Comments on: Survival of the Fittest? http://rickseaney.com/2008/07/22/survival-of-the-fittest/ Fri, 21 Nov 2008 17:20:27 GMT http://wordpress.org/?v=wordpress-mu-1.2.4 By: Rick Seaney http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20812 Rick Seaney Thu, 24 Jul 2008 21:04:19 +0000 http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20812 I am not saying that an airline will not go out of business ... it could happen if we have prolonged fuel 100+/barrel ... My point is simple - who benefits from 1 or 2 airlines going bankrupt -- consumers -- no, competition drives price. Shareholders -- no -- they are left holding worthless paper. Airline employees -- no -- they are out of jobs ... His point was bankruptcies of a few would be good for the whole (airline industry) ... it is all a matter of perspective ... If i was an airline analyst I would like to have at least 1 airline to analyze ... I am not saying that an airline will not go out of business … it could happen if we have prolonged fuel 100+/barrel …

My point is simple - who benefits from 1 or 2 airlines going bankrupt — consumers — no, competition drives price. Shareholders — no — they are left holding worthless paper. Airline employees — no — they are out of jobs …

His point was bankruptcies of a few would be good for the whole (airline industry) … it is all a matter of perspective … If i was an airline analyst I would like to have at least 1 airline to analyze …

]]> By: mwarden http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20665 mwarden Wed, 23 Jul 2008 23:57:49 +0000 http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20665 I don't really understand your counterpoint. The analyst is using economics 101 here. How would an airline raise prices without losing overall profit? If a major died, then the spill over demand would allow this and compensate for the natural reduction of demand that occurs with a price hike. If fuel prices go up x%, and revenue goes up less than x%, then profit margins decrease. This proportion is so out of whack that ALL airlines are in trouble now. The loss of an airline (or a consolidation and reduction of overall supply for that consolidated airline) would help the survivors as described above. I don’t really understand your counterpoint. The analyst is using economics 101 here. How would an airline raise prices without losing overall profit? If a major died, then the spill over demand would allow this and compensate for the natural reduction of demand that occurs with a price hike.

If fuel prices go up x%, and revenue goes up less than x%, then profit margins decrease. This proportion is so out of whack that ALL airlines are in trouble now. The loss of an airline (or a consolidation and reduction of overall supply for that consolidated airline) would help the survivors as described above.

]]> By: mwarden http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20664 mwarden Wed, 23 Jul 2008 23:54:51 +0000 http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20664 I don't really understand your counterpoint. The analyst is using economics 101 here. How would an airline raise prices without losing overall profit? If a major died, then the spill over demand would allow this and compensate for the natural reduction of demand that occurs with a price hike. If fuel prices go up x%, and revenue goes up I don’t really understand your counterpoint. The analyst is using economics 101 here. How would an airline raise prices without losing overall profit? If a major died, then the spill over demand would allow this and compensate for the natural reduction of demand that occurs with a price hike.

If fuel prices go up x%, and revenue goes up

]]> By: DMcD http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20596 DMcD Wed, 23 Jul 2008 12:26:23 +0000 http://rickseaney.com/2008/07/22/survival-of-the-fittest/#comment-20596 Competition is good, but not competition propped up by a Chapter 11 process that keeps broken businesses in the air. The U.S. has seen airline after airline go through Chapter 11 reorganization on numerous occasions. This is not the natural forces of the market at play. In the real business world, smart, efficient, competitive businesses prosper while those that are not reform or go away. There are no shortage of air carriers to fill the void should one of the less viable ones go away. Without a real threat of liquidation, furthermore, the various stakeholders in a company's restructuring don't have quite the same incentive to reform the business. Of course it is tragic for the employees of the affected company. Nobody likes to see people lose their jobs. Competition is good, but not competition propped up by a Chapter 11 process that keeps broken businesses in the air. The U.S. has seen airline after airline go through Chapter 11 reorganization on numerous occasions. This is not the natural forces of the market at play.

In the real business world, smart, efficient, competitive businesses prosper while those that are not reform or go away. There are no shortage of air carriers to fill the void should one of the less viable ones go away.

Without a real threat of liquidation, furthermore, the various stakeholders in a company’s restructuring don’t have quite the same incentive to reform the business.

Of course it is tragic for the employees of the affected company. Nobody likes to see people lose their jobs.

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