Quote:
Originally Posted by Kali Yuga
If US Airways is the only one running that route, then demand for that route is almost certainly low, which means the price will be high.
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Then why are flights out of Scranton (low demand, but no dominant carrier) often cheaper than out of Philadelphia (high demand, US Airways hub)?
Another view:
"If you are not going to get [the low cost rivals] out tomorrow there is no point to diminish profits today" - American CEO Robert Crandall
To see how this works, check out the history of various airlines that have challenged US Airways on the highly-traveled Philadelphia-Boston route. And see how, in 2012, a non-refundable ticket to Boston can be more than one to Istanbul.
We can argue back and forth whether the book industry has potential to become like airlines. But we surely know that, in some industries, below cost pricing is used as a temporary tactic to drive up prices sky-high.