USA Today had a story that U.S. airlines will continue to cut back on their domestic schedules even though demand continues to increase. On the surface this cutting costs looks like the time-honored technique used by lazy and/or unimaginative managers to help the bottom line. However, one thing I gleaned from my Economics 101 class is the law of supply and demand, which is; lower supply plus higher demand equals rising prices.
Why do I bother pointing out the obvious? It’s because of a couple chafing ironies and one wish. First, the airlines are considered victims here, mostly because of high fuel prices and a bad economy. They might even get some breaks from congress, who are adept at ignoring facts such as the many airlines that are held up as perfect examples of poorly managed businesses.
Second, this same congress, on behalf of “the American people” would froth with simulated outrage for the obvious price manipulation if the oil companies used this same tactic. Not that I particularly care, mind you, it’s all good fun after all.
And third, if prices do rise and airlines become profitable again; maybe some radical company will try a unique business model. Instead of shaving margins to a minimum and competing purely on price, they might try providing service for customers who cannot justify Business and First Class, but who wouldn’t mind paying a reasonable amount more to be treated with respect.
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