The airline industry has long been a place where fortunes are destroyed. Between large capital costs, long equipment lead times, and operating expenses that are largely based on the number of flights rather than the number of paying passengers, the industry is plagued with huge structural problems. Those problems aren't going away anytime soon.
When you add in the skyrocketing costs of fuel, the mixture gets all the more volatile -- and not just from the exhaust fumes. After all, business travelers often decide to cut back their travel expenses to compensate for the impact that higher fuel costs have on the rest of their own operations. That limits airlines' abilities to successfully hike fares just as their own costs skyrocket.
Baggage surcharges can't save them
In something of an acknowledgement of their industry's inability to generate profits from their core business, airlines have taken to nickel-and-diming their customers. Things like baggage surcharges, snack and water fees, and even charges for blankets have been instituted by airlines across the country in an attempt to get the carriers to recover their costs.
And that strategy seems to be failing the airlines in their quests to cover their costs. United Continental
When good news is actually bad
Even among the airlines posting decent earnings results, the numbers are only good relative to the context of this very ugly industry. JetBlue
Likewise, Alaska Airlines'
And while Delta
It won't change anytime soon
As long as it costs $50 million to $300 million (or more) to buy a commercial airplane, airlines will want to fill seats to recover those capital costs. And as long as the costs of running that airplane are based more on the number of takeoffs, landings, and miles than the number of passengers, airlines will have incentive to keep prices low to fill those seats.
That's why -- even with all the fees and surcharges -- the airlines, as a whole, struggle to post profits and why those that can post profits so often show such razor thin margins. It's endemic to the industry, and it's a problem that won't go away anytime soon.
At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. Southwest Airlines is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.