Can you point us toward this "solid evidence"? Presumably, even if it did occur in the early 90s, such below cost pricing is no longer present in the industry today, a well over a decade later. It seems hard to fathom that business conditions in 1990 contributed significantly to problems experienced in 2004. I think United would point to its wage agreements from 2000, as well as intense competition from discount carriers, as far more important factors in its bankruptcy than below cost pricing by CO in the early 90s. The airline business is an unquestioned oligopoly. As long as the industry is not dying, prices rise in oligopolistic competition. Plus, there is nothing illegal about pricing below cost. And CO did not finance this purported pricing on the backs of shareholders. They were wiped out the moment the company filed for bankruptcy the first time. When it pulled out the second, it was through $450 million in financing from Air Partners/Air Canada. Free markets are NOT supposed to ensure that a formerly regulated market will function freely after deregulation. Regulated markets are, by definition, not free. Removing regulation does not suddenly cause every participant to wake up and rejoice that their bonds have been lifted. Look at AT&T: deregulation has killed the company because it had no concept of how to compete in a free market. Same with electric power. Same with most formerly Communist countries. A mindset develops in employees and management in regulated industries that is antithetical to what is needed to function effectively in a free market. Risk taking is non-existent and there is no entrepreneurial spirit. Deregulation cannot instill those value overnight. I don't question your position that bankruptcy imposes a certain friction in the free market. But it is a friction we accept because we believe that the benefits of a second chance and an orderly reorganization outweigh the impact on the free market. -----Original Message----- From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of Travel Pages Sent: Tuesday, September 28, 2004 8:35 AM To: AIRLINE@xxxxxxxxxxxxxxxxx Subject: Re: Industry Changes There's solid evidence that Continental's below-cost pricing during their bankrupticies distorted fares, forced other carriers to compete, again below cost. CO used the bankruptcy laws to gain an unfair advantage by selling -- regularly and deliberately -- below cost. You use investment bankers to finance that kind of corporate behavior, not shareholders. This has left a scar on the industry still felt today. The CO bankruptcy totally destroyed any hope for a rational realignment following deregulation, you know, what a free market is supposed to insure? A market isn't free when it is subsidized by a court decision at the expense of other competitiors. And what we have today is the product not only of competition, but of corporate mismanagment followed up by further government subsidy and mismanagement. If only it were competition at work. Douglas Schnell <dks28@xxxxxxxxxxx> wrote: But how? On the margin, the prospect of reorganization rather than liquidation does undoubtedly alter some incentives, but there is just no evidence that bankruptcy would result in a stronger industry structure. To put it in different terms, imagine there was, from the time of the first "modern" bankruptcy code in 1898, an exemption saying that firms engaged in the asbestos business could not seek reorganization, only liquidation. Would this have altered the structure of the industry to any degree? Would it have avoided the liability problems companies began to experience in the 1970s? Doubtful. Remember, bankruptcy is a US Constitutional mandate. It is not something dreamed up by Congress "just for fun." -----Original Message----- From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of Travel Pages Sent: Monday, September 27, 2004 3:52 PM To: AIRLINE@xxxxxxxxxxxxxxxxx Subject: Re: Industry Changes The Euro's don't think so. They only know Chapt 7. My position is that the elimination of a Chapter 11 in the airline industry would have put US carriers in a much stronger position today. CO's protracted and abusive bankruptcies went a long way to developing much of today's pricing irrationalities in the name of market share. damiross3@xxxxxxxxxxx wrote: A bankrupt airline could be liquidated - it all depends on the type of bankruptcy declared. Chapter 11 allows a business to continue operating while it reorganizes. Chapter 7 is liquidation. Chapter 11 is a good idea - it gives the business a second chance to be profitable. David R -------------- Original message -------------- > CO could also be said to have abused the state of Chapter 11 to the > extreme detriment of the entire market. Operating for YEARS under cost > in an attempt to recoup market share totally pushes the envelope of > what bankruptcy is supposed to do. It is not supposed to reshape a market. > > Reminder to all observers that in Europe, when you become insolvent, > your ticket is immediately pulled. Consequently, Euro-carriers cannot > plan to file bankruptcy as a "what if" scenario in their marketing > plans. Bankruptcy is the end of the operation, and they do indeed > behave very differently than US carriers because of this restriction > on a company living beyond it's means. > Just one reason why Euro-fares are inherently different and will > remain so for a long time to come. > > You wonder what US airfares would look like if carriers equated "bankruptcy" > with "liquidation." Methinks you'd see fewer irrational fares. > > Douglas Schnell wrote: > CO benefits mightily from cost savings imposed during its two trips to > bankruptcy in the early 90s. In that sense, they could be said to have > extreme foresight. > > They also have made a conscious decision to focus on business > travelers as their core market, another decision that seems to be > paying dividends. > > -----Original Message----- > From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of > Alireza Alivandivafa > Sent: Monday, September 27, 2004 11:51 AM > To: AIRLINE@xxxxxxxxxxxxxxxxx > Subject: Re: Industry Changes > > I think CO is a good example of a legacy carrier that is treating its > employees decently, offering good fares and keeping up service with > things like meals on longer (and I mean over 2 hours) flights and the > like. They have a seat-mile cost around that of WN according to recent > measurements, mostly because they do things in house. They do their > own catering (decent > too) and keep their costs way down. A cool enough concept that I have > Onepass now and am considering going elite on them next year (as I fly > a lot more now). > > > find a way to do that, they are going to continue to have hard > > times. I > suspect that most people don't care that they don't get the bad > airline food anymore. I for one am not about to choose what airline I > fly based on whether or not they serve food. I think BAHA, you are the > exception to the rule here.>> > > > --------------------------------- > Do you Yahoo!? > Y! Messenger - Communicate in real time. Download now. --------------------------------- Do you Yahoo!? New and Improved Yahoo! Mail - 100MB free storage! --------------------------------- Do you Yahoo!? Yahoo! Mail Address AutoComplete - You start. We finish.