mweiss,Feb 22 2005, 04:53 PM]
Apparently not.
No. See, you have a real problem with reading comprehension. I proved the following:
- It is possible to determine a demand curve
- It is possible to know the supply curve
- With both of those known, it is possible to determine the optimal price (defined as the price at which profits are maximized) in a monopoly market
Then I went on to explain how to extrapolate that into a competitive marketplace, and how it results in those with the lowest costs being the ones who are able to set the prices for the entire market.
Not exactly, you claimed to have proven your point, and the subject being debated was whether or not an increase in fares could increase profits. Now you are claiming that to proved something was possible but you did not ever prove that by increasing fares the airlines would not increase profits. Another thing that your arguement did not address is predatory pricing which while technically being illegal is hard to enforce.
In other words, I proved each step along the way, which leads to the conclusion. Your claim was that it's not possible to do. I showed that it is, and showed how you do it.
Not really. That's a gross oversimplification. Choose a particular city pair at a specific point in time, say, LAX-JFK next Monday, departing at 8:00 AM. Would you exclude 8:05AM from that market? How about 8:30? 10:00? 3PM? Similarly, would you exclude LGB-JFK? How about LAX-EWR? LAX-LGA? Would you only include nonstops between LAX and JFK, or would connections also be within the market? How about interline connections?
So, no, a "market" is
not a city pair at a specific point in time.
Ok, then define the market in question.
See, this is where your logic escapes me. You don't lose money to cut labor costs, you cut labor costs because you're losing money. You're so focused on the universe revolving around you that you don't even realize that you're just a bit player.
Well if you are losing money anyway then why not take full advantage of what losing money can do for you? I'm not saying that they choose to lose money but I am saying that they exaggerated those losses in order to get labor, not just me, but the other 100,000 employees also, and collectively we are not just "bit platers" to agree to long term concessions. The fact is that they could rebound within a year and be making profits that were large enough to support higher pay rates but now they wont have to. Just like back in 1995.
And so, of course, everyone in upper management at AA is cheerfully willing to fall on their swords for GE and ExxonMobil.
Well how often do we see these guys bounce from one company to the next? They dont fall on their swords, they get the employees to do it.
The funny thing is that you keep wanting to find conspiracies in places where the market fundamentals explain the behaviors perfectly well. Where was the conspiracy in 1999?
Are you saying that the airlines do not conspire to lower wages? Ever hear of Aircon.org? On their old web page they claimed that they were formed by the airlines in the early 70s to control labor costs.
Actually, GE does far better when the market is robust. Right now, GE has to choose between making a little money on their aircraft, and shutting US down entirely, thus making nothing on the aircraft. There are too many used airplanes in the market right now.
Thats not what the papers said. Did the Judge impose new, reduced lease rates on GE over at USAIR?
If you look back to 1999, GE was making a killing off of these same aircraft. Demand outstripped supply, and GE was able to lease them at much higher rates.
Do you know what the rate are or where?
Nobody wins in a recessionary market.
Hmmm.I'll have to save that little gem. The fuel companys certainly have not done all that bad, especially when you consider that they are largely to blame.
GE has just managed to lose a little less.
Yes, you are. One refers to a handful of players (losing money), while the other refers to the overall industry (growing). What you're seeing is a market that, in a macro sense, is roughly balanced, but with widely disparate levels of efficiency among the different players at a micro level.
Which handful of players? I meant the industry -as a whole- for both points, you read what you wanted into it, again. Probably so you could counter what I said. I did not say anything that would imply that I just meant a handful of players lost money.
The legacy airlines have, on the whole, roughly broken even since deregulation.
The difference is in degree.
In other words you were wrong.
There are similarities, but there are also some key differences. First of all, one LCC never went away. WN has grown to the point where it cannot be purchased, and can no longer be ignored.
Yes but SWA does not really serve the markets that the "legacies" serve. They did not go head to head with the majors (although the fight over Love Field is an interesting developement). If the start to then they too will pay the higher landing fees, rents etc that the legacies pay and with their higher labor rates they will no longer be a LCC will they?
Secondly, the current group of LCCs are, to varying degrees, much more intelligent in design than the past ones.
In what way?
Third, the war chests that were used in the past to outlast the LCC startups are much smaller this time.
Yes but most of the legacies are much larger.
Having said that, I have no doubt that at least a couple (most likely four) legacy carriers will survive this cycle. But it's a war of attrition, and the long-term prognosis for the legacies is not good.
No different than what we heard in the early 80s and 90s.
