How Do Airlines and Plane Makers Stay Profitable?

TL;DR

Airline profitability increasingly depends on controlling costs, attracting premium and corporate travelers, and operating efficient aircraft. Airbus currently leads Boeing in orders, deliveries, backlog, and recent profitability, driven especially by the A321, while airlines such as United pursue Delta’s profitability and Spirit struggles after losing more than $2 billion since 2020.

Transcript

The airline industry is a long-cycle business. Spirit has had one challenge after another coming out of the pandemic. The icon of budget air travel in the U.S. has not been profitable since 2019, and it lost over $2 billion since 2020. Airlines that have shown more success have greater exposure to premium and corporate. The biggest competitor ... Read More

Key Insights

• Airline costs are 30% higher than they were in 2019, making profitability harder across the industry. Airlines with greater exposure to premium and corporate travelers have performed more successfully, while budget carrier Spirit has faced repeated challenges and losses since the pandemic.
• Spirit Airlines is a major example of the pressure on budget carriers. The airline has not been profitable since 2019, lost more than $2 billion since 2020, and filed for bankruptcy protection in November 2024, becoming the first major U.S. airline to do so since 2011.
• Airbus is ahead of Boeing based on recent profits, orders, deliveries, and aircraft backlog. Airbus has remained profitable since the pandemic and holds a backlog of 8,726 planes, while Boeing has not made a profit since 2018 and has a backlog of 5,643.
• The A321 is Airbus’s strongest competitive advantage in commercial aviation. Experts describe its order performance as exceptional, and its success was already helping Airbus gain market share before Boeing’s 737 Max crisis created additional manufacturing, financial, and production problems.
• The A320 family is challenging the Boeing 737 family for historical narrow-body leadership. The A320 surpassed the 737 in total orders in 2019, and depending on 2025 deliveries, it could become the most-produced jet family in history.
• The A320 introduced important technological differences from the 737, including side-stick controls and fly-by-wire systems that convert pilot inputs into electronic signals. Although early accidents slowed public acceptance, the aircraft eventually succeeded beyond expectations and opened major international markets for Airbus.
• The A380 is an engineering achievement that became a costly strategic mistake. Airbus invested billions in the four-engine superjumbo as demand shifted toward smaller, efficient twin-engine aircraft such as the A330 and A350, and the program ended production in 2021 after operating in service from 2007.
• Boeing is still stronger in the wide-body segment despite Airbus’s overall lead. Boeing aircraft represent nearly 56% of the global wide-body fleet, and its wide-body backlog exceeds 1,500 planes, although manufacturing issues with the 787 and certification delays affecting the 777X create continuing pressure.

Questions & Answers

Q: Why is airline profitability harder than before the pandemic?

Airline profitability is harder because costs are 30% higher than they were in 2019. The industry also operates on long business cycles, so decisions involving aircraft, networks, and customer segments can affect results for years. Airlines with greater exposure to premium and corporate travelers have achieved more success, while budget-focused Spirit has accumulated losses exceeding $2 billion since 2020.

Q: Why has Spirit Airlines struggled to remain profitable?

Spirit has faced one challenge after another since the pandemic and has not posted a profitable year since 2019. The budget airline lost more than $2 billion beginning in 2020 and filed for bankruptcy protection in November 2024. Its difficulties also reflect a broader market in which airlines serving more premium and corporate customers have generally demonstrated stronger financial performance.

Q: How is United Airlines trying to surpass Delta?

United wants to become the world’s biggest and most profitable airline, but Delta has held the leading profitability position for several years and remains United’s biggest competitor. United’s stock was among the best-performing U.S. airline stocks in 2024. Its broader effort centers on winning more customers and strengthening its position as it pursues Delta’s financial performance.

Q: Why is Airbus currently ahead of Boeing?

Airbus leads Boeing in recent net profits, orders, deliveries, and backlog. Airbus has earned steady profits since the pandemic, while Boeing has not made a profit since 2018. Airbus also has 8,726 ordered but undelivered planes compared with Boeing’s 5,643, and it has delivered more aircraft annually than Boeing since 2019.

Q: How did the Airbus A320 compete successfully with the Boeing 737?

The A320 combined a slightly wider fuselage with advanced technology, including side-stick controls and fly-by-wire systems. Early accidents delayed public acceptance, but airlines eventually recognized its performance and efficiency. The aircraft helped Airbus enter the U.S. market and other regions, surpassed the 737 in total orders in 2019, and could become the most-produced jet family depending on 2025 deliveries.

Q: Why is the Airbus A321 important to Airbus’s market lead?

The A321 is the strongest-performing category in Airbus’s order portfolio and is described as the aircraft that is driving its advantage. Its success began before the 737 Max crisis, so Airbus was already gaining ground when Boeing’s problems intensified. The A321neo has a list price of around $129 million and contributes substantially to Airbus’s large backlog.

Q: Why did the Airbus A380 fail commercially despite its engineering?

The A380 entered a market that was moving away from very large four-engine aircraft. Airbus spent billions developing the double-decker jet, but airlines increasingly favored smaller twin-engine aircraft such as the A330 and A350, which could carry roughly 250 to 450 passengers on long routes. The A380 entered service in 2007 and ended production in 2021.

Q: Can Boeing still compete with Airbus in commercial aircraft?

Boeing remains highly competitive, particularly in wide-body aircraft, where it accounts for nearly 56% of the global fleet and holds a backlog exceeding 1,500 planes. However, it faces financial losses, production limits, 787 manufacturing problems, and delays to the uncertified 777X. Its ability to compete in the 2030s depends on addressing these operational and product challenges.

Summary & Key Takeaways

• Airline profitability remains difficult because industry costs are 30% higher than in 2019. Spirit has not recorded a profitable year since 2019 and filed for bankruptcy protection in November 2024, while airlines with greater exposure to premium and corporate customers have achieved more success. United is pursuing Delta’s leading profitability position.

• Airbus has moved ahead of Boeing in net profits, orders, deliveries, and backlog. Its backlog totals 8,726 aircraft, compared with Boeing’s 5,643, and Airbus has delivered more planes annually since 2019. The A321 is central to this advantage, although Boeing still holds nearly 56% of the global wide-body fleet.

• Airbus developed from a partnership of European aerospace companies into Boeing’s principal competitor. The A300 introduced a twin-engine wide-body, while the A320 brought fly-by-wire controls and helped Airbus enter the U.S. market. Strategic successes with smaller twin-engine aircraft outweighed the costly A380 program and established the modern manufacturing duopoly.