Search This Blog

Monday, January 24, 2005

Airlines = railroads?

When is an airline really just a railroad? When its industry is de-regulated. "Airline executives say they never anticipated that deregulation would precipitate a crisis as deep or as long as the present one," Micheline Maynard reported in the New York Times on Sunday. But anyone familiar with the "cut-throat" competition that prevailed in the American railroad industry in the late 19th century wouldn't be surprised by it. What is interesting is that it took so long back then for expert observers outside of the industry to understand the peculiar competitive dynamics induced by high fixed costs--and that they are hardly any better understood today.
Micheline Maynard, "Coffee, Tea or Regulation? As Grumbling Grows About Airlines, Some Eyes Turn to Washington," New York Times, 1/23/05, sec. 3, pp. 1, 4, 12 (quotation from p. 4).

No comments: