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The domestic airline industry is one of the most flaunted examples of a non-competitive, stagnate industry. High barriers to entry, heavy regulations, limited

The domestic airline industry is one of the most flaunted examples of a non-competitive, stagnate industry. High barriers to entry, heavy regulations, limited supply chains are all factors that limit competition. It's problems are frequently written about: * https://www.economist.com/news/leaders/21721201-americans-are-treated-abysmally-their-airlines-they-should-look-europe-lessons-lack https://www.economist.com/news/leaders/21721201-americans-ar... * http://www.latimes.com/business/la-fi-airlines-invest-in-foreign-carriers-20180227-story.html http://www.latimes.com/business/la-fi-airlines-invest-in-for... * https://www.bloomberg.com/news/articles/2018-02-26/american-air-qantas-renew-push-for-trans-pacific-joint-venture https://www.bloomberg.com/news/articles/2018-02-26/american-... * https://www.economist.com/blogs/gulliver/2018/01/stretched-budgets https://www.economist.com/blogs/gulliver/2018/01/stretched-b... * https://www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/the-economics-underlying-airline-competition https://www.mckinsey.com/industries/travel-transport-and-log... Competition isn't a binary thing where either a market is competitive or it isn't, but rather a gradient scale. The airline industry is one of the least competitive industries, especially in the US (my frame of reference), even if it isn't completely without competition.

sokoloff 9y ago
Thanks for the links. I read through them and agree that competition isn't a binary thing. Those articles read to me more like "the airline business is a shitty business to be in because it's too competitive" rather than "the airline business is a great business to own because it's not very competitive" This quote seemed to summarize my point of view overall: > Airlines in North America posted a profit of $22.40 per passenger last year; in Europe the figure was $7.84. $22.40 per pax looks to be about a 6% margin (avg US domestic RT fare of $354 in 2017). 6% is not quite the bloody competition of grocers (sub 2%), but it's a pretty damned slim profit margin for such a capital and labor intensive business and not anyplace I'd want to put my investment (of time or money) to seek profit. It wouldn't surprise me if the European carriers had a similar profit margin on their lower priced tickets. I couldn't readily conjure up an estimate of average RT intra-Europe airfares on Google.

sokoloff 9y ago

Thanks for the links. I read through them and agree that competition isn't a binary thing. Those articles read to me more like "the airline business is a shitty business to be in because it's too competitive" rather than "the airline business is a great business to own because it's not very competitive" This quote seemed to summarize my point of view overall: > Airlines in North America posted a profit of $22.40 per passenger last year; in Europe the figure was $7.84. $22.40 per pax looks to be about a 6% margin (avg US domestic RT fare of $354 in 2017). 6% is not quite the bloody competition of grocers (sub 2%), but it's a pretty damned slim profit margin for such a capital and labor intensive business and not anyplace I'd want to put my investment (of time or money) to seek profit. It wouldn't surprise me if the European carriers had a similar profit margin on their lower priced tickets. I couldn't readily conjure up an estimate of average RT intra-Europe airfares on Google.