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The main aspect of Southwest’s advantage in the economy is their fuel hedging program. (Dunn, 2009 It is important for US government to take account of the fact. Since, this fiscal strategy allows airlines to protect themselves in opposition to rising oil prices by locking in a price for fuel. While this strategy is a risky gamble, it has proven successful for Southwest and has saved the airline company $3.5 billion since 1998 over what it would have spent if it would have paid the industry’s average price for fuel. Reduction of fares will eventually minimize obstacles to efficiency of airlines in long run.
Another recommendation for the US government is to appreciate Mergers of airlines. Mergers among competing airline corporations will bring profitable results. (Fishback, 2007, 415) By companies merging together, this allows them to cut costs by eliminating duplicate operating costs. Through their success, Delta and Northwest have set the path for other airlines to follow. Mergers, such as that of Delta and Northwest, will eliminate duplicate routes from the two airlines departing from the same airport. By doing so, wage and fuel expenses will also decrease substantially. As airlines merge the competition in the industry will drop benefiting the entire industry. This will decrease buyer power, economic inequality between airlines and let the airlines set the prices they need to operate profitably.
Currently customers have a great deal of power within the airline industry due to the fact that each airline does not differ greatly from one another. (Yosef, 2005, 210) Therefore, price is ultimately the only factor that buyers will consider while choosing an airline. It is recommended to the US higher authorities, to make airline companies focus more on customer service in order to separate themselves from their competitors. This involves focusing both attention and
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1 Pages(250 words)Research Paper
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