Southwest Airlines, one of the largest in the industry, is currently enjoying high revenues due to lower prices on crude oil. The company made deals year ago that allowed them to buy oil today at less than half the cost of the current market price. This lower cost has allowed the company the opportunity to keep fares low and save nearly $200 million in gas prices. These reduced prices will shortly end for Southwest, but they expect no change in revenue due to planned fare increases. The author of the article believes the company will raise airline fares by the end of the year, which will allow other competitors in the industry to also raise their prices. This is an interesting phenomenon. Usually we think that the market determines the price, but in this case, it appears that a single company can set the industry price.
Posted by BOB at 4/14/2005 05:30:00 PM