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kellwolf · September 4th, 2004, 21:23

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I think you are confusing costs with price. The consumer determines the price. The airlines have some control over price by setting supply.

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So what you're saying is that the airlines will scale back flights instead of raising prices?

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Costs are the airlines' responsibility. These will get ironed out as cost-efficient airlines will survive and those that can't deliver service at cost below price will die. Of course that in itself will lower supply and price will then go up and profits will result for all the remaining players. Try to get too greedy and someone will surely come in with some supply and fix your wagon. (See the story of Southwest Airlines).

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I happen to be a Keynesian (sp?) when it comes to economics (the whole sticky prices, sticky wages thing). I don't think you can place the airline industry into the econ cookie cutter mold and say "Viola." It's more complicated than that, and gov't fees make it even more so. What happens if Uncle Sam decides that the 9/11 fee needs to go up? Airlines cut their prices so the public doesn't blame them for jacked rates again? What about fuel costs? SWA was one of the smart ones that hedged years ago, and it's paying dividends for them now. With the industry the way it is, it's VERY difficult to "deliver service at cost below price." Even SWA is having problems with that, and they actually cost MORE on some routes than the legacies. They turned a profit by slim margins the past few quarters. Slim by SWA standards, but still better than Delta and United. US Air is gone, there's no doubt in my mind. Customer service has been notoriously bad at that airline, and now people are in the "we don't care since management doesn't care" mode.

September 4th, 2004, 21:23	#18
kellwolf Old Skool Join Date: Jun 2003 Location: Memphis, TN Posts: 13,838	Re: Deregulation [ QUOTE ] I think you are confusing costs with price. The consumer determines the price. The airlines have some control over price by setting supply. [/ QUOTE ] So what you're saying is that the airlines will scale back flights instead of raising prices? [ QUOTE ] Costs are the airlines' responsibility. These will get ironed out as cost-efficient airlines will survive and those that can't deliver service at cost below price will die. Of course that in itself will lower supply and price will then go up and profits will result for all the remaining players. Try to get too greedy and someone will surely come in with some supply and fix your wagon. (See the story of Southwest Airlines). [/ QUOTE ] I happen to be a Keynesian (sp?) when it comes to economics (the whole sticky prices, sticky wages thing). I don't think you can place the airline industry into the econ cookie cutter mold and say "Viola." It's more complicated than that, and gov't fees make it even more so. What happens if Uncle Sam decides that the 9/11 fee needs to go up? Airlines cut their prices so the public doesn't blame them for jacked rates again? What about fuel costs? SWA was one of the smart ones that hedged years ago, and it's paying dividends for them now. With the industry the way it is, it's VERY difficult to "deliver service at cost below price." Even SWA is having problems with that, and they actually cost MORE on some routes than the legacies. They turned a profit by slim margins the past few quarters. Slim by SWA standards, but still better than Delta and United. US Air is gone, there's no doubt in my mind. Customer service has been notoriously bad at that airline, and now people are in the "we don't care since management doesn't care" mode.