Passenger airlines are a crucial industry in the global economy, but the sector is also extremely volatile. Why do airlines struggle to stay profitable? Watch the full video here:
Airline stocks have been on a wild ride since the beginning of the pandemic, which shows just how volatile the sector can be.
"It seems that airlines once or twice a decade are hit with these really hard-to-process exogenous shocks, whether it's something like 9/11 or the Great Recession," said Adam Gordon, managing director and partner at Boston Consulting Group's Airline Practice.Despite the risks, the industry has experienced some periods of consistent growth.
"If you just step back and you think about what service airlines are offering, they're putting you in a metal tube, taking you up to 40,000 feet, and transporting you in relative or absolute comfort at hundreds of miles an hour to get from point A to point B. And if you think about the substitutes for that service, like, there really aren't any," said Gordon.
"So it's kind of surprising to me that an industry that delivers that kind of a service and does it with an absolutely impeccable operational and safety record is able to come under such pressure," he added. Watch the video above to learn whether investors should steer clear of the sector and why passenger airlines struggle to stay profitable.
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