On the surface the outrage over United Airlines forcibly removing a man from a flight after he refused to "voluntarily" give up his seat for a United employee looks like just another case of airline overbooking gone awry.
Overbooking is necessary, the story goes, because sometimes passengers don't show up for their flights. The practice allows airlines to recoup their lost revenue while keeping flights affordable for everyone. Yes, some people will inevitably need to be bumped involuntarily, but profits are thin, we're told, and so this practice is necessary.
"The nice way to look at all this is, the more effectively airlines can fill their seats and generate revenue with the seats they have, the better it is for all of us," aviation consultant Samuel Engel told Marketplace in 2015. Southwest puts an even sunnier gloss on the practice, saying it "creates booking opportunities for Customers who really want or need to be on a flight that is showing full but likely to depart with available seats."
As it turns out, however, America's commercial airlines are currently enjoying near-record profits. Here's the data from the International Air Transit Association, an airline trade group.
According to the IATA North American airlines have raked in over $20 billion in profits for each of the past two years. They expect that number to dip, slightly, to around $19.5 billion next year. "2017 is expected to be the eighth year in a row of aggregate airline profitability, illustrating the resilience to shocks that have been built into the industry structure," the IATA writes in its annual analysis.
Among the world's air carriers, North American companies stand out for their profitability. The $20.3 billion in profits American carriers earned last year is greater than the sum total of profits generated by airlines in Europe, Asia, the Middle East, Latin America and Africa -- combined. The profit margin in North America is around 8.5 percent, or about $19.85 per passenger.
One big driver of the profit boom is the airline industry's decade-long consolidation binge -- what were once 10 airline companies in 2000 had shrunk down to 4 carriers by 2010. The relative lack of competition has lead to near-monopoly conditions at some airports and given the remaining airlines little incentive to cut prices or provide more amenities -- indeed, the trend continues in the opposite direction: smaller seats, greater fees, charges for blankets, even fees to use the bathroom.
In the past, airlines were able to credibly deflect charges of poor customer service with appeals to profitability concerns and thin profit margins. But given the boom times at America's major airlines, those explanations look less like survival tactics and more like padding profit margins.
United made $2.3 billion dollars in profit last year.