Starting and operating an airline is a challenging business proposition. However, investors that make the right decisions have developed highly profitable airlines.

Airlines are capital- and labour-intensive, based around a perishable service that if not sold cannot be stored. Furthermore there is a need to match fixed capacity with demand that varies by day, week and season. In addition, it is a highly competitive, regulated business prone to political influence.

The multiple challenges of the airline business attract skilled leadership. New airline projects are more prevalent than ever, especially in the fast-growing markets of Asia, Latin America and Middle East.

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The single most important driver of profitability is the choice of market segment. A market at an early stage of its life cycle allows new airlines to achieve a leading market position and will deliver the highest returns.

The return an investor can expect will depend on many factors, including fleet selection, start-up capital, management team, regulatory environment and competitive reactions.

There is no magic formula for profitability and no business model is guaranteed to deliver high return on investment. Success is dependant upon being in the right place at the right time with the right business model.

Airline profitability in different parts of the world and with different business models varies: while a few airlines achieved a 30 per cent net margin in 2006, IATA Airlines made a margin of less than 2 per cent on revenues of US$470 billion.