12/06/2004

Airlines Hit Again

It is reported again that Continental Airlines, Pan American World Airways and Eastern are looking at strikes from its employees. Employees feel that because these airlines are either bankrupt or on the verge that their jobs are in jeopardy. It is said that they will not be able to strike because the union does not allow strikes while they are on the contract. Employees say they will strike anyway and that they have a right to walk out on the airlines if something does not happen to them to their advantage. I wonder what would happen to flights if the employees went on strike. It would be interesting to see.

This is not the only thing affecting airlines. There are also rising fuel prices. With jet fuel prices rising 74 percent within the last year, airlines are not sure what will happen to its revenue. Southwest Airlines however are doing really well and are taking the place of many of the airlines. What is happening to the airlines?

4 comments:

Kova said...

Obviously there are profits to be made in the airline industry. Southwest and JetBlue have shown us that. I feel bad that the rest of the airlines are getting hit so hard but I can't help but thing they could have done things a little differently.

As for the employee strikes, I don't really understand what they are striking about. What are they really expecting the airlines to do? If the company goes bankrupt, it goes bankrupt. I can't really see how threatening strike is going to help the employees in any way.

Dr. Tufte said...

There's some good strategic behavior involved here. The question should not be "why would they want to strike?" but rather "since they are threatening to strike, how could that help them?"

First off, they have threatened rather than gone out and done the deed. This makes me think they view it as a risky proposition, because the airlines might go bankrupt.

Secondly, they must think that striking could somehow hurt the airlines. For example, an airline on strike may incur variable costs that it wouldn't if it were running (suce as the costs of mothballing planes, and the loss of consumer goodwill) that could be avoided if they averted a strike.

Jake said...

It is unfortunate that employees and employers in the Airline industry cannot resolve their differences, hopefully this does not have a negative impact on the consumer. Another interesting thought would be to see what some of the smaller, low-cost airlines do. With the potential strikes on hand, Southwest and Jet Blue will hopefully see an increase in passengers and demand of flights. Will they consider expanding internationally to help fill the void left by some of the larger Airlines?

rico said...

The small airlines seem to be holding their own regarding high fuel prices and low demand. Delta Airlines put a price cieling on their flights at the beginning of January. Delta put a price cieling of $499 one way for coach, and $599 for one way first class. Other flights fares were cut up to 50%, which the other major airlines had to follow to remain competitive. Regarding the strike, there are many replacements waiting to get jobs with the airlines. The strike will ultimately do more harm than good for the current employees.