Originally Posted by
richarddd
When thinking about the effect of reducing overbooking on airline pricing, consider why airlines haven't already raised prices.
We often think businesses price on a cost plus basis or in order to maintain some level of profitability, but market forces and competitive pressures (even in an oligopolistic industry) are very important.
With Oil prices settling at a 40'ish - 50'ish equilibrium range & rising labor costs, without overbooking, Airlines would be forced to reduce capacity growth. Now, this isn't necessarily bad for the bottom line; but, for obvious reasons, it certainly won't lead to lower prices.
UA needs to increase profit margins by reducing/limiting capacity, which now has become more challenging without aggressive overbooking and newly minted draconian measures, just to address a blackswan Pax event that will never happen again.
In my view, given the environment, Airlines will (or, ought to) seek to reduce capacity to increase margins. If done prudently, there are bright days ahead, especially with Oil prices likely capped at current levels.