ABSTRACT
To achieve the desired stability a better understanding of factors causing and driving airline profitability dynamics is needed. The required research was guided by three questions: Why are airline profits cyclical? What are the causes and dynamics that determine the cycle's shape? How can the situation be improved? To answer these questions the following approach was taken. Potential airline profit cycle causes, drivers, and possible cycle mitigation measures were derived from an interdisciplinary literature review and expert interviews. Airline managers often claim gross domestic product (GDP) changes, fuel price developments, or shocks drive the cycle. Yet, a statistical analysis of world airline profits exposed that none of these factors can sufficiently explain the airline profit cycle. Hence, in order to incorporate more factors and dynamics in the investigation a system model of the airline industry was formulated. It allowed to test the impact of the derived potential cycle causes, drivers, and mitigation measures in quantitative scenario simulations.
