ABSTRACT
This chapter reviews historical world airline profits and examines the main sources of airline revenue and discussing the interaction between revenue-generating activities. It examines the fleet selection process and discusses how managers weigh aircraft alternatives in order to make smart choices for fleet expansion or aircraft replacement. Profits and losses closely track the business cycle, fluctuations in economic activity over irregular periods of time. During periods of expansion, the economy grows in real terms with increases in jobs, industrial production, sales, and personal income. In good economic times with rising corporate profits, business activity is vigorous with high-paying business travelers filling airline seats. The fundamental microeconomic law of demand holds that people will purchase less of a product the higher the price, all else remaining unchanged. Airline fares in the pre- and early post-deregulation years included many complementary services in the basic fare. Increasing productivity lowers an airline’s cost of production, but airline employee wages were also reduced.
