Airlines are making more money than ever -- but they're facing a mountain of problems

TOSHIFUMI KITAMURA/AFP/Getty ImagesA child watches All Nippon Airways (ANA) jetliners on the tarmac at Haneda international airport in Tokyo on August 2, 2017.
  • These days, airlines are becoming safer, more efficient, and more profitable with savvier management teams.
  • However, the problems that plague the airline industry have not gone away.
  • The global nature of the industry makes it uniquely vulnerable to a multitude of elements ranging from insufficient infrastructure to disease epidemics to politics.

The state of the airline industry is strong. Around the world, the number of people flying increased by 6.6% in 2017.

In fact, the world’s 20 busiest airports, alone, saw roughly 1.5 billion passengers pass through its terminals last year, trade group Airports Council International reported.

Consolidation, coupled with relatively affordable fuel prices and increasingly savvy management teams has resulted in record profits for the industry.

However, the airline business is not without its problems. Any cursory look at today’s new will turn up any number of stories about dissatisfied customers or some facet of the industry under threat.

Even as profitability remains solid, the problems that plague airlines have not gone away. In fact, they have actually become more complex.

A former airline CEO once jokingly responded to my question about areas of concern in the future with “What aren’t we concerned about?”

It’s a fair response. The airline industry for all of its power and prestige is unique in the sheer number of factors that could negatively affect its business.

Over the past couple of years, airlines have experienced major disruptions caused by everything from electrical fires to catastrophic disease outbreaks.

Then there are also the challenges caused by the world’s ever-shifting economic and political climates. And let’s not forget about the issues created by changes in our actual climate.

The vulnerability of airlines to this multitude of factors has to do with the global nature of the business. The very things that make airlines so interesting and alluring are also the same things that threaten its well-being.

Here’s a closer look a handful of the challenges that plague the airline industry:


Congestion

Not only are the skies over the US congested with air traffic, the airports from which the planes operate are also bursting at the seams.

The increase in the number flyers along with the airlines’ strategic shift towards increasing the frequency of flights, means more planes and more passengers.

This results in crowded airport terminals and an increase in the number of delays.

“At no time is the peril of this strategy more exposed than when the weather goes bad,” author and commercial airline pilot Patrick Smithwrote in a blog post. “In years past, snow or thunderstorms meant moderate delays and perhaps a cancellation or two. These days, a half inch of powder or a line of cumulonimbus brings the entire system to its knees.”


Terrorism

Even though the frequency of terrorist acts targeted at airliners has gone down, incidents like the shoe bombers and the tragic events of 9/11 serve as a reminder they remain a substantial and persistent threat.

As a result, airlines and security services around the world have to remain vigilant. Over the past 15 years, security screening procedures have become increasingly stringent. This has resulted in longer checkpoint wait times and complaints from the travelling public.


Passenger comfort.

In many respects, the industry’s search for greater profitability has been to the detriment of passenger comfort.

For investors, the lower the unit costs the better. For airlines, an effective way to reach that target is to stuff more seats into each plane. In addition, airlines have become much more disciplined when it comes to flooding the market with additional flights. The capacity discipline along with a greater number of seats per plane has resulted in full planes with less room for individual passengers.


Politics

Since airlines serve as a bridge between nations or even as a flying ambassador for its homeland, it is all but inevitable that they wind up in the middle of political scuffles.

Recent examples include the Trump administration’s ban on travellers from certain Muslim majority nations and its ban on laptops in the cabins of flights from selected airports in the Middle East and North Africa.

There’s also Qatar’s dispute with its Persian Gulf neighbours that saw its national airline banned from a couple of its most lucrative markets.

Strife between nations usually results in a hit to the operations and profitability of airlines.


Technology

Technology has been great for airlines. Biometrics is going to be a changer for airport experience. While hybridisation is expected to usher in a new age of flight. Technology has already helped revolutionise everything from in-flight entertainment to freeing flights crews from their cumbersome flight manuals.

However, as the airline industry and the infrastructure that serves it becomes increasingly dependent on technology, it’s also going be even more vulnerable. Insufficient investment in technology infrastructure over the past decade has resulted in a spate of computer outages that can cripple an airline’s operations for days on end. With the growing threat of cybercrime, the airline industry will have to work much harder to stay ahead of the curve.


Labour relations

Getty Images/Scott OlsonUnited Airlines aviation maintenance technicians and related support personnel demonstrate outside the company’s annual shareholders’ meeting at the Willis Tower on June 10, 2015 in Chicago, Illinois.

Every airline executive will tell the most important part of his or her company are the people. It’s true, an airline’s employees are its lifeblood. Which is why poor labour relations can cripple an airline both financially and operationally.

With the proliferation of smartphones and social media, the actions of airline employees are under the microscope more than ever. Thus the actions of a few employees can have a major effect on the airline.

However, as the airline industry learns to run leaner, its business and labour model is evolving as well. As a result, employees at major airlines in the UK, France, and Germany have gone on strike in recent years.


Pilot shortage

As airlines around the world expanding their fleets, everyone is looking for people to do the flying. But there doesn’t seem to be enough people around to fill those jobs. After all, it takes a tremendous amount of time and money to train a pilot.

Thus, the pilot shortage is real and some airlines are beginning to feel the pinch. According to Patrick Smith, it is regional carriers that are bearing the brunt of the shortage. However, if this trend continues, it may one day affect mainlines carriers as well.

One airline executive clarified the situation by saying there isn’t a shortage of pilots, there’s a shortage of good, qualified pilots.


Fume events

Shutterstock

Fume events occur when toxic smoke or odours from the plane’s engines find their way into the cabin. “A toxic fume event can result in immediate incapacitation and have a long-term adverse impact, and it can affect everyone on board,” Allied Pilots Association president Captain Dan Carey said in a statement.

However, the long-term effects of fume event remain largely unknown.

According to the APA, the union that represents American Airlines’ 15,000 pilots, there have been 20,000 of these toxic fume events over the past 10 years.


Pets

CNBCAn emotional support peacock that was denied entry on a United flight shows the growing problem of pets on planes.

Over the past couple of years, the sharp increase in the number of animal-related incidents on board planes has increased dramatically. Delta Air Lines reported an 84% spike since 2016.

Many attribute this to the widespread abuse of emotional support and service animal privileges by the flying public.

Recent incidents include the mauling of a passenger by an emotional support dog on a Delta flight and the death of a puppy on board a United Airlines jet after it was placed in the overhead compartment.

In addition, there are questions regarding the viability of the airline industry’s animal cargo handling procedures after a spate of recent pet deaths.


Fuel prices

Jeff Fusco/Getty

Fuel is an airline’s greatest cost. The industry’s new-found profitability has certainly been helped by a sharp decline in oil prices in 2014. However, crude prices are rebounding. Even though it may not reach its previous heights, airlines will have to learn how to survive in a higher cost environment.


Climate Change

In 2017, Hurricane Harvey devastated Texas. Stuck in the middle of the storm was United Airline’s mega hub in Houston and roughly 10,000 of its employees. Fortunately, the airline and its employees were able to get back on their feet. But as our climate changes, the number of extreme weather events has increased dramatically.

Event like Hurrican Harvey or Super Storm Sandy that hit New York/New Jersey in 2012 will no longer be the exception, but the norm.

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