The crash of Flight 592 has brought increased scrutiny to ValuJet (and to low-fare carriers in general), and the long-term effect on ValuJet is not yet known. The stock, which had two, two-for-one splits in 1995 and which peaked at more than 30 dollars per share in late 1995, has plummeted to below 12 dollars per share in late 1996. Investors with high tolerance of risk might consider the stock at this low level, and the company might be a takeover target in the future as other carriers seek its routes. However, the company’s aging aircraft fleet would not be an asset to most carriers, and it is unclear whether stockholders would realize a reasonable profit, even at today’s low prices. The outlook for Southwest is considerably brighter than for ValuJet. The company has one of the highest safety records in the industry, and the company has also benefited from higher ticket prices and increased passenger traffic. The recent reinstatement of the federal excise tax is not expected to have a negative effect on Southwest demand since it has indicated it will increase fares in only 20 percent of its markets, but this will affect profitability. The company’s strategy is to make up the difference of lower revenue with increased demand through its lower fares (Thorpe, 1996, p. 262). The airline industry has become one of the most competitive segments of our economy. The economic realities of operation costs versus passenger demand for cost-effective travel has forever changed the face of the travel industry. After deregulation in 1978, the airline industry was forced to abandon its service-oriented philosophy and consider the competitive pressures since they affected the various companies bottom line. Price had suddenly become the benchmark in the airline industry. Companies such as Southwest and ValuJet recognized the potential for low fares with commensurably low levels of service. With the changing paradigms in the airline industry comes risk, not only to the individual airlines but also the public in general. At what point do the economic pressures of making a profit for the airlines affect passenger safety? If the trend toward more airline disasters continues and those accidents can be attributed to cost-cutting measures, surely Congress will intervene. The airline industry must be disciplined in its approach to solving the economic pressures, while, at the same time stay focused on safety issues. If the airline industry is to survive and give the consumer choices, passenger confidence cannot be sacrif

Some topics in this essay:
Cost ASM, ValuJet February, Southwest ValuJet, United TWA, Cole Pasztor, , American Airlines, Southwest Airlines, Companies Southwest, Orlando Atlanta, airline industry, low fares, passenger miles, seat miles, revenue passenger, load factor, southwest’s success, regional carriers, revenue passenger miles, low fare, 1994 1993 revenue, thorpe 1996 262, chart identifies, 1995 1994 1993, cost factors cents,