The American Effect

The Fort Worth Star-Telegram ran this interesting article about American Airlines and the airline industry in general. As you’ve probably heard or figured out, $130/barrel oil makes jet fuel extremely expensive. The airlines need to raise their fares significantly with the same traffic level to cover the added cost. Unfortunately, since the airline industry is so competitive, no airline can instantly raise fares that much without driving customers away to other airlines who haven’t matched the increase. To make matters worse, many customers are price sensitive, and are unwilling to fly if the fare is too high. Most airlines are responding by reducing the number of flights and raising fares, hoping to cram in more people to each flight and forcing them to pay more by reducing their flight options. Meanwhile Southwest continues to grow, albeit more slowly than in previous years, and fill in the gaps left by our competitors. There’s no easy way to fix the Americans of the industry, and I don’t know if I would even want to try. I just thank God over and over that I work for Southwest and hope to maintain that privilege for decades to come.

Speaking of oil, a friend sent another article in the Star-Telegram that provides a fascinating and plausible explanation for the ridiculous rise in oil prices. Check out Part 1 and Part 2.

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