Domestic Trunk Airlines: Earning Power under Recession Conditions

Abstract

THE AIR TRANSPORT INDUSTRY has been frequently categorized as a cyclical industry, and the question of earning power under recession conditions has been frequently raised. Clearly, there is a relationship, however vague and difused, between air travel and general economic activity, although thus far attempts to nail down useful correlations between airline volume or revenues and major indicators have yielded scant result. These notes are predicated on the bland assumption that a slowing of business will be reflected in some slowing of traffic gains and that a steep or long recession might be reflected in an absolute, albeit temporary decline in traffic volume or revenues. We shall not attempt to define the adverbs eventually or sufficiently or to pinpoint the impact of a still hypothetical recession upon air travel. We have posed, instead, the more manageable question, What traffic increase would be required under present and foreseeable conditions to maintain operating profits at the level of the previous non-recession year?. These comments are directed primarily to the domestic trunk carriers but may be applicable in part to the local service and international carriers; naturally these general notes obscure important differences between the eleven domestic trunk carriers.