Airline market
Road trips have so many downfalls: you can only go as fast as a mile a minute, there is a chance of wrecking or running out of gas, and no matter what you can’t drive while sleeping, not to mention, traffic violations. If you could prevent all of those drawbacks and decrease the time it would take to arrive at your destination would it be worth a few extra dollars? Airlines offer a service that makes road trips obsolete. An Airplane can get you to a faraway location in less than half the time it takes to drive and charge you almost the same amount it would cost you for gas. The market for airlines has come from being regulated, in the seventies, to unregulated which has caused for the market to saturate and unsaturated (Borenstein). Because of this the airlines fall under a competitive market causing them to become price takers. Big airline companies such as southwest, United, and Midwest all offer the same services, so each one offers different incentives hoping they can take the other airlines business. Supply and demand directly effects airlines since the market is competitive. The supply and demand for labor is a big part of airlines because of the quality and specialization it takes to fly an airplane and direct them. These concepts help to understand airline companies’ strategies to survive in today’s market.
Early operations of airlines were regulated by government causing a government-created monopoly. This regulation was necessary in the beginning of airlines early operations because it served the interest of the public. The regulation on airlines helped prevent labor strikes which could wreak havoc on the flow of economic goods or make flying very unsafe. First airline regulations held the airlines travel fare to a fixed rate and made entry to the market very hard because of the little success factor. This regulated rate only allowed the airlines to compete based off of service they provided in flight such as food, and cabin crew quality (Smith). This factor of only being able to make little profit caused is what caused the market to be so small. However, the deregulation of the market helped create the airlines for what it is today.
When the market became deregulated in the late seventies, mid-eighties more firms came in and the market became saturated. The deregulation of the airlines caused a boom for firms to enter and these firms entering the market lowered prices and made it much more competitive. According to Fred L. Smith Jr, “air fares have fallen twenty-five percent since ninety-one.” In recent years airline companies have started merging: United with Continental, Southwest with Airtran, and Frontier with Midwest. These original companies are combining and the market is start to unsaturated again, but this time without regulation. Due to the fact that the market is unregulated there is no monopoly and the market is competitive.
The airline industry has grown by leaps and bounds because of it unregulated business. The market is very competitive and because of this each firm has had to become innovative. Companies such as Southwest have Mcdonaldised their planes in hopes to lower air fare. This Mcdonaldisation involves southwest only using certain airplane for all of its transportation. This enables the airline to be able to repair planes faster and more efficient spending for parts. Also, the company keeps a familiarity with its entire market making it more consistent for its consumers. Southwest is also trying a new approach on airports. They have decided to start buying all of the regional airports. These airports are small and are for more specific markets such as college students. The airports are in little towns and would be used in order to go visit family without having to fly into a big city and drive to the town. The competitive market that has formed has also caused airlines to start combining with each other in order to gain more airways. This expansion of airports and travel