A main building block concerning competition and the effects that it has on consumers must first be addressed. If a large, well-known airline (United Airlines, for example) was initially the only carrier for customers to fly on, they would be able to set the price that would generate the highest amount of revenue possible (number of seats available multiplied by highest ticket price that would fill all of the seats; suggesting elasticity of demand, which will be covered shortly). What would happen if a start-up airline offered lower rates? The question of customer preferences now comes into play. Everyone is attempting to save money,

so this no longer a question of if people will try the new airline, it is a question of how many people will try the new airline. The answer depends on a few factors, including brand loyalty, United’s response to the new airline, and most importantly, current economic conditions. Another position that must be considered is time. If the new airline can sustain low prices, a good reputation, and quality services for a lengthy time frame, they will increasingly draw a larger market share. The case refers to this occurrence as the “Southwest Effect”.

As supported by historical evidence, the airline industry cannot successfully operate under a fully deregulated scheme. It has also been evidenced in the case that too much regulation “strangled” the industry. The industry had become too inflexible to operate smoothly. I believe that the airline industry must be as deregulated as possible in order to allow the flexibility needed to operate efficiently. With that in mind, however, there are some areas of the industry that must be regulated or problems are sure to arise. If I were the head of a large carrier (United Airlines), I would ask Congress to enact resolutions that would prohibit too many airlines into the industry. Additionally, I would want the number of airlines flying the same route to be restricted. These two suggestions would greatly reduce the problem of “cutthroat competition” and would increase profits at the same time. A more radical idea that I would think about presenting would be a “price floor” on all routes. All airlines would have to abide by the floor that Congress sets. To calculate the floor price, I would take the average cost of all airlines to fly that specific route and divide it by average number of seats on the plane of the airlines. This would give us a break-even point. Obviously some airlines would be above this point and some would be below it, but overall, the industry would be able to break-even by charging the “floor price”. This would also increase profits dramatica

Some topics in this essay:
Aeronautics Act, United Airlines, Initially Act, Airlines Congress, , Deregulation Act, airline industry, “cutthroat competition”, elasticity demand, ticket price, people try airline, building block concerning, price airline ticket, question people try, non-business customer, block concerning, forms travel, ticket prices, price airline, airline ticket,