Why airlines fail so often

Every year millions of people board an airplane without giving it much thought. The civil aviation industry moves billions of passengers, generates huge revenues, and dominates long-haul transportation without serious rivals.

Yet the airlines close with a frequity that is unparalleled In other industries of similar size. Air Berlin, Wow Air, Primera Air, Thomas Cook, Adria Airways. In Europe alone, in the space of a few years, dozens of companies disappeared. Some large, some small, some historic. How is it possible for such a large industry to be so fragile?

The margins that don't exist

The first reason is that selling airline tickets is a business with almost ridiculous margins. According to the data IATA, the international air transport association, the net profit per passenger in 2024 was about 6 dollars. On a one hundred euro ticket, the company is literally left with the price of a coffee after paying for fuel, airport taxes, handling, maintenance, salaries, aircraft leasing, and everything else. This is not a metaphor: it is the one used by the director general of IATA himself, Willie Walsh, to describe how thin the industry's margins are.

The fuel alone represents Between 20 and 30 percent of the costs operations of a company, and its price is out of anyone's control. When oil goes up, costs go up, but raising ticket prices is complicated because passengers choose the cheapest flight and competition is fierce. This means that many companies operate on such thin margins that all it takes is one bad quarter to put years of work into crisis.

Huge fixed costs, demand changing daily

A airliner costs between 100 and 400 million of euros. Flight crews require years of training and expensive certifications. Airports charge slots, landing fees and handling services regardless of how many passengers are on board. All of these are fiss costsi, or nearly so. Whether the plane flies full or half-empty, most of the expenses remain the same.

On the other hand, demand is volatile. In summer planes fly full, in winter many routes go almost deserted. In an economic crisis, business travel drops precipitously. A pandemic wipes out traffic in weeks. A regional conflict shuts down entire routes, and in this case we know the example from the U.S. and Israel's aggression against Iran with repercussions on air traffic passing through the Persian Gulf. This combination of Rigid costs and unpredictable revenues creates a structural vulnerability that has no equivalent in almost any other industry. It is no coincidence that many European airlines often go bankrupt between September and October. After the passenger-rich summer comes the fall, revenues plummet, accumulated debts come back, and coffers cannot hold.

The unforgiving competition

The deregulation of the European air market in the 1990s opened routes to competition and lowered prices for passengers. It has also created an environment where companies have to fight each other every day on every route. Ryanair and EasyJet have built business models with very low structural costs that traditional airlines struggle to imitate without disrupting everything. Those who try to compete on price without having the same operational efficiency end up selling tickets at a loss in order to fill planes.

The Alitalia case: an all-Italian disaster

In this already difficult picture, the history of Alitalia is a textbook case of how things can go wrong when the structural difficulties of the industry are compounded by decades of disastrous political, union and industrial management. The company has been losing money for virtually its entire history. According to the best estimates, the overall losses between Alitalia and ITA amount to about 15 billion, with a total bill for taxpayers, shareholders and creditors exceeding 25 billion.

Commissioning, bridge loans never repaid, takeover bids rejected for political reasons, business plans rejected by employees in referendums: every rescue attempt turned out to be a postponement of the problem. In 2008, a serious offer from Air France was on the table that could have changed history. It was rejected. In 2021 the company closed its doors and from its ashes was born ITA Airways, started with a reduced fleet, far fewer employees, and a mandate as precise as it is simple: not to be another Alitalia.

Initial results confirmed that the change of pace was necessary but not immediate. Then Lufthansa came along and with German management came the first concrete sign of a turnaround: ITA ended 2025 with the first profitable budget in its history. An achievement that Alitalia had never been able to achieve stably in decades of operations.

What changes for the passenger when a company goes bankrupt

If you have a ticket with a company that closes overnight, the first thing to do is to check how you paid. If you used the credit card, you can try chargeback: contact the bank and ask for a chargeback. If you have travel insurance that covers company bankruptcy, that is the way. The EC Regulation 261/2004 in these cases doesn't help you because it deals with operational disruptions, not failures. If, on the other hand, you are already on the road when the company ceases operations, it gets more complicated and depends a lot on where you are and who is managing the protections in the country you are in.

Flying has become very normal, almost commonplace. But behind every ticket is an industry that operates on razor-thin margins, huge costs, and a vulnerability to the unexpected that few other industries know. You don't need to become a financial analyst before every departure, but every now and then it's worth looking not just at the lowest price, but at who's selling you that ticket.