Breaking into the airline industry is a costly and unprofitable business. The explicit costs of purchasing planes requires hundreds of millions of dollars. Subsequently, because existing airlines are operating in a manner where they barely make and profit, the return on investment will take decades if at all.
This is also the reason why airlines are increasingly trying to implement the "super cost saving measures" such as the 1 inch gaps in between rows where if you are are screwed if you are taller than 5'5".
While there is always the danger of all the airlines consolidating such as when US Airways and American Airlines merged in 2015, I think the fierce competition between airlines is a good thing, as it allows for the cheap and easy transportation that nurtures globalization.
https://www.youtube.com/watch?v=72hlr-E7KA0
https://research.stlouisfed.org/publications/page1-econ/2018/11/01/the-economics-of-flying-how-competitive-are-the-friendly-skies/
https://www.washingtonpost.com/business/the-last-days-of-us-airways/2015/09/25/f5530686-60a6-11e5-8e9e-dce8a2a2a679_story.html
This was an interesting post and I agree that while it's unfortunate that it's hard for newcomers to break into the airline industry, there's enough competition to keep the price down which is good for us as consumers.
ReplyDeleteI enjoyed reading this post and thinking about how the airline competition is used to better the experience for the consumer. I know that airlines also have very similar refund policies to make sure that their public images are fairly equal to their competitors. For refundable flights, you usually need 24 hour notice and they refund you with cash or credits. I hadn't really thought about how all these policies were so similar and how prices are so similar all to prevent each other from competing too much and wasting money.
ReplyDeleteAs Trevor mentioned, reputation is huge to airline companies seeking to fill their seats. Take for example the incident where a passenger was forcibly removed and the video of the incident went viral. The next day, according to Yahoo News, "shares of United fell as much as 6.3% in pre-market trading". So like previously mentioned, maintaining a good public image is crucial to the success of an airline company, however in the case of newer and unknown airlines, this step is made more difficult as they do not have the sort of reputation bigger airlines have.
ReplyDelete