Airlines
In 2005 many airlines where facing difficulties in revenue flowing into their business. The market structure being so unstable, consisting of only 10 major airlines and millions of consumers who would like to fly, one would think the airlines would not endure this problem. Although the airlines consist of only 10 major companies competition is growing at a rapid rate. First, the legacy carriers are forced to be price takers for they have to take the price in the market. They can not raise their prices due to the low-costing airlines that compete with them. Second, the Internet playing an important role in airlines the consumers choose to fly in. The Internet allows consumers to shop around and find the lowest fare according to their flight they desire.
Ticket pricing is a major issue in determining the profit, along with the costs that each airline has to make throughout the year. Many airlines are cutting costs to cope with the low rate tickets. Most airlines are making normal profit, where there profit only covers the their costs. Some even can be considered at a shutdown point. Companies dread revue equaling the variable costs, many choose to shutdown. Airline companies on the other hand are not willing the throw in the white towel. The flying industry being so elastic gives hope companies that they might just jump back and start making profit. Legacy companies are not shutting down for they have too much hope and it is so easy for them to reestablish their incoming profits. As is stated in May many flights increased in passengers. With they numbers almost reaching the point where companies call full, the statistics gave companies hope.
Once the airlines compiles a combination of low costing costs as well as low costing tickets for the consumers the market will be in good shape. With fuel on the rise and low-cost carriers coming to play companies find it hard to get a brake. The average revenue would not vary as much if the companies...