Question

Read the above article and answer the questions that follow. 

a. Why did the investigative reporter James B. Stewart describe US airlines as a classic Oligopoly? 

b. What is the meaning of yield management as described in the above article? 

c. Why did the writer accuse people running airlines of missing service ethics?

Answer 1

1.An oligopoly exists when a market is controlled by a small group of firms, often because the barrier to entry is significant enough to discourage potential competitors. The US airline industry is today more of an Oligopoly.As of 2019, there are four major domestic airlines – American Airlines, Inc. (AAL), Delta Air Lines, Inc. (DAL) Southwest and United Airlines, subsidiary of United Continental Holdings, Inc. (UAL) – which fly just under 70% of all domestic passengers.

2.Yield management is variable pricing strategy where prices are charged differently on the basis of understanding and study of consumer behaviour.This is done to maximize revenue.For example some seats may be charged at discounted rate or open for bargaining, some may be priced high and labeled as business travel seats, some may be kept vacant and priced very high for last minute travelers. In this way profits can be maximized.

3.Author feels that airlines are more concerned in making huge profits and is concerned with the profitability of shareholders. As a result the service standards have deteriorated and customer satisfaction is ignored.The size of seats have been reduced, thus making them uncomfortable to sit. On the other hand the number of seats have been increased so that by using price discrimination strategy more profits can be reaped.