What are the challenges associated with managing in a business with high fixed costs like airlines?

One of the challenges associated with managing in a business with high fixed costs, like airlines, is how to generate enough revenue during the peak season to reduce the effect of losses during off-peak seasons. Airlines must generate enough seasonal revenue during heavy travel periods, predominantly the summer months, to offset losses experienced during other seasons when profits from travel are low and costs remain the same. One way that airlines are doing this is through an additional fee structure for extra baggage or flight changes. Another challenge that airlines face is the threat of employee strikes, such as the Iberian Airlines pilot strike, which often have detrimental effects on the airlines profits by causing changes in flight schedules and increases in employee pay (Chen, Iberian Airlines and the Implications of High Fixed Costs). As a recent Wall Street Journal article, "Delta Air's Profit Up on Business Travel Gains", reports airlines are increasing their profits this quarter as a result of increased business travel. The article further points out that while the demand for trans-Atlantic flights by banking sector business travelers is down, the demand for those flights by consulting and business-services travelers is up (Carey, 2011). The airline industry's largest costs are salaries, fuel and planes. Using larger airplanes could be a method to neutralize the costs of salaries and fuel, in that a larger plane would seat more passengers, which would cause the average cost of fuel and salaries to shrink. Boeing is releasing two new larger passenger planes over the next two years, the 787 Dreamliner and the 747-8 (Kesmodel, 2011).
"Iberian Airlines and the Implications of High Fixed Costs" Dr. Min Chen.

Competition is another major challenge