A study of the financial history of the U.S. scheduled airlines and the improvement of airline profitability through technology

The financial history of the U.S. scheduled airline industry was investigated to determine the causes of the erratic profit performance of the industry and to evaluate potential economic gains from technology advances of recent years. Operational and economic factors affecting past and future profitability of the industry are discussed, although no attempt was made to examine the profitability of individual carriers. The results of the study indicate that the profit erosion of the late 1960's and early 1970's was due more to excess capacity than to inadequate fare levels, but airline problems were severely compounded by the rapid fuel price escalation in 1974 and 1975. Near-term solutions to the airline financial problems depend upon the course of action by the industry and the CAB and the general economic health of the nation. For the longer term, the only acceptable alternative to continued fare increases is a reduction in unit operating costs through technological advance. The next generation of transports is expected to incorporate technologies developed under Government sponsorship in the 1960's and 1970's with significant improvements in fuel consumption and operating costs.