ABSTRACT
The International Air Transport Association (IATA) investigated the financial performance of airlines around the world. The research aims to identify the 'system wide issues' which negatively impact the airline industry's profitability. This chapter takes a system approach to reveal the airline profit cycle's causes, to explain its particular shape, and to derive measures which mitigate or even eliminate the profit cycle. Simulation experiments are conducted based on a System Dynamics model calibrated for the US airline industry, which is the world's most cyclic one and has already been deregulated in 1978, and offers exceptional data availability. To underline the importance of this research, the airline profit cycle's consequences are described in the chapter. Presumably, more stable airline profits would positively impact aircraft manufacturers' business through smoother aircraft order patterns, which ensure steady production capacity utilisation and enable manufacturers to retain their workforce.
