Article Review Paper
The article predicts the decline of demand in the U.S. domestic airline market in 2008. Analysts said some softening in the economy and a lack of relief from fuel pricing are driving the trend. The International Air Transport Association, citing March 2007 traffic results, said international passenger traffic rose 7.8 percent year over year. Based on the data given by the Air Transport Association, capacity still is expected to grow among carriers in both the domestic and international front. The article states Southwest CEO, Gary Kelly was among the first airline CEO’s to suggest a softening of demand during the carrier’s first quarter earnings and JetBlue CEO, David Neeleman said soft demand would impact in the short term. As carriers that primarily are focused on the domestic market, JetBlue and Southwest likely would be the hardest hit by downward shifts in domestic demand, but also would be the best suited to deal with such changes, said Robert Mann, an independent airline analyst and principal of R.W. Mann & Co. (ebscohost, 2007).
It is further stated in the article the reason airlines like Southwest and JetBlue are not affected by the downward spike is because they are the price leaders and they are the cost leaders. These airlines can make money with lower prices, while other airlines are not able to. Since these airlines are the cost leaders they continue to grow during ever during an economic downturn. Other airlines have to pull back from higher pricing to keep their airlines in demand. This in turn hurts them resulting in a loss instead of a gain as predicted for the following years. The International Air Transport Association, said international passenger traffic rose 7.8 percent year over year. International will continue to do ok, because there is a large slice of foreign origin demand, Corporate profits are still pretty high, so out bound business travel is still strong (ebscohost). In summary, the airline...
References: Ebscohost. (2007). Demand past peak: Airlines increasingly receptive to domestic corporate
discounting. Retrieved September 09, 2007 from http://web.ebscohost.com/ehost/delivery.
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