"Knowledge at Wharton" includes a concise article on the "death spiral" of the U.S. airline industry, likely to be aggravated by recent price wars. Sources of the problem date back to the legacies of the days when a line could make money at 50% capacity (gone since deregulation) and the excess capacity in the industry. The suggested solution includes not letting bankrupt airlines rise again to compete, and making sure that in the future, the dead stay dead.
Sounds to me a lot like other industries with similar woes and capacity surpluses. Maybe some of the same solutions might work there.
The article identifies companies that are most unlikely to survive, in Wharton's opinion, and suggests three solutions: 1) reform bankruptcy laws, 2) revamp industry work rules and 3) limit new investment in airlines.
Few Survivors Predicted: Why Most Airlines Are Caught in a Tailspin - Knowledge@Wharton
Posted by dougsimpson at January 27, 2005 08:59 AM | TrackBack