Thursday, July 24, 2008

Up in the Air

NYT reports on the surprising(?) success of Southwest Airlines:
Dallas-based Southwest posted its 69th straight profitable quarter while many other airlines lost money [...]
But how did they do it?
[...] and it is mostly because of fuel hedging -- financial transactions that Southwest uses to lock in lower prices for most of its fuel.


In recent years, Southwest has poached business from weaker or higher-priced competitors in Denver, Philadelphia, Pittsburgh and Dallas.
Ahhhh. The old better service/lower price model.

To clarify: Southwest makes better deals, resulting in lower prices for consumers. Then, consumers reward Southwest by choosing the low-cost airline over its competitors. So, Southwest gains and other airlines eventually go out of business.

What an earth-shaking discovery. I wonder how long it will be before the other guys catch on.

Competition. It works, folks.

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