2/03/2005

Is it America West or America Worst?

America West, the Phoenix-based airline company, posted a loss of $49.7 million for the last quarter of 2004 on January 21, 2005. The company believes high gas prices and passenger vacancies were the main causes of the reported loss. For many America West customers this may not come as a big surprise. The inherent lack of customer service is enough for many to wonder how the planes remain in the skies. While things do not appear to be getting better for America West, who forecasts another loss for the current quarter, they may find comfort in the fact that other airlines seem to be struggling as well. If America West wants to reverse their current trend, they need to consider providing a more efficient, friendly service for their travelers.
Article:http://money.cnn.com/2005/01/21/news/midcaps/america_west.reut/index.htm

2 comments:

Rex said...

It seems to me as airlines keep lowering there prices’ there has to be some sort of equilibrium price. With all of the airline choices available for consumer today, if American West is going to stand out of crowd they are going to have to provide superior service at a budget price. They may want to consider picking up new routs which will be more appealing to passengers. Everyone has their own personal opportunity costs and if the airlines can bring their prices in line with these costs, I think they will fill more of those empty seats.

Dr. Tufte said...

-1 for a poorly formatted link in BOB's post, and for spelling mistakes in Rex's comment.

What we are seeing with airlines is a general belief that this industry is not perfectly competitive. This is wrong. Competition is driving the firms in this industry to zero (economic) profits, and management, unions, bureaucrats, and the legacy media are in denial.

I find this really annoying because it is so senselessly stupid. Can you name any form of (human) transportation that doesn't end up at zero profits (or just plain non-existent)? Think about it: stage coaches, canal boats, railroads, buses, taxis (where unregulated), and airlines. Where do people get off thinking that airlines are really any different from buses?

Two caveats are instructive here. First, taxis are successful in some locations where supply is restricted by law (like New York City). Secondly, the alternative to mass transportation is individual transporation - these days using a car. Auto transportation is wildly expensive for what you get. The message though, is that the marginal benefits of going where you want when you want must be huge. Mass transporation can never match that.