Originally Posted by
longtimeflyin
I said what I said because it's by far the least controversial answer. Your answer is not entirely correct.
Scenario A: Airbus A320
CASM: $X
Airfare charge to customer: Y
Scenario B: 737 MAX
CASM: $X - $5
Airfare charge to customer: Y
This is the initial scenario (as an example)
Yes, Shareholders profit initially as CASM has dropped with the 737 MAX. This doesn't last long though, because WS will then compete, and their CASM also drops as they take on new, denser aircraft. Thus, Air Canada's price can now drop more than in Scenario A.
So who wins in the end? Both shareholders and customers. Because people won't stop flying, the environment always wins. (new plane vs old plane)
Except, that's a bit naive.
Why would "Westjet compete?" Surely they will be more than happy keeping their profit where it is. So no, they won't "compete." True competition would require a true free market, not an oligopoly. Not the current cozy arrangement whereby AC and WS are more than happy letting both do well. I.e. "not compete."
I am amazed to see how the ideological BS of a "free" market that it is not keeps blinding people.
(BTW, we did once have a free market. Between CP and AC. And yes, in the end, we ended up just as Adam Smith predicted: that they would both go bankrupt. In other words, that a true free market is optimal for the consumer and terrible for businesses, since the equilibrium point is zero profit. Yes it was a great time for consumers back in the nineties.)