Let's think about this for a minute in the framework of Economics 101: business competition --
-- A Low Cost Carrier enters a market where none exist and prices their fares at a low but profitable rate.
-- The incumbents must either a) match the LCC dollar-for-dollar, or B) attempt to differentiate themselves in order to display a competitive product. If their products were, in fact, superior in the eyes of the marketplace, they would easily be able to maintain a respectable market share. Alas, they are viewed simply as "different" products, not commanding a premium afforded to "better" products.
-- Thus, the incumbent neither able to reduce costs to the level necessary to generate a profit at the matching fare nor to establish themselves as "worth the cost" effectively price themselves out of the market.
Our example uses SWA as the LCC entrant. In fact, any number of new LCCs could be inserted except, ironically, the carrier whose NYSE symbol is "LCC"!
Lets look at it from an Econ 611 standpoint instead.
- Cheap airine comes in.
- Incombant airline that brought value to the entire community cuts back service. Residents may even realize that flying the turd in blue water painted jets is bad for the economy, but they are simply out to save a few bucks for themselves (see "free rider")
- Businesses flee that city due to lack of Global reach of new dominate carrier. Economy becomes centered even more around major business centers (that still enjoy "feed"), making vibrant small cities a thing of the past.
- City has low fares.....and now needs them.
- SWA then threathens nearly BK city with pulling out if they don't lower all the fees for SWA's service
- Already devistated economy then must give in to SWA's tactics, taxpayers suffer even more.
- local radar sectors gridlocked due to 37 daily flights between 1 city pair with 130 seat jets (instead of using BIGGER jets).
- Government raises fee's on ALL airlines, even the responsible ones, to cover the higher costs.
- Responsible airlines cut back even more.
- SWA keeps costs low on the back of low pay and no retirement plan. Management plays the Stock option game. Oldest employees do VERY well in Ponzi Scheme. Convince young employees they'll get rich also. Young employees too stupid to understand doubling rates.
- Payrates and retirement plans at responsible carriers collapse to SWA "costs", not payrates (additional cost of upgrades and of other legacy costs such as healthcare). SWA proudly boasts of "high payrates" that are nowhere near the rates they so wisely forced down. IOW, SWA is proud to be the richest resident of Somolia instead of being the richest in New York. Yippee, Airline career now only for those too old to retrain or too stupid to graduate college. Senior employees, confident of their ability to snow young stupid employees, already working to low the now dismal industry pay rates by arguing for paycuts. Should make options of old f@rts worth more, under the promise that "everybody will get rich". Once again, not enough young employees smart enough to understand doubling rates.
I could go on and on. I personally like competition, I just have a problem with the government player favorites. If one company raises the costs for everyone else, then THEY should pay ALL of the increased cost. If the FAA has to hire two or three more employees to read clearances so SWA can save the $0.20 cents it costs to uses ACARS, then SWA should pay the costs. If SWA makes a 10 hop across the U.S. then they should pay at least 10 times as much for the service as a 747-400 that goes direct. Level the playing field, then we can talk.