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July 9, 2024

Air travel demand is breaking records. Airline profits are not.

In 2021, airlines have seen a revival in passenger demand after the industry suffered massive losses due to the COVID-19 pandemic. However, even though demand for air travel has been higher than expected, airline profits have not kept pace. The primary reason airlines are not bringing in record profits despite record demand is the increased costs associated with operating flights. Airlines are facing higher fuel prices, shortages in labor, and increased maintenance costs, all of which affect their bottom line. Additionally, airlines also had to invest a lot to ensure safety measures because of Covid-19 related protocols. Furthermore, the recovery has not been even across all types of travel. While leisure travel demand has indeed rebounded significantly and is even surpassing pre-pandemic levels in many regions, business travel and long-haul international flights (both significant profit generators for many airlines) continue to lag due to ongoing pandemic-related restrictions and companies adopting more flexible remote work and meeting strategies. With air traffic predicted to continue growing in the coming months, airlines will need to find ways to control costs and navigate these challenges to improve their profit profiles.