It's a highly-regulated, highly capital intensive industry, with a complex perishable product, extremely price sensitive customers (it's basically a commodity), with a history of state champion regulated airlines everywhere, and continuing operation of national flag carriers on that basis. International flights are politically regulated as well (i.e. which of the 9 freedoms you get depends on binational agreements), and various countries seriously subsidize their airlines.
Plus, extreme variation in demand with the economy, and cost due to fuel.
Plus, extreme variation in demand with the economy, and cost due to fuel.