Originally posted by Kishan
Certainly you are correct. My issue however is this: if the airline cannot do much about the overhead, why not raise ticket prices?
Because as others have noted in this thread, we aren't talking about a small price difference. U.S. automakers for example spend more on pension and benefit obligations than they do on the actual steel in their vehicles. Also when you have other competitors who DO NOT have these obligations, what are you supposed to do? Raise prices and watch the customers run away?
I'm not especially fond of the whole "gotcha" mentality of ticket pricing with airlines and I think they could make some gains in that area but obviously cruise ships, hotels and other industries have that type of pricing structure as well.
Is it possible that the major airlines are collapsing under their own weight?
The "weight" you mention is mostly benefit and especially pension obligations. As you yourself have noted, most of the present cost cutting that can be done has been accomplished. However while you can cut the salary of your current pilot you cannot cut the promised benefit from the pilot you had that retired five years ago.
If so, why not let them go under?
Would you feel any better when they dump these pensions on the federal Pension Benefit Guaranty Corp and ask the tax payers to take them on?
This isn't just a problem with the airlines. It is a problem with all pension especially with boomer related retirement. As a generation they simply did not invest enough and overpromised.
In the short run there would be pilots, mechanics, flight attendants and more who would be unemployed.
So basically unemploy the current generation who they are already cutting to fund the overpromised pension guarantees of the prior generation. Something tells me that won't work. Until the boomer generation faces the music, nothing will get fixed. Look at Social Security which isn't even tied to an airline. It has 8 trillion of future obligations which it cannot meet while the entire federal deficit is already 6 trillion dollars. When you underinvest by 14 trillion dollars over a generation, nothing you can do with the current generation or in the present can fix that. Someone is going to realize that there is no silver bullet but that might cause a lot of boomers to start eating real bullets when they realize what their "golden" years might look like.
However, those routes served by the defunct airline would be sitting there unserved. Some other airline would step in and fill their space thusly creating new jobs.
This sort of crash is likely what will occur. My pet scenario is hyperinflation.