Factors Affecting Airline Company’s Ability to Break Even

A number of factors contribute to the difficulties experienced by airline companies with regard to their ability to attain a level that has neither gain nor loss. The first factor is the high cost of fuel. This is a cost in the airline industry that is liable to change. According to economic experts, a rise or fall in fuel prices often affects crucial elements such as the ability of an airline company to make revenue, retain its customers, and also maintain a competitive advantage in the market. Achieving equilibrium with unpredictable fuel prices is difficult to achieve for airline companies. An increase in fuel prices leads to reduced profitability, while a reduction in its prices often results in increased revenue because of lower ticket prices that encourage more people to travel.

The second factor is low air traffic, which is characterized by low travel demands. According to economic experts, the ability of airline companies to achieve prolonged success depends a lot on the number of travelers. An increase in air traffic enhances the ability of an airline to break even because the cost of operation will be balanced by the sale of tickets. On the other hand, if the air traffic decreases, the ability of an airline company to achieve the same feat reduces greatly due to low sales at a time when the company continues to incur expenses through operational costs.

The third factor is the nature of the freight market. Studies have established that the rate of growth in the global freight market has slowed down over the last couple of years. This has, in turn, reduced the number of opportunities for airline companies to make enough revenue. Another element of the market that has negatively affected airline companies is the increased demand for better quality services by customers. Stabilization of the freight market often leads to increased profitability, while a slight destabilization can lead to massive losses.