it be Hollywood accounting?
rayiner 3 hours ago [-]
Fascinating article. One sentence jumped out to me:
> So Chapter 11 is a relief valve for airlines struggling under the weight of their fixed costs; but it doesn’t really do much to help the system as a whole
The American founders writing a uniform federal system of bankruptcy was a stroke of genius that's been paying dividends for 250 years now.
flextheruler 2 hours ago [-]
Chapter 11 bankruptcy as well as all modern corporate law has its roots in the tycoons of the late 19th century. They lobbied and wrote it which is why it's corrupt.
rayiner 1 hours ago [-]
U.S. bankruptcy law is a foundational social technology that enables the marvelous world around you to exist.
zbentley 17 minutes ago [-]
Even if that's true, current bankruptcy law is still really far from socially optimal.
There are a lot more points on the "how does your system respond to business failure" spectrum besides low-consequence ch11/better-luck-next-time and debtors' prison.
agency 50 minutes ago [-]
Is the marvelous world in the room with us right now?
waswaswas 2 hours ago [-]
It's a tough business. Capital intensive, operationally complex, commodity product, unionized workforce, highly regulated...
jamesfinlayson 38 minutes ago [-]
I'd never given a lot of thought but the proliferation of budget airlines creating a race to the bottom always made it seem like airlines were a bad investment.
fourthark 24 minutes ago [-]
Capitalism doesn't work for big infrastructure projects? Who knew?
lesam 13 minutes ago [-]
This is capitalism working as intended. Only the best run airlines can survive, and investors are collectively subsidizing air travel for non-investors.
jmpman 2 hours ago [-]
How much of this is related to the pilots union? It seems like they capture all excess profit in the system during the good times, and fight vigorously to keep their inflated earnings even during the bad times.
turrican 31 minutes ago [-]
The article touches on this. Pilot wages are very similar across major US airlines due to heavy unionization and pattern bargaining, so labor is more-or-less a fixed cost (and not the biggest fixed cost).
Additionally, pilots can and do take pay cuts in lean times. The pilots at my own airline saw a 20% pay cut in the contract following 9/11 and very reduced wage growth for a decade after that. Management took something like a 5% cut and kept the retirement benefits we lost.
Edit: I thought I recognized your name, I see we discussed pilot unions together on HN a few years back. Can I ask what you have against us? Out of genuine curiosity.
aworks 8 hours ago [-]
This argues airlines are undifferentiated. In the aggregate, maybe that's true. Personally, I have a long list of airlines I try to avoid flying.
mint5 1 hours ago [-]
Southwest was very different and I personally preferred it. But Now it’s undifferentiated itself.
I have no reason to prefer it anymore other than if it’s the best on route and price. After all, it’s undifferentiated now.
aworks 8 hours ago [-]
Maybe not related but fascinating: "Annual spending on Delta-branded American Express cards comes out to about 1 percent of U.S. GDP. In 2025, this produced about $8 billion in revenue for Delta, accounting for more than the entirety of its profit."
Atheros 3 hours ago [-]
New revenue model idea: Charge $40/month on a person's credit card; a subscription. This buys the customer miles. Whenever you want to go somewhere, you use your miles. I think it would work based on the fact that people are willing to pay much more money for services if it's spread out and predictable. The fact that it's pre-paid also creates a lock-in benefit for the airline that the 'pay later over time' schemes lack.
twoodfin 2 hours ago [-]
Alaska Airlines apparently does or did this kind of thing: My sister in law had a “subscription” that was good for monthly tickets between San Diego and wine country.
anon7000 2 hours ago [-]
I mean a lot of airline point credit cards do something like that. Many have a fee, and you earn miles by using the card & get mileage bonuses for certain things. But these programs only make sense to a consumer if A) you’re good at finding good value for your miles and B) you’re passively earning miles by doing things you’d normally do anyways. (With a bonus for airline loyalty perks, if you fly a lot.)
Thing is, buying miles is normally a really poor use of your money, because the redemption rate isn’t great, and airlines devalue miles all the time. For example, the lowest option at delta is to buy 2000 miles for $70. That’s 3.5 cents per mile, but you can only expect to get a value of 1.25 cents per mile when you redeem them. Which only comes out to $25 in value, loosing you $45 — and that’s assuming you wait to spend miles for a good deal. (Redemption rate is worse during more popular flights.)
Airline miles are just not worth much, which is why people chase like hundreds of thousands of miles at a time through credit card sign up bonuses.
aanet 4 hours ago [-]
Great post. Thanks for sharing.
I always wondered why airlines were always running bankrupt…
Now I know.
fragmede 22 minutes ago [-]
I submitted https://www.thebignewsletter.com/p/who-killed-spirit-airline... but it failed to get traction. tl,dr: Jetblue pulled some illegal moves, Trump's trip to Iran caused gas prices to go up, the big four legacy airlines did a thing, and regulators.
That was surprising. Goes against the idea that deregulation allows companies to squeeze consumers and earn excess profits. My understanding is that before regulation, routes were allotted by the government. So an airline might own New York to Boston, so they didn't have to compete. Obviously de-regulation changed that.
The article doesn't go into it, but unions are also a challenge. Much of the airline industry is unionized. So you have situations where pilots that have been there a while get a lot more money. You have people doing essentially the same job but some are getting paid 3x as much just because they've been there a long time. In most industries, there is higher pay for senior talent, but that's because they're more effective at their job, and produce higher output. In this case it's just a legacy cost that makes some airlines incredibly uncompetitive through structural features.
https://www.thrustflight.com/united-airlines-pilot-salary/
All US airlines have the same labor costs for pilots and it isn't their highest cost anyway. That would be fuel.
If you want to divvy up costs that way: Boeing is probably the biggest problem. Both them and Airbus eat up all possible excess profit on the back end via the cost for airliners. Break up Boeing, bring back competition in airliner manufacturing. People who want to screw over labor don't usually frame things in those terms for some reason.
That's because this assertion is economically illiterate. Deregulation can lead to increased profits where otherwise companies have monopoly power. But often, the regulation was there in the first place to ensure that companies had sufficient profit to invest in expensive infrastructure. (E.g. railroads).
Same thing happens in law, investment banking, etc... the hardest workers are often the youngest and least-paid. They do it because they know big money may come later.
Sometimes it does and sometimes it doesn't. It depends on the industry, as the article goes into detail to explain.
> So Chapter 11 is a relief valve for airlines struggling under the weight of their fixed costs; but it doesn’t really do much to help the system as a whole
The American founders writing a uniform federal system of bankruptcy was a stroke of genius that's been paying dividends for 250 years now.
There are a lot more points on the "how does your system respond to business failure" spectrum besides low-consequence ch11/better-luck-next-time and debtors' prison.
Edit: I thought I recognized your name, I see we discussed pilot unions together on HN a few years back. Can I ask what you have against us? Out of genuine curiosity.
I have no reason to prefer it anymore other than if it’s the best on route and price. After all, it’s undifferentiated now.
Thing is, buying miles is normally a really poor use of your money, because the redemption rate isn’t great, and airlines devalue miles all the time. For example, the lowest option at delta is to buy 2000 miles for $70. That’s 3.5 cents per mile, but you can only expect to get a value of 1.25 cents per mile when you redeem them. Which only comes out to $25 in value, loosing you $45 — and that’s assuming you wait to spend miles for a good deal. (Redemption rate is worse during more popular flights.)
Airline miles are just not worth much, which is why people chase like hundreds of thousands of miles at a time through credit card sign up bonuses.
I always wondered why airlines were always running bankrupt… Now I know.