In another case of supply and demand economics, the airline industry seems to have turned a corner, in terms of pricing and inventory. That’s according to this recent story in the New York Times. For the past few years, the airlines have collectively cut capacity… which is putting upward pressure on the price of air travel, and pushing profits upward for the industry. Click here to read the story.
Implications: Every product has a tipping point, at which the price takes consumers out of the market. It will be interesting to see if that point is acknowledged first by the airlines, or their passengers. We should know next spring and summer, as the tourism season resumes.
It is not so much the cost of a ticket that matters at this moment... but the cost of a ticket in contrast to their pricing in the depths of the recession, which was not all that long ago. I haven't heard too much about various baggage fees and pillow prices among business travelers... but I've heard a few "non-frequent vacation flyers" that were shocked by the hidden costs of hitting the skies. If that goes on too long (the surprise, I mean), I have to guess people will find alternatives that are closer to home. What do you think?
Mike Anderson
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